DOJ Announces FCPA Enforcement Pilot Program and Guidance
On April 5, 2016, the Fraud Section of the US Department of Justice (DOJ) launched a one-year pilot Foreign Corrupt Practices Act (FCPA) cooperation initiative and released an accompanying memorandum outlining its enforcement plan and guidance. The stated purpose of the new initiative is to increase transparency into the DOJ’s settlement considerations and the particular benefits a company may receive should it choose to self-report an FCPA violation. The memorandum raises several points that may be relevant to companies investigating or considering whether to report potential FCPA violations:
- If a company “cooperates fully” in a case where a criminal resolution is warranted, the company may receive a reduction of up to 50 percent below the low end of the applicable US Sentencing Guidelines fine range, and the DOJ will generally not require the appointment of a monitor. The memorandum notes, as discussed below, that the DOJ may also decline to press charges altogether.
- Consistent with previous guidance, the new program emphasizes the importance of self-reporting FCPA-related misconduct, stating that self-reporting is a mandatory prerequisite to obtaining the full range of potential mitigation credit. Companies that fail to self-report, but thereafter cooperate, will receive “markedly” less credit (at most, a 25 percent reduction off the bottom of the Sentencing Guidelines fine range) regardless of the extent of later cooperation and remediation.
- Self-reporting must (1) occur “prior to an imminent threat of disclosure or government investigation”; (2) be “within a reasonably prompt time after becoming aware of the offense,” with the burden on the company to demonstrate timeliness; and (3) include disclosure of all relevant facts known, including those regarding any individuals involved in the violation.
- Other prerequisites to obtaining full mitigation credit are (1) full cooperation during the course of the investigation; (2) appropriate remediation (e.g., establishing a robust compliance program, taking appropriate disciplinary measures, and reducing the risk of a repeat offense); and (3) disgorgement of all profits resulting from the FCPA violation.
- The memorandum lists a number of factors designed to evaluate the extent of a company’s cooperation. That list includes requiring a proactive approach to disclosing all relevant facts, including those discovered during internal investigations on a rolling basis, whether about the company and its employees or third parties. The company is also expected to produce all documents and, if requested, to make available witnesses and translations, as well as to facilitate third-party overseas discovery. If a company claims that it cannot disclose overseas documents due to foreign data privacy laws, the burden is on the company to establish the prohibition and to identify any legal bases for providing or withholding such documents. Claims of conflicting foreign law will be “closely evaluate[d]” by the Justice Department. Waiver of attorney-client privilege is not required.
Notably, the DOJ also announced that it is devoting additional resources to FCPA investigations, including hiring more prosecutors and FBI agents dedicated to FCPA matters, and will continue to increase its coordination with foreign counterparts.
For years, lawyers operating in the FCPA space have been calling for guidelines on how self-disclosure and cooperation will be measured and credited by the DOJ and the Securities and Exchange Commission (SEC). The Fraud Section’s guidance certainly provides more transparency than ever before. For those situations where clear malfeasance has been uncovered, the new guidance offers a compelling case for self-disclosure, including the possibility of a declination, criminal fines reduced by up to 50 percent, and avoiding the appointment of a monitor. These are all substantial incentives for a company that identifies an FCPA violation to self-report and to cooperate.
Notably absent from the memorandum, however, is guidance for reporting decisions for companies finding suspicious circumstances falling short of an FCPA violation. Similarly, while the memorandum notes the possibility of a declination of prosecution, it offers little elaboration or specifics on what might warrant such a result. Instead, it lists general considerations such as the seriousness of the offense, involvement by executive management, extent of profit and the company’s history of compliance. Accordingly, it is likely that companies and their counsel will continue to struggle with the decision of whether to report.
Government officials and commentators expect that the new guidance—combined with, among other things, the DOJ’s Yates Memorandum and recent remarks from SEC Enforcement Division Chief Andrew Ceresney requiring companies to self-report FCPA violations as a prerequisite to obtaining a deferred prosecution or non-prosecution agreement—will substantially increase the volume of reports to regulators. Such increased reporting, which could test government resources despite the addition of prosecutors and investigators, may cause regulators to rely more heavily on company counsel’s investigations and reports. This could represent an opportunity for companies, in appropriate cases, to build credibility and set the tone in discussions with regulators.
 See Andrew Ceresney, ACI’s 32nd FCPA Conference Keynote Address (Nov. 17, 2015), available at https://www.sec.gov/news/speech/ceresney-fcpa-keynote-11-17-15.html; see also Leslie R. Caldwell, Remarks at ACI’s 32nd FCPA Conference (Nov. 17, 2015), available at https://www.justice.gov/opa/speech/assistant-attorney-general-leslie-r-caldwell-delivers-remarks-american-conference.