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Assistant Attorney General Leslie Caldwell On Transparency, The DOJ’s FCPA Pilot Program, And Corporate Compliance


Yesterday, Assistant Attorney General Leslie Caldwell participated in an event at George Washington University Law School focused on the Foreign Corrupt Practices Act. The DOJ released these prepared remarks that will be familiar to most FCPA practitioners in that the speech did not break any new ground.

Ms. Caldwell spoke at great length about transparency (similar to this April 2015 speech she delivered on the topic) and added how the DOJ’s FCPA Pilot Program (announced in April 2016) was an effort in increase transparency.

This is an interesting statement given that the majority of the DOJ’s so-called declination letters under the Pilot Program merely reference “potential” FCPA violations and offer no substance whatsoever regarding the “potential” violations.

On the issue of transparency, Ms. Caldwell stated:

“I would next like to turn to the related issue of transparency, as it has been one of my priorities to increase transparency regarding charging decisions in our corporate prosecutions.

Corporate 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.  I agree that transparency is very important. Transparency is what enables the public to understand why particular results are reached in particular cases and helps to reduce any incorrect perception that our enforcement decisions may be unreasoned or inconsistent.  Transparency also informs corporate actors and their advisors what conduct will result in what penalties and what sort of credit they can receive for self-disclosure and cooperation with an investigation.

But criminal prosecutions are also about deterring the conduct of future would-be wrongdoers, and I believe transparency plays an important part in achieving deterrence.  Being transparent about our expectations and the consequences of corporate misconduct is another way the Criminal Division can promote lawful corporate behavior.

That is why, earlier this year, I announced a one-year pilot program in the Fraud Section’s FCPA Unit, which provides guidance to our prosecutors for corporate resolutions in FCPA cases, and which is designed to motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section and, where appropriate, remediate flaws in their controls and compliance programs.  The pilot program guidance explains the credit available to companies that voluntarily self-disclose FCPA misconduct, fully cooperate with investigations and remediate.  The pilot program dovetails with a change we made to the Filip Factors, making voluntary disclosure a separate factor to be evaluated in making corporate charging decisions, including in non-FCPA cases.

The guidance provided by the pilot program is designed to enable companies to make more rational decisions when they learn of foreign corrupt activity by their agents and employees.  Companies now understand that in any eventual investigation, a decision not to disclose wrongdoing will result in a significantly different outcome than if the company had voluntarily disclosed the conduct and cooperated in our investigation.

And what we’re seeing is that the pilot program is having an effect.  Although I can’t share precise figures, anecdotally we’ve seen an uptick in the number of companies coming in to voluntarily disclose potential FCPA violations.

Perhaps one thing that’s motivating these companies is that they’ve seen that there are very real upsides to coming in and cooperating.  In the pilot program we said that companies who meet certain criteria—including timely disclosure and full cooperation—are eligible to receive an outright declination.  And over the last six months, we have furthered our commitment to transparency and have made public a number of declination letters to show that this result is attainable for companies that come in and cooperate.

But we remain committed to ensuring that those who violate the law don’t profit from their crimes, even when we decline to prosecute.  That is why the pilot program requires that companies disgorge the proceeds of bribery in order to be eligible for the full benefits, including possible declination, of the program.  In most of our FCPA cases, we work in parallel with the SEC, and disgorgement of proceeds is usually part of the SEC resolution.  Under the pilot program, even when the SEC is not involved in an investigation, disgorgement is still a prerequisite.  Last month, for example, we announced separate resolutions with two private companies, where we declined to prosecute significant FCPA violations, and disgorgement was required.  We make those resolutions public, partly to show others that the pilot program provides real benefits, and partly so that the public understands that corporate wrongdoers are not being allowed to keep profits earned through bribery.  I believe that increased transparency in our FCPA charging decisions will continue to encourage voluntary corporate self-disclosure of overseas bribery, and thus more prosecutions of the individuals responsible for those crimes, and ultimately less crime.

