FCPA Survival Guide

By Tom Fox

The U.S. Department of Justice has clearly and consistently communicated its expectations for any company which finds itself facing an enforcement action under the Foreign Corrupt Practices Act. The book is designed for the compliance professional and business executive who finds themselves in an investigation. It details the steps needed for obtaining the most favorable resolutions possible. It lays out, in the DOJ's own words, what a company can do and the actions they can take to reduce any fine and penalty.

• Language: English
• Publisher: Stoney Creek Publishing
• Release date: Apr 23, 2024
• ISBN: 9798990128941

Book preview

Introduction

The Department of Justice (DOJ) has clearly and consistently communicated its expectations for any company which finds itself in a FCPA enforcement action. The book is designed for the compliance professional and business executive who finds themselves in an investigation. It details the steps you need to take to obtain the most favorable resolutions possible. Since the advent of the FCPA Corporate Enforcement Policy (now Corporate Enforcement Policy) the presumption for any company which self-discloses a potential FCPA violation to the DOJ is that of a declination. Yet even if a company does not self-disclose or there are aggravating factors, a company can take advantage of significant discounts available from the DOJ. This book lays out, in the DOJ’s own words, what a company can do and the actions they can take to reduce any fine and penalty.

Chapter 1

The Top Ten Things To Do

Self-Disclosure. The DOJ rewards self-disclosure above all else.

The ‘Need for Speed’. The DOJ expects a company to share information with regulators as quickly as it finds those facts.

Extensive Remediation. The DOJ expects extensive remediation, well documented with data analytics to support everything you have done.

Root Cause, Risk Assessment and Gap Analysis. Your remediation should begin with a root cause analysis. From there move to a risk assessment, gap analysis and then.

Data Analytics. You should implement a data analytics program for your compliance program across your entire company.

Clawback and Holdbacks. You must clawback or holdback bonuses for any employees who were a part of the bribery scheme and for any executives who failed to engage in appropriate oversight.

Change in sales models. If your organization uses third parties, you need to seriously consider a new direct sales model using your own employees.

Enhancement of Compliance. Make sure to hance your compliance program, with budget, head count and expertise in your reporting, investigations and consequence management processes.

Internal Controls. Use your internal controls to engage in continuous testing, monitoring and improvement of all aspects of its compliance program.

Investigation Protocol. Have an investigation protocol which can quickly triage any claim and escalate so you can make a decision to self-disclosure or best how to move forward.

Chapter 2

A Deep Dive into Lessons From FCPA Settlement

Lesson No. 1, Self-Disclosure

The first and by far most important is that a company should self-disclose a potential FCPA violation to the DOJ. The DOJ expects and will reward self-disclosure above all else. IN the ABB enforcement action, it all began with ABB’s putative attempt to self-disclose. ABB set up a meeting where they intended to self-disclose but only set up the meeting, not telling the DOJ the reason for the meeting. Unfortunately for ABB, this attempt was not successful as the South African press broke the story of ABB’s bribery and corruption between the time ABB called to set up meeting and actually sat down with the DOJ. Yet the DOJ spent significant time discussing the underlying facts and it was clear it had a positive impact on the DOJ.

Kenneth Polite, then Assistant Attorney General said of ABB’s conduct around this attempt, Before the meeting, however, a media report drew public attention to the wrongdoing.  But because the company could demonstrate intent and efforts to self-disclose prior to, and without any knowledge of, the media report, the Department weighed both the early detection of the misconduct and the intent to disclose it significantly in ABB’s favor.

In the Albemarle enforcement action, there was a significant discussion in the NPA around Albemarle’s voluntary self-disclosure to the DOJ. It was the disclosure was not reasonably prompt as it was made approximately 16 months to the DOJ after initial discovery by the company. This meant the self-disclosure was not within a reasonably prompt time after becoming aware of the misconduct in Vietnam and it means that Albemarle did not meet the standard for voluntary self-disclosure. While the DOJ gave significant weight", to the Company’s voluntary, even if untimely, disclosure of the misconduct; it is certainly cautionary.

