US FCPA Corporate Enforcement Policy
The recent announcement by the Department of Justice (DOJ) to codify and formalize the DOJ Foreign Corrupt Practices Act (FCPA) Pilot Program to a permanent guideline is significant for companies considering whether to self-report FCPA-related misconduct. The new FCPA Corporate Enforcement Policy reinforces the DOJ’s message of the importance of having a meaningful corporate compliance program. The new policy further incentivizes companies to voluntarily self-disclose FCPA misconduct by establishing a presumption in favor of a declination of prosecution, albeit a rebuttable one, in exchange for self-disclosure.
The FCPA is the primary US anti-corruption law that criminalizes bribery payments made by companies to foreign government officials in an effort to obtain or retain business. The FCPA does not mandate that companies disclose known or suspected violations. To motivate companies to make voluntary disclosures of FCPA violations, the DOJ launched a one-year pilot program in April 2016, making self-disclosing companies eligible to receive a declination of prosecution or, in the alternative, considerable reductions in penalty and fines. On November 29, 2017, Deputy Attorney General Rod Rosenstein announced the new Corporate Enforcement Policy, making the Pilot Program permanent by incorporating the Pilot Program into the US Attorneys Manual (USAM) at Title 9-47.120.
Differences between the Corporate Enforcement Policy and the Pilot Program
The Corporate Enforcement Policy shares the same core principals outlined in the Pilot Program. Under both programs, companies that self-disclose potential FCPA-related misconduct may be spared from an enforcement action and the imposition of a monitor in return for the voluntary self-disclosure, full cooperation and remediation. However, there are notable key differences:
First, under the new program, the DOJ will give a self-disclosing company the presumption of declination, even if a company’s disclosed conduct warrants an enforcement action. In contrast, under the Pilot Program, the DOJ promised to consider a declination of prosecution. Consequently, the new policy provides greater assurances for companies in an effort to help tip the scale in favor of voluntary self-disclosure as the companies contemplate whether to self-disclose. Importantly, the presumption in favor of a declination is rebuttable if there are aggravating circumstances or if the company is a repeat offender.
Second, in the event that the self-disclosing companies do not qualify for the declination, whereas the Pilot Program promised “up to 50-percent reduction” off the bottom end of the Sentencing Guidelines fine range, the new program offers a clear-cut 50-percent reduction. This provides greater certainty and eliminates guesswork of the potential fine reduction amount by companies contemplating self-disclosure.
Remediation Measures Under the Corporate Enforcement Policy
Of course, in order to receive the presumption in favor of a declination, a company must satisfy certain conditions, most of which are largely similar to those enumerated in the Pilot Program. A self-disclosing company must make a timely and complete self-disclosure to the government, fully cooperate with the government’s investigation, and engage in genuine remediation to correct the alleged misconduct. The new policy includes additional specified remediation measures that are worth noting:
Companies seeking the declination must prohibit their employees from using self-destructing apps such as Snapchat, Telegram and Wickr. This requirement demands that companies capture and preserve potential evidence in an era of end-to-end encryption messaging apps designed to destroy potential evidence.
In addition, the new policy requires the company to conduct and provide a root-cause analysis of the misconduct. This is also a newly added requirement that encourages companies to self-reflect and think more extensively about the causes of the misconduct.
The US Corporate Enforcement Policy Compared to UK Model
In our opinion, the significance of the Corporate Enforcement Policy can be better understood and appreciated when compared with other jurisdictions’ self-disclosure regimes. For example, in the United Kingdom, the Serious Fraud Office (SFO), the principal authority that enforces anti-bribery laws in the UK, offers incentives for self-disclosure of bribery-related misconduct as outlined in the SFO’s guidance on Corporate Self-Reporting.
Under the SFO Guidance, if the SFO decides not to prosecute a self-disclosing company, although it has the power to, the SFO may give the self-disclosing company a deferred prosecution agreement (DPA) under which the prosecution is temporarily suspended pending full reparations by the company for the misconduct. In the event that the company does not satisfy the reparations and other conditions under the DPA, the SFO may resume the prosecution against the company.
In contrast, the Corporate Enforcement Policy provides self-reporting companies the presumption of a declination of prosecution, which eliminates the threat of future prosecution related to the same misconduct.
Voluntary Disclosure Under the FCPA
To be sure, the FCPA disclosure obligations are still voluntary and self-disclosure does not guarantee a declination. Companies still need to perform a cost-benefit analysis to determine whether to self-disclose a FCPA-related misconduct. Disclosure is onerous and costly.
Regardless of the resolution of the case, companies are required to disgorge any ill-gotten profits stemming from the misconduct. Unsurprisingly, the amount the government requires to be disgorged is typically higher than the amount contemplated by the company.
Equally important is the requirement to fully cooperate upon following disclosure. Full cooperation requires disclosure of all relevant, proactive participation; timely preservation; de-confliction of investigative steps; and the facilitation of witness interviews, including former employees and employees located overseas.
Furthermore, companies that choose not to voluntarily disclose its FCPA-related misconduct may still receive up to a 25 percent fine reduction (as opposed to the 50 percent reduction contemplated by the Corporate Enforcement Policy) for full cooperation and appropriate remediation, should an enforcement agency bring an enforcement action.
In addition, prior to self-disclosure, a company must evaluate whether it is fully on board with developing and maintaining a robust compliance program to demonstrate that commitment to the DOJ.
Lastly, a company needs to prepare to engage in remediation of the misconduct–even when it involves tough decisions.
On balance, the Corporate Enforcement Policy is favorable for companies that are committed to having meaningful corporate compliance policies and robust compliance programs. The underlying rationale of the FCPA was to create a level playing field that does not allow for bribery. In recent years, significant progress has been made in pushing the anti-corruption agenda forward. For example, foreign governments have been enacting or strengthening their global anti-bribery laws. The announcement of the Corporate Enforcement Policy signals a move in the right direction for the global fight against corruption.
Wallace W. Dietz (email@example.com) is a member at Bass, Berry & Sims PLC and chairs the firm’s Compliance & Government Investigations Practice Group. He has 30 years experience guiding clients through internal and government investigations. Lindsey Fetzer (firstname.lastname@example.org) and Abby Yi (email@example.com) are associates with Bass, Berry & Sims PLC working with clients on white collar and corporate compliance matters.
Civil War in Syria: How Conflict Erodes Trade