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Once Again The DOJ Shoots Itself In The Foot

This is the fourth time this general post has appeared on these pages (see here [1], here [2] and here [3] for prior posts).

So here it goes again.

The Department of Justice has long wanted companies to voluntarily disclose conduct that implicates the Foreign Corrupt Practices Act. Why then does the DOJ continually make decisions that should result in any board member, audit committee member, or general counsel informed of current event not making the decision to voluntarily disclose?

The recent Societe Generale enforcement action (see here [4] and here [5] for prior posts) is just the latest example.

For starters Societe Generale did not voluntarily disclose.

Moreover, upon becoming the subject of FCPA scrutiny, Societe Generale did not fully cooperate. In the words of the DOJ:

“The Company did not receive full credit for its cooperation because of issues that resulted in a delay during the early stages of the investigation, which led the Offices, without the assistance of the Company, to develop significant independent evidence of the Company’s misconduct …”.

As to the underlying conduct, the DOJ noted:

“the lengthy time span of the conduct; the high dollar value of the bribes paid and the resulting illicit gains; the bribes were paid in a high-risk jurisdiction; and the nature of the misconduct, including that high-level employees within a business unit of the Company’s investment bank were aware of, involved in, or willfully ignorant of the misconduct”

The end result for a non-disclosing, non-fully cooperative company in which the conduct at issue was egregious?

Societe General received a DPA with a settlement amount (prior to offset for a related French law enforcement action) 20% below the minimum amount suggested by the guidelines.

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In short, if I am a rational board member, audit committee member, or general counsel, I look at this “precedent” (and I use that term loosely and not in the sense of case-law precedent) the DOJ has created in this enforcement action (and the many other enforcement actions highlighted in the prior related posts) and think to myself:

“Why in the world should we disclose. Let’s thoroughly investigate the issues, promptly implement remedial measures, and effectively revise and enhance compliance policies and procedures – all internally and without disclosing to the enforcement agencies. In the unlikely event the DOJ finds out about the conduct, even if it is truly egregious, the DOJ is still likely to offer the company an NPA or DPA and we will still likely be able to resolve the matter for a meaningful reduction off the minimum amount suggested by the guidelines. Sure the “FCPA Corporate Enforcement Policy” may offers bigger “carrots” but those are discretionary and generally only relate to settlement amounts and not the full range of financial ramifications that often result from FCPA scrutiny. (See here [7] for the article “Grading the DOJ’s FCPA Corporate Enforcement Policy.”)

In short, if the goal of the DOJ is to encourage corporate voluntarily disclosures, it is actually shooting itself in the foot by virtue of its recent decisions.

The message seems to be clear for any board member, audit committee member, or general counsel informed of current events – do not voluntarily disclose.

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