November begins the final push for the compliance conference season, which customarily ends with the ACI National FCPA Conference. During November and into early December, Department of Justice (DOJ) officials have traditionally given remarks about various areas of interest for the compliance practitioner. The DOJ continued the tradition of providing solid information to the compliance practitioner as recently as last week when Assistant Attorney General Leslie R. Caldwell, spoke at her alma mater, George Washington University School of Law, on Foreign Corrupt Practices Act (FCPA) enforcement. Every compliance practitioner should study these remarks, for if the DOJ (and Securities and Exchange Commission (SEC) for that matter) have demonstrated one thing over the past several years, they clearly communicate their enforcement priorities.
Caldwell’s remarks were broken down into three general areas. First was the DOJ’s “ongoing fight against international corruption.” The second was the “increased transparency in charging decisions with respect to corporate prosecutions.” And finally, the third was the DOJ’s desire to “encourage and foster meaningful corporate compliance and cooperation.”
The Obama administration has consistently spoken out against the scourge of international corruption. Indeed, President Obama has been doing so long before he became president, as far back as 2006. This summer, Secretary of State John Kerry further articulated the administration’s position on this issue. Caldwell continued this theme, noting that “Corruption is far more harmful than can be measured numerically. The World Bank estimates that more than $1 trillion is paid every year as bribes.” Yet, as Secretary Kerry noted this summer, it is not simply the monetary costs of corruption that make it so invidious, it is the societal costs, which can lead to responses such as terrorism. Caldwell continued this theme by stating, “we all know that when corruption takes hold, the fundamental notion of playing by the rules get pushed to the side, and individuals, businesses and governments instead begin to operate under a fundamentally unfair—and destabilizing—set of norms.”
While such conditions can certainly lead to domestic instability in the international arena, Caldwell also made clear that by allowing such corruption to fester, US businesses suffer. Obviously the rule of law in such jurisdictions is weak and this can lead to harsh penalties being levied by local autocrats without any legal basis. She also stated, “American companies are harmed by global corruption when they are denied the ability to compete in a fair and transparent marketplace. Instead of being rewarded for their efficiency, innovation and honest business practices, U.S. companies suffer at the hands of corrupt government and lose out to corrupt competitors.”
Caldwell listed some of the recent DOJ successes in FCPA prosecutions, such as Alstom, Vimpelcom, Och-Ziff and Embraer, where there was a wide-range of international cooperation in the investigation. This cooperation ranged from coordination with foreign counterparts to “sharing leads, making available essential documents and witnesses, and more generally working together to reduce criminals’ abilities to hide behind internal borders.” She also pointed to the Kleptocracy Asset Recovery Initiative, including asset forfeiture and money laundering enforcements.
Caldwell next turned to transparency in charging decisions. She said, “I agree that transparency is very important. Transparency is what enables the public to understand why particular results are reached in particular cases and helps to reduce any incorrect perception that our enforcement decisions may be unreasoned or inconsistent. Transparency also informs corporate actors and their advisors what conduct will result in what penalties and what sort of credit they can receive for self-disclosure and cooperation with an investigation.”
Regarding specific transparency, Caldwell pointed to three different areas. The first was the FCPA Pilot Program, announced in April. She stated, “The pilot program explains the credit available to companies that voluntarily self-disclose FCPA misconduct, fully cooperate with the investigations and remediate. The pilot program dovetails with a change we made to the Filip Factors, making voluntary disclosure a separate factor to be evaluated in making corporate charging decisions, including in non-FCPA cases.” Yet equally importantly, Caldwell remarked, “
A key point in this transparency is that a company may not benefit from their ill-gotten gains, even if they receive a declination. This is why, even when the SEC is not involved in a matter due to lack of jurisdiction, the DOJ will still require a company to disgorge the profits it received back from its illegal actions. She stated, “We make those resolutions public, partly to show the pilot program provides real benefits, and partly so that the public understands that corporate wrongdoers are not being allowed to keep profits earned through bribery.”
Finally, Caldwell discussed the DOJ’s increased use of its charging documents, including Deferred Prosecution Agreements (DPAs), Non-prosecution agreements (NPAs) and guilty pleas; to provide a written record of the key facts which led to the resolution. She noted, “The factual agreements filed with the resolution documents typically include a detailed recitation of the misconduct, as publicly admitted by the company. But it is more than simply the facts which are presented, as these resolution documents also “provide a transparent explanation of the department’s expectations when it comes to compliance programs. Companies seeking to measure their own compliance programs need look no further than many of the resolutions we have made publicly available.”
Caldwell’s final topic was corporate compliance. She has found that a consistent theme, where bribery and corruption is engaged in on behalf of an organization, is a lack of corporate compliance. But while most companies have gotten the message from Sarbanes-Oxley (SOX) and DOJ enforcement that compliance programs are needed for any company doing business outside the US, the DOJ still sees “companies with compliance programs that seem strong on paper but are much weaker in practice.” Caldwell highlighted some of the areas of corporate compliance programs from the DOJ perspective.
Compliance programs should be industry-specific and metrics-oriented, meaning it must be tailored to your business.
Geographic areas that are viewed as high risk must be managed as such.
Companies must not only train on their compliance programs but also continually communicate the philosophy of doing compliance up and down through the organization.
This is more than simple appropriate tone at the top, it is a tone that must be communicated throughout the company.
Compliance reminders need to be sent out on a regular basis.
Transaction monitoring is becoming a standard practice in compliance.
Demonstration of the overall effectiveness of your compliance program.
All of this must be Documented, Documented, and then Documented because if you cannot prove to the DOJ you have done all of the above, they will assume you have not done so.
With the late fall FCPA conference season upon, I am sure we will have more remarks from not only Leslie Caldwell but others, possibly including Sally Yates, Andrew Weissmann, Daniel Kahn, Hui Chen and others. We can also expect to hear remarks from the SEC FCPA regulators such as Kara Brockmeyer. The government has consistently communicated its expectations around FCPA enforcement and corporate compliance. I can only hope you have been listening.