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Time Out – The Obama DOJ Invented “Declinations With Disgorgement,” Drafted The Boilerplate Language, And Used NPAs 22 Times

TIme Out

Some FCPA commentators are either lacking in historical perspective or just spinning narratives to fit their beliefs.

Either one is troubling and from time-to-time someone in the FCPA space has to call a time-out.

This recent post from Matt Kelly who runs a site called Radical Compliance takes issue with the two DOJ corporate FCPA enforcement announced thus far in the Trump administration. Nothing wrong with this as FCPA Professor covered the Linde Gas and CDM Smith “declination with disgorgement” enforcement actions as well (see here, here, here and here for prior posts). And to be sure, I’ve criticized these form of FCPA resolution vehicles invented by the Obama DOJ (see here) as well as non-prosecution agreements used by the Obama DOJ to resolve alleged instances of corporate FCPA liability. In fact, I’ve long argued that NPAs (and DPAs) should be abolished in the FCPA context.

In pertinent part, here is what Kelly says about the two corporate FCPA enforcement actions brought thus far by the Trump administration (obviously a small – at this point – sample size).

“What’s frustrating is that we don’t really know how Linde or CDM Smith met the criteria of the Pilot Program; or why meeting the criteria resulted in no prosecution, when under the Obama Administration a company might have received a deferred-prosecution agreement or some amount of penalties. Did these companies handle their FCPA violations in some fundamentally better way? Or have prosecutors in the Trump Administration fundamentally changed their tune, in favor of no corporate prosecutions?”

[…]

“If we can’t identify what these companies did right, we can’t determine how to emulate that behavior—or whether we can adopt the cynical view that the Trump Administration just isn’t interested in prosecuting corporations any more, so let’s not try too hard at building a rigorous FCPA compliance program. At least some employees and third parties in your extended enterprise have that cynical view already. Compliance officers need a compelling argument, with tangible evidence, to thwart it. Right now, you don’t have much.”

[…]

“I’m not arguing that the Trump Administration needs to punish all FCPA violations at the more severe levels we saw during the Obama Administration. It doesn’t. There are plenty of good arguments for declinations. But we don’t have any arguments right now; just declination letters with generic language that the company met the criteria of the FCPA Pilot Program. That’s not enough if compliance officers want to understand the proper amount of resources they need to manage compliance in the Trump Era.”

Regarding the relevant considerations language in the Linde and CDM Smith enforcement actions (see below) Kelly states: “All we have to digest is boilerplate.”

Time-out.

We interrupt Kelly’s rant with some facts (none of which you will find in his article perhaps because it didn’t fit the narrative he was trying to spin that somehow FCPA enforcement has changed in the Trump administration).

Fact – the Obama DOJ created the FCPA Pilot Program in April 2016 (see here for the prior post).

Fact – the Obama DOJ announced 5 matters as being resolved consistent with the FCPA Pilot Program. 3 of these matters (Akamai, Nortek, and Johnson Controls) were “declinations” (i.e. no enforcement action whatsoever) and 2 of these matters (HMT and NCH) were “declinations with disgrogement.” (The same resolution vehicle Kelly appears to be criticizing the Trump DOJ for using).

Fact – outside the context of the FCPA Pilot Program, the Obama DOJ resolved 22 corporate FCPA enforcement actions through a non-prosecution agreement (in other words Kelly’s assertion / inference that the Obama DOJ typically resolved corporate FCPA enforcement actions more harshly than the two instances thus far in the Trump administration is just plain false).

Fact – the “boilerplate language” Kelly objects to in the two “declinations with disgorgement” thus far in the Trump administration is the same general “boilerplate language” used by the Obama DOJ.

Here is the relevant language from the HMT enforcement action announced by the Obama DOJ on September 29, 2016.

“The Department’s decision to close its investigation into this matter is based on a number of factors, including but not limited to: (1) HMT’s timely, voluntary self-disclosure of the matters described above; (2) HMT’s thorough and comprehensive global investigation of the matter; (3) HMT’s full cooperation in this matter (including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct) and its agreement to continue to cooperate in any ongoing investigations of individuals; (4) HMT’s agreement to disgorge to the Department all profits it made from the illegal conduct; (5) the steps HMT has taken and continues to take to enhance its compliance program and its internal accounting controls; and (6) HMT’s full remediation (including terminating eight employees — including two regional managers and a director of business development — involved in the conduct, sanctioning ten employees through suspensions, pay freezes, bonus suspensions, and reductions of responsibilities, and severing business relationships with the Venezuela agent and the China distributor who were involved in the conduct). HMT also severed business relationships with seven other agents/distributors based on the findings of its investigation.”

Here is the relevant language from the NCH Corp. enforcement actions announced by the Obama DOJ also on September 29, 2016.

“The Department’s decision to close its investigation into this matter is based on a number of factors, including but not limited to: (1) NCH’s voluntary self-disclosure of the matters described above; (2) NCH’s thorough and comprehensive internal investigation of the matter; (3) NCH’s full cooperation in this matter (including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct) and its agreement to continue to fully cooperate in any ongoing investigations of individuals arising from this matter; (4) NCH’s agreement to disgorge to the Department all profits earned from the illegal conduct; (5) the steps NCH has taken and continues to take to enhance its compliance program and its internal accounting controls; and (6) NCH’s full remediation (including terminating and/or taking disciplinary action against the employees involved in the misconduct, including senior managers and lower-level employees involved in the misconduct, as well as high-level executives at NCH’s headquarters in the United States who oversaw the subsidiary in which the China misconduct occurred).”

Here is the relevant language from the Linde enforcement action released by the Trump DOJ on June 16, 2017.

“The Department’s decision to close its investigation into this matter is based on a number of factors, including but not limited to: (1) Linde’s timely, voluntary self-disclosure of the matter; (2) the thorough, comprehensive and proactive investigation undertaken by Linde; (3) Linde’s full cooperation in this matter (including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct) and its agreement to continue to cooperate in any ongoing investigations of individuals; (4) Linde’s agreement to disgorge the profits Spectra Gases and it received from the improper conduct and forfeit to the United States the corrupt proceeds its withheld from companies owned or controlled by the NHTC Officials; (5) the steps Linde has taken and continues to take to enhance its compliance program and its internal accounting controls; and (6) Linde’s full remediation (including terminating and/or taking disciplinary action against the employees involved in the misconduct, including the Spectra Executives and lower-level employees involved in the misconduct; terminating the agreement with the “management company” owned by the NHTC Officials; withholding “Earn-Out” payments attributable to the corrupt conduct from the Spectra Executives; and withholding payments due to companies owned or controlled by the NHTC Officials.”

Here is the relevant language from the CDM Smtih enforcement actions released by the Trump DOJ on June 21, 2017.

“The Department’s decision to close its investigation of this matter is based on a number of factors, including but not limited to: (1) CDM Smith’s timely, voluntary self-disclosure of the matters described above; (2) CDM Smith’s thorough and comprehensive investigation; (3) CDM Smith’s full cooperation in this matter (including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct); (4) CDM Smith’s agreement to disgorge to the Department all profits it made from the illegal conduct; (5) the steps CDM Smith has taken and continues to take to enhance its compliance program and its internal accounting controls; and (6) CDM Smith’s full remediation, including but not limited to terminating all the executives and employees who were involved in or directed the misconduct.”

In short, facts matter.

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