Lessons from DOJ’s FCPA Resolution with PTC China: No Partial Self-Disclosure Credit

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In 2015, the Department of Justice (DOJ) made more news for the corporate Foreign Corrupt Practices Act (FCPA) cases that it did not bring than for the two that it did bring: Nine times last year, DOJ declined to join corporate FCPA resolutions brought by the Securities and Exchange Commission (SEC). This led some observers, including us, to wonder what had caused the “great divide” between DOJ and SEC. When asked in late 2015 whether there had been a “slow down” in DOJ FCPA enforcement, Assistant Attorney General (AAG) Leslie Caldwell stated that the Criminal Division was focusing on “bigger, higher impact” FCPA cases that involve bribery in multiple countries or wrongdoing by senior executives.1 And indeed, the SEC resolution papers indicated that many of the nine SEC-only enforcement actions involved relatively small penalties and bribery that was generally contained to one foreign country. Many of those actions also included a self-disclosure, cooperation, or both. In light of this, and because of the availability of a non-criminal remedy in the form of the SEC resolution itself, one could infer that in several of these SEC-only cases from 2015, DOJ exercised its discretion under the Federal Principles of Prosecution of Business Organizations and declined to pursue a criminal resolution. Prior to February 16, 2016, it appeared that DOJ might be following a similar course this year, as it declined to join the two SEC corporate FCPA resolutions brought up to that point.

But on February 16, 2016, DOJ and SEC brought parallel FCPA corporate resolutions involving Massachusettsbased issuer PTC Inc. and two of its wholly owned Chinese subsidiaries under circumstances that, at least at first glance, seemed similar to the cases that DOJ declined to join in 2015 and earlier in 2016: a relatively small penalty and bribery contained to one foreign country, plus self-disclosure and cooperation. So what was different about the PTC case that made DOJ pursue its own resolution? The answer appears to be the manner in which PTC self-disclosed the misconduct. According to the DOJ resolution papers, PTC and its subsidiaries did not disclose all relevant facts known to the companies at the time of the initial disclosure. In fact, they did not disclose these facts until the Department independently uncovered them and brought them to PTC’s attention. Thus, the PTC resolution sends a strong message that incomplete or piecemeal self-disclosures are insufficient to obtain a declination. In other words, DOJ is saying that if you are coming in, you must be all-in.

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