As highlighted in this previous post, earlier today Deputy Attorney General Rod Rosenstein announced that the DOJ issued a new “revised FCPA corproate enforcement policy.” (See here for the actual policy in the U.S. Attorneys’ Manual).
The following statement may be attributed to Professor Koehler.
As highlighted in my 2012 article “Revisiting an FCPA Compliance Defense,” the DOJ has long seemingly recognized a de facto compliance defense to the FCPA. The DOJ’s April 2016 FCPA Pilot Program (see here and here), issued during the Obama administration, further recognized a de facto compliance defense and moved the DOJ even closer to a compliance defense (which can only actually be accomplished by Congress amending the law).
Today’s announcement of a new “FCPA Corporate Enforcement Policy” that is “aimed at providing additional benefits to companies based on their corporate behavior once they learn of misconduct” moves the DOJ even further along the road of a de facto compliance defense (again without an actual FCPA compliance defense).
Specifically, as stated in the policy.
“When a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, all in accordance with the standards set forth below, there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender. Aggravating circumstances that may warrant a criminal resolution include, but are not limited to, involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism.
If a criminal resolution is warranted for a company that has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated, the Fraud Section:
- will accord, or recommend to a sentencing court, a 50% reduction off of the low end of the U.S. Sentencing Guidelines (U.S.S.G.) fine range, except in the case of a criminal recidivist; and
- generally will not require appointment of a monitor if a company has, at the time of resolution, implemented an effective compliance program.
To qualify for the FCPA Corporate Enforcement Policy, the company is required to pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.”
Elsewhere, the policy states: “The requirement that a company pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue may be satisfied by a parallel resolution with a relevant regulator (e.g., the United States Securities and Exchange Commission).”
The above language is clearly permissive and allows the DOJ to retain complete, unreviewable discretion as to how to resolve corporate FCPA enforcement actions.
Moreover, the phrase “to quality for the FCPA Corporate Enforcement Policy, the company is required to pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue” is very important.
While the new policy is articulated as a “declination” policy akin to a compliance defense, the reality is that the new policy still allows the DOJ to bring so-called “declinations with disgorgement” – an enforcement mechanism invented by the Obama DOJ in September 2016 (see here) and used, at present four times, by both the Obama and Trump administrations. This is merely slapping a new label on something without representing a substantive change. When a company, under threat of DOJ criminal action, pays money to the U.S. government, this represents an FCPA enforcement action pure and simple regardless of what the DOJ calls it.
The main public policy issue to consider from today’s announcement is not whether the DOJ’s new and revised “FCPA Corporate Enforcement Policy” is better than the April 2016 FCPA Pilot Program, but whether non-binding DOJ policy, in which the DOJ retains complete and unviewable discretion, represents sound decision-making in a country based on the rule of law – something the DOJ has been actively talking about in recent months. (See here and here).
One of the best things ever written about the FCPA was penned nearly 35 years ago by Robert Primoff who stated:
“The government has the option of deciding whether or not to prosecute. For practitioners, however, the situation is intolerable. We must be able to advise our clients as to whether their conduct violates the law, not whether this year’s crop of administrators is likely to enforce a particular alleged violation. That would produce, in effect, a government of men and women rather than a government of law.”
What the Foreign Corrupt Practices Act space once again witnessed today is a government of individuals rather than law as the DOJ announced yet another non-binding FCPA enforcement policy document.
If the DOJ is truly serious, as Rosenstein stated in his speech today, of efficiently identifying and punishing criminal conduct and providing guidance and greater certainty for “companies struggling with the question of whether to make voluntary disclosures of wrongdoing,” non-binding DOJ guidance replete with discretionary terms and concepts is not the best answer.
Indeed, as Andrew Weissman (a former DOJ Fraud Section Chief who served in the Obama administration) noted in advocating for a compliance defense, including at the Senate’s 2010 FCPA hearing, an FCPA compliance defense (and other FCPA reforms) are “best suited for Congressional action” and reform should best motivate compliance “on a daily basis” and “regardless of what the Department of Justice is doing.”
Today’s development, in form and mostly in substance as well, is really no different than the 2016 FCPA Guidance and will fall short in best accomplishing the laudable policy objectives the DOJ has long articulated in connection with its FCPA enforcement program.
As highlighted in my 2012 article “Revisiting an FCPA Compliance Defense” and my 2016 article “Grading the FCPA Pilot Program,” the best approach to accomplishing these laudable policy objectives is an actual statutory amendment to the FCPA formally adopting a compliance defense.
In today’s political environment there are many who are likely to view today’s development inching even closer to an actual FCPA compliance defense (without actually accomplishing it) as the Trump administration waving the white flag of surrender to corporate bribery and paving the way for business organizations to go on a bribery binge.
Everyone is entitled to their own opinion of course, but do recognize the following facts.
- Numerous former DOJ and SEC enforcement officials who have served in prior Democratic and Republican administrations (as well as many others) have long actively supported an actual FCPA compliance defense. (See the article “Revisiting an FCPA Compliance Defense” to learn more).
- During the Senate’s FCPA hearing in 2010 and the House’s FCPA hearing in 2011, Democrats supported an FCPA compliance defense. For instance, Senator Christopher Coon’s (D-DE) stated: that he “would welcome [the] opportunity” to work on “potential amendments to the [FCPA] that would allow clarification on the definition of foreign official and the creation of a compliance defense.” Likewise, during the House hearing. Representative John Conyers (D-MI) said he can support the addition of a compliance defense so that companies can fight imposition of criminal liability if individual employees and agents circumvent compliance measures.
- The U.S. is not the only nation with an FCPA-like law and several other “peer” nations have compliance-like defenses and concepts embedded into their actual law (i.e. not merely non-binding guidance by law enforcement) (See the article “Revisiting an FCPA Compliance Defense” to learn more).
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