Yesterday, Assistant Attorney General Leslie Caldwell discussed the DOJ’s FCPA enforcement goals at George Washington University Law School in Washington, D.C. Caldwell’s remarks, available here, covered three topics: enforcement focus on large-scale international corruption; transparency in charging decisions with respect to corporate prosecutions; and fostering corporate compliance and cooperation.
The discussion below focuses on the Q&A portion of the event, which included the audience and panelists Karen Popp of Sidley Austin and Susan Karamanian of GW Law. Assistant Attorney General Caldwell answered questions regarding the DOJ’s new FCPA pilot program, relationships with foreign law enforcement and the DOJ’s understanding of the FCPA’s jurisdictional reach.
DOJ Pilot Program – Voluntary Disclosure
As Caldwell noted in her initial remarks “[c]orporate counsel and practitioners have long raised concerns about what is a perceived lack of transparency, and even arbitrariness, in how the department decides when to bring charges or to seek some lesser resolution in cases involving corporations.” A key point of discussion during the Q&A was the DOJ’s pilot program and corresponding guidance that Caldwell announced in April of this year. The one-year pilot program aims to encourage self-reporting and cooperation. The guidance elaborates on the DOJ’s standards with respect to “voluntary disclosure,” “full cooperation,” and “timely remediation,” and, for the first time, quantifies their potential credit value. However, significant questions remain for companies – in particular, regarding the severity of the conduct that the DOJ expects companies to report (i.e., the monetary value of the suspected bribes) and the timeline at which the DOJ expects to hear from companies (i.e., to what extent should a company internally investigate before reporting).
Regarding the conduct threshold, at the extremes, Caldwell’s suggested calculation in deciding whether to self-report is relatively straightforward. Caldwell stated that the DOJ does not want to hear about “the bribe that was paid on the dock in Argentina to get your package to leapfrog the other package.” If, however, the conduct is significant enough that it could reach the DOJ through the press, whistleblowers, foreign law enforcement, or competitors, a company should seriously consider voluntary-disclosure. For all of the conduct that falls in between, Caldwell suggested considering whether the conduct involved (i) a U.S.-based person or (ii) a high-level employee, regardless of their location.
Caldwell clarified that there should not be an immediate race to the DOJ’s door upon receipt of a tip, in order to reach the DOJ before a potential whistleblower. Citing her experience in private practice, Caldwell expressed an understanding that it is rare for a company to immediately, and reliably, determine that a significant illegal act occurred. It is sensible, Caldwell explained, for companies to take steps to determine whether the allegation is accurate. For self-disclosure credit, Caldwell would expect a company to come forward at the point when it has a “pretty good reason to think it’s true and it’s serious.”
DOJ Pilot Program – Disgorgement with Declination
Following from the pilot program, DOJ has introduced a new form of settlement — disgorgement with a public letter declination. See HMT LLC (Sept. 29, 2016) and NCH Corp. (Sept. 29, 2016). Caldwell explained that the DOJ’s analysis for gaining this settlement is very fact-specific, taking into account the nine Filip factors (including the nature and seriousness of the offense and the pervasiveness of wrongdoing within the corporation). If a company meets sufficient criteria, it will be able to disgorge the profits gained from illegal conduct and receive a declination letter from the DOJ. For defense counsel, it is arguably concerning, and a potential disincentive to self-report, that the declination letters will be made public. Further, there is a concern that, in some cases, the language in the letter may be imposed on companies without a fair chance to contest the characterization of events. In other words, by coming forward, even with a declination indicating best-efforts, a company risks some level of negative public exposure. Caldwell acknowledged this potential for hesitation in self-disclosure. However, she argued that, as a matter of Department policy, disgorgement to the DOJ should be conducted in a transparent manner. Caldwell also stated that companies have come forward after seeing the declinations – for example, realizing that even a high value bribe might warrant a declination in certain circumstances.
DOJ’s Work with Foreign Law Enforcement and the FCPA’s Jurisdictional Reach
Caldwell discussed the DOJ’s active cooperation with other countries on anti-corruption enforcement. The DOJ, for example, participated in the OECD’s Working Group on Bribery and with United Nations anti-corruption efforts. According to Caldwell, this year the cases of Vimpelcom, Alstom and Embraer involved strong multi-jurisdictional efforts. Caldwell stated that the relationships that have developed throughout the world on anti-corruption cases have led to more effective law enforcement relationships on other kinds of cross-border matters, such as cybercrime.
Parallel proceedings involving multiple prosecutors around the world, as well as regulators, lead to a risk that a company will pay a penalty twice for the same conduct – raising questions of international double jeopardy. Caldwell stated that she views the penalty as a pie to be divided, and tries to ensure that not everyone is claiming one hundred percent. Interestingly, Caldwell remarked that the most challenging situations, in her experience, are U.S. state regulators, not foreign governments.
Caldwell confirmed that the DOJ would defer to a foreign prosecutor if the DOJ was convinced that the foreign authorities would be “vigorous in their prosecution” and fair in the outcome. She cited sharing of enforcement with the Netherlands in Vimpelcom and the individuals that were recently charged in Brazil and Saudi Arabia connected to the Embraer matter.
Regarding questions as to whether the DOJ overextends its jurisdictional reach, Caldwell stated that the U.S. DOJ does not “have the time to be the world police.” The DOJ, according to Caldwell, focuses on matters that will affect the U.S. She cited criticism from some in France regarding the BNPP matter and others in Germany regarding the Volkswagen case. In both, Caldwell argued, the conduct was tied to the U.S. and significant U.S. policy interests were at stake. For example, Volkswagen allegedly sent hundreds of thousands of vehicles to the U.S knowing that they violated U.S. energy laws. According to Caldwell, U.S. interests become involved when conduct impacts fair business competition, or when the U.S. banking or securities systems are used to commit illegal acts.
Although it is still early to tell whether the pilot program will lead to increased cooperation and transparency, Caldwell’s discussion of DOJ enforcement priorities and her interpretation of the factors companies should consider when determining whether to self-report provides additional color and detail to the pilot program guidelines. The panelists, and audience, expressed appreciation for Caldwell’s transparency and willingness to spend over an hour after her remarks addressing concerns and answering questions regarding the DOJ’s FCPA enforcement activities.