Beyond the pilot program, we have also sought over the past couple of years to more clearly communicate our analysis and evaluation of the considerations laid out in the nine Filip Factors.  Arriving at a corporate resolution requires a unique balancing of the Filip Factors in each case.  In each of our corporate resolutions—be it a guilty plea, deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA)—we provide a written explanation of the key factors that led to our decision.  The factual statements filed with resolution documents typically include a detailed recitation of the misconduct, as publicly admitted by the company.  The actual agreements outline the factors that were significant in determining the type of resolution, such as the corporation’s cooperation—if any—and remedial measures.  We publicly announce corporate resolutions and pleas, and make the documents available on our website.  We are trying to provide the public with a greater insight into our thought processes, analyses and conclusions.

In addition to their use as enforcement tools, our plea agreements, DPAs and NPAs provide a transparent explanation of the department’s expectations when it comes to compliance programs.  Companies seeking to measure their own compliance programs need look no further than many of the resolutions we have made publicly available.  There is perhaps no more transparent guidance to a specific corporation than the terms in a DPA or NPA, especially when we set forth remedial or compliance measures we expect.

Over the course of my career, I have found that when it comes to affecting corporate conduct, nothing has a more powerful impact than concrete examples.  Such examples have traditionally stemmed from publicized corporate prosecutions, as it is more challenging to publicize investigations in which we decline to file charges.

The challenge we continue to work to address is how to appropriately publicize these cases while taking into consideration the legitimate concerns of the companies and individuals who were under investigation.  We are continuing to look for additional ways to better inform the community about cases in which we decline to prosecute, as there is often as much to learn from a decision not to bring charges as a decision to prosecute.  We seek not just to prosecute, but to encourage and reward good corporate citizenship, and increasing transparency can play an important role in achieving that goal.”

Ms. Caldwell also spoke about corporate compliance and stated:

“The department has long placed emphasis when reaching corporate resolutions on the existence or lack of an effective corporate compliance program.  A consistent theme of the fraud, corruption, money laundering and sanctions cases we’ve brought over the years has been a failure of corporate compliance.  In this day and age—more than a decade after the Sarbanes-Oxley Act—very few companies don’t have any compliance program.  Indeed, there’s been a marked improvement in compliance programs over the years, where in the past even large corporations had only rudimentary programs in place.  Indeed, it’s increasingly rare to see a case in which a company has a feeble corporate compliance program.  Instead, what we encounter more often are companies with compliance programs that seem strong on paper but are much weaker in practice.

Over the past 20 years in particular, the role of compliance has evolved, becoming more sophisticated, industry-specific and metrics-oriented.  Many companies have tailored their compliance programs to make sense for their businesses, risk factors, geographic regions and their work.  But some have not.

There is no doubt that monitoring compliance on a global scale is a difficult, but difficulty cannot be used as an excuse to turn a blind eye to problematic business practices.  Compliance programs must be put into place and—more importantly—communicated repeatedly and enforced properly throughout the entire organization.

The emphasis on compliance must be heard not only in the executive suites at headquarters, but wherever the company operates around the globe.  Under the department’s internal guidance, the Principles of Federal Prosecution of Business Organizations, prosecutors must consider “the existence and effectiveness of the corporation’s pre-existing compliance program.”  As all of you know, the United States Sentencing Guidelines also expressly include a company’s corporate compliance program as a factor in corporate sentencing in criminal cases.

We recognized that as prosecutors, we were not best-positioned to evaluate whether a given company’s compliance program really worked, as opposed to looked good on paper.  We also recognized that we might not be best suited to evaluate the quality of remediation proposed or undertaken by a company, or to recommend future remediation.  That is why, last year our Fraud Section hired a compliance consultant—a former federal prosecutor with extensive compliance expertise in a range of different industries—to evaluate corporate compliance and remediation programs.  Our compliance consultant is not simply assisting us in analyzing the compliance programs of companies in resolution negotiations, she has also helped prosecutors improve how we approach investigations.

With the benefit of the experience of the compliance consultant, we are able to conduct more exacting interviews of compliance personnel and other witnesses.  But the compliance consultant also brings with her a real-world understanding of the corporate compliance function in companies in different industries, both big and small.”

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