Last week, the U.S. Department of Justice quietly rolled out a revised version of its FCPA Corporate Enforcement Policy. Although the substantive changes do not break new ground, they do affect existing self-disclosure practices. This alert puts those changes on your radar and provides our insights into what they mean.
The updated policy was released on Wednesday, November 20, 2019. When we posted this alert, the new policy was only available in HTML format on DOJ’s website. DOJ’s PDF version of the policy still reflected the version last updated in March 2019.
There are three inline revisions and a new endnote. For convenience, we have provided a verbatim recitation of these changes below.
First, in Paragraph 3(a)—Definitions, Voluntary Self-Disclosure in FCPA Matters, at the third bullet point, DOJ revised the policy as follows:
The company discloses all relevant facts known to it at the time of the disclosure,
including all relevant facts about all as to any individual substantially involved in or responsible for the violation of law misconduct at issue.
And the newly inserted endnote reads:
: The Department recognizes that a company may not be in a position to know all relevant facts at the time of a voluntary self-disclosure, especially where only preliminary investigative efforts have been possible. In such circumstances, a company should make clear that it is making its disclosure based upon a preliminary investigation or assessment of information, but it should, nonetheless provide a fulsome disclosure of the relevant facts known to it at that time.
Second, in Paragraph 3(b)—Definitions, Full Cooperation in FCPA Matters, at the second bullet point, DOJ revised the policy as follows:
Proactive cooperation, rather than reactive; that is, the company must timely disclose all facts that are relevant to the investigation, even when not specifically asked to do so
, and. Additionally, where the company is or should be aware of opportunities for the Department to obtain relevant evidence not in the company’s possession and not otherwise known to the Department, it must identify these opportunities that evidence to the Department;
Third and last, in Paragraph 4—Comment, M&A Due Diligence and Remediation, DOJ inserted language as follows:
The Department recognizes the potential benefits of corporate mergers and acquisitions, particularly when the acquiring entity has a robust compliance program in place and implements that program as quickly as practicable at the merged or acquired entity. Accordingly, where a company undertakes a merger or acquisition, uncovers misconduct by the merged or acquired entity through thorough and timely due diligence or, in appropriate instances, through post-acquisition audits or compliance integration efforts, and voluntarily self-discloses the misconduct and otherwise takes action consistent with this Policy (including, among other requirements, the timely implementation of an effective compliance program at the merged or acquired entity), there will be a presumption of a declination in accordance with and subject to the other requirements of this Policy.
As stated, these policy adjustments are not dramatic shifts in existing FCPA enforcement practices. In fact, the revisions to paragraphs 3(b) and 4 are principally editorial when practically applied. But the revisions to 3(a)—and, in particular, the new endnote associated therewith—do impact corporate FCPA self-disclosure strategy. Here’s why:
The revisions to 3(a) and insertion of the endnote have seemingly expanded the scope of information to be disclosed while simultaneously shrinking the timeline for doing so. On the information front, by replacing “violation of law” with “misconduct at issue,” DOJ is signaling a desire to expand the universe of information it receives upon disclosure. This language change means that the relevance of facts should not be gauged by a company’s own analysis of a legal violation. Instead, DOJ’s apparent expectation is that facts relevant to the misconduct at issue—even if those facts are not relevant to a violation of law—are now part of the self-disclosure.
And the timing for making that disclosure is now clearly sooner rather than later. It remains the company’s burden to establish that its self-disclosure occurred within a “reasonably prompt time after becoming aware of the offense.” However, the newly added endnote provides greater clarity about what “reasonable promptness” means from DOJ’s perspective. Previously, the policy could be read to permit a delayed disclosure while the company conducted a thorough and complete investigation to identify the scope and extent of any violation. The revised policy, instead, demonstrates a belief that a company ought to disclose what it knows—as soon as it knows it—even if the company’s internal investigation or assessment is in its “preliminary” stages.
[Back to reference]
- The insertion of a new endnote resulted in the sequential renumbering of the original two endnotes accordingly.
[Back to reference]