Last week, the Department of Justice (DOJ) premiered a new policy regarding Foreign Corrupt Practices Act (FCPA) enforcement. Deputy Attorney General Rod Rosenstein, in a speech, called it the FCPA Corporate Enforcement Policy. I have explored some of the issues relating to the compliance professional and compliance programs. I believe this new Policy has strengthened not only the need for an effective compliance program but also continued the DOJ’s elevation of the compliance profession within an organization.

Today I want to consider some of the components of the new Policy which speak more about enforcement. I had the opportunity to visit with James Koukios, a partner at Morrison & Foerster LLP and a former DOJ prosecutor in the FCPA unit of the Fraud Section. Koukios characterized the new Policy as one of “clarification and consolidation.” I found this new Policy to be the culmination of different concepts we have seen in FCPA enforcement actions, the 2016 FCPA Pilot Program, the 2017 Evaluation of Corporate Compliance Programs and DOJ pronouncements at speeches over the past few years. It also incorporated concepts articulated in the Yates Memo from September 2015.

I was most particularly interested in the presumption laid out in the new Policy. The language reads:

Due to the unique issues presented in FCPA matters, including their inherently international character and other factors, the FCPA Corporate Enforcement Policy is aimed at providing additional benefits to companies based on their corporate behavior once they learn of misconduct. When a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, all in accordance with the standards set forth below, there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender. Aggravating circumstances that may warrant a criminal resolution include, but are not limited to, involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism. [emphasis supplied]

This was the first time I could recall the DOJ saying that even with a violation of federal law, a company could start out with a presumption of receiving a declination. I put the question to Koukios of whether my view was correct and he responded, “I think you are exactly right, Tom.” He went on to add that due to the unique circumstances present in FCPA cases the DOJ aimed to bring additional benefits to companies based on their corporate behavior. Further, “the presumption can be overcome if there are certain aggravating factors and those are things that you would probably recognize from other parts of the U.S. attorney’s manual like high level management involvement, corporate recidivism and other factors like that.” Koukios characterized this presumption as “a real improvement over the over the pilot program.”

I was also interested in the process the DOJ used to develop the new Policy. Step back and consider the innovation of the Pilot Program and how it helped to formalize the process that former FCPA unit head Patrick F. Stokes had described at the 2015 ACI National FCPA Conference; where he laid out criteria for fine and penalty reductions. Stokes explained the discounts that both Parker Drilling and Hewlett-Packard (HP) received from their extensive cooperation and remediation. Obviously, there is language from the FCPA Pilot Program which was announced in April 2016. The Pilot Program put discounts in place of up to 50% for meeting the requirements and now that discount can range up to 100%.

Koukios pointed to the new category of declination with disgorgement as a solid achievement and the biggest outcome from the Pilot Program. He felt like it really benefited corporations, so they would not have to go through either a more formal Deferred Prosecution Agreement (DPA) or Non-Prosecution Agreement (NPA) process. Further, companies would have less information about their violations put out into the public record.

From the Yates Memo, there were two areas where the new Policy pointed towards companies self-disclosing quickly, efficiently and with solid information about culpable individuals. In the introductory policy section, it states, “Any information relating to a possible violation of the FCPA should be brought immediately to the attention of the Fraud Section of the Criminal Division. Even when such information is developed during the course of an apparently unrelated investigation, the Fraud Section should be notified immediately.” In the section defining “Voluntary Disclosures” it states, “The company discloses all relevant facts known to it, including all relevant facts about all individuals involved in the violation of law.” [emphasis supplied]

Last April, at the one year anniversary of the Pilot Program, the DOJ announced it was reviewing and evaluating the Pilot Program. The new Policy came out of that process. I found this process to be an excellent example where the DOJ reviewed how it prosecuted FCPA cases, inputted data and came up with something better and stronger in the form of the new Policy. There is also language from the 2017 Evaluation of Corporate Compliance Programs, most particularly impacting the compliance practitioner and compliance profession that I explored over the past two blog posts.

Tomorrow I will consider how the new FCPA Corporate Enforcement Policy sounds, once and for all-time, for the death-knell of the clarion cry for a compliance defense.


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© Thomas R. Fox, 2017