Under the new FCPA Corporate Enforcement Policy recently released by the Department of Justice (“DOJ”), when a company has voluntarily self-disclosed misconduct, fully cooperated in the government’s ensuing investigation, and appropriately remediated the situation and made restitution or otherwise disgorged all illicit profits, there is a now an express presumption – absent certain identified aggravating factors – that DOJ will affirmatively decline to prosecute the company.
This new Policy is an evolutionary step forward in enforcement – not a radical change. For many years, DOJ has been encouraging voluntary self-disclosure and cooperation in FCPA matters with a variety of carrots and sticks, and companies have been pressing for more guidance and transparency. Five years ago, the DOJ and the SEC combined forces to issue a long-awaited “Resource Guide” to the FCPA. By the use of real-world examples and detailed hypotheticals, the Guide provided more concrete direction about the key FCPA issues than was previously available. Since that time, DOJ has provided additional guidance on a case-by-case basis as FCPA matters are made public.
Four important points stand out in the new Policy:
- First, the Policy is more specific and concrete about the benefits of voluntary self-disclosure and cooperation than prior practices, creating an explicit “presumption” of specific results.
- Second, the Policy reinforces DOJ’s oft-stated objective that effective deterrence of corporate corruption requires prosecution of culpable individuals.
- Third, the Policy emphasizes that meaningful cooperation must include tangible assistance in evidence gathering, especially of foreign-located evidence.
- Finally, the Policy explicitly requires restitution or disgorgement, and notes that payments in response to the actions of other regulators (like the SEC) may count towards this requirement.
Here are five important questions addressed by the new Policy:
- What counts as a “Voluntary Self-Disclosure”? For a self-disclosure to count, it must occur reasonably promptly after discovery of the misconduct and before an imminent threat of disclosure by others or government investigation. And it must be fulsome.
- What counts as “Full Cooperation”? Cooperation comes in many forms, and DOJ retains latitude to evaluate the scope, quantity, quality and timing of cooperation based on the circumstances presented by each individual situation. DOJ expects the disclosure to include all relevant information. There is a heavy emphasis on disclosure of facts relevant to prosecuting individuals. Several factors expressly touch on international evidence collection, suggesting that part of the motivation for the Policy as written is to help DOJ overcome one of the greatest obstacles to bringing FCPA cases – the challenges inherent in prosecuting cases where much of the critical evidence is located outside the jurisdiction of U.S. law enforcement’s ability to collect it. DOJ expects a cooperating company to make affirmative efforts lawfully to work around blocking statutes, data privacy considerations, and other similar obstacles to gathering foreign evidence.
- What counts as “Timely and Appropriate Remediation”? The Policy expects a company to undertake a thorough root cause analysis of the misconduct and address the identified root causes in remediation, including by implementing an effective compliance and ethics program. It also expects a company to impose discipline not only on those who directly participated in the misconduct, but also on those who had supervisory responsibility, even if they did not directly participate in the misconduct. Finally, the Policy expects that a company will take affirmative steps to prevent the use of certain popular, but “off-the-record,” communications technologies.
- What “Aggravating Circumstances” may disqualify a company from receiving a declination? Not surprisingly, DOJ does not provide an exhaustive list, so there remains some uncertainty, but Aggravating Circumstances would include: (1) executive management involvement in the misconduct; (2) significant profit to the company from the misconduct; (3) pervasiveness of the misconduct within the company; and (4) recidivism. Even in these circumstances, however, the Policy indicates that a company making voluntary self-disclosure, cooperating, and remediating will still merit a 50% reduction off the low end of the Sentencing Guideline fine range (except for recidivists – not surprisingly, repeat offenders should expect to be treated more harshly).
- Is Any Credit Available Absent a Voluntary Self-Disclosure Or With Less Than Full Cooperation? DOJ still provides some incentives in both circumstances. For a company that does not make a voluntary self-disclosure, but fully cooperates and remediates after discovery, the Policy presumes a 25% reduction off the low end of the Sentencing Guideline fine range.
For more details, see Foley Hoag’s recent client alert available here.