This week, in a podcast series sponsored by Affiliated Monitors, Inc. (AMI), I visit with Vincent DiCianni, founder and President of AMI, and Eric Feldman, Senior Vice President of AMI. We look at the Department of Justice (DOJ) announcements over the past year and back to the FCPA Corporate Enforcement Policy, announced in November 2017, to consider what strategies companies can use based upon these documents. Over this series we have explored what companies can do both internally and externally to incorporate the Benczkowski Memo (the “Memo”) and other DOJ guidance into their organizations. In Episode 4, we discuss how the new DOJ Guidance from 2018 on Foreign Corrupt Practices Act (FCPA) compliance can be used as both a sword and a shield.

This week, in a podcast series sponsored by Affiliated Monitors, Inc. (AMI), I visit with Vincent DiCianni, founder and President of AMI, and Eric Feldman, Senior Vice President of AMI. We look at the Department of Justice (DOJ) announcements over the past year and back to the FCPA Corporate Enforcement Policy, announced in November 2017, to consider what strategies companies can use based upon these documents. Over this series we have explored what companies can do both internally and externally to incorporate the Benczkowski Memo (the “Memo”) and other DOJ guidance into their organizations. In Episode 4, we discuss how the new DOJ Guidance from 2018 on Foreign Corrupt Practices Act (FCPA) compliance can be used as both a sword and a shield.

The first thing to recognize is that while laying out the criteria for monitor selection by the DOJ, the Memo also lays out a roadmap of how to avoid a monitor. Feldman believes the Memo lays  out several conditions to indicate a situation where a monitor is warranted. The first includes whether the underlying misconduct involved something as systemic as manipulation of corporate books and records or exploitation. If it does this may well be indicia that a company had an inadequate compliance program. This would further indicate that the corporate compliance program is not designed and implemented effectively.

The second factor considers whether the misconduct was pervasive across the organization or approved or facilitated by senior level management. This situation includes the concept of tone at the top and whether or not senior level managers are contributing to the misconduct or creating the kind of culture that’s necessary to prevent this conduct. A third factor is, did the corporation make significant investments in and improvements to its corporate compliance program and internal controls? If the company did remediate, what is the evidence it did so and is there evidence of the effectiveness of the remediation?

This would also include an analysis of the whether the company made significant investment in its compliance program to remediate, improve, and strengthen the controls that may have failed. This signifies the DOJ is looking for demonstrated remediation. Feldman said a fourth factor considers whether these improvements to the compliance program had been tested to demonstrate they prevent or detect similar misconduct in the future. He noted this is the “first time I’ve seen in the DOJ policy document the concept of testing a compliance program and testing internal controls.” This is clear evidence of what a company can do to try to avoid a monitor if it finds itself in a FCPA investigation. Feldman concluded that these “four factors can be a very big step for the company, not only in its negotiation with Department of Justice, but as a proactive approach to lower the threat of a FCPA violation and a potential risk recurrence.”

Feldman believes the Memo is a natural extension of the 2017 FCPA Corporate Enforcement Policy, which laid out the four steps a company must take to obtain a Declination: (1) self-disclosure, (2) extensive cooperation, (3) full remediation, and (4) profit disgorgement; most particularly in Prong 3 – Remediation. Yet, all of this is a clear continuation of DOJ policy evolution. Beginning with the 2012 FCPA Guidance, up through multiple enforcement actions, the 2016 FCPA Pilot Program, the 2017 Evaluation of Corporate Compliance Programs, the 2017 FCPA Corporate Enforcement Policy and the 2018 anti-piling on and Safe Harbor in mergers and acquisitions (M&A).

Finally, the a speech by Principal Deputy Assistant Attorney General John P. Cronan, in December 2018 before the Practising Law Institute Event, he focused on an effectivecompliance program, not a paper compliance program. Cronan stated, “when we at the Department talk about compliance, we are referring to effective compliance. The Principles of Federal Prosecution of Business Organizations make that clear. Under those Principles, in determining whether to charge a corporation, prosecutors must consider, among other factors, the existence and effectiveness of the corporation’s preexisting compliance program, as well as the corporation’s subsequent remedial actions including efforts to implement an effective compliance program or improve an existing one. In assessing a compliance program, the Principles specifically direct prosecutors to consider “whether a corporation’s compliance program is merely a ‘paper program’ or whether it was designed, implemented, reviewed, and revised, as appropriate, in an effective manner.”

Feldman concluded by noting, “the drumbeat keeps getting stronger and stronger for accountability in corporate compliance programs.” The DOJ will take a hard look at and wants companies to demonstrate that they are holding the perpetrators accountable. If they can do so, this is evidence that “you are looking at some real basic compliance program principles and that the company will remediate misconduct if there was a bad actor in place.”

Feldman emphasized that compliance professionals should read the Memo carefully to fully understand the principals it lays out. This will help you use it as both a shield to protect your organization from getting into FCPA hot water but also, if you do, it will help act as a sword to cut off the possible requirement of a monitor.

Join us tomorrow as we conclude our five-part series and consider the benefits of using a third party to help to fulfill a compliance mandate.

For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors, Inc.  at www.affiliatedmonitors.com.

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