1. Criminal Division AAG Promises Increased Transparency in Corporate Charging Decisions. In an April 17, 2015 speech at New York University Law School’s Program on Corporate Compliance and Enforcement, Leslie Caldwell, Assistant Attorney General of DOJ’s Criminal Division, which oversees the Fraud Section’s FCPA Unit, promised to increase transparency in the Division’s charging decisions in corporate prosecutions. Caldwell pledged to provide “even more detailed [written] explanations” of the key factors that led to a particular guilty plea, non-prosecution agreement (NPA), or deferred prosecution agreement (DPA), and to “look for ways to better inform the community about cases in which we decline to prosecute.” Echoing the FCPA Resource Guide’s hallmarks of effective compliance programs, Caldwell set forth several “hallmarks of all good internal investigations,” including the identification of wrongdoers, the complete and timely provision to the Division of all available facts relating to the misconduct, and an independent, appropriately tailored, and well-designed investigation aimed at uncovering the facts. While Caldwell noted that the Division expects internal investigations to be thorough, she stated that the Division “does not expect companies to aimlessly boil the ocean” by conducting overly broad and needlessly expensive investigations. Caldwell also stated that, although the Division “does not dictate” how a company conducts an internal investigation, it will provide “guideposts” and make clear to the company its areas of interest, while contemporaneously “pressure test[ing]” the company’s investigation. Also of note, Caldwell stated that the Division “will not hesitate to tear up a DPA or NPA and file criminal charges” if a company breaches its agreement. Caldwell’s remarks, which bring together in one statement many of the Division’s practices and expectations, should be a useful guide for inside and outside counsel in determining how to react to potential corporate wrongdoing.
2. KBR Resolves With SEC for “Pre-taliation.” On April 1, 2015, the SEC announced its first enforcement action against a company for using confidentiality agreements that had the potential to “stifle” the whistleblowing process. According to the SEC, engineering and construction firm KBR, Inc., required witnesses in certain internal investigations to sign confidentiality agreements that warned of possible discipline, including termination, if they discussed the subject matter of the interview with outside parties without the company’s prior approval. If taken literally, such an agreement could penalize witnesses for reporting misconduct to the SEC and other government agencies in certain circumstances. KBR agreed to pay a $130,000 penalty to settle the SEC’s charges, and the company amended its confidentiality agreement to make it clear that employees are free to report legal violations to the SEC without prior company approval. In the SEC’s order instituting the settlement, the agency stated that it did not find any instances in which KBR actually prevented one of its employees from communicating with the SEC about a legal violation. Nonetheless, the SEC said that KBR’s pre-notification requirement had a potential chilling effect on whistleblowers’ willingness to report violations. The KBR action will likely impact how other companies draft their confidentiality agreements — indeed, the SEC has already warned that companies should amend agreements “that in word or effect stop their employees from reporting potential violations to the SEC.”
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