Sometimes I get to select the topics I blog on each week and sometimes it seems as if the topics select themselves. It looks like we will have a sports-themed week here on the FCPA Compliance and Ethics Blog. First, a brief note about last night’s hiccup by the Astros on their way to back-to-back championships. For all of those who taunted me (and you know who you are) about ‘posting before the game ends’, warned me not to write about even wanting your team to win or any other similar slight, do not worry as the Astros welcome the league’s top team to Minute Maid Park for three fun-filled nights of great baseball. Come on down and enjoy some good ole Southern hospitality on the baseball field. Personally, I cannot wait for Tuesday night as the Astros continue their march to the 2018 World Series. Moreover, back-to-back informs our subject today, the Benczkowski Memo.

However, this sports theme continues as we switch sports to mourn the loss of former Packers legend Jim Taylor. He was on those great Packer teams under Vince Lombardi in the 1960s. According to his New York Times (NYT) obituary, “Taylor ran for more than 1,000 yards in five consecutive 12- or 14-game seasons and was named to the N.F.L.’s all-decade team for the ’60s.” In 1962, he wrested the rushing crown from Jim Brown with 1472 yards running. He was also on those Packer teams in 1966 and 1967 that defeated by boyhood heroes, Dandy Don Meredith and the Dallas Cowboys.

Taylor was a fullback, a position not much in favor these days. He was also one of the toughest and meanest guys around. He regularly was the lead blocker for “Golden boy” Paul Horning on the famed Packer sweeps. Most impressively, he is the only offensive player I ever heard getting flagged for unnecessary roughness when he destroyed a defensive back on a block which was just a little bit ‘out of bounds’. Taylor was also a LSU grad and played on the great Tiger teams under Coach Charlie McClendon in the mid to late 1950s.

All of which introduces today’s topic which was also yesterday’s topic (not the back-to-back part) but the Benczkowski Memo  on the use and selection of corporate monitors by the Department of Justice (DOJ). A colleague emailed me and asked what I thought had changed from the most current DOJ practice and my response was not much. Former DOJ compliance counsel Hui Chen was quoted in a Wall Street Journal Risk & Compliance Journal article, that “she struggled to find anything new in the proposal. “This is just spelling out what they’ve always done””.

However, when further contemplating the Memo, I did realize it communicated significant information to every Chief Compliance Officer (CCO) and compliance practitioner that had not been articulated previously. That message is to reinforce the importance of remediation during the pendency of a Foreign Corrupt Practices Act (FCPA) investigation and to do so, as thoroughly as possibly. For if you do so, not only will you make your organization eligible for a potential declination if you meet the other criteria in the new FCPA Corporate Enforcement Policy and/or garner a significant discount from your potential fine and penalty, but you will also more than likely avoid a monitor. 

Beginning in at least 2014, with the Parker Drilling and Hewlett-Packard (HP) FCPA enforcement actions, the DOJ began giving meaningful credit to companies that engaged in extensive remediation even if there was pervasive corruption involved in the systemic override of controls (HP) and C-Suite involvement in the bribery scheme (Parker). Nevertheless the benefits of this extensive remediation went beyond the reduction in fines and penalties. It extended to the lack of monitorships to oversee the implementation of the compliance program mandated in the resolution of the FCPA enforcement actions. This is one of the key concepts memorialized in the  Benczkowski Memo.

The Memo notes that factors to consider from the compliance program remediation perspective include “(c) whether the corporation has made significant investments in, and improvements to, its corporate compliance program and internal controls system and (d) whether remedial improvements to the compliance program and internal controls have been tested to demonstrate that they would prevent or detect similar misconduct in the future.”

But the Memo does not stop there in prescribing the inquiry a DOJ prosecutor should make. Other factors include whether remedial actions were taken against those involved and those who may have looked the other way or through inaction, effectively over-riding internal controls. Further, the DOJ prosecutors have to drill down and look at the risk each company is facing, included assessments of the industry the company operates in, the geographic regions it does business in, how the company does business and the “nature of the company’s clientele.” Finally, this section of the Memo ends with “Where a corporation’s compliance program and controls are demonstrated to be effective and appropriately resourced at the time of resolution, a monitor will not be necessary.” [emphasis supplied]

Put another way, the DOJ prosecutors need to have confidence in not only the recalcitrant company’s remediated compliance program but also that the company will honor its obligations to which it agreed in the resolution documents. This means establishing a good working relationship with prosecutors during the investigation phase and demonstrating a commitment to the design, creation and implementation of a best practices compliance program.

The Memo furthers one other goal that the DOJ has continued to articulate. It wants to give companies greater incentives to self-disclose and work with the DOJ to jointly fight the international scourge of bribery and corruption. Through its formalization of issues that DOJ prosecutors will consider in the decision to require a monitor it provides companies information on how to advocate that the goals of the new FCPA Corporate Enforcement Policy are met without the need for a monitor. This is beyond the simple cost benefit analysis articulated in the Memo. This provides any company which finds itself in a FCPA situation specific key performance indicators (KPIs) which they can use to benchmark themselves to see if they could expect the DOJ to urge a monitor is needed. More information and transparency are always a good thing and I believe the Memo provides more sunshine into the process.

And do not forget to watch the Astros play this week. I will not make any more predictions that the Astros will burn through the Red Sox in Houston on their way to back-to-back championships. Go Astros.

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© Thomas R. Fox, 2018