FCPA and Voluntary Disclosure Redux

Policy Overview

On November 29, 2017, Deputy Attorney General Rod Rosenstein announced a revised “FCPA Corporate Enforcement Policy” (“Policy”) that encourages voluntary disclosures of Foreign Corrupt Practices Act (FCPA) violations. Rosenstein explained, “[w]e want corporate officers and board members to better understand the costs and benefits of cooperation. The [P]olicy therefore specifies what we mean by voluntary disclosure, full cooperation, and timely and appropriate remediation.”

The Policy also addresses companies that do not qualify for voluntary disclosures but cooperate fully with the United States Department of Justice (DOJ). Rosenstein reasoned that, “[t]he government should provide incentives for companies to engage in ethical corporate behavior. That means fully cooperating with government investigations, and doing what is necessary to remediate misconduct—including implementing a robust compliance program. Good corporate behavior also means notifying law enforcement about wrongdoing.” Still, companies can choose not to comply with the Policy, in which case the DOJ “will take appropriate action consistent with the facts, the law, and the Principles of Federal Prosecution of Business Organizations.”

The Policy signals a shift away from just dictating policy through speeches or memoranda by placing the Policy in the United States Attorneys’ Manual. While it strongly emphasizes the DOJ’s preference for voluntary disclosures, the Policy does not differ greatly from the DOJ’s 2016 pilot program.

Full Credit

The first section of the Policy outlines (1) how a company can receive the presumption of a declination or, (2) if criminal resolution is warranted, how the DOJ will recommend to a sentencing court a 50 percent reduction from the low end of the U.S. Sentencing Guidelines fine range and will not require a monitor. To receive the presumption, a company must (1) voluntarily self-disclose misconduct in an FCPA matter, (2) fully cooperate with the investigation and (3) timely and appropriately remediate. Additionally, the Policy requires a company to pay all disgorgement, forfeiture and/or restitution for its conduct.

There are two exceptions. First, there will be no presumption where aggravating circumstances are present, such as involvement by executive management of the company in the misconduct; a significant profit to the company; pervasiveness of the misconduct within the company and recidivism. Second, there will be no presumption that the DOJ will recommend a 50 percent reduction when the case involves criminal recidivism.

Limited Credit

The Policy states that, even if the company did not voluntarily disclose to the DOJ, if it fully cooperated and appropriately remediated, the DOJ may recommend to a sentencing court up to a 25 percent reduction.

Definitions

Keeping with the goal of increasing understanding of the costs and benefits of complying with the Policy, an extensive explanation is included of what constitutes voluntary self-disclosures, full cooperation and timely and appropriate remediation.

Voluntary Self-Disclosure in FCPA Matters. Under the Policy, to receive credit for voluntary self-disclosure of wrongdoing, the DOJ requires: (1) the voluntary disclosure qualifies under U.S.S.G. § 8C2.5(g)(1) as occurring “prior to an imminent threat of disclosure or government investigation”; (2) the company discloses the conduct to the DOJ “within a reasonably prompt time after becoming aware of the offense,” with the burden being on the company to demonstrate timeliness; and (3) the company discloses all relevant facts known to it, including all individuals involved.

Full Cooperation in FCPA Matters. The Policy highlights five categories necessary for full cooperation with the Policy. First, the company must timely disclose all facts relevant to the wrongdoing at issue, including (i) information gathered during a company’s independent investigation; (ii) attribute information to specific sources where it does not violate the attorney-client privilege, rather than a general narrative of the facts; (iii) timely updates on a company’s internal investigation, including “rolling” disclosures; (iv) all facts related to involvement in the criminal activity by the company’s officers, employees or agents; and (v) all facts known, or that become known, to the company regarding potential criminal conduct by all third-party companies (including their officers, employees or agents).

The second category requires proactive cooperation. While, as a practical matter, this approach is often undertaken, the Policy clarifies that a company must timely disclose information even when not specifically asked to do so. Additionally, if the company learns of evidence that is not in its possession and not otherwise known to the DOJ, then the company must identify the information to the DOJ.

The third category requires a company to preserve, collect and disclose relevant documents and information. This category includes disclosing overseas documents, the locations where such documents were found and who found them, facilitating third-party production of documents and, where requested and appropriate, providing translations of relevant documents in foreign languages.

The fourth and fifth categories, when requested, require companies to make sure witness interviews and other internal investigation procedures do not conflict with the DOJ’s procedures and to make available witnesses for DOJ interviews.

Timely and Appropriate Remediation in FCPA Matters. Finally, for full credit, the Policy lays out a series of requirements for remediation. They include a thorough analysis of underlying causes of conduct and remediation to address the root causes; implementation of an effective compliance and ethics program; discipline of employees (including those identified by the company as being responsible for the misconduct in a direct capacity or as a result of a failure to supervise); retention of business records and prohibition of improper destruction or deletion of business records and any additional actions that demonstrate recognition of the seriousness of the misconduct, the acceptance of responsibility for it and the implementation of measures to lower the risk of repetition.

The Policy underscores that FCPA prosecutions remain a priority. It also is a continuation of the DOJ’s focus on increased FCPA compliance through self-reporting, a long-standing tenet of DOJ corporate prosecution principles. Although the Policy does not set forth significant changes, it will likely spur additional corporate voluntary disclosures given the incentives and potentially harsh consequences of government prosecutions.

For more information about this alert or the FCPA, please contact Jonathan Feld (jfeld@dykema.com), Sean Griffin (sgriffin@dykema.com), James Brady (jbrady@dykema.com), Jason Ross (jross@dykema.com), Edwin Tomko (etomko@dykema.com), Matthew Dybas (mdybas@dykema.com) or your Dykema relationship attorney.