This recent post highlighted the net $218.4 million enforcement action against chemical company Albemarle Corp.
This post highlights additional issues to consider from the enforcement action.
Timeline
As highlighted in this prior post, in February 2018 Albemarle Corp. disclosed scrutiny. Specifically, the company disclosed:
“Based on [an] internal investigation, we have voluntarily self-reported potential issues relating to the use of third party sales representatives in our Refining Solutions business to the DOJ and SEC and intend to cooperate with the DOJ and SEC in their review of these matters.”
Thus, from start to finish, Albermarle’s FCPA scrutiny lasted an unconscionable 5.5 years.
I’ve said it many times, and will continue saying it until the cows come home: if the DOJ/SEC want their FCPA enforcement programs to be viewed as more credible and more effective, the enforcement agencies must resolve instances of FCPA scrutiny much quicker.
This is particularly true in the Albermarle matter given that the company, in the words of the DOJ, among other things
“(i) voluntarily disclos[ed] the conduct that forms the basis for this Agreement before it came to the attention of the Offices; (ii) promptly provid[ed] information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own extensive independent investigation; (iii) ma[de] regular and detailed presentations to the Offices; (iv) proactively identif[ied] information previously unknown to the Offices; (v) me[t] the Offices’ requests promptly; (vi) voluntarily ma[de] foreign-based employees available for interviews in the United States; (vii) collect[ed] and produc[ed] voluminous relevant documents and translations to the Offices, including documents located outside the United States; and (viii) produc[ed] documents to the Offices from foreign countries in ways that did not implicate foreign data privacy laws.”
Likewise, the SEC stated:
“Albemarle’s cooperation included providing regular updates on its internal investigation; giving regular and detailed factual presentations to the staff; voluntarily producing relevant documents (including translations, bank records, emails, and text messages); making current and certain former employees available to the Commission staff, including those who needed to travel to the United States; and summarizing the results of forensic accounting and auditing analysis.”
Voluntary Disclosure Was Not “Reasonably Prompt”
There is of course no requirement in the FCPA to voluntary disclosure. Nor has the DOJ or SEC provided any specific requirements about the timing of a voluntary disclosure. In its FCPA Corporate Enforcement Policy, the DOJ provides, among other things, the following metric for a “voluntary disclosure” – “the company discloses the conduct to the Department ‘within a reasonably prompt time after becoming aware of the offense,’ with the burden being on the company to demonstrate timeliness.”
In other words, the DOJ will determine what “reasonable” is and in the Albermarle enforcement action the DOJ determined that the company’s disclosure was not “reasonably prompt.”
As stated by the DOJ:
“[T]he Company voluntarily disclosed to the Offices conduct that forms the basis for this Agreement; however, the disclosure was not “reasonably prompt” as defined in the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy and the U.S. Sentencing Guidelines (“U.S.S.G.” or “Sentencing Guidelines”) § 8C2.5(g)(1). The Company learned of allegations regarding possible misconduct in Vietnam approximately 16 months before disclosing to the Offices. After an internal investigation, the Company gathered evidence demonstrating the potential misconduct at least approximately nine months prior to the disclosure. The Company took remedial action and continued to investigate other potential issues. In January 2018, the Company disclosed to the Fraud Section misconduct relating to four separate geographies, including Vietnam. Hence, the disclosure was not within a reasonably prompt time after becoming aware of the misconduct in Vietnam.”
For at least the last 15 years, the DOJ (and SEC) have practically begged business organizations to disclose FCPA scrutiny (even though many business organizations make the sensible business decision not to).
Now, the DOJ has taken it a step further and criticized a company – that voluntarily disclosed – for not doing it quick enough.
This is a strategic misstep by the DOJ.
Where Else
The “where else” issue in connection with a voluntary disclosure often works as follows.
A company voluntarily discloses conduct to the DOJ/SEC that occurred in country x that could implicate the FCPA. Before the DOJ/SEC agree to resolve any enforcement action, the agencies will often ask (or the company to demonstrate cooperation will often suggest) a broader review. The lawyers on the receiving end of the “where else” question don’t mind because it often means millions of additional dollars in pre-enforcement action professional fees.
Relevant to the “where else” issue, as indicated above, Albermarle’s FCPA scrutiny began in Vietnam and then expanded to additional countries.
As stated by the SEC:
“Albemarle made an initial self-disclosure to the Commission of potential FCPA violations in Vietnam following its completion of an internal investigation of such conduct and, at the same time, self-reported potential violations it was investigating in India, Indonesia, and China. Albemarle later self-disclosed to the Commission potential violations in other jurisdictions as part of an expanded internal investigation.”
Clawbacks, etc.
According to the DOJ, Albermarle disciplined “employees involved in the misconduct, including terminating eleven employees and withholding bonuses from sixteen employees.”
Elsewhere, the DOJ states:
“[T]he Company withheld bonuses totaling $763,453 during the course of its internal investigation from employees who engaged in suspected wrongdoing in connection with the conduct under investigation, or who both (a) had supervisory authority over the employee(s) or business area engaged in the misconduct and (b) knew of, or were willfully blind to, the misconduct, qualifying the Company for an additional fine reduction in the amount of the withheld bonuses under the Criminal Division’s March 2023 Compensation Incentives and Clawbacks Pilot Program (“Pilot Program”).”
Given the relative “newness” of clawbacks, the DOJ missed an opportunity to provide additional clarity to the business and compliance community on this issue.
The DOJ stated that the misconduct was engaged in by “Albemarle, through its third-party sales agents and subsidiary employees.”
Thus, who are these sixteen employees who had bonuses withheld and for what specific reasons? The resolution documents are not clear on this issue.
