On November 29, 2017, Deputy Attorney General Rod Rosenstein announced revisions to the Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy; the revisions are designed to “increase the volume of voluntary disclosures” by corporations and “enhance [the DOJ’s] ability to identify and punish culpable individuals.”
In large part, the revisions described by Rosenstein formalize existing practices that the Department of Justice (DOJ) rolled out in 2016 as part of its voluntary disclosure pilot program. However, the new policy—which has been made part of the United States Attorneys’ Manual—includes an explicit presumption, according to Rosenstein, that the DOJ will “resolve [a] company’s case through a declination” when a company “satisfies the standards of voluntary self-disclosure, full cooperation, and timely and appropriate remediation.” This marks a significant expansion of the incentives previously available under the pilot program.
However, to qualify for the benefits under the policy, “the company is required to pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.” Furthermore, Rosenstein noted that the policy should be viewed as a clear indication of the DOJ’s continued “commitment to hold individuals accountable for criminal activity” under the FCPA as “[e]ffective deterrence of corporate corruption requires prosecution of culpable individuals.”
Presumption of Declination Not Guaranteed
The presumption that the DOJ will decline to bring a case against a company that has self-disclosed, fully cooperated, and remediated may be overcome if there are “aggravating circumstances,” including, but not limited to, “involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism.”
However, practitioners should be aware that neither the policy nor Rosenstein’s remarks shed much light on how the DOJ will actually determine what constitutes aggravating circumstances, and many other important questions remain unanswered. For example, does any prior criminal conviction, regardless of the subject matter, disqualify a company from the benefits offered under the policy, or only prior FCPA offenses? What constitutes a significant profit? These questions create uncertainty with respect to how the DOJ will apply the policy in practice.
Corporate Compliance Program Evaluation Criteria
A company must engage in timely and appropriate remediation to receive credit under the policy. Among other things, to satisfy this criterion, a company must implement “an effective compliance and ethics program.”
In evaluating the efficacy of such programs, the DOJ may consider the following:
- the company’s culture of compliance,
- the resources dedicated to compliance,
- the quality and experience of the personnel involved in compliance,
- the authority and independence of the compliance function,
- the effectiveness of the company’s risk assessment (and the compliance program’s response thereto),
- the compensation and promotion of the personnel involved in compliance,
- the auditing of the compliance program to assure its effectiveness, and
- the reporting structure of compliance personnel.
These criteria previously appeared in the pilot program. The policy, however, enumerates other items that a company must satisfy to receive full credit for remedial steps—some of which did not appear in the pilot program—including the performance of a root-cause analysis and retention of relevant business records.
Interestingly, the policy does not explicitly adopt all of the evaluation criteria set forth in the pilot program. For example, the policy includes consideration of employee discipline for misconduct and oversight failure but makes no mention of compensation considerations in connection with such discipline. As a result, it is unknown what deference the DOJ intends to give to unadopted criteria from the pilot program (or from the “Hallmarks of Effective Compliance Programs” described in the DOJ’s FCPA resource guide).
Reductions in Sentencing Guidelines and Monitorship
To the extent that aggravating circumstances compel an enforcement action in spite of a company’s voluntary self-disclosure, cooperation, and remediation, the policy mandates that U.S. attorneys recommend “a 50% reduction off of the low end of the U.S. Sentencing Guidelines . . . fine range” and generally waive the appointment of a corporate monitor. However, as noted by Rosenstein, “criminal recidivists may not be eligible for such credit. [The DOJ] want[s] to provide an incentive for good conduct. And scrutiny of repeat visitors.”
Continued Focus on Individual Accountability
Finally, practitioners should note that the DOJ has expressed a heightened commitment to prosecuting individuals for corporate misconduct. In July 2017, a legal blog noted that of the “nearly 20 corporate FCPA enforcement actions by the DOJ, approximately $1.4 billion [had been] collected, and not one company employee ha[d] been charged with FCPA offenses” (initial caps lowercased). Although the revised policy should not be read as a response to this report, Rosenstein pointedly noted in his remarks that, “[i]n total, 19 individuals have pleaded guilty or been convicted in FCPA-related cases so far this year” and that “[t]hose cases and others like them reinforce the Department’s commitment to hold individuals accountable for criminal activity.”
This comment is likewise consistent with the goals of the 2015 Yates memo, as well as remarks this year by both Rosenstein and Attorney General Jeff Sessions about the department’s increasing focus on individual accountability. Moreover, individual accountability is recognized in the text of the policy itself, which requires companies to disclose “all relevant facts about all individuals involved in the violation of law” in order to receive credit for voluntary self-disclosure.
David A. Silva is an associate at Jones Day in Dallas, Texas.