Equally interesting was the SAP enforcement action. While this factor was not present in the SAP enforcement action, the message sent by the DOJ could not be clearer on not simply the expectation of the DOJ for self-disclosure but also the very clear and demonstrable benefits of self-disclosure. Under the Corporate Enforcement Policy, SAP’s failure to self-disclose cost it an opportunity of at least 50% and up to a 75% reduction off the low end of the U.S. Sentencing Guidelines fine range. Its actions as a criminal recidivist, resulted in it not receiving a reduction of at least 50% and up to 75% from the low end of the U.S.S.G. fine range but rather at 40% from above the low end. SAP’s failure to self-disclose cost it an estimated $20 million under the Sentencing Guidelines. SAP’s failure to self-disclose and recidivism cost it a potential $94.5 million in discounts under the Corporate Enforcement Policy. The DOJ’s message could not be any clearer.

In addition to these enforcement actions, Kenneth Polite, in a speech announcing changes in the Corporate Enforcement Policy, made clear the importance of self-disclosure in the eyes of the DOJ. Our existing policy provides that, if a company voluntarily self-discloses, fully cooperates, and timely and appropriately remediates, there is a presumption that we will decline to prosecute absent certain aggravating circumstances involving the seriousness of the offense or the nature of the offender. These aggravating circumstances include, but are not limited to, involvement by executive management of the company in the misconduct; a significant profit to the company from the wrongdoing; egregiousness or pervasiveness of the misconduct within the company; or criminal recidivism. If a company self-discloses, but a criminal resolution is warranted, our existing policy offers 50% off of the low end of the applicable Sentencing Guidelines penalty range.

He re-emphasized this position, stating When a company has uncovered criminal misconduct in its operations, the clearest path to avoiding a guilty plea or an indictment is voluntary self-disclosure.  It is also the clearest path to the greatest incentives that we offer, such as a declination with disgorgement of profits. While noting the difficulty of a company making a decision to self-disclose,   "we are underscoring that a corporation that falls short of our expectations does so at its own risk. Make no mistake - failing to self-report, failing to fully cooperate, failing to remediate, can lead to dire consequences." [emphasis supplied]

The DOJ could not be clearer. The No. 1 lesson is that if you want any of the benefits available, you need to self-disclose.

Lesson No. 2, the Need for Speed

Next is Number 2, the Need for Speed. The DOJ expects a company to share information with regulators as quickly as it found those facts, without necessarily knowing how such admissions might affect its overall case and settlement chances.

In a 2023 speech, Assistant Attorney General Kenneth Polite announced the change which I have monikered as ‘the Need for Speed’. Polite characterized the change as from ‘full’ cooperation to ‘extraordinary’ cooperation. He noted the DOJ has differences between corporations and individuals, in both investigations and enforcement but with respect to how we consider cooperation, the lens and framework through which we analyze the level and degree of cooperation aren’t so different.

Polite named three concepts, immediacy, consistency, degree, and impact—that apply to cooperation by both individuals and corporations, which will help to inform our approach to assessing what is extraordinary. He went onto note, that In assessing the quality of a cooperator’s assistance, we value: when an individual begins to cooperate immediately, and consistently tells the truth; individuals who allow us to obtain evidence we otherwise couldn’t get, like quickly obtaining and imaging their electronic devices, or having recorded conversations; cooperation that produces results, like testifying at a trial or providing information that leads to additional convictions. He emphasized there are examples in the individual context.

Then came the puzzling part. Polite stated we know extraordinary cooperation when we see it, and the differences between full and extraordinary cooperation are perhaps more in degree than kind. To receive credit for extraordinary cooperation, companies must go above and beyond the criteria for full cooperation set in our policies—not just run of the mill, or even gold-standard cooperation, but truly extraordinary. He closed by intoning, At the same time, the government will not affirmatively direct a company’s internal investigation, if it chooses to do one, and companies are often well positioned to know the steps they can take to best cooperate in a particular given case. He concluded with the following, And of course, the facts and circumstances of each case will be unique.

Perhaps Polite may simply be channeling his inner Potter Stewart with his line ‘we know it…when we see it’. Of course, if there are two or more people looking at the same set of facts, there is always the chance for two or more interpretations. The question then becomes how to define extraordinary cooperation.

It also ties directly into what Deputy Attorney General Lisa Monaco said in announcing the Monaco Doctrine, when she stated, "it is imperative that Department prosecutors gain access to all relevant, non­ privileged facts about individual misconduct swiftly and without delay. [emphasis supplied] This meant, to receive full cooperation credit, corporations must produce on a timely basis all relevant, non-privileged facts and evidence about individual misconduct such that prosecutors have the opportunity to effectively investigate and seek criminal charges against culpable individuals. If a company fails to meet this burden, it will place in jeopardy their eligibility for