In April 2016, the Department of Justice (DOJ) launched an experimental Foreign Corrupt Practices Act (FCPA) enforcement policy known as the “Pilot Program.” For those unfamiliar, the FCPA is a U.S. law that prohibits business from bribing foreign officials and requires certain accounting transparency among public companies. The FCPA is enforced both criminally and civilly, has broad jurisdiction, and resulted in nearly $2 billion in settlements in 2017 alone.
The Pilot Program is, in effect, a mechanism for increasing self-reporting and cooperation by companies that may have violated the FCPA in exchange for penalty reductions and the possibility of a declination. If a company (1) voluntarily discloses, (2) cooperates fully with investigators, (3) timely remediates by instituting an effective compliance program, and (4) disgorges all ill-gotten profits, then the company will receive a 50% reduction off the low end of the U.S. Sentencing Guidelines and even the possibility that the DOJ will not bring an action against the company.
The Pilot Program has been largely hailed as a success by the DOJ. In the year and a half that the program was in effect, the DOJ FCPA unit received 30 voluntary disclosures, compared to 18 during the previous 18-month period. On November 29, 2017, the Deputy Attorney General announced that DOJ would make permanent the Pilot Program and added its enforcement guidelines to the U.S. Attorneys Manual as Section 9-47.120, the “FCPA Corporate Enforcement Policy.” As the voluntary disclosure guidelines become institutionalized, more companies should consider bringing credible allegations of foreign corruption to the attention of U.S. authorities. But, self-reporting potential criminal liability is a delicate and daunting question that must be carefully considered.
To qualify as voluntary, a company’s disclosure must meet the definition set forth in U.S.S.G. § 8C2.5(g)(1) as occurring “prior to an imminent threat of disclosure or government investigation.” In other words, knowing that the FBI is likely to execute a search warrant on your office the next day doesn’t give a company a window to disclose and expect a reduction in the sentencing guidelines. Disclosure must also be timely—meaning within a reasonably prompt time after becoming aware of the offense—and fulsome—meaning that the company must disclose all relevant facts and disclose the individuals involved.
A company can meet the second requirement, full cooperation, by timely and continuously disclosing to the DOJ all facts discovered during the company’s internal investigation, including individual employees and third parties who may have engaged in criminal conduct. The company must be proactive and facilitate access to third-party or foreign documents and witnesses, as well as make available to the DOJ officers and employees who possess relevant information. Most challenging, perhaps, is the DOJ’s cooperation requirement that the company “deconflict” witness interviews and other investigatory steps with the DOJ. In many cases, this means that the company may not interview its own employees regarding a potential FCPA violation until the DOJ has had an opportunity to do so. Companies must conduct thorough and professional internal investigations of all alleged FCPA violations, but until a company interviews its employees it is difficult to decide whether voluntary disclosure is warranted in the first place.
Third, companies must be prepared to timely and adequately remediate the underlying problems that led to the FCPA violation. This typically includes implementing or strengthening a compliance and ethics program, improving the company’s compliance culture, dedicating additional financial and personnel resources to anti-corruption compliance, and conducting compliance audits. The DOJ also considers whether a company adequately disciplines employees involved in the misconduct or those with supervisory authority when assessing remediation.
When the DOJ decides that a company has cooperated fully, the company will receive a 50% reduction off the minimum sentencing guidelines and the DOJ generally will not require that the company appoint a monitor if the company has implemented an effective compliance remediation program. However, companies can also receive so-called “limited credit” for full cooperation and timely and appropriate remediation even if the company did not voluntarily self-disclose. Even though declination is no longer an option, the company will receive a 25% reduction off the low end of the sentencing guidelines range. The largest carrot, however, in the DOJ’s new enforcement policy is the strong presumption in favor of resolving cases through a declination for companies that fully satisfy the requirements above.
The consequences of a FCPA criminal action can be severe. In 2017, Telia, a Swedish company, paid $965 million in total penalties for FCPA offenses. Companies with potential FCPA liability should consult with counsel and seriously consider voluntary disclosure before it is too late.