The Importance Of Anti-Corruption Compliance Remediation

by Michael Volkov
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complaince solutionsWhen you catch someone (e.g. a child, friend or business associate) in the wrong, it is interesting to watch their reactions.  (Notice I left out spouse or relationship partner – we all know our spouse or relationship partner is never in the wrong – just ask them).  I always look at their eyes and their mouth for tell-tale signs of guilt and remorse.  When confronted, people usually grasp for straws unless they have a good defense.  Sometimes the straw may be a little thicker than you expect and can carry some weight.

Buried in many of the FCPA settlements with the Department of Justice and the SEC, is the award of “meaningful credit” for remediation.  If carried out effectively, this can be a pretty strong straw in the context of an overall settlement with the government.  Companies can earn “meaningful credit” with the Department of Justice and the SEC if they remediate any identified problems with their existing anti-corruption compliance controls.

The Justice Department and the SEC have regularly cited this specific factor in resolving FCPA investigations.  See, e.g. A Resource Guide to the U.S. Foreign Corrupt Practices Act (November 14, 2012, hereinafter “FCPA Guidance”) citing  Principles of Federal Prosecution of Business Organizations, Chapter 9-28.000 of the U.S.Attorney’s Manual (one of nine factors cited by the Department of Justice in determining whether to prosecute a business organization is  “the corporation’s remedial actions, including any efforts to implement an effective corporate compli­ance program or improve an existing one”);  Section 8B2.1 of United States Sentencing Guidelines.compliance and remediation

As explained by the Justice Department and the SEC in the FCPA Guidance (p. 54):

While the conduct underlying any FCPA investigation is obviously a fundamental and threshold consideration in deciding what, if any, action to take, both DOJ and SEC place a high premium on self-reporting, along with cooperation and remedial efforts, in determining the appropriate resolution of FCPA matters.

In resolving enforcement actions, the Justice Department and the SEC have cited specific remediation efforts by companies as a significant credit in the ultimate resolution of enforcement actions.  See, e.g., In Re the NORDAM Group (July 17, 2012), available here   (“The [D]epartment entered into a non-prosecution agreement with NORDAM as a result of NORDAM’s timely, voluntary and complete disclosure of the conduct, its cooperation with the [D]epartment and its remedial efforts) (emphasis added); United States v. Orthofix International, N.V., Court Docket No. 4:12-cr-00150-RAS-DDB-1 (“Orthofix and the Department agree that this fine is appropriate given the nature and extent of Orthofix’s cooperation in this matter and the remediation undertaken by Orthofix (emphasis added);” Deferred Pros. Agreement, In the Matter of Tenaris, S.A. (May 17, 2011), available here  (“Tenaris also thoroughly reviewed its pre-existing compliance program and undertook steps to update and improve its compliance program, and to continue to implement enhanced compliance measures”).

imagesCAGMJ2TZIn the initial stages of any FCPA investigation, a company needs to initiate a remediation review of its compliance program and internal controls. The remediation review should be conducted separate from the investigation team.  A regular communication line should be established between the two teams and should focus on two important questions:

 What went wrong?

Why?

The remediation team needs to ask and answer the third question: what does the company need to do about the problem and what solutions are available?

Specific solutions need to be developed to meet identified problems.  Companies cannot be shy and need to devote adequate resources and take bold steps.  Remediation is an important credit for companies to earn.  It requires early action in any investigation and commitment.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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