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DOJ Announces A “Revised FCPA Corporate Enforcement Policy”

Justice Dept

One of the best things ever written about the FCPA was penned nearly 35 years ago by Robert Primoff who stated: “The government has the option of deciding whether or not to prosecute.  For practitioners, however, the situation is intolerable.  We must be able to advise our clients as to whether their conduct violates the law, not whether this year’s crop of administrators is likely to enforce a particular alleged violation.  That would produce, in effect, a government of men and women rather than a government of law.”

Earlier today, the Foreign Corrupt Practices Act space once again witnessed a government of individuals rather than law as the DOJ announced yet another non-binding FCPA enforcement policy document.

Several forthcoming posts will examine in greater detail the “revised FCPA corporate enforcement policy”, but for now set forth below are the relevant portions of Deputy Attorney General Rod Rosenstein’s speech. (See here for the actual new policy in the U.S. Attorneys’ Manual. Note: the new policy is 9-47.120, the other FCPA portions in the USAM have been there for years).

Below is the preamble to Rosenstein’s speech.

“So today, I am announcing a revised FCPA Corporate Enforcement Policy. 

The new policy enables the Department to efficiently identify and punish criminal conduct, and it provides guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing…

…We expect the new policy to reassure corporations that want to do the right thing.  It will increase the volume of voluntary disclosures, and enhance our ability to identify and punish culpable individuals. 

The new policy, like the rest of the Department’s internal operating policies, creates no private rights and is not enforceable in court.  But it does promote consistency by attorneys throughout the Department.

Establishing internal policies helps guide our exercise of discretion and combat the perception that prosecutors act in an arbitrary manner.”

As relevant to the “revised FCPA corporate enforcement policy,” Rosentsein stated:

“The incentive system set forth in the Department’s FCPA Pilot Program motivates and rewards companies that want to do the right thing and voluntarily disclose misconduct.

In the first year of the Pilot Program, the FCPA Unit received 22 voluntary disclosures, compared to 13 during the previous year.  In total, during the year and a half that the Pilot Program was in effect, the FCPA Unit received 30 voluntary disclosures, compared to 18 during the previous 18‑month period.

We analyzed the Pilot Program and concluded that it proved to be a step forward in fighting corporate crime.  We also determined that there were opportunities for improvement.

So today, I am announcing a revised FCPA Corporate Enforcement Policy.

The new policy enables the Department to efficiently identify and punish criminal conduct, and it provides guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing.

Before I speak about the substance of the policy, let me digress for a moment to make a process point.

I know that previous corporate fraud policies often were identified by the name of the Deputy Attorney General who wrote the memo.  It is nice to be remembered. But one of my goals is not to be remembered for writing a memo.

After spending nearly three decades trying to keep track of prolix memos, I want the Department to issue concise policy statements.  Historical background and commentary should go in a cover memo or a press release.  In most instances, the substance of a policy should be in the United States Attorneys’ Manual, and it should be readily understood and easily applied by busy prosecutors.

So, the FCPA Corporate Enforcement Policy I am announcing today will be incorporated into the United States Attorneys’ Manual.

We expect the new policy to reassure corporations that want to do the right thing.  It will increase the volume of voluntary disclosures, and enhance our ability to identify and punish culpable individuals.

The new policy, like the rest of the Department’s internal operating policies, creates no private rights and is not enforceable in court.  But it does promote consistency by attorneys throughout the Department.

Establishing internal policies helps guide our exercise of discretion and combat the perception that prosecutors act in an arbitrary manner.

The new policy does not provide a guarantee.  We cannot eliminate all uncertainty.  Preserving a measure of prosecutorial discretion is central to ensuring the exercise of justice.

But with this new policy, we strike the balance in favor of greater clarity about our decision-making process.

The advantage of the policy for businesses is to provide transparency about the benefits available if they satisfy the requirements.  We want corporate officers and board members to better understand the costs and benefits of cooperation.  The policy therefore specifies what we mean by voluntary disclosure, full cooperation, and timely and appropriate remediation.

Even if a company does not make a voluntary disclosure, benefits are still available for cooperation and remediation.  Those steps assist the Department in running an efficient investigation that identifies culpable individuals.  They also reduce the likelihood that crimes will be committed again.

I want to highlight a few of the policy’s enhancements.

First, the FCPA Corporate Enforcement Policy states that when a company satisfies the standards of voluntary self-disclosure, full cooperation, and timely and appropriate remediation, there will be a presumption that the Department will resolve the company’s case through a declination.  That presumption may be overcome only if there are aggravating circumstances related to the nature and seriousness of the offense, or if the offender is a criminal recidivist.

It makes sense to treat corporations differently than individuals, because corporate liability is vicarious; it is only derivative of individual liability.

Second, if a company voluntarily discloses wrongdoing and satisfies all other requirements, but aggravating circumstances compel an enforcement action, the Department will recommend a 50% reduction off the low end of the Sentencing Guidelines fine range.  Here again, criminal recidivists may not be eligible for such credit.  We want to provide an incentive for good conduct.  And scrutiny of repeat visitors.

Third, the Policy provides details about how the Department evaluates an appropriate compliance program, which will vary depending on the size and resources of a business.

The Policy therefore specifies some of the hallmarks of an effective compliance and ethics program.  Examples include fostering a culture of compliance; dedicating sufficient resources to compliance activities; and ensuring that experienced compliance personnel have appropriate access to management and to the board.

We expect that these adjustments, along with adding the FCPA Corporate Enforcement Policy to the U.S. Attorneys’ Manual, will incentivize responsible corporate behavior and reduce cynicism about enforcement.

Of course, companies are free to choose not to comply with the FCPA Corporate Enforcement Policy.  A company needs to adhere to the policy only if it wants the Department’s prosecutors to follow the policy’s guidelines.

Companies that violate the FCPA are always free to choose a different path.  In those instances, if crimes come to our attention through whistleblowers or other means, the Department will take appropriate action consistent with the facts, the law, and the Principles of Federal Prosecution of Business Organizations.

Since 2016, the Fraud Section’s FCPA Unit has secured criminal resolutions in 17 FCPA-related corporate cases, resulting in penalties and forfeiture to the Department in excess of $1.6 billion.  Of those 17 corporate criminal resolutions, only two were voluntary disclosures under the Pilot Program.

Significantly, each of the two voluntary disclosure cases was resolved through a non-prosecution agreement, and in neither case did we impose a compliance monitor.

Of the 15 corporate resolutions that were not voluntary disclosures, all but three were resolved through guilty pleas, deferred prosecution agreements, or some combination of the two.  In ten of those cases, the company was required to engage an independent compliance monitor.

Over that same time period, seven additional matters that came to our attention through voluntary disclosures were resolved under the Pilot Program through declinations with the payment of disgorgement. Clearly, this is not immunity.

Allow me to conclude with the observation that corrupt government officials and criminals who bribe them learn from the cases we bring and the investigative techniques we use.

Criminals try to evade law enforcement.  But they also need to evade internal controls and compliance programs, if those internal controls and programs exist.  Honest companies pose a meaningful deterrent to corruption.

Companies can protect themselves by exercising caution in choosing their business associates and by ensuring appropriate oversight of their activities.

There is an ancient proverb that counsels, “If you want to know a person’s character, consider his friends.”

My advice is to make sure that you can stand proudly with the company you keep.”

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