This recent Bloomberg article is titled “Outing Companies That Avoid Charges a Dilemma for US Prosecutors” and it begins as follows:
“The Justice Department is wrestling over how to provide greater transparency into when it ends investigations of companies without pressing charges, former officials said. Such coveted resolutions, known as declinations, are usually concealed from the public, as details of their existence are sought by the defense bar and other businesses considering whether to self-report white-collar crime. But DOJ is also motivated to show its work, knowing it will give companies more certainty that turning themselves in won’t backfire. Internal DOJ deliberations and discussions with outside counsel over ways to make the process less opaque have a major obstacle to overcome, according to six lawyers who’ve been involved in the talks that date to at least 2016. All parties benefit from more declination visibility except the recipient companies that are outed.”
The same general topic has been discussed for years on these pages.
For approximately 15 years, I have suggested: when a company voluntarily discloses an FCPA internal investigation to the DOJ and/or SEC and when one or both of the enforcement agencies do not bring an enforcement action, have the enforcement agency publicly state, in a thorough and transparent manner, the facts the company disclosed and why the enforcement agency did not bring an enforcement action based on those facts.
Here is why the proposal makes sense and is in the public interest.
For starters (as I first wrote in 2010 and even more relevant today), the DOJ and the SEC are already wildly enthusiastic when it comes to talking about FCPA issues. Enforcement attorneys from both agencies are frequent participants on the FCPA conference circuit and there seems to be no other single law that is the focus of more DOJ or SEC speeches than the FCPA. Thus, there is clearly enthusiasm and ambition at both agencies when it comes to the FCPA.
Further (as I first wrote in 2010 and even more relevant today), both the DOJ and the SEC have the resources to accomplish this task. Both agencies have touted the increased FCPA resources in their respective offices and the new personnel hired to focus on the FCPA. Combine enthusiasm and ambition with sufficient resources and personnel and the proposal certainly seems doable considering that there are likely less than 10 relevant examples per year.
In addition, the DOJ is already used to this type of exercise. It is called the FCPA Opinion Procedure Release (see here), a process the DOJ frequently urges those subject to the FCPA to utilize. For instance, as highlighted in this prior post high ranking DOJ officials have stated: “not enough companies are taking advantage of this process” and that “the opinion process is a tremendous resource and we want to encourage greater use of it going forward.” Under the Opinion Procedure regulations, an issuer or domestic concern subject to the FCPA can voluntarily disclose prospective business conduct to the DOJ which then has 30 days to respond to the request by issuing an opinion that states whether the prospective conduct would, for purposes of the DOJ’s present enforcement policy, violate the FCPA. The DOJ’s opinions are publicly released and the FCPA bar and the rest of FCPA Inc. study these opinions in advising clients largely because of the general lack of substantive FCPA case law.
If the DOJ is able to issue an enforcement opinion as to voluntarily disclosed prospective conduct there seems to be no principled reason why the enforcement agencies could not issue a non-enforcement opinion as to voluntarily disclosed actual conduct. If the enforcement agencies are sincere about providing guidance on the FCPA, as they presumably are, such agency opinions would seem to provide an ideal platform to accomplish such a purpose.
Requiring the enforcement agencies to disclose non-enforcement decisions after a voluntary disclosure could also inject some much needed discipline into the voluntary disclosure decision itself – a decision which seems to be reflexive in many instances any time facts suggest the FCPA may be implicated.
Notwithstanding the presence of significant conflicting incentives to do otherwise, it is hoped that FCPA counsel would advise clients to disclose only if a reasonably certain legal conclusion has been reached that the conduct at issue actually violates the FCPA. Accepting this assumption, transparency in FCPA enforcement would be enhanced if the public learned why the enforcement agencies, in the face of a voluntary disclosure, presumably disagreed with the company’s conclusion as informed by FCPA counsel. If the enforcement agencies agreed with the conclusion that the FCPA was violated, but decided not to bring an enforcement action, transparency in FCPA enforcement would similarly be enhanced if the public learned why.
A final reason in support of the proposal is that it would give the disclosing companies (and others similarly situated) a benefit by contributing to the mix of public information about the FCPA.
In most cases, companies spend millions of dollars investigating conduct that may implicate the FCPA and on the voluntary disclosure process. When the enforcement agencies do not bring an enforcement action, presumably because the FCPA was not violated, these costs are forever sunk and company shareholders can legitimately ask why the company just spent millions investigating and disclosing conduct that the DOJ and the SEC did not conclude violated the FCPA.
However, if the enforcement agencies were required to publicly justify their decision not to bring an enforcement action after a voluntary disclosure, the company would achieve, however small, a return on its investment and contribute to the mix of public information about the FCPA – a law which the company will remain subject to long after its voluntary disclosure and long after the enforcement agencies no enforcement decision. Thus, the company, the company’s industry peers, and indeed all those subject to the FCPA would benefit by learning more about the DOJ and the SEC’s enforcement conclusions.
While the above proposal is triggered when a company makes a voluntary disclosure, it is also worth noting that the DOJ did – in the past – provide general summaries of closed FCPA inquiries.
As highlighted in this prior post, in 1983 in the context of FCPA reform hearings, a House Committee wanted to better understand and access the DOJ’s FCPA enforcement program. To this end, it requested a variety of information from the DOJ, including its closed FCPA cases. The DOJ responded with “summaries of all closed investigations of alleged FCPA violations” and its response detailed 83 investigations summarized over 18 pages. In reading the summaries, it is interesting to note that several instances concern conduct that would very likely be the basis of an FCPA enforcement action in this current era. It is further interesting to observe from the summaries something old-fashioned on display. That is the DOJ being mindful of the evidentiary burdens it would be put to in bringing an action (either in persuading a grand jury to indict or ultimately prevailing at trial).
One final point relevant to the topic at hand.
As highlighted in this prior post, in connection with FCPA reform hearings in the House in 2011 the DOJ was asked by a Congressman about its FCPA declination decisions and was asked to provide more detail as to its declination decisions including the DOJ’s reasons and rationale for why enforcement actions did not result. Soon after the hearing, certain members of Congress sent the DOJ: “Please provide to us information on cases that been brought to the attention of DOJ, but your agency decided, for one reason or another, not to investigate or pursue prosecution within in the last year along with the rationale for those decisions.” As highlighted in the prior post, the DOJ declined to provide specific responses relevant to its declination decisions.
