Justice Department Revises FCPA Corporate Enforcement Policy

December 5, 2017Alerts Corporate Alert

The Foreign Corrupt Practices Act is alive and well under the Trump administration and remains a top priority for the U.S. Department of Justice.

Since 2016, the DOJ’s Fraud Section has resolved 17 criminal corporate matters under the FCPA, obtaining more than $1.6 billion in penalties and forfeited profits.

Last week, Deputy Attorney General Rod J. Rosenstein reaffirmed DOJ’s commitment to FCPA enforcement while announcing a revised corporate enforcement policy aimed at incentivizing corporations to self-report violations and fully cooperate in exchange for a declination of prosecution.

The new policy largely formalizes principles previously announced in April 2016 as part of the DOJ’s “Pilot Program” on FCPA enforcement. Rosenstein credited the positive results of the Pilot Program with a significant increase in voluntary disclosures over the prior 18-month period. As a result, DOJ has adopted the new enforcement guidelines, which will be incorporated into the U.S. Attorneys’ Manual.

Self-Reporting Can Avoid Prosecution

The highlight of the revised policy is a presumption that the government will decline prosecution when a company voluntarily self-reports a violation, fully cooperates with DOJ, and takes appropriate remediation steps.

This presumption of declination is not absolute, but generally applies “absent aggravating circumstances involving the seriousness of the offense or the nature of the offender.”

This new policy will provide firmer guidelines on the outcomes that corporate executives can expect if they decide to self-report, removing some of the uncertainty surrounding a voluntary disclosure.

While there is no strict definition for the types of “aggravating circumstances” that would warrant removing the presumption of obtaining a declination, DOJ suggested it would cover situations where there was “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.”

When aggravating circumstances are present and the DOJ decides to pursue criminal resolution, a corporation that voluntarily discloses and still meets the other requirements of the policy can earn the DOJ’s recommendation for a 50 percent reduction off the bottom end of the Sentencing Guidelines range, and will generally avoid the appointment of a monitor if the company has put an effective compliance program in place.

Full cooperation means:

  • Timely, proactive, and full disclosure of all relevant facts learned in an a company’s independent investigation;
  • Preservation and disclosure of relevant documents (including documents located in foreign jurisdictions and having those documents translated where requested);
  • Facilitating document production from relevant third parties;
  • Acceding to DOJ’s request to defer certain internal investigative steps for a limited period of time so as not to conflict with DOJ’s investigation; and
  • Making officers and employees available for interviews by the DOJ and facilitating interviews of third-party witnesses.

To qualify as “effective remediation,” a company’s actions must include implementing an effective compliance program, appropriate discipline of corporate employees responsible for the misconduct, retention of relevant business records, and an understanding of the seriousness of the conduct at issue and what caused it.

Deputy AG Rosenstein commented that the “hallmarks” of an effective compliance program include “fostering a culture of compliance; dedicating sufficient resources to compliance activities; and ensuring that experienced compliance personnel have access to management and to the board.”

The new policy also counts using experienced compliance personnel, performing quality risk assessments, promoting compliance personnel, and conducting routine compliance audits as other important pieces of an effective compliance program.

Companies that do not voluntarily self-disclose, but ultimately do fully cooperate and take appropriate remedial measures are eligible to receive a recommendation from the DOJ to the sentencing court of up to a 25 percent reduction off the bottom end of the Sentencing Guidelines range.

In announcing the new FCPA corporate enforcement policy, Deputy AG Rosenstein stressed that the renewed focus on individual accountability is still firmly in place. The DOJ will continue to ask that corporations provide facts related to individuals who engaged in criminal conduct, and seek appropriate penalties for those individuals.

In light of the new FCPA enforcement policy, and the DOJ’s continued commitment to ensuring that corporations are complying with the law, it is increasingly important to ensure that your company is adequately protected.

An Ounce of Prevention

First and foremost, businesses should ensure that a robust FCPA compliance policy is in place and that all employees have been trained on how it works.

This means employees must know what is expected of them and how they can quickly and safely report potential FCPA concerns to management.

A company that becomes aware of an FCPA issue must immediately preserve all relevant documents and commence an internal investigation, assisted by independent counsel, to ascertain what exposure the company may have. Full self-disclosure credit may be lost if there is a delay in reporting wrongdoing to the DOJ, so time is of the essence.

Establishing an effective compliance organization with a corporate culture that places an emphasis on doing things the right way may help to stop an FCPA problem before it even starts. Coupling that compliance culture with taking swift action to investigate potential wrongdoing can lead to potential savings of significant financial resources for the company in the long run, and help to get out ahead of any attendant reputational harm that might come from an FCPA prosecution.

If you have any questions about your company’s FCPA compliance program or need assistance handling an internal investigation, Fox Rothschild attorneys are experienced in guiding companies through the full range of FCPA-related issues.

Contact Ryan T. Becker at [email protected] or 215.299.2033 or any member of our White-Collar Compliance & Defense practice group.