For years, approximately the last 15-20 years, the Department of Justice has wanted business organizations under Foreign Corrupt Practices Act (and other scrutiny) to voluntarily disclose conduct in violation of the law (or mere potential violation of the law) to the DOJ.
No surprise here, voluntary disclosures make the DOJ’s job easier and in many of these instances it is odd to say that the DOJ is “bringing an enforcement action,” but rather processing a corporate voluntary disclosure.
That the DOJ has made various attempts to encourage voluntary disclosure over the years – and every few years seems to tweak its voluntary disclosure and related corporate criminal enforcement policy – is seemingly an indication that its previous policies were not accomplishing the intended results.
Yesterday, DOJ Assistant Attorney General Kenneth Polite delivered this speech announcing – what amounts to – the DOJ saying what the heck, let’s try this next.
In pertinent part, Polite stated:
“[I]n September of last year, the Deputy Attorney General asked all Department components to write voluntary self-disclosure policies, to the extent that they didn’t already have them, and “to clarify the benefits of promptly coming forward to self-report, so that chief compliance officers, general counsels, and others can make the case in the boardroom that voluntary self-disclosure is a good business decision.”
Although the Division already had such a policy, we took the DAG’s call as an opportunity to reassess and strengthen it. Which brings us to today. I am proud to announce the first significant changes to the Criminal Division’s CEP since 2017.
As you’ll hear, these changes offer companies new, significant, and concrete incentives to self-disclose misconduct. And even in situations where companies do not self-disclose, the revisions to the policy provide incentives for companies to go far above and beyond the bare minimum when they cooperate with our investigations.
CEP Revisions
We are constantly evaluating whether our policies and practices result in appropriately vigorous and fair corporate enforcement. With that in mind, I am pleased to announce important revisions to our Corporate Enforcement Policy, which applies to all corporate criminal matters handled by the Criminal Division, including all FCPA cases nationwide. These revisions provide specific, additional incentives to companies for voluntary self-disclosures, as well as for cooperation and remediation. The revisions make clear that there will be very different outcomes for companies that do not self-disclose, meaningfully cooperate with our investigations, or remediate.
I appreciate that in many situations, companies that have identified potential wrongdoing and are weighing whether to self-disclose that conduct to the Department will be concerned that an aggravating factor may prevent a company from obtaining a declination. And that concern may have led companies and their outside counsel to conclude, under the prior version of the CEP, that it is more prudent not to disclose the misconduct.
The revised CEP presents another path for companies facing such a choice. A path that incentivizes even more robust compliance on the front-end, to prevent misconduct, and requires even more robust cooperation and remediation on the back-end, if a crime occurs. Namely, even if aggravating circumstances are present, although a company will not qualify for a presumption of a declination, under the revised CEP I am announcing today, prosecutors may nonetheless determine that a declination is the appropriate outcome, if the company can demonstrate that it has met each of the following three factors:
- The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct;
- At the time of the misconduct and the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the company’s voluntary self-disclosure; and
- The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation.
Each of these factors is familiar. That is by design. We are requiring companies seeking the possibility of a declination—even in the face of aggravating factors—to take extraordinary measures before, during, and after a Criminal Division investigation to earn such an outcome. This possibility is directed squarely at companies that take compliance and good corporate citizenship seriously.
While some companies may be able to overcome the aggravating factors and receive a declination with disgorgement by meeting these criteria, others will not. But the revised CEP I’m announcing today contains incentives for those companies as well.
If a company voluntarily self-discloses misconduct, fully cooperates, and timely and appropriately remediates, but a criminal resolution is still warranted, the Criminal Division:
- will now accord, or recommend to a sentencing court, at least 50%, and up to 75% off of the low end of the U.S. Sentencing Guidelines fine range, except in the case of a criminal recidivist. In that case, the reduction will generally not be from the low-end of the fine range, and in all cases, prosecutors will have discretion to determine the starting point within the Guidelines range. This revision represents a significant increase from the previous potential maximum reduction of 50% off the Guidelines range; and
- in these circumstances, we will generally not require a corporate guilty plea—including for criminal recidivists—absent multiple or particularly egregious aggravating circumstances. While relevant and important, criminal recidivism alone will not always mean a plea.
This policy applies to all Criminal Division corporate resolutions, not only voluntary self-disclosure cases. There will be many instances in which a company will not have voluntarily self-disclosed conduct to the Criminal Division. In such circumstances, the revised CEP provides Criminal Division prosecutors with a greater range of options to distinguish among companies that commit crime.
The revised CEP provides incentives for companies that do not voluntarily self-disclose but still fully cooperate and timely and appropriately remediate. In such a case, the Criminal Division will recommend up to a 50% reduction off of the low end of the Guidelines fine range. That is twice the maximum amount of a reduction available under the prior version of the CEP. In the case of a criminal recidivist, the reduction will likely not be off of the low end of the range. And in all cases, prosecutors will have discretion to determine the specific percentage reduction and starting point in the range based on the particular facts and circumstances.
To be sure, while 50% off the low end of the Guidelines range is the maximum available (absent a voluntary self-disclosure) under the revised CEP, each and every company starts at zero cooperation credit and must earn credit based on the parameters and factors outlined in the CEP. This is not a race to the bottom. A reduction of 50% will not be the new norm; it will be reserved for companies that truly distinguish themselves and demonstrate extraordinary cooperation and remediation. But having a greater range of cooperation and remediation credit available—from 0% to 50%, instead of from 0% to 25%, and using the full spectrum of the Guidelines from which to apply those reductions—will allow our prosecutors to draw greater distinctions among the quality of companies’ cooperation and remediation.
Many of you may be curious as to how our prosecutors will distinguish between “extraordinary” and “full” cooperation under the revised policy. We are well aware of the differences between corporations and individuals, of course. But with respect to how we consider cooperation, the lens and framework through which we analyze the level and degree of cooperation aren’t so different.
I’ll note some concepts—immediacy, consistency, degree, and impact—that apply to cooperation by both individuals and corporations, which will help to inform our approach to assessing what is “extraordinary.” To defense counsel, recall your days as a prosecutor. In assessing the quality of a cooperator’s assistance, we value: when an individual begins to cooperate immediately, and consistently tells the truth; individuals who allow us to obtain evidence we otherwise couldn’t get, like quickly obtaining and imaging their electronic devices, or having recorded conversations; cooperation that produces results, like testifying at a trial or providing information that leads to additional convictions.
These, of course, are just examples in the individual context. In many ways, we know “extraordinary cooperation” when we see it, and the differences between “full” and “extraordinary” cooperation are perhaps more in degree than kind. To receive credit for extraordinary cooperation, companies must go above and beyond the criteria for full cooperation set in our policies—not just run of the mill, or even gold-standard cooperation, but truly extraordinary. At the same time, the government will not affirmatively direct a company’s internal investigation, if it chooses to do one, and companies are often well positioned to know the steps they can take to best cooperate in a particular given case. And of course, the facts and circumstances of each case will be unique.
The policy is sending an undeniable message: come forward, cooperate, and remediate. We are going to be closely examining how companies discipline bad actors and reward the good ones. Our number one goal in this area – as we have repeatedly emphasized – is individual accountability. And we can hold accountable those who are criminally culpable—no matter their seniority—when companies come forward and cooperate with our investigation.
Failing to take these steps, a company runs the risk of increasing its criminal exposure and monetary penalties.
[…]
To all assembled, and especially our students — I started out noting some changes since I was last on campus. But there is one constant – As a member of this community, none of us are sheltered from criminality. We need only walk a block away to experience, in stark terms, the despair and hopelessness of crime, and its root causes, right here in this neighborhood. The answer is not to run away from it, but to use your resources, education, and experiences to increase your civic engagement and help reach truly lasting solutions to these social ills.
To our corporate citizens – the message is the same. You see, our job is not just to prosecute crime, but to deter and prevent criminal conduct. Through our enforcement efforts and our policies, we are committed to incentivizing companies to detect and prevent crime in their own operations, and to come forward and cooperate with us when they identify criminal wrongdoing.
We need corporations to be our allies in the fight against crime.
And we believe that our revised policies will, at the end of the day, further our ability to bring individual wrongdoers—the corporate executives, employees, and agents who engage in misconduct—to justice.”
