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The Numbers Prove That The DOJ’s FCPA Pilot Program Is Really Nothing New

Prior posts (here [1], here [2] and here [3]) have discussed the DOJ’s “new” Foreign Corrupt Practices Act “pilot program” including the fact that the DOJ’s latest attempt to reward voluntary disclosure and cooperation is nothing new (see here [4]).

This post highlights, through the use of the DOJ’s own numbers, that the DOJ’s offer to perhaps extend:

(i) up to a 50% reduction off the minimum amount suggested by the guidelines to companies that voluntarily disclose, cooperate and remediate; and

(ii) up to 25% reduction off the minimum amount suggested by the guidelines to companies that cooperate and remediate even in the absence of voluntary disclosure

is nothing new either.

In short, both in terms of rhetoric and substance, the DOJ’s FCPA “pilot program” is really not “new.”

As highlighted in this Q&A style post [2] in the “pilot program” the DOJ says it “may” offer the following.

Q: Under the “pilot program,” what happens when a company full cooperates and timely and appropriate remediates without voluntary self-disclosure?

A: According to the document: “If a company has not voluntarily disclosed its FCPA misconduct in accordance with the standards set forth above, it may receive limited credit under this pilot program if it later fully cooperates and timely and appropriately remediates. Such credit will be markedly less than that afforded to companies that do self-disclose wrongdoing […]  Specifically, in circumstances where no voluntary self-disclosure has been made, the Fraud Section’s FCPA Unit will accord at most a 25% reduction off the bottom of the Sentencing Guidelines fine range.”

Q: Under the “pilot program,” what happens when a company voluntarily self-discloses as well as fully cooperates and timely and appropriately remediates?

A: According to the document: “When a company has voluntarily self-disclosed misconduct in an FCPA matter in accordance with the standards set forth above; has fully cooperated in a manner consistent with the DAG Memo on Individual Accountability [the Yates Memo] and the USAM Principles; has met the additional stringent requirements of the pilot program; and has timely and appropriately remediated, the company qualifies for the full range of potential mitigation credit.

In such cases, if a criminal resolution is warranted, the Fraud Section’s FCPA Unit:

  • may accord up to a 50% reduction off the bottom end of the Sentencing Guidelines fine range, if a fine is sought; and
  • generally should not require appointment of a monitor if a company has, at the time of resolution, implemented an effective compliance program.

Where those same conditions are met, the Fraud Section’s FCPA Unit will consider a declination of prosecution. […] To qualify for any mitigation credit under this pilot […] the company should be required to disgorge all profits from the FCPA misconduct at issue.”

For starters, the “pilot program” generally commits the DOJ to do nothing (like prior DOJ guidance on the FCPA, such as the 2012 FCPA Guidance, the document states: “this memorandum is for internal use only and does not create any privileges, benefits, or rights, substantive or procedural, enforceable by any individual, organization, party or witness in any administrative, civil, or criminal matter.”).

Even as to the specific percentage thresholds mentioned above, the DOJ is not committing itself to anything. Rather discussion of the thresholds contains the key qualifier “may” and are further qualified to the extent the DOJ, and the DOJ alone, internally (and subject to no review) determines that its standards for “voluntary disclosure,” “cooperation,” and “timely and appropriate remediation” have been satisfied.

Notwithstanding the above, the percentage thresholds are not new.

As demonstrated below there have been numerous instances, prior to last week’s “pilot program,” in which the DOJ has resolved corporate FCPA enforcement actions using the same thresholds it “may” use going forward.

In connection with this post, I reviewed all DOJ corporate FCPA enforcement actions since 2010 and analyzed whether the DOJ settlement amount was below the minimum amount suggested by the guidelines or within the guidelines range.

For starters, it is important to recognize that in 16 instances such an analysis was not possible because the DOJ resolved the action through a non-prosecution agreement. Unlike DPAs and plea agreements, NPAs do not contain a guidelines calculation section, but rather just states a settlement number in the NPA. (As an aside, if the DOJ wants to achieve greater FCPA enforcement transparency, it should consider setting forth a guidelines calculation in NPAs).

Next, it is important to recognize that the guidelines range is a “final number” that is the product of and contingent upon several less than transparent discretionary calls that happen “earlier in the equation.”

In short, looking at the “final number” is interesting, but as a factual matter the “final number” is the end result of a detailed equation. (As an aside, this reality of the guidelines score is meaningful going forward when assessing whether the DOJ is acting consistent with the “pilot program.” In short the DOJ can make discretionary calls “earlier in the equation” that will impact the “final number.” Thus merely looking at the “final number” is not necessarily proof that the DOJ is consistent with the “pilot program.”).

Finally, it is important to recognize that several ultimate DOJ settlement amounts that were significantly below the minimum amount suggested by the guidelines were due to factors other than voluntary disclosure, cooperation, and remediation.

For instance, Innospec (86% below the minimum amount suggested by the guidelines score) was the result of the DOJ giving credit to the company’s claimed inability to pay the full settlement amount as well as credit given for related foreign law enforcement action settlements.

Likewise, VimpelCom (71% below the minimum amount suggested by the guidelines score) was the result of credits and deductions for foreign law enforcement action settlements.

Similar to Innospec, Alcoa (53% below the minimum amount suggested by the guidelines score) was the result of the DOJ giving credit to the company’s claimed inability to pay the full settlement amount.

Removing these “special” circumstances and recognizing that there have been 16 instances since 2010 when such an analysis was not possible because the DOJ used an NPA, the fact remains that there have been more DOJ settlement amounts below the minimum amount suggested by the guidelines, than settlement amounts within the range suggested by the guidelines.

As to DOJ settlement amounts below the minimum amount suggested by the guidelines, the DOJ has already offered companies that have voluntarily disclosed, cooperated and remediated up to, and indeed over, a 50% reduction off the minimum amount suggested by the guidelines.

Examples include: Avon (58% below the minimum amount suggested by the guidelines score) and Pride International (55% below the minimum amount suggested by the guidelines score).

Other enforcement actions that have originated with voluntary disclosure and in which the company cooperated and remediated have come close to 50% or at the very least have exceeded 25% off the minimum amount suggested by the guidelines.

Examples include: ABB (38% below the minimum amount suggested by the guidelines score), ADM (35% below the minimum amount suggested by the guidelines score) and Pfizer (34% below the minimum amount suggested by the guidelines score).

In short, the “carrot” advanced by the DOJ under its “new” “pilot program” for voluntarily disclosing, cooperating and remediating is really nothing new.

Nor is the other “carrot” articulated under the “pilot program” new (i.e. even if no voluntary disclosure, a company that cooperates and remediates, may receive 25% below the minimum amount suggested by the guidelines score).

For instance, Data Systems and Solutions was an enforcement action that did not originate from a voluntary disclosure, yet the settlement amount was 30% below the minimum amount suggested by the guidelines score.

Likewise, HP was an enforcement action that did not originate from a voluntary disclosure, yet the DOJ settlement amount was 30% below the minimum amount suggested by the guidelines score.

Notably, JGC of Japan was an enforcement action that did not originate from a voluntary disclosure nor did the company fully and completely cooperate, yet the DOJ settlement amount was 30% below the minimum amount suggested by the guidelines score. Another related “Bonny Island, Nigeria” enforcement action, Technip, did not involve voluntary disclosure, yet the DOJ settlement amount was 25 % below the minimum amount suggested by the guidelines score.

In short, the numbers tell the true story and the true story is that both in terms of rhetoric and substance, the DOJ’s FCPA “pilot program” is really not “new.”