“Declinations” With Disgorgement
The most recent corporate FCPA enforcement action was a so-called declination with disgorgement involving Liberty Mutual.
Declinations with disgorgement were invented and added to the buffet of options the DOJ has created to resolve FCPA enforcement actions (non-prosecution agreements and deferred prosecution agreements were introduced to FCPA enforcement circa 2004) by the Obama administration and first used in 2016.
A “CEP Declination” Is Still An Enforcement Action
The DOJ recently released a revised version of its Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), a policy document which “applies to all corporate criminal matters handled by the Criminal Division.”
Similar to prior versions of the CEP, the “best” a business organization can generally hope for under the CEP is an enforcement action.
The CEP states:
The Criminal Division will decline to prosecute a company for criminal conduct when the following factors are met:
SEC FCPA Unit Chief – There Are “Plenty Of Situations” Where Not Disclosing “Would Be The Right Choice”
This recent article contains a few interesting quotes from SEC FCPA Unit Chief Charles Cain.
The article states: “The SEC’s enforcement division offers benefits to companies that self-report potential misconduct – usually in the form of reduced penalties and more lenient settlement conditions. Still, companies have no obligation to disclose potential violations, said Charles Cain, who leads the agency’s FCPA unit. “From my perspective, a company never has to come in and there are plenty of situations where learning about something, correcting it and moving on would be the right choice,” Cain told lawyers at a 4 November conference outside Washington, DC.”
Cain’s statement is spot-on (and consistent with voluntary disclosure observations often shared on this website) but hearing it from the head of the SEC’s FCPA Unit Chief is notable.
Once Again, Rebooting A Long-Standing FCPA Proposal, This Time In The Aftermath Of A Recent Disclosure By Stanley Black & Decker
Including the first time I proposed this concept in 2010, this is the 11th time I have written this general post (see here, here, here, here, here, here, here, here, here and here for the previous versions). Until things change I will keep writing it which means I will probably keep writing this same general post long into the future.
The proposal is this: when a company voluntarily discloses an FCPA internal investigation to the DOJ and/or SEC and when one or both of the enforcement agencies do not bring an enforcement action, have the enforcement agency publicly state, in a thorough and transparent manner, the facts the company disclosed and why the enforcement agency did not bring an enforcement action based on those facts.
As highlighted in this prior post, in early 2023 Stanley Black & Decker, Inc. (a manufacturer of industrial tools and household hardware and provider of security products) disclosed:
Lifecore Resolves FCPA Enforcement Action Regarding Wastewater Issues In Mexico
Yesterday, the DOJ released this so-called “declination with disgorgement” letter regarding Lifecore Biomedical, Inc. (f/k/a Landec Corporation) in connection with alleged Foreign Corrupt Practices Act violations involving wastewater issues in Mexico.
Pursuant to the letter agreement, Lifecore agreed to “disgorge” $406,505 in “costs avoided” (which of course is an interesting spin on disgorgement which is traditionally understood to mean relinquishment of unjust gains).
The letter agreement states in full: