The second day of the SCCE Compliance and Ethics Institute (CEI) Conference began with Principal Deputy Associate Attorney General Bill Baer providing remarks. After opening with how aggressively the Department of Justice (DOJ) had prosecuted banks for illegal activity during the 2008 financial crisis, he turned to a more compliance focus subject matter; that being what constitutes extensive cooperation under the DOJ Foreign Corrupt Practices Act (FCPA) Pilot Program and, more broadly, which would allow a company to receive a reduction in a fine or penalty.
Most interestingly he said that DOJ consideration for cooperation credit is only available where an entity has satisfied the requirements of the Yates Memo which he termed the “department’s Individual Accountability policy.” To meet this initial threshold, companies who want credit for their cooperation must disclose all facts relating to the individuals involved in the wrongdoing, no matter where those individuals fall in the corporate hierarchy. He stated, “We will not credit cooperation unless this threshold requirement has been met.”
He went on to give the general disclaimer that while each investigation and defendant will be treated differently, there were some common elements the DOJ has observed. The first is that the cooperation should be proactive; that is, the company should materially assist the DOJ, including by disclosing facts that are relevant to the investigation, even when not specifically asked to do so. This could mean such things as a “company describing its own conduct and pointing us to inculpatory documentary evidence, such as emails and text messages.” It could also mean providing documents or access to witnesses that the department might not have obtained through its subpoena power. Somewhat more troublingly, Baer also said such cooperation could be “providing information that the government did not know about or did not recognize would be significant.”
He provided some examples where cooperation with the DOJ makes case administration easier and more efficient for the DOJ. These Instances included providing summaries of evidence that were designed to specifically to assist the government’s investigation; providing data compilation to the DOJ in a manner which is helpful and that the DOJ could not readily achieve on its own. It also included encouraging individuals with knowledge of the relevant conduct to cooperate with the investigation. Finally he listed providing information that might otherwise not have been discovered in the ordinary course of the investigation.
Baer cautioned that another linchpin is timeliness of the cooperation. If it is in the early stages of an investigation it is substantially more helpful than cooperation after the DOJ has “invested significant time and energy in exposing problematic conduct.” The corollary to this is that “little or no cooperation credit will be afforded in situations where the supposed cooperation occurs after the department has completed the bulk of its investigation.” One can think back to both the Weatherford and Total FCPA enforcement actions, where the companies actively resisted the DOJ’s investigation until at some point they ‘got it’ and began to actively cooperate.
This series of remarks ties into something observed in the Nortek Corporation FCPA enforcement action, where the company self-reported to the government even before completing its internal investigation. Baer said that a company should come in as early as it possibly can, even if it has not completed an internal investigation. He did acknowledge that “A company will not be disqualified from receiving cooperation credit simply because it doesn’t have all the facts lined up on the first day; rather, under those circumstances, we expect that cooperating companies will simply continue to turn over the information to our lawyers as they receive it.”
Turning to the quality of the information provided, Baer said that a company (or individual for that matter) would be considered for credit where it provides information that allows the DOJ to obtain conclusions that are more significant. He explained, “where a cooperator enables the government to pursue conduct that might not otherwise have been addressed. This type of cooperation may involve detailing relevant conduct by a different party (or parties) participating in the same or similar scheme or that enables the department to net greater recoveries.”
He went on to add that a company could take other actions which could lead to a reduced fine or penalty or even a declination to prosecute. They turned on situations where a company acknowledged the responsibility for it negative actions. He also noted a key factor could be a company’s efforts to help assist victims of the illegal conduct. Baer conceded, “These actions are distinct from cooperation, which is focused on helping us uncover and understand the underlying conduct. But they can be important additional factors in the department’s determination of an appropriate outcome.”
Baer also had some cautionary remarks around cooperation. He stated, “not every interaction between the government and a party under investigation will constitute cooperation.” He then provided an example from the DOJ’s enforcement action against “the RMBS banks, mere compliance with legal requirements such as subpoenas, or one-sided presentations urging the department to decline an enforcement action, do not measure up. Indeed, the department may view some such activities – including the belated provision of information that an entity was legally obligated to produce – as impediments to investigative work rather than genuine examples of cooperation.”
No doubt drawing on his inner Potter Stewart, Baer concluded with the ubiquitous remark, “We know meaningful cooperation when we see it.” He went on to cite a recent matter involving an un-named prescription drug chain that overbilled the government for orders of prescription drugs that were never picked up by customers. He said that the evidence involved handwritten pick-up signature logs kept at the cash registers of thousands of pharmacies and noted, “The company decided to cooperate early and in ways that mattered. In addition to the thousands of pages of the handwritten logs, the defendant produced extensive spreadsheets reflecting the information on the logs. To accomplish this, the defendant had a team enter the information line by line into a format where it could be analyzed. The defendant also shared its analysis using the information from the logs. This effort avoided the need to spend months and significant government resources tabulating the logs.”
From these remarks it is clear that the DOJ expects no adversarial relationship if you self-disclose and want cooperation credit. It was unclear from these remarks if that would also include the negotiations of any proposed fine or penalty. It will be interesting to see what happens to Telia Company AB and Deutsche Bank in their negotiations as they both balked at paying the originally proposed fine, stating they were simply the DOJ’s “opening demand”. If they actively fight the fine amounts, I wonder if it will penalize their cooperation credit.
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© Thomas R. Fox, 2016