On April 5, 2016, the Fraud Section of the Criminal Division, Department of Justice ("DOJ") released a policy document entitled, The Fraud Sections' Foreign Corrupt Practices Act Enforcement Plan and Guidance ("Guidance"), in an attempt to bring greater transparency to the benefits corporations will achieve by voluntarily disclosing FCPA problems and fully cooperating with investigations of these problems. Unfortunately, the Guidance falls short of accomplishing its intended goal and certainly is not the bold policy pronouncement for which many were hoping.
The Guidance sets forth "three steps" in what DOJ is calling its "enhanced enforcement strategy."
The first step describes enhanced resources being brought to bear in FCPA cases by increasing the DOJ and FBI resources assigned to the FCPA beat. These increased resources have been known for some time. The second step concerns the increased cooperation DOJ is giving to and receiving from foreign law enforcement agencies. International cooperation around corruption has increased slowly but steadily since at least 2007 and so is neither new policy nor particularly noteworthy. The real news in the Guidance concerns the "FCPA enforcement pilot program" being launched by DOJ, effective immediately.
The pilot program's primary goal is "to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA related-misconduct, fully cooperate with the Fraud Section, and, where, appropriate, remediate flaws in their controls and compliance programs." DOJ states in the Guidance that it hopes to achieve this goal by "providing greater transparency about what we require from companies seeking mitigation credit" and "what sort of credit those companies can receive[.]"
The Guidance then explains how its pilot program will work and how the Fraud Section might accord credit over and above what is currently provided for by the US Sentencing Guidelines and the Principles of Federal Prosecution of Business Organizations found in the United States Attorneys' Manual. To qualify for this enhanced credit, a company must engage in the following steps:
Voluntarily disclose the potential FCPA violation. A company that does not voluntarily disclose, may still receive some credit under the program, but that credit will be "at most" a 25% reduction off the bottom of the Sentencing Guidelines fine range.
- Fully cooperate with DOJ's investigation of the potential violation. The Guidance incorporates the policy of the recent "Yates Memo" which was focused on individual prosecutions, and provides helpful detail about what is meant by cooperation. It requires, in essence, that such cooperation be pro-active and fulsome. It notes that less-than-prompt and complete cooperation might result in some degree of credit under the program but that such credit will be "markedly less than for full cooperation[.]"
- Timely and appropriate remediation of the potential violation. The Guidance makes clear that remediation includes improvements to a corporate compliance program and discipline of culpable employees.
When a company has fully met the standards set forth by the Guidance: (1) DOJ may reduce by 50% the bottom end of the otherwise-applicable sentencing guideline fine range.; (2) a monitor will generally not be appointed if the company has implemented an effective compliance program; and (3) DOJ will consider declining prosecution altogether.
While this guidance is a step forward in terms of providing clarity and providing more incentive for companies to voluntarily disclose FCPA problems, it falls short of what could have been.
First, the Guidance itself acknowledges that DOJ often already provides companies that disclose, cooperate and remediate with a reduction below the bottom end of the guidelines range. Second, the benefits set forth in the Guidance are articulated in such a way as to leave DOJ with ample room to avoid according the full benefit. The Guidance says that DOJ "may accord up to a 50% reduction;" that cases in which companies meet the designated criteria "generally should not require the appointment of a monitor" and, in those cases DOJ "will consider a declination of prosecution." (emphasis added). Third and most importantly, the Guidance does not go nearly as far as it could have in serving the goals of law enforcement, while also providing more certainty to companies.
In 2012, I proposed a more robust policy which provides that so long as companies satisfy the following 5 criteria, DOJ would decline to bring a corporate prosecution altogether. Read the full article here
. These 5 criteria are:
The company must voluntarily disclose the violation;
- The potential violation must not include illegal conduct by senior leaders (C-Suite and Board) within the company;
- The company must cooperate fully with the government, including providing evidence and information against employees, officers, directors, and agents of the company;
- The company must agree to implement appropriate remedial measures to mitigate the chances for future violations; and
- Prior to discovering the misconduct, the company must have implemented a robust compliance program.
- And, consistent with the new Guidance, my proposal provides that a company would not be allowed to keep its ill-gotten gains, but that profits from corruption could be disgorged through a civil action by either DOJ or the SEC.
Such a policy would serve the interests of law enforcement by virtually guaranteeing an increase in voluntary disclosures which would give DOJ more of an opportunity to prosecute culpable individuals –given the recent Yates Memo, a big priority for DOJ -- and give DOJ more of a window into corrupt activity worldwide which would assist it with both bringing cases against related companies that do not disclose (such as the series of prosecutions in both the Panalpina and medical device cases) and helping law enforcement agencies in other countries with bringing such cases. This policy would also provide further incentive for companies to establish robust compliance programs. Such a policy would give companies the assurance of knowing they would not be prosecuted at all if they did everything the government wanted them to do while at the same time better serving the ends of law enforcement than does the new Guidance.
In November 2015, the Washington Post reported that the Fraud Section was considering a policy which was described so as to make it sound quite similar to my 2012 proposal. We have been waiting since then to see what would emerge from behind DOJ's closed doors with the hope that the new policy would be truly innovative. Alas, it was not to be.
With the new Guidance, DOJ has missed a wonderful opportunity to establish bold and clear guidance that would both provide real transparency to companies and serve the ends of law enforcement. Instead, a distinct lack of clarity remains -- companies are still forced to guess at how they will be treated at the hands of DOJ -- and law enforcement does not get nearly the assist it could have received. Unfortunately, this guidance, issued just as the baseball season gets underway, is -- and as a lifelong fan of the New York Mets I know something about this -- a swing and a miss.