On June 9th, DOJ Deputy Attorney General Todd Blanche issued this memo to the head of the DOJ Criminal Division titled “Guidelines for Investigations and Enforcement of the Foreign Corrupt Practices Act.”
At first blush, it may seem like there are many new topics in the Guidelines.
What is perhaps new is that these topics are actually written down in a DOJ policy document, but as highlighted in this prior and future posts, many of the topics discussed in the Guidelines have been happening before our eyes for several years.
For instance, the Guidelines state:
“Prosecutors shall … proceed as expeditiously as possible in their investigations; and consider collateral consequences, such as the potential disruption to lawful business and the impact on a company’s employees, throughout an investigation, not only at the resolution phase.”
The DOJ has long stated an intention to proceed expeditiously in FCPA investigations.
For instance, in this 2005 speech the DOJ’s then Assistant Attorney General Christopher Wray stated:
“Simply put, speed matters in corporate fraud investigations. The days of five-year investigations, of agreement after agreement tolling the statute of limitations – while ill-gotten gains are frittered away and investor confidence sinks – are increasingly a thing of the past.”
As highlighted here, in 2017 Acting Principal Deputy Assistant Attorney General Trevor McFadden stated it was the DOJ’s “intent … for our FCPA investigations to be measured in months, not years.”
As highlighted here, in 2022 Assistant Attorney General Kenneth Polite stated: “Where misconduct has occurred, everyone involved — from prosecutors to outside counsel to corporate leadership — should be ‘on the clock,’ operating with a true sense of urgency.”
Despite this rhetoric from DOJ officials over the past 20 years, long lasting DOJ investigations have continued.
Each year, this site tracks the average length of time business organizations are under FCPA scrutiny and the average is typically 4-5 years. (See here).
In large part because of the long length of FCPA investigations, many companies under FCPA scrutiny have experienced a litany of negative “ripple effects” (in the words of the Guidelines “collateral consequences, such as the potential disruption to lawful business and the impact on a company’s employees …”.
The article “FCPA Ripples” categorizes many of these collateral consequences.
One ripple effect is the often eye-popping pre-enforcement action professional fees and expenses companies may spend during the typical 4-5 years of FCPA scrutiny. In part, this is a function of the “where else” question (see here for the prior post) in which a company under scrutiny in country A will often expand an investigation into multiple countries.
These issues have been discussed and acknowledged by DOJ officials for many years.
For instance, as highlighted in this prior post, in 2015 – against the backdrop of ever-escalating FCPA investigative fees – then DOJ Assistant Attorney General Leslie Caldwell gave the “we do not expect companies to aimlessly boil the ocean” speech.
Caldwell stated:
“All too often, criticism is leveled against the Justice Department for purportedly causing companies to spend years, and many millions of dollars, investigating potential violations. This is particularly true in the FCPA context where the need for international evidence can add to the expense and burden of an investigation. Critics wrongly question the wisdom of disclosing misconduct and cooperating with the government in light of what they perceive to be the department’s requirement that companies then must conduct unnecessarily costly, time consuming and widespread investigations.
There is no question that some cooperating companies spend large sums of money investigating potential misconduct and correcting internal controls issues that allowed the misconduct to occur. The decision to incur those costs, however, is one made by those companies, not a requirement of the department. When a company chooses to cooperate with the government, the manner in which the company approaches its cooperation, and its own investigation of the conduct, can significantly affect the length of the investigation and the costs incurred by the company.
Although we expect internal investigations to be thorough, we do not expect companies to aimlessly boil the ocean. Indeed, there have been some instances in which companies have, in our view, conducted overly broad and needlessly costly investigations, in some cases delaying our ability to resolve matters in a timely fashion.
For example, if a company discovers an FCPA violation in one country, and has no basis to suspect that violations are occurring elsewhere, we would not necessarily expect it to extend its investigation beyond the conduct in that country. On the other hand, if the same people involved in the violation also operated in other countries, we likely would expect the investigation to be broader.
This example is not intended to suggest the proper scope of an investigation of any given matter. My point instead is that, to receive cooperation credit, we expect companies to conduct appropriately tailored investigations designed to root out misconduct, identify wrongdoers and provide all available facts. To the extent a company decides to conduct a broader survey of its operations, that decision, and any attendant delay and cost, are the result of the company’s choices, not the department’s requirement.”
Caldwell’s speech set off a war-of-words of sorts in the FCPA space and shortly thereafter Caldwell again took to the podium and stated: “That’s not us. That’s the companies” who are responsible for the pre-enforcement action professional fees and expenses.” (See here).
In large part because of long-lasting investigations and eye popping professional fees and expenses, many companies under FCPA scrutiny have seen stock prices impacted, bond ratings impacted, credit facilities impacted, and other financial and business disruptions.
In a notable example, logistics company Panalpina was under FCPA scrutiny for many years concerning conduct in Nigeria. In the midst of this scrutiny, during the company’s annual meeting a shareholder demanded that someone “step up and take responsibility” for
the company’s poor performance. In response, Panalpina’s CEO stated:
“You can say the whole FCPA and Nigeria situation reflects badly on the management, but the fact is that as long as we are still involved in the investigation we will continue to lose market share, because our customers have internal regulations which prevent them from doing business with companies which are under investigation by the DOJ. As soon as this investigation is over, we will win some of this business back. Customers have told us ‘as soon as you have settled the FCPA, we will do business with you again.”
