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 events not making the decision to voluntarily disclose?
For starters, Petrobras did not voluntarily disclose.
As to the underlying conduct, the DOJ stated that it involved:
“[E]xecutives at the highest levels of Petrobras – including members of its Executive Board and Board of Directors – [who] facilitated the payments of hundreds of millions of dollars in bribes to Brazilian politicians and political parties and then cooked the books to conceal the bribe payments from investors and regulators.”
You really don’t get more egregious than that.
The end result for a non-disclosing company in which the conduct at issue was egregious?
Petrobras received an NPA with a settlement amount (prior to offset for a related Brazil law enforcement action) 25% below the minimum amount suggested by the guidelines.
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 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.
FCPA Institute - Boston (Oct. 3-4)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.