DOJ urges voluntary self-disclosure in corporate enforcement policy updates

In a speech Tuesday at Georgetown University, Assistant Attorney General Kenneth Polite Jr. announced revisions to the DOJ’s FCPA corporate enforcement policy (CEP). The agency will consider reducing fines for criminal resolutions by 50-75 percent on the low end of U.S. sentencing guidelines for companies that self-disclose FCPA violations, cooperate with investigators, and remediate the misconduct.

In these circumstances, the DOJ will generally not require a guilty plea from the company to resolve the violation, said Polite, head of the agency’s Criminal Division.

The leniency incentives can also apply to settlements with companies that did not voluntarily self-disclose misconduct but that cooperated with the DOJ’s investigation and remediated the issues, he said. Criminal corporate recidivists might receive some reduction in their fines, Polite said, but the starting point would be higher than the low end of the penalty range.

Fine reductions for recidivists and companies that do not self-disclose violations will not become the new norm, he said, but will be reserved for companies “that truly distinguish themselves and demonstrate extraordinary cooperation and remediation.”

Companies that demonstrate “robust compliance on the front-end,” as well as “even more robust cooperation and remediation on the back-end, if a crime occurs” would be in the best position to benefit from the changes to the CEP, said Polite.

“When a company has uncovered criminal misconduct in its operations, the clearest path to avoiding a guilty plea or an indictment is voluntary self-disclosure,” he said. “It is also the clearest path to the greatest incentives that we offer, such as a declination with disgorgement of profits. And a functioning compliance program with effective detection mechanisms best positions companies to not only identify misconduct in the first instance but to make the important decision of whether to disclose it.”

The policy changes give prosecutors more latitude to reduce fines in criminal resolutions than was currently allowed under the previous policy, which only offered a maximum reduction of 50 percent off the fine guidelines range.

Polite said in gauging how much to reduce fines, prosecutors will assess a company’s or individual’s cooperation on factors like immediacy, consistency, degree, and impact.

“To receive credit for extraordinary cooperation, companies must go above and beyond the criteria for full cooperation set in our policies—not just run-of-the-mill or even gold-standard cooperation but truly extraordinary,” he said. “At the same time, the government will not affirmatively direct a company’s internal investigation, if it chooses to do one, and companies are often well positioned to know the steps they can take to best cooperate in a particular given case. And of course, the facts and circumstances of each case will be unique.”

The policy changes build on previously announced incentives for companies that voluntarily disclose white-collar crime violations, cooperate with DOJ investigators, and remediate the issues that contributed to or allowed the misconduct.

“When a company has uncovered criminal misconduct in its operations, the clearest path to avoiding a guilty plea or an indictment is voluntary self-disclosure.”

Kenneth Polite Jr., Assistant Attorney General, Department of Justice Criminal Division

Polite cited several examples of how the agency will handle resolutions of FCPA violations by companies that self-disclose, cooperate, and remediate, as well as those that do not self-disclose but do cooperate and remediate.

The DOJ in December declined to prosecute French aircraft equipment manufacturer Safran for an FCPA violation regarding alleged bribes paid by employees to a China-based consultant. Safran discovered the apparent misconduct during post-acquisition due diligence of the subsidiaries where it occurred, voluntarily disclosed it to the DOJ, fully cooperated with the subsequent investigation, disgorged more than $17 million in ill-gotten profits, and fired and disciplined several employees involved.

Another example Polite cited was the resolution of FCPA violations by Swiss technology company ABB, which agreed to pay $327 million in penalties in December to settle allegations it bribed officials to win energy contracts in South Africa. Polite said the company did not voluntarily self-disclose the violations but had planned to do so before media reports preempted that attempt.

The company was able to show it intended to disclose the misconduct, cooperated with the investigation, and ensured remediation. Due to a history of FCPA violations, ABB’s fine was set from the middle to high end of the sentencing guidelines, rather than the low end, Polite said.

Companies that fail to report FCPA violations, cooperate, and remediate will continue to face “dire consequences,” Polite said. The new policy extends to other kinds of misconduct as well.

Swiss-based commodity trader Glencore International AG agreed to pay more than $1 billion in fines in May and was placed under a three-year monitorship to settle FCPA and market manipulation violations that occurred over the course of a decade. Polite said the DOJ determined Glencore was only due a “minimal reduction” because of “late and incomplete cooperation and failure to take adequate, timely disciplinary measures” against several employees involved in paying bribes.

The Bank of Nova Scotia (Scotiabank) agreed to pay $127.4 million in August 2020 for its role in a massive price manipulation scheme in the precious metals market. Polite said the fine against the bank was derived from the top end of the sentencing guidelines because the “company’s compliance function contributed to the misconduct.”

The DOJ did not consider reducing the $65 million in fines and restitution Balfour Beatty Communities was ordered to pay in December 2021 to resolve fraud allegations against the military private housing contractor, Polite said. The company did not self-disclose the violations, its cooperation with the DOJ was “lackluster,” it failed to remediate the misconduct, and its compliance program was inadequate before and after the resolution, he said. The DOJ imposed an independent compliance monitor in the case.