Last April, the Criminal Division of the U.S. Department of Justice launched a one-year pilot program in the Fraud Section’s Foreign Corrupt Practices Act (“FCPA”) Unit. The pilot program, self-described as “building” on the Yates memorandum, provides structured incentives for companies to self-disclose, cooperate, and remediate with respect to FCPA violations. The remaining four months of the program before it expires promise to provide valuable information on several fronts.
Pursuant to the pilot program, to date DOJ has issued a total of five declination letters. Three of these were in June 2016, and two were in September 2016. All five involved conduct in China. In all five, DOJ pointed to six common factors for its reasons to decline prosecution: 1) timely self-disclosure, 2) thorough investigation, 3) fulsome cooperation (including identifying responsible individuals), 4) a promise to cooperate in the future regarding individual investigations, 5) remediation (including termination of employees in all five declinations), and 6) full disgorgement. All but one also pointed to the establishment of an enhanced compliance program. And only one mentioned a civil penalty in addition to a disgorgement. One declination also cited as a factor that the company’s internal audit program had discovered the reported conduct.
While many of these factors can take a significant period time to put into place, many targets of ongoing FCPA investigations are likely to have significant incentives to seek to reach a resolution with DOJ before next April. Uncertainty pertaining to the upcoming change in DOJ leadership may further heighten motivations for quick resolutions, providing yet more data points on DOJ’s current practices in this area.
The pilot program’s fate and continued implementation after the change in administration in January 2017 could also provide clues as to the new Attorney General’s enforcement priorities. Theoretically, the new administration could elect to terminate the pilot program before its April 2017 expiration, but it could also let it run its natural course, extend it, or even apply it across additional areas of DOJ. Any of these courses of action could provide a signal as to the way ahead in FCPA investigations and perhaps beyond.
