FCPA Enforcement and Credit for an Effective Compliance Program

Michael Volkov
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The Justice Department has touted its efforts to bring greater transparency to FCPA enforcement. There is no question that in the last five years the Justice Department has moved the needle – the FCPA Guidance issued in 2012; the release of the April 5, 2016 Pilot Program; the Evaluation of Corporate Compliance Programs issued in February 2017; the release of letters confirming declinations awarded to companies under the FCPA Pilot Program; and more information disclosed in FCPA enforcement actions.

A significant question has been raised as to whether a company that violates the FCPA can (or has) receive(d) credit for an effective compliance program notwithstanding the fact that the company paid illegal bribes? The issue focuses on the state of the company’s compliance program at the time the FCPA violation occurred. This is a separate issue from the related question of what steps did the company take to remediate its compliance program in response to the FCPA violations.

Andy Spalding, a Senior Editor to the FCPA Blog, raised this issue in an interesting post on the FCPA Blog (here) and in his related law review article (here).

Andy makes the valid point that DOJ does not appear to be awarding credit for pre-existing anti-corruption compliance programs. I would recommend that practitioners and compliance professionals read Andy’s excellent law review article.

DOJ’s failure to award credit for pre-existing compliance programs is inconsistent with DOJ’s historical approach to encouraging investment in compliance programs and specific statements made in the FCPA Guidance.

DOJ’s FCPA Pilot Program requires companies to: (i) voluntarily disclose a potential FCPA violation; (ii) cooperate in the investigation; (3) remediate its compliance program to prevent the recurrence of an FCPA violation; and (4) disgorge any ill-gotten gains from the illegal bribery conduct. The FCPA Pilot Program does not require nor credit any company for maintaining a pre-existing effective compliance program when the violations occurred.

DOJ’s FCPA Pilot Program does not take into account the company’s existing compliance program at the time the violations occurred. This apparent omission is inconsistent with DOJ’s Principles of Federal Prosecution of Business Organizations and specific statements contained in the FCPA Guidance.

The United States Attorneys’ Manual includes specific policies concerning corporate prosecution guidelines. Specifically, whether to criminally charge a corporation is governed by USAM 9-27.280 (HERE), which sets out what is referred to as the “Filip Factors,” referring to former Deputy Attorney General Mark Filip (who I had the honor of serving with at DOJ during the Bush Administration). As set forth below, the Filip Factors include two specific factors focused on corporate compliance programs – one for the existence of a corporate compliance program at the time the wrongdoing occurred (number 5, USAM 9-28.800), and another focused on remedial actions taken by the company to enhance its compliance program in response to the misconduct (number 7, USAM 9-28.1000).

The FCPA Guidance at page 56 includes the following specific statement:

[A] company’s failure to prevent every single violation does not necessarily mean that a particular company’s compli­ance program was not generally effective. DOJ and SEC understand that ‘no compliance program can ever prevent all criminal activity by a corporation’s employees,’ [citation omitted] and they do not hold companies to a standard of perfection. An assessment of a company’s compliance program, including its design and good faith implementation and enforcement, is an important part of the government’s assessment of whether a violation occurred, and if so, what action should be taken. In appropriate circumstances, DOJ and SEC may decline to pursue charges against a company based on the company’s effective compliance program, or may otherwise seek to reward a company for its program, even when that program did not prevent the particular underlying FCPA violation that gave rise to the investigation. (emphasis added; citation omitted).

Notwithstanding this clear language and policy statement, DOJ omitted consideration of a company’s compliance program for consideration under the FCPA Pilot Program. DOJ’s earlier statement in 2012 provided a clear incentive to companies to implement an effective compliance program in the hopes of preserving the ability to earn a declination even when the company suffers FCPA violations.

DOJ is conducting yet another review and revision of its corporate prosecution policies, including the FCPA Pilot Program. Hopefully, DOJ will reiterate the importance of pre-existing compliance programs and affirm this important incentive.

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.

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