Corporate America received an early holiday gift this year: The Department of Justice announced today that it will not only make permanent the incentives of its FCPA Pilot Program, but sweetened it with a bonus: the opportunity to receive a declination, rather than a discounted fine.
In April 2016, Andrew Weissman, chief of the Criminal Division’s Fraud section, issued a nine-page memo setting forth the details of a one-year FCPA enforcement pilot program initiated by the Fraud Section’s FCPA Unit. The pilot program does not apply to any other part of the Fraud Section, the Criminal Division, the U.S. Attorneys’ Offices, or any other part of the Justice Department.
Today, in remarks at the International Conference on the Foreign Corrupt Practices Act, Deputy Attorney General Rod Rosenstein noted that the incentives set forth in the FCPA Pilot Program “motivates and rewards companies that want to do the right thing and voluntarily disclose misconduct.”
In the first year of the Pilot Program, the FCPA Unit received 22 voluntary disclosures, compared to 13 during the previous year. In total, during the year and a half that the Pilot Program was in effect, the FCPA Unit received 30 voluntary disclosures, compared to 18 during the previous 18-month period, according to the Justice Department.
“We analyzed the Pilot Program and concluded that it proved to be a step forward in fighting corporate crime,” Rosenstein said. “We also determined that there were opportunities for improvement.”
The result: a revised FCPA Corporate Enforcement Policy. “The new policy enables the Department to efficiently identify and punish criminal conduct, and it provides guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing,” Rosenstein said.
“In most instances, the substance of a policy should be in the U.S. Attorneys’ Manual, and it should be readily understood and easily applied by busy prosecutors,” Rosenstein added. Thus, the newly announced FCPA Corporate Enforcement Policy will for the first time be incorporated into the U.S. Attorneys’ Manual.
The new policy will promote consistency by attorneys throughout the Department. “Establishing internal policies helps guide our exercise of discretion and combat the perception that prosecutors act in an arbitrary manner,” Rosenstein said.
He further stressed that the new policy provides no guarantees. “Preserving a measure of prosecutorial discretion is central to ensuring the exercise of justice,” he said, “but with this new policy, we strike the balance in favor of greater clarity about our decision-making process.”
This new policy is intended to have a win-win effect by encouraging more companies to voluntary disclose issues, while enhancing the Justice Department’s ability to identify and punish culpable individuals.
Importantly, compliance officers will now have much greater transparency about the benefits available if a company satisfies its requirements. “We want corporate officers and board members to better understand the costs and benefits of cooperation,” Rosenstein said. “The policy, therefore, specifies what we mean by voluntary disclosure, full cooperation, and timely and appropriate remediation.” Companies that do not make a voluntary disclosure can still receive benefits for cooperation and remediation.
In his remarks, Rosenstein highlighted a few key policy enhancements:
A declination is possible. When a company satisfies the standards of voluntary self-disclosure, full cooperation, and timely and appropriate remediation, “there will be a presumption that the Department will resolve the company’s case through a declination,” Rosenstein explained. Exceptions may apply to aggravating circumstances related to the nature and seriousness of the offense, or if the offender is a criminal recidivist, he said.
In some cases, a fine reduction will apply. Where a company voluntarily discloses wrongdoing and satisfies all other requirements, but aggravating circumstances compel an enforcement action, the Department will recommend a 50% reduction off the low end of the Sentencing Guidelines fine range. “Here again, criminal recidivists may not be eligible for such credit,” Rosenstein said. “We want to provide an incentive for good conduct and scrutiny of repeat visitors.”
More details on how the Justice Department evaluates a compliance program. The policy specifies some of the hallmarks of an effective compliance and ethics program—such as fostering a culture of compliance; dedicating sufficient resources to compliance activities; and ensuring that experienced compliance personnel have appropriate access to management and to the board.
Since 2016, the Fraud Section’s FCPA Unit has secured criminal resolutions in 17 FCPA-related corporate cases, resulting in more than $1.6 billion in penalties and forfeiture to the Department. Of those corporate criminal resolutions, two were voluntary disclosures under the Pilot Program—and each were resolved through a non-prosecution agreement, without a compliance monitor.
Of the 15 corporate resolutions that were not voluntary disclosures, three were resolved through guilty pleas, deferred prosecution agreements, or some combination of the two. In 10 of those cases, the company was required to engage an independent compliance monitor.
Over that same period, seven additional matters that came to the Department’s attention through voluntary disclosures were resolved under the Pilot Program through declinations with the payment of disgorgement, Rosenstein said. “Clearly, this is not immunity.”
Overall, this development should be welcoming news for the compliance community. Jason Linder, who until May 2017 served as federal prosecutor in the FCPA Unit in the Fraud Section of the U.S. Department of Justice's Criminal Division, says the new FCPA Corporate Enforcement Policy “commendably makes [the incentives of the FCPA Pilot Program] permanent and—importantly—greater.”
“Companies that hit all three wickets of voluntarily self-reporting, full cooperation, and appropriate remediation may now win a full declination rather than just a discounted fine,” adds Linder, who now heads Irell & Manella’s Global Investigations and Anti-Corruption Practice. “That carrot may well change the conversations boards and companies will have when deciding whether to self-disclose in the first instance.”