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The Department Of Justice Is Lost


Department of Justice officials have recognized “the need for better defined ‘rules of the road’ in corporate enforcement” meaning “settled and predictable guideposts by which prosecutors exercise their discretion – guideposts that we hope provide greater clarity and clearer expectations to the private sector, and allow companies to conform their conduct accordingly.” (See here).

Nice rhetoric, but as highlighted in this post, as an organization the DOJ is lost when it comes to resolving alleged Foreign Corrupt Practices Act violations by business organizations.

For most of the FCPA’s history (1977 to 2004), there were two options when the DOJ believed that a business organization violated the FCPA. It either charged the company (in which case the company would likely plead guilty) or it did not charge the company.

In late 2004, the DOJ brought to the FCPA context non-prosecution agreements. (See here).

Shortly thereafter, in early 2005 the DOJ brought to the FCPA context deferred prosecution agreements. (See here).

Apparently unhappy with its existing three options of resolving alleged instances of corporate FCPA violations, in April 2016 the DOJ unveiled a non-binding policy (a one year FCPA Pilot Program) in which so-called “declinations” would be available and then in September 2016 the DOJ first used so-called “declinations with disgorgement” to resolve alleged corporate FCPA violations. (See here).

And then in November 2017, it revised the Pilot Program and came up with a new non-binding policy called an FCPA Corporate Enforcement Policy. (See here).

And then in March 2019, the DOJ revised its CEP. (See here).

Over the years, the DOJ has used these alternative resolution vehicles in bewildering, opaque, and inconsistent ways to resolve instances of corporate FCPA scrutiny.

Voluntary disclosures sometimes result in NPAs (see here and here), sometimes result in DPAs (see here), yet other times result in declinations with disgorgement (see here and here).

Companies that do not voluntarily disclose are sometimes offered NPAs (see here), yet others times are offered DPAs (see here), and yet other times are required to enter into plea agreements (see here).

Companies that engage in egregious instances of corporate bribery are sometimes offered NPAs (as highlighted below), yet other times are offered DPAs (see here and here), yet other times are required to enter into plea agreements (see here).

Some FCPA resolutions use NPAs, DPAs and plea agreements to resolve the same core conduct all within a corporate hierachy (see here).

In other instances, the DOJ uses so-called “declinations” even though – based on the information in the public domain – there does not appear to be any viable criminal charges against the resolving company to actually decline (see here, here, here and here).

The absurdity of this hodge-podge law enforcement system reached new levels in recent weeks.

Prior to the Cognizant Technology enforcement action (see here, here and here for prior posts), the DOJ stated in its CEP that:

“When a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, all in accordance with the standards set forth below, there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender. Aggravating circumstances that may warrant a criminal resolution include, but are not limited to, involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism.” (emphasis added).

There seemed to be plenty of aggravating circumstances in the Cognizant matter as per the government’s own allegations: “high-level employees” (Gordon Coburn – President and Steven Schwartz – Executive Vice President, Chief Legal and Corporate Affairs Officer) were involved in the improper conduct; the company “received ill-gotten gains of approximately $16,394,351 as a result of the conduct;” and the improper payments were not just in connection with one project, but “other improper payments in connection with other projects in India.”

Nevertheless, the DOJ resolved Cognizant’s FCPA scrutiny through a so-called “declination with disgorgement” (crediting the amount paid to the SEC).

And then along comes the Fresenius matter (see here and here for prior posts). For starters, allowing FCPA scrutiny to last approximately 6.5 years is indicative of being lost (among other things).

According to the DOJ, the conduct at issue was widespread involving improper conduct in Angola, Saudi Arabia, Morocco, Spain, Turkey, and West Africa; resulting in tens of millions of dollars of gain to the company; the misconduct continued even after the company’s disclosure to the government; the conduct at issue involved high level executives who, among other things, engaged in document destruction; and the company did not even fully cooperate in the DOJ’s investigation “because it did not timely respond to requests by the Department and, at times, did not provide fulsome responses to requests for information.”

The end result?

Fresenius was offered an NPA to resolve its FCPA scrutiny and moreover the DOJ allowed the company to settle for “40% off of the bottom of the U.S. Sentencing Guidelines fine range.”

For a prior post touching upon similar issues, see here “DOJ ‘Enforcement’ Has Become a Joke.”

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