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Richard Schroeder

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DOJ Announces “Presumption” of Declination of Prosecution When Companies Self-Report, Cooperate, and Timely Remediate FCPA Issues: Practical Application Of The New Policy Remains Unclear

by: Richard Schroeder, Justin M. Woodard of Jones Walker LLP - Client Alert

Thursday, November 30, 2017

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On November 29, 2017, the U.S. Department of Justice (“DOJ”) announced a revised Foreign Corrupt Practices Act (“FCPA”) Corporate Enforcement Policy.^[^1] The new policy comes a year and a half after DOJ initiated its FCPA Pilot Program, which aimed to promote voluntary corporate disclosure of FCPA misconduct by providing mitigation credit for such cooperation. During that time, DOJ’s Criminal Division, Fraud Section, FCPA Unit received 30 voluntary disclosures, compared to only 18 voluntary disclosures during the previous such period.

The Pilot Program offered greater transparency into what DOJ requires from companies seeking mitigation credit for voluntarily self-disclosing misconduct. Under the Pilot Program, companies were eligible for a “significant” mitigation credit if they disclosed all relevant facts about the wrongdoing, fully cooperated in an investigation, and timely and appropriately remediated misconduct. If a company met the criteria for credit, then DOJ guidance provided that the FCPA Unit “may” offer up to a 50% reduction off the bottom end of the Sentencing Guidelines fine range and generally would not require appointment of a compliance monitor if the company had implemented an effective compliance program. In addition, the FCPA Unit would “consider” offering a declination of prosecution. In making that determination, prosecutors would take into account factors such as the seriousness of the offense, the involvement of executive management, the amount of profit derived from the misconduct in relation to the company’s size and wealth, the company’s history of non-compliance, and any prior resolutions within the past five years.^[2]

The “revised” policy announced on November 29 by Deputy Attorney General Rod Rosenstein marks a decision by DOJ to permanently extend the Pilot Program, with certain changes. Some significant differences include the following:

Perhaps the most significant enhancement is the creation of a “presumption” of declination. When a company satisfies the standards of voluntary self-disclosure, full cooperation, and timely and appropriate remediation, DOJ states that there will be a presumption that it will resolve the case through a declination. The presumption may be overcome only if there are certain aggravating circumstances or the offender is a recidivist.
In addition, even in cases where an enforcement action is required, DOJ states it “will recommend” a 50% reduction off the low end of the Sentencing Guidelines fine range other than in cases of criminal recidivism, and “generally will not require appointment of a monitor” if the company has implemented an effective compliance program. These changes, on their face, offer more certainty to companies regarding punishment by U.S. enforcement authorities than under the Pilot Program.^[3]
Finally, the new policy offers details about how the FCPA Unit will evaluate corporate compliance programs, and in particular specifies some “hallmarks” of an effective program.

Mr. Rosenstein noted that companies continue to be free to choose not to comply with the FCPA Corporate Enforcement Policy. Self-reporting is not required by law, but the presumption of declination will be reserved for those who do.

The Deputy Attorney General’s remarks reflect some caution in prosecuting corporations as opposed to individuals. Calling corporate America an “ally” of law enforcement, Mr. Rosenstein stated that companies with “a robust compliance program” can “reduce the need for enforcement” and free up prosecutors to focus on prosecution of individuals.

Still, he noted, it is important to recognize that the FCPA Corporate Enforcement Policy does not offer companies immunity. Even when a company voluntarily self-discloses, fully cooperates, and remediates, it can still be required to disgorge profits stemming from a FCPA violation and/or pay restitution. There also may be criminal actions taken against individuals. Mr. Rosenstein noted that “[e]ffective deterrence of corporate corruption requires prosecution of culpable individuals.”

The new policy, like the Pilot Program, only offers guidance and is not enforceable in court. It will be incorporated into the United States Attorneys’ Manual used by federal prosecutors when making charging decisions.

Compliance Caveats and Takeaways:

Every situation is unique, and careful consideration should be given to any decision to self-report potential offences involving foreign corruption.
The “presumption” in the policy is not a legal presumption enforceable in courts. Declinations remain in the sole discretion of DOJ, whether or not a company chooses to self-report.
The policy does not affect the rights of foreign enforcement authorities to prosecute and fine U.S. or foreign companies. In light of recent settled cases, such as Odebrecht^[4] and SBM Offshore,^[5] where foreign enforcement authorities received the lion’s share of fines, consideration should be given to the fact that any settlement would likely involve multiple enforcement authorities.
Particularly in cases where the underlying issue arises through the activities of a foreign affiliate, it remains unclear whether the policy’s presumption would be applied to the entire multi-national corporate organization.
All things considered, the policy and the tone at DOJ have arguably shifted more towards the carrot of rewarding cooperation, and away from the stick of harsher treatment for not reporting violations.