Another day another Foreign Corrupt Practices Act speech by a Department of Justice official.
Earlier today Assistant Attorney General Brian Benczkowski talked about mutual interests between the DOJ and business organizations, transparency, and the DOJ FCPA corporate enforcement program.
This post excerpts the speech and provides various rebuttal points.
“Government enforcers and industry are so often painted as adversaries. But that simplistic view ignores how frequently our individual interests can intersect. Financial fraud and corruption threaten private competition as well as the public fisc. Effective white-collar enforcement promotes market integrity and fairness, as well as fundamental values of democratic accountability. And prosecutors and companies alike each bear a critical responsibility, both in deterring corporate misconduct, and also in addressing such misconduct when it occurs.”
Benczkowski then talked about transparency and stated:
“Mutual interests, however, don’t necessarily guarantee mutual trust. At the Department of Justice, we recognize that transparency often can be key to advancing our mutual interests with the many responsible members of the corporate community. After all, when companies understand what conduct will be credited or penalized, the more likely they are, as generally rational actors, to implement effective compliance programs and, upon finding misconduct, to voluntarily disclose it, cooperate with the government, and remediate. And the more likely they are to work with the government, not against us, and to choose a course of action that ultimately advances the rule of law.
Since rejoining the Department last year, I have made it a priority to foster transparency in our corporate enforcement practices. We have sought to promote transparency in both our general policies and our case-specific resolutions, many of which I will be discussing today. And we have further promoted that transparency through a focus on both the clarity and detail of the policies themselves, as well as their effective dissemination within the Department and to the public.”
The Department’s white-collar prosecutions and resolutions should send an unmistakable message to the private sector: We are serious about fighting corporate fraud and corruption, and we are serious about doing so through resolutions that are fair and effective.
That means, as an initial matter, that we aim to be as transparent and consistent as possible about the criteria we apply in exercising our prosecutorial discretion. We strive to be open books about which factors we find aggravating, which we find mitigating, and how each is penalized, credited, and ultimately weighed. It also means, more fundamentally, that we want to convey to companies the right incentives for responsible corporate behavior. We want to avoid penalties imposed for penalties’ sake. If a company faces other civil or foreign penalties for the same misconduct, we will apply our “anti-piling on” policy to reduce or apportion financial fines, forfeitures, and restitution between authorities to ensure that the overall outcome is equitable and just. We also will avoid penalties that disproportionately punish innocent employees, shareholders, customers, and other stakeholders.
Each of these guiding principles helps ensure that companies and their advisors, with better visibility into our decision-making process, can make their own well-informed decisions going forward.”
The notion that the DOJ strives to be an “open book” is laughable against the backdrop of the DOJ refusing to answer basic questions about its FCPA enforcement policies or basic factual questions regarding FCPA enforcement. (See prior posts here, here, here, and here).
“Of course, the Department conveys its approach to white-collar and corporate enforcement not simply through the cases that we prosecute, but also the cases we agree not to prosecute. The Department’s FCPA Corporate Enforcement Policy is at the forefront of this effort. The Policy lays out in plain terms how we assess FCPA violations based on our evaluation of specific actions taken by a company in the face of misconduct.
By formalizing and memorializing the Department’s declination criteria in the Justice Manual, the policy conveys to both prosecutors and the public that we will reward companies that act responsibly upon uncovering criminal misconduct.
As many of you well know, the Corporate Enforcement Policy details the standards for what constitutes voluntary self-disclosure, full cooperation, and timely remediation, providing for a presumption of a declination when a company meets these conditions. It lays out various aggravating circumstances that could potentially overcome that presumption. And it details reductions to fines that prosecutors should apply if aggravating circumstances call for a criminal resolution with a company that has voluntarily self-disclosed.
At bottom, the policy fosters transparency about when credit is due, and how we will award that credit. With that information, companies and their officers will be better equipped to engage in rational decision-making about the steps they should take to qualify for a declination.
At the end of the day, companies that voluntarily self-disclose, take steps to prevent misconduct through robust compliance programs, and take appropriate remedial steps when misconduct is detected should know that they will get a fair shake from the Department.
To further promote transparency, we have made publicly available all of our case declinations to date under the FCPA Corporate Enforcement Policy. There currently are 12 declination letters published on the Department’s website. Each sheds additional light on how we apply the Corporate Enforcement Policy to different facts and circumstances and the determinative factors in our resolution.”
As highlighted in prior posts here, here and here, among many others, several of these so-called declinations are not transparent. Indeed, based on the information in the public domain it is an open question just what viable criminal charges the DOJ actually declined to prosecute.
“The most recent of those 12 letters involves our decision just last month to not prosecute Cognizant Technology Solutions Corporation, a publicly traded Fortune 200 company, for FCPA violations. Certain high-level employees and agents of Cognizant allegedly participated in a scheme through which they authorized a third-party construction company to pay approximately $2 million in bribes to Indian officials for help in securing a planning permit relating to an office park project. Notwithstanding the fact that the misconduct reached the highest levels of the company, we declined prosecution. And we have made it clear why: The company voluntarily self-disclosed the conduct within two weeks of when the company’s board learned of it. As a result, the Department was able to identify the culpable individuals – and indeed, we have announced charges against the former president and the former chief legal officer of the company for their alleged involvement in the scheme.
Our declination letter also noted, among other factors in the declination: the thoroughness of the company’s internal investigation; the proactive and ongoing nature of its cooperation with the government in investigations and prosecutions; the effectiveness of its preexisting compliance program; and the company’s willingness to fully remediate and disgorge its entire cost savings from the bribery.
A declination letter from this past August provides another reference point. We declined prosecution in the case of the Insurance Corporation of Barbados Limited, or ICBL, despite the involvement of high-level executives in a scheme to bribe a Barbadian government official in exchange for insurance contracts. We reached that decision based, in part, on the company’s voluntary disclosure, its significant remediation efforts, including the termination of all employees involved, its cooperation with our investigation, and its implementation of an enhanced compliance program and more robust internal accounting controls. And the Department pursued individual accountability, charging two of the company’s senior executives, as well as a former Barbadian official.
These two cases make clear that aggravating factors like high-level executive involvement in the misconduct will not necessarily preclude a declination when the company’s actions are otherwise exemplary.”
Benczkowski concluded as follows:
“At the end of the day, we at the Department of Justice are deeply mindful of our role in ensuring greater transparency in corporate enforcement, and the impact that has in the corporate community. Given my own past experience, I’d venture to guess that most, if not all of you, in the room today have had a client ask some version of the following question in the course of a DOJ-facing matter: “How do you think the Department will react if we do X?” Believe it or not, we want to help enable you to better answer those questions with greater confidence and greater credibility. It is in our own interest to do so.
Exercises of prosecutorial discretion are never formulaic. But with more established markers by which both prosecutors and the private sector can conform their actions, we can expand the extent to which government and industry find themselves aligned and working toward the same ends, rather than against each other.
After all, companies are, in many ways, the first line of defense against corporate misconduct. Working with many of you, companies are best equipped and best positioned to evaluate risk and implement measures to prevent corporate misconduct before it occurs.
And when companies are incentivized to avert at the front end – through effective internal controls and compliance programs – the very violations that we would have to prosecute at the back end, that inures to the benefit of both government and industry.
We have mutual interests in seeing corporate misconduct fairly and effectively deterred and redressed. And at the Department of Justice, we will continue to do our part to advance those mutual interests.”
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