Last week the Department of Justice (DOJ) held a Press Conference, open to all, led by Andrew Weissmann and Leslie Caldwell. At this Press Conference, they announced the culmination of several ongoing initiatives into a new program around Foreign Corrupt Practices Act (FPCA) enforcement, for which I will use the DOJ-term “Pilot Program”. Contemporaneously, the Fraud Section of the Criminal Division of the DOJ released a written document, entitled, “The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance” (herein “The Guidance”) more fully laying out the specifics of this Pilot Program and providing more background and information for the compliance practitioner.
The DOJ Press Conference and document release make clear that in the FCPA world, when the DOJ talks every Chief Compliance Officer (CCO) needs to listen. Over the next few blog posts, I will be exploring how we got here, where we are and where the compliance community might be going forward. To gain some greater insight from both a former DOJer perspective and in-house compliance practitioner perspective, I visited with Stephen Martin, a partner at Arnold & Porter on these issues.
The Guidance lays out the culmination of changes and adaptations which the Department has gone through since last September, when the Yates Memo was released and its emphasis on the prosecutions of individuals; through the public announcement of the appointment of the new Compliance Counsel position, filled by Hui Chen in November and her insights as to what she would be considering in the exploration of what constitutes an effective compliance program for companies involved in a FCPA investigation; and finally the November summations of both Caldwell and Sally Yates about the DOJ expectations for company’s cooperation going forward under the Yates Memo, further detailing and specifying from the outlines laid out in the Memo.
As a starting point, I think it is incumbent to note that that DOJ, once again discussed the increase in resources, which have been made available to the FCPA unit. The Guidance stated, “These new resources will significantly augment the ability of theCriminal Division’s Fraud Section and the Federal Bureau of Investigation (FBI) to detect and prosecute individuals and companies that violate the FCPA. Specifically, the Fraud Section is increasing its FCPA unit by more than 50% by adding 10 more prosecutors to its ranks. At the same time, the FBI has established three new squads of special agents devoted to FCPA investigations and prosecutions.” Although is not new information, it certainly impends that there are now resources to engage in more FCPA enforcement actions with prosecutorial and investigatory resources.
Additionally the Guidance references another well-documented phenomena, the increase in foreign cooperation with the DOJ and the increase in foreign enforcement of local anti-bribery and anti-corruption (ABC) laws. The former has been ongoing for some time but the initial efforts on foreign government enforcement of local ABC laws largely began in 2015 and into 2016. The Guidance stated, “The Department is strengthening its coordination with foreign counterparts in the effort to hold corrupt individuals and companies accountable. Law enforcement around the globe has increasingly been working collaboratively to combat bribery schemes that cross national borders. In short, an international approach is being taken to combat an international criminal problem.” Exhibit A on the enforcement is the recently announced VimpelCom FCPA enforcement action when, in addition to settling with the DOJ and Securities and Exchange Commission (SEC), the company settled with the Public Prosecution Service of the Netherlands paying $397.5 million in penalties for the same conduct prosecuted as violations of the FCPA.
I think the DOJ should be commended for not only listening to the compliance community but also taking some of the pointed complaints and addressing them going forward. Martin believes this is a process which began with the Morgan Stanley Declination and went on to say the “DOJ does seem to be listening to corporation and to their outside counsel about if you have an effective compliance program and you self disclose, does that really help the company either seek, ultimately, a declamation of prosecution or a reduction in fine.” He went on to note the DOJ has “set up a pilot program for a year, giving companies the opportunity to either secure full cooperation credit if they take certain steps or some kind of partial cooperation credit that we can discuss depending on again the level of cooperation and steps that a company takes either before self disclosure or during an investigation and self disclose with the Department of Justice.”
Martin was also intrigued by the creation of a Pilot Program, as opposed to a full and final policy change. He stated, “Certainly a permanent change is something that gets finalized at the Department of Justice and that’s going to be the process that’s going forward. Here, what I think the Department was trying to do is set up a program for a year, as kind of a test basis. With the idea, I think this is probably how they are going to handle prosecutions going forward, but really trying to show companies that the Department is interested and willing to listen to how this program should be modified after the one year time period or things that the Department of Justice learns from, that might be helpful going forward from the prosecution side.”
All of the above is pointing down the same road which was articulated by Sally Yates when she initially announced the Memo which bears her name; the DOJ will now focus more on prosecuting individuals going forward. The incentives for corporations to investigate and turn over information on individuals, coupled the DOJ incentives to prosecute individuals, as set out in the Yates Memo and then restated by both Yates and Caldwell in their November public remarks, together with this new Guidance would point towards a shift in prosecution emphasis.
The Guidance laid out three requirements to obtain full credit towards penalty amelioration. They are (1) voluntary self-disclosure; (2) full cooperation in FCPA matters; and (3) timely and appropriate remediation in FCPA matters. The Guidance re-emphasizes that the self-disclosure must be “prior to imminent threat of disclosure or government investigation” and must be “within a reasonably prompt time after becoming aware of the offense”. This quoted language comes from US Sentencing Guidelines so it is not new. What is new, at least from the Yates Memo forward is the following, “The company discloses all relevant facts known to it, including all relevant facts about the individuals involved in any FCPA violation.”[emphasis supplied] If it was not clear to you before, it should be abundantly clear now that you have to give up information on individuals at the time of self-disclosure.
Over the next couple of blog posts, I will be writing about prongs two and three listed under the Guidance. Stay tuned.
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