United States: Pilot Program No Longer: DOJ Makes FCPA Pilot Program Permanent Policy

V&E FCPA & Global Anti-Corruption Update E-communication, November 30, 2017

On Wednesday before a crowd of legal and compliance professionals attending the American Conference Institute's 34th International Conference on the Foreign Corrupt Practices Act in Washington, D.C., Deputy Attorney General Rod Rosenstein announced that the Department of Justice (DOJ) is officially incorporating the Department's FCPA Pilot Program into its permanent policy guidelines. Hours later, the "FCPA Corporate Enforcement Policy," as the newly revised policy has been dubbed, was inserted into the United States Attorneys' Manual and published on the Department's website.1

The Obama-era Pilot Program, initiated in April 2016, provided additional incentives to corporations to voluntarily disclose evidence of bribery to government enforcement agencies and cooperate with ensuing investigations. It also provided more detailed guidelines for what would constitute appropriate cooperation and remedial compliance efforts.

Although the original term was just a year, the Program was extended this spring while the DOJ evaluated potential revisions. During its 18-month tenure, voluntary disclosures were up more than 50%.2 In announcing the Program's promotion to a permanent policy, Mr. Rosenstein's prepared remarks — which are also published on the DOJ website — indicate that the program "proved to be a step forward in fighting corporate crime," though it was "determined that there were opportunities for improvement."3 A common criticism of the Pilot Program was that it lacked clarity as to what was required to qualify, and that the incentives for participation were too uncertain. The so-called "enhancements" of the new Policy are meant to provide "guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing."4

While the qualification criteria remain largely unchanged, the new FCPA Corporate Enforcement Policy certainly strikes a more definitive tone concerning available incentives. If a company voluntarily discloses, fully cooperates, and appropriately remediates the misconduct, the new Policy provides that "there will be a presumption that the company will receive a declination."5 Under the Pilot Program, the DOJ had only suggested it would "consider a declination of prosecution" for similarly situated companies.6 As Mr. Rosenstein described in his remarks, the now-revised Policy's "presumption may be overcome only if there are aggravating circumstances related to the nature and seriousness of the offense, or if the offender is a criminal recidivist."7 Where such aggravating factors exist (warranting criminal charges instead of a declination), complete participation in the Policy will now result in a full 50% penalty reduction for non-recidivists, whereas under the Pilot Program 50% was merely the upper end of possible discounts.8 The Pilot Program's possible 25% discount for cooperation, even without voluntary disclosure, remains available under the Policy.9

As the Department cautioned in announcing the new Policy, it is important to remember that these guidelines are not legally binding and provide no legal rights or guarantees. The U.S. Attorneys' Manual is merely a guideline — the government maintains prosecutorial discretion over these matters. Still, the new Policy language suggests that the DOJ intends to further incentivize companies to disclose with the promise of declinations.

Not a "Free Pass"

Companies should keep in mind that a declination may mean avoiding criminal charges and penalties, but it is not a "free pass." Qualification for the Policy's benefits requires disgorgement of any profits obtained as result of the misconduct.10 Measuring the amount of "ill-gotten gains" is a complicated process, and often results in multi-million dollar forfeitures.11

Moreover, in order for companies to be positioned to provide what the Department views as "full cooperation" under the Policy likely will require an extensive internal investigation, including document collection and review, interviews, and government presentations. The Policy requires sharing "all relevant facts gathered during a company's independent investigation," "preservation, collection, and disclosure of relevant documents," and making employees available for government interviews.12 Companies must conduct a root cause analysis and implement appropriate measures as part of their remediation requirements.13 Cooperating with a government investigation often proves to be a significant drain on companies' time and resources. Reputational risk is also a concern, as even declinations under the Policy will be made public.14

Individuals Remain at the Forefront

Since the publication of the 2015 "Yates Memo," the DOJ has espoused an increased focus on individual accountability for corporate misconduct. The Pilot Program and now the FCPA Corporate Enforcement Policy further reinforce DOJ's focus on investigating and penalizing the individual wrongdoers within companies. Indeed, many of the participation requirements revolve around identifying and providing evidence that could potentially be used to support prosecution of individuals, as well as taking disciplinary action against those involved.

In his remarks, Mr. Rosenstein reiterated that the new policy is meant to "reinforce the Department's commitment to hold individuals accountable for criminal activity." He explained the DOJ's position that "[e]ffective deterrence of corporate corruption requires prosecution of culpable individuals. We should not just announce large corporate fines and celebrate penalizing shareholders." The published remarks cite several recent FCPA prosecutions — all of individuals — and note that "19 individuals have pleaded guilty or been convicted in FCPA-related cases so far this year."15

The announcement of the FCPA Corporate Enforcement Policy's adoption provides some clarity in what has largely been an uncertain enforcement environment under the Trump administration. While it may take some time for the actual investigations initiated under the present administration to season, it seems that there is a commitment to building on the successes of the Pilot Program and a continued focus on individual liability and corporate transparency.

Footnotes

1 USAM 9-47.120 – FCPA Corporate Enforcement Policy. Available at https://www.justice.gov/usam/usam-9-47000-foreign-corrupt-practices-act-1977.

2 According to the published prepared remarks for Mr. Rosenstein's announcement, in the first year of the Pilot Program, the DOJ's FCPA Unit received 22 voluntary disclosures, compared to 13 during the previous year. In total, during the year and a half that the Pilot Program was in effect, the FCPA Unit received 30 voluntary disclosures, compared to 18 during the previous 18-month period. "Deputy Attorney General Rosenstein Delivers Remarks at the 34thInternational Conference on the Foreign Corrupt Practices Act," Nov. 29, 2017 (as prepared for delivery) ("Rosenstein Remarks"). Available at https://www.justice.gov/opa/speech/deputy-attorney-general-rosenstein-delivers-remarks-34th-international-conference-foreign.

3 Id.

4 Id.

5 USAM 9-47.120(1).

6 U.S. Dept. of Justice, "The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance," April 15, 2016 ("Pilot Program"), at 9. Available at https://www.justice.gov/archives/opa/blog-entry/file/838386/download.

7 Rosenstein Remarks.

8 Compare the Policy's language — "If a criminal resolution is warranted...the Fraud section will accord, or recommend to a sentencing court, a 50% reduction off of the low end of the U.S. Sentencing Guidelines" (USAM 9-47.120(1) — with the language of the Pilot Program, "if a criminal resolution is warranted, the Fraud Section's FCPA Unit may accord up to a 50% reduction..." (Pilot Program, at 8).

9 USAM 9-47.120(2); Pilot Program, at 8.

10 USAM 9-47.120(1).

11 "Declinations with Disgorgement" was the topic of a previous V&E Insight publication by CCL Partner Jessica Mussallem six months after the Pilot Program was initiated. That article, available at https://www.velaw.com/Insights/Declinations-with-Disgorgement--The-DOJ-s-New-Enforcement-Category/, includes specific case examples from early declinations under the Program, as well as commentary on the uncertainty of the Program's incentive structure.

12 USAM 9-47.120(3)(b).

13 USAM 9-47.120(3)(c).

14 USAM 9-47.120(4).

15 Rosenstein Remarks.

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