Last month, I considered the effects of the Securities and Exchange Commission’s whistleblower program and how it has transformed the dynamics of SEC investigations and enforcement in Foreign Corrupt Practices Act cases. With the now one-year-plus run of the Yates Memo and its incorporation of the memo into the superstructure of the Justice Department’s FCPA Enforcement Pilot Program, it seems to me that these two initiatives have now formally changed the nature of investigations and enforcement of FCPA violations.

At the Society of Corporate Compliance and Ethics (SCCE) 2016 Compliance and Ethics Institute (CEI), Justice Department Principal Deputy Associate Attorney General Bill Baer provided remarks on what constitutes extensive cooperation under the FCPA Pilot Program and, more broadly, what would allow a company to receive a reduction in a fine or penalty. Baer began by stating that credit is only available where an entity has satisfied the requirements of the Yates Memo, which he termed the “Department’s Individual Accountability policy.” To meet this initial threshold, companies who want credit for their cooperation must disclose all facts relating to the individuals involved in the wrongdoing, no matter where those individuals fall in the corporate hierarchy. He stated, “We will not credit cooperation unless this threshold requirement has been met.”

But this means going beyond simply being “proactive” in your interactions, by materially assisting the Justice Department, by disclosing facts that are relevant to the investigation, even when not specifically asked to do so. This could mean such things as a “company describing its own conduct and pointing us to inculpatory documentary evidence, such as e-mails and text messages.” It could also mean providing documents or access to witnesses that the Department might not have obtained through its subpoena power. It could also be organizing binder and other summaries of voluminous documents in such a way as to make it easier for the government to digest.

Yet, Baer went further by emphasizing such cooperation could be “providing information that the government did not know about or did not recognize would be significant.” He provided some examples where cooperation makes case administration easier and more efficient. These instances included providing summaries of evidence that were designed to specifically to assist the government’s investigation; providing data compilation in a manner that is helpful and that the Justice Department could not readily achieve on its own. It also included encouraging individuals with knowledge of the relevant conduct to cooperate with the investigation. Finally, he listed providing information that might otherwise not have been discovered in the ordinary course of the investigation.

Baer’s remarks need to be carefully considered by every chief compliance officer and general counsel before beginning an FCPA investigation. Whether you receive cooperation credit may depend on your cooperation as well other liabilities, foreseen and unforeseen, down the road.

Cooperation, however, now goes even further, as the Justice Department wants companies to help bring more significant charges. Baer stated, “a company or individual will be considered for credit where it provides information that allows the Department to secure resolutions that are more significant—meaning, where a cooperator enables the government to pursue conduct that might not otherwise have been addressed. This type of cooperation may involve detailing relevant conduct by a different party (or parties) participating in the same or similar scheme or that enables the department to net greater recoveries.”

Another newly emphasized linchpin in evaluating cooperation is the timeliness of the cooperation. If it is in the early stages of an investigation, it will be viewed as substantially more helpful than cooperation after the Justice Department has “invested significant time and energy in exposing problematic conduct.” The corollary to this is that “little or no cooperation credit will be afforded in situations where the supposed cooperation occurs after the Department has completed the bulk of its investigation.”

This series of remarks ties into something observed in the Nortek FCPA enforcement action, where the company self-reported to the government even before completing its internal investigation. Baer said that a company should come in as early as it possibly can, even if it has not completed an internal investigation. He did acknowledge that “a company will not be disqualified from receiving cooperation credit simply because it doesn’t have all the facts lined up on the first day; rather, under those circumstances, we expect that cooperating companies will simply continue to turn over the information to our lawyers as they receive it.”

He went on to add that a company could take other actions that could lead to a reduced fine or penalty or even a declination to prosecute. They turned on situations where a company acknowledged the responsibility for it negative actions. This is more than extensive remediation; it moves toward restitution as Baer noted a key factor could be a company’s efforts to help assist victims of the illegal conduct. Baer conceded, “These actions are distinct from cooperation, which is focused on helping us uncover and understand the underlying conduct. But they can be important additional factors in the department’s determination of an appropriate outcome.”

Near the end of his remarks, Baer also had some cautionary statements around cooperation. He stated, “not every interaction between the government and a party under investigation will constitute cooperation.” He then provided an example from the Justice Department’s enforcement action against the RMBS banks. “Mere compliance with legal requirements such as subpoenas, or one-sided presentations urging the department to decline an enforcement action, do not measure up. Indeed, the department may view some such activities—including the belated provision of information that an entity was legally obligated to produce—as impediments to investigative work rather than genuine examples of cooperation,” he said.

Citing a recent matter involving an un-named prescription drug chain that overbilled the government for orders of prescription drugs that were never picked up by customers, Baer concluded with the ubiquitous: “We know meaningful cooperation when we see it.” The evidence involved handwritten pick-up signature logs kept at the cash registers of thousands of pharmacies, but the company cooperated early—which, noted Baer, was all that mattered. “In addition to the thousands of pages of the handwritten logs, the defendant produced extensive spreadsheets reflecting the information on the logs. To accomplish this, the defendant had a team enter the information line by line into a format where it could be analyzed. The defendant also shared its analysis using the information from the logs. This effort avoided the need to spend months and significant government resources tabulating the logs.”

From Baer’s remarks it is clear that the Justice Department expects no adversarial relationship if you self-disclose and want cooperation credit. You will have to provide information; you will have to provide it quickly and keep the flow going. But it is more than simply providing information, it now seems that the Justice Department wants active advice and even guidance from companies in who to pursue and how to pursue them. If this is even the effect of the Yates Memo and FCPA Pilot Program, this is a very big change with multiple consequences both known and unknown. If the prosecutorial arm of FCPA enforcement has now moved into the internal investigation realm, new procedural protections will need to be addressed and put in place going forward.

These procedural protections will have to include protections for potential defendants as well as protocols to protect the integrity of internal investigations. If the Justice Department is going to depend on evidence gathered in internal investigations to bring criminal charges, this will require a critical rethinking of the investigative format from determining facts so that the problem can be stopped and remediated to who can we get to serve up to the Justice Department. Moreover, if the Justice Department wants insights or even suggestions as to the types of claims to bring or new angles to look at, this requires an investigative counsel with prosecutorial experience, not a civil based lawyer who might be more expert in uncovering the facts.

Baer’s remarks need to be carefully considered by every chief compliance officer and general counsel before beginning an FCPA investigation. Whether you receive cooperation credit may depend on your cooperation as well other liabilities, foreseen and unforeseen, down the road.

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