Obviously, there have been multiple developments by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) since 2012 release of the First Edition of the FCPA Resources Guide (2012 Resources Guide). The evolution in the DOJ’s thinking has clearly been at the forefront of many of these developments. While the seeds were clearly sown in the 2012 Resources Guide, there have been multiple Foreign Corrupt Practices Act (FCPA) enforcement actions where the DOJ demonstrated a clear commitment to rewarding companies. Two FCPA settlements that clearly articulated this view were Parker Drilling, in 2013, and Hewlett-Packard (HP), in 2014.
In 2015, then-Assistant Attorney General Leslie Caldwell further clarified this development in her remarks at New York University Law School’s Program on Corporate Compliance and Enforcement. In this talk, Caldwell laid out for the first-time, the key metrics the DOJ would consider to determine if a company was operationalizing compliance rather than simply having a paper program. If a company met these metrics it could receive additional credit from the DOJ in an enforcement action.
In April 2016, the DOJ rolled out the FCPA Pilot Program. The Pilot Program modified enforcement and provided more information on the specifics of a best practices compliance program. It fashioned two new categories of credit companies could receive: First, up to a 25 percent reduction off the bottom guideline of the US Sentencing Guidelines fine range if the firm cooperated and engaged in appropriate remediation and second, up to a 50 percent reduction off the bottom end through self-disclosure, cooperation, and full remediation.
In 2017, there were two significant additions to both FCPA enforcement and compliance programs. February saw the release of the first version of the Evaluation of Corporate Compliance Programs, which was most recently updated in June 2020. In November 2017 came the new FCPA Corporate Enforcement Policy, which formalized parts of and also extended the Pilot Program by providing a presumption of a declination for FCPA enforcement actions when four criteria were met: (1) self-disclosure, (2) extensive remediation, (3) thorough investigation, and (4) profit disgorgement. From the compliance program perspective, the FCPA Corporate Enforcement Policy formalized the mandate for professionalism in corporate compliance personnel and adequate resources to be made available in the compliance function. This FCPA Corporate Enforcement Policy was discussed in detail in the 2020 FCPA Resources Guide.
The FCPA Corporate Enforcement Policy was expanded in 2019 to give greater benefits during the mergers and acquisition (M&A) process, recognizing “the potential benefits of corporate mergers and acquisitions, particularly when the acquiring entity has a robust compliance program in place and implements that program as quickly as practicable at the merged or acquired entity. Accordingly, where a company undertakes a merger or acquisition, uncovers misconduct by the merged or acquired entity through thorough and timely due diligence or, in appropriate instances, through post-acquisition audits or compliance integration efforts, and voluntarily self-discloses the misconduct and otherwise takes action consistent with the CEP, there will be a presumption of a declination in accordance with and subject to the other requirements of the CEP. In appropriate cases, an acquiring company that discloses misconduct may be eligible for a declination, even if aggravating circumstances existed as to the acquired entity.”
In the 2020 Resources Guide there was a discussion of three cases where companies received full declinations as they were able to meet the four prongs on the FCPA Corporate Enforcement Policy. As with the 2012 Resources Guide, the inclusion of any information on declinations is a boon for the compliance professional. The 2020 Resources Guide continued this most welcome source of information.
In 2018, the DOJ declined to prosecute a UK company which manufactured and sold equipment used to detect earthquakes and other seismic events. The company had voluntarily self-disclosed to DOJ that it had made numerous payments amounting to nearly $1 million to the director of a Korean government-funded research center. Following the disclosure of these payments, DOJ indicted the director, tried and convicted him of one count of money laundering in violation of 18 U.S.C. § 1957. The director was subsequently sentenced to 14 months in prison in October 2017. The company achieved a declination because it voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated. In addition, the company was the subject of a parallel investigation by the UK’s Serious Fraud Office (SFO) for legal violations relating to the same conduct and committed to accepting responsibility.
In the second declination, the DOJ declined to prosecute an insurance company incorporated and headquartered in Barbados. The investigation found that the company, through its employees and agents, paid bribes to a government official in exchange for insurance contracts. High-level employees of the company took part in a scheme to pay bribes to the Minister of Industry in Barbados and to help launder the payments in the US. The 2020 Resources Guide stated, “Despite the high-level involvement of corporate officers in the misconduct, DOJ declined prosecution based on a number of factors”.
The factors which led to this result included: (1) the company’s timely, voluntary self-disclosure of the illegal conduct; (2) the company’s thorough and comprehensive investigation; (3) the company’s cooperation and its agreement to continue to cooperate in DOJ’s ongoing investigations and/or prosecutions; (4) the company’s agreement to disgorge to DOJ all profits it made from the illegal conduct; (5) the steps the company had taken to enhance its compliance program and its internal accounting controls; (6) the company’s remediation, including terminating all of the executives and employees who were involved in the misconduct; and (7) the fact that DOJ had been able to identify and charge the culpable individuals.
The third and final example listed in the 2020 Resources Guide involved a declination to prosecute a publicly traded technology services company. The company authorized its agents to pay approximately a $2 million bribe to one or more government officials in India for securing and obtaining a statutorily required planning permit in connection with the development of an office park, as well as other improper payments in connection with other projects in India. Despite the fact that certain members of senior management participated in and directed the bribery scheme, the DOJ declined prosecution of the company based on an assessment of the factors set out in the FCPA Corporate Enforcement Policy.
As listed in the 2020 Resource Guide, they included: (1) the company’s voluntary self-disclosure within two weeks of the Board learning of the criminal conduct; (2) the company’s thorough and comprehensive investigation; (3) the company’s full and proactive cooperation in the matter and its agreement to continue to cooperate in DOJ’s ongoing investigations and any prosecutions that might result; (4) the nature and seriousness of the offense; (5) the company’s lack of prior criminal history; (6) the existence and effectiveness of the company’s pre-existing compliance program, as well as steps that it had taken to enhance its compliance program; (7) the company’s full remediation, including terminating the employment of, and disciplining, employees and contractors involved in the illegal activity; (8) the adequacy of remedies as demonstrated by the company’s resolution with SEC to pay a civil penalty of $6 million; (9) the company’s agreement to disgorge the full amount of its cost savings from the bribery; and (10) the fact that, as a result of the company’s timely voluntary disclosure, DOJ was able to conduct an independent investigation and identify individuals with culpability for the corporation’s malfeasance.
Please join me again tomorrow when I continue my exploration of the A RESOURCE GUIDE TO THE U.S. FOREIGN CORRUPT PRACTICES ACT SECOND EDITION.
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© Thomas R. Fox, 2020