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Rebuttal Points Regarding Lessons From The First Six Months Of The FCPA Pilot Program


Recently Robert Kent (Baker McKenzie) penned this article in Law360 titled “The First 6 Months of FCPA Pilot Program: 10 Lessons.”

This post contains various rebuttal points regarding the article.

First, the article implicitly asserts that the “surge” in FCPA enforcement thus far in 2016 is casually related to announcement of the April 2016 FCPA Pilot Program by the DOJ.

Yes, 2016 has been a record-breaking year for FCPA enforcement as highlighted in this post.

However, the enforcement activity is not casually related to the Pilot Program.

For starters, 14 of the 22 (approximately 65%) corporate FCPA enforcement actions thus far in 2016 have been SEC only enforcement actions. The Pilot Program is a DOJ program, not an SEC program.

Moreover, the companies that have resolved DOJ FCPA enforcement actions in 2016 were under FCPA scrutiny for several years prior to Pilot Program being announced in April 2016. A few representative examples.

  • Och-Ziff (FCPA scrutiny began in 2011)
  • Analogic (FCPA scrutiny began in 2011)
  • PTC (FCPA scrutiny began in 2011)

Moreover, none of the five so-called declinations the DOJ has released in connection with its Pilot Program (see here for the DOJ’s Pilot Program declination page) state that resolution was pursuant to the Pilot Program.

Rather, the letters merely that the resolution was “consistent” with the Pilot Program. This is no doubt due to the fact that Nortek and Akamai Technologies disclosed to the DOJ/SEC nearly 1.5 years prior to the Pilot Program being announced and Johnson Controls disclosed to the DOJ/SEC nearly 3 years prior to the Pilot Program being announced.

In short, there is not believed to be any corporate FCPA enforcement action yet that has been resolved pursuant to the April 2016 Pilot Program in the traditional sense (in other words after the Pilot Program was announced, a company disclosed and cooperated, and then there is a resolution).


The article asserts that “all of the declination letters issued by the DOJ under the Pilot Program … were made public and included explicit allegations of misconduct.”

Yes, the DOJ has made public its five declination letters.

However, the notion that “all of the declination letter .. include explicit allegations of misconduct” is false.

Three of the declination letters (Nortek, Akamai Technologies, and Johnson Controls) concern “possible violations of the FCPA” and contain no meaningful substantive allegations whatsoever.


The article asserts that the “authorities’ increased focus on disgorgement (and relatively less on amount of bribes paid) means that companies under investigation, from the outset, also need to focus on calculating disgorgement.”

However, disgorgement has always been the most important component of FCPA settlements, the Pilot Program has not materially change anything.

As highlighted in prior year SEC FCPA enforcement year in review posts (here, here, here, and here), disgorgement typically comprises approximately 95+% of SEC FCPA settlement amounts in any given year.

More pertinent to the DOJ’s Pilot Program, disgorgement – stated differently the value of the benefit received from the improper conduct – has always been a significant factor under the advisory Sentencing Guidelines in arriving at a criminal fine amount.


The article notes that since the September 2015 Yates Memo and April 2016 Pilot Program there is a focus on prosecuting individuals. On this score, the article carries forward the DOJ’s (and SEC’s) rhetoric on this issue, but the facts are as follows.

Since the Yates Memo was announced, there have been 8 corporate FCPA enforcement actions (this figure includes the 2 “declination & disgorge” enforcement actions). None of the enforcement actions have resulted (at least yet) in any DOJ charges against company employees.

Even though the DOJ stated in the Pilot Program that it “is intended to encourage companies to disclose FCPA misconduct to permit the prosecution of individuals whose criminal wrongdoing might otherwise never be uncovered by or disclosed to law enforcement,” in none of the 5 examples that invoke the Pilot Program has there been (at least yet) any DOJ charges against company employees.


In short, next to nothing is truly known about the first sixth months of the DOJ’s FCPA Pilot Program other than two things.

First, as highlighted in prior posts here and here, in the majority of instances in which the DOJ invoked the Pilot Program (Nortek, Akamai Technologies and Johnson Controls), there does not appear – based on the information in the public domain – that there were any viable criminal charges for the DOJ to actually “decline.”

Second, as highlighted in this prior post, the DOJ has now invented a 5th option when faced with an instance of corporate FCPA scrutiny: (i) do not bring an enforcement action; (ii) bring an enforcement action resolved with a criminal plea; (iii) bring an enforcement action resolved with a non-prosecution agreement; (iv) bring an enforcement action resolved with a deferred prosecution agreement; or (v) bring an enforcement action pursuant to a so-called “declination & disgorge” letter.

Whether the next six months will yield any other tangible lessons from the Pilot Program remains to be seen.

However, don’t forget what was stated in this article titled “Grading the DOJ’s FCPA Pilot Program.”

“[T]he key issue to track is whether the pilot program is motivating voluntary disclosure of potential FCPA violations that did not occur prior to the pilot program. It will be impossible to empirically measure this issue. Likewise, it will be difficult (if not impossible) to assess whether the DOJ is acting consistent with the pilot program for the reasons discussed [elsewhere in the article] regarding how the final sentencing guidelines amount is the product of and contingent upon several less than transparent discretionary calls made by the DOJ earlier in the sentencing guidelines equation.”

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