FCPA pilot program aims to offer predictable outcomes for self-disclosing violations



April 05, 2016

Government Investigations & White Collar Defense Alert

Author(s): Brian T. Kelly, Eric Walz

FCPA pilot program aims to offer predictable outcomes for self-disclosing violations

A new three-pronged approach announced today by the Department of Justice’s Fraud Section aims to give more cooperation credit to companies that violate the Foreign Corrupt Practices Act (“FCPA”). In a nine-page memorandum, the Fraud Section announced a plan to improve investigative and prosecutorial efforts by increasing the number of prosecutors and federal agents tasked with rooting out foreign bribery. Assistant Attorney General Leslie R. Caldwell called the new guidelines a “robust and transparent enforcement program,” and urged companies to self-disclose FCPA violations in exchange for a pilot program offering vastly reduced criminal fines and federal oversight.

The enforcement plan and guidance

The plan restated the Fraud Section’s most recent approach to FCPA investigations and prosecutions. According to the plan, the Department of Justice has assigned ten additional Assistant United States Attorneys to the Fraud Section in an effort to detect and prosecute individuals and companies in violation of the FCPA. At the same time, the FBI has increased its investigative efforts by creating three new squads of special agents devoted to FCPA investigations.

The plan also included the Fraud Section’s first ever written framework explaining the fine reductions and incentives offered to business organizations that self-disclose criminal conduct, fully cooperate and remediate wrongdoing. As is acknowledged in the memorandum, the DOJ has long taken the position that business organizations receive cooperation credit for voluntarily disclosing criminal conduct under the United States Sentencing Guidelines. While that claim is often disputed by defense attorneys, the Fraud Section’s one-year “Pilot Program” intends to put an end to the debate at least with respect to FCPA prosecutions.

The criteria

Business organizations will receive cooperation credit in FCPA matters above and beyond those offered in the Sentencing Guidelines if they meet the Pilot Program’s written criteria. The criteria are broken down into three parts:

Voluntary self-disclosure

In determining whether to give cooperation credit under the Pilot Program, the government will first consider whether disclosure of the criminal conduct is already required by law. If the disclosure was required by law, it will not be considered voluntary self-disclosure. In addition, the Fraud Section requires the voluntary disclosure to occur:

  • Prior to an imminent threat of disclosure or government investigation;
  • Within a reasonably prompt time after becoming aware of the offense;
  • Fully and include all relevant facts, including the identities of individuals involved in any FCPA violations.

Full cooperation

In addition to voluntary self-disclosure, the Pilot Program requires full cooperation. Under the Pilot Program, full cooperation means:

  • Making a timely disclosure of all relevant facts, including involvement of the corporation’s officers, employees and agents in the criminal activity under investigation, proactively notifying government investigators of opportunities to obtain other relevant evidence and identifying criminal conduct of third-party companies and individuals;
  • Preserving, collecting and disclosing relevant documents and other information, including updating government investigators on the progress and results of internal investigations;
  • Making present and former company officers and employees—whether domestic based or foreign—available for interviews with government investigators, disclosing translated versions of foreign documents to the fullest extent legally able and facilitating third-party production of documents and witnesses from foreign jurisdictions.

Remediation

Once the Fraud Division determines that the business organization is eligible for cooperation credit, it will evaluate whether the organization should receive credit for timely and appropriate remediation. A company that does not cooperate should not expect to receive remediation credit. The following criteria will be used to determine whether a business organization may receive remediation credit:

  • Whether the business organization implemented an effective compliance and ethics program;
  • Whether employees responsible for the misconduct, or responsible for supervising those responsible for the misconduct, are disciplined appropriately including any effect on the employee’s compensation;
  • Whether the business organization demonstrated its recognition of the seriousness of the criminal misconduct, accepted responsibility and took steps to reduce the risk of future misconduct.

The credit

Under the Pilot Program, a business organization that satisfies all three criteria can expect up to a 50% reduction off the bottom end of the Sentencing Guidelines fine range, and if at the time of resolution the organization has implemented an effective compliance program, generally will not be subject to a monitor. The Fraud Division may also decline to prosecute a business organization that self-discloses. Such an incentive is unavailable to a company that does not self-disclose or is otherwise required by law to self-disclose. In those circumstances, the best an organization can hope for is a 25% reduction in criminal fines. In either case, the business organization will be required to disgorge all profits associated with the FCPA violation.

Conclusion

The Pilot Program is a good step towards making the Fraud Division’s criminal charging decisions more consistent and understandable to business organizations. Of course, written guidelines are only useful if implemented in a transparent way. Over the next year, business organizations and FCPA counsel should watch closely to see whether the Pilot Program lends some sense of predictability to complex self-disclosure issues.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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