Justice Department: There’s much to unpack from Assistant Attorney General Kenneth Polite yesterday’s remarks on revisions to the Criminal Division’s Corporate Enforcement Policy.
Before we delve into the comments themselves and what they mean for compliance programs, let’s first give a brief introduction on the CEP, for the benefit of those new to this terminology.
The US Department of Justice (DOJ) has a program in place to encourage companies to self-report any misconduct they come across. This program, called the FCPA Corporate Enforcement Policy (CEP), was first announced in 2016 and was expanded in 2017.
The CEP offers companies benefits for self-reporting, cooperating with investigations, and taking steps to fix any issues they find. For example, if a company self-reports and cooperates, they may be able to avoid prosecution altogether. And even if a company is facing prosecution, the CEP may reduce the penalties they face.
The CEP also applies to companies that find misconduct during the process of buying or merging with another company. If a company finds misconduct and self-reports it, they may still be eligible for benefits under the CEP.
Examples of Successful Resolutions
The DOJ has recently had successful resolutions with companies that have self-reported misconduct and cooperated with investigations, showing that the DOJ is committed to rewarding companies that do the right thing.
The DOJ recently declined to prosecute a French aerospace company, Safran SA, because they had self-reported violations that they found during a merger. Even though the violations occurred between 1999 and 2015, the company fully cooperated with the investigation, fixed the issues and gave back any illegal gains.
Another company, Swedish-Swiss multinational ABB, also had a positive outcome even though they didn’t self-report the misconduct. They had previous violations in the past and had a compliance program in place that detected the misconduct in South Africa, and they had plans to self-report it. However, before they could do that, the media reported about the misconduct.
The Department of Justice took into consideration the company’s intent to self-report, the early detection and the extensive cooperation and remediation. As a result, ABB was able to avoid a guilty plea and entered into a deferred prosecution agreement with the Department. However, since they had previous violations and were considered a FCPA recidivist, they didn’t receive the same benefits as Safran SA.
On the Flipside
The DOJ wants to be transparent about the incentives for companies to self-report, cooperate and fix any misconduct they find. However, they want to make it clear that if a company falls short of their expectations, it could lead to serious consequences.
For example, a company called Balfour Beatty Communities did not receive any benefits under the Corporate Enforcement Policy (CEP) due to lack of voluntary self-disclosure, lackluster cooperation, failure to conduct appropriate remediation in a timely manner.
The starting point for the fine amount was determined to be between the low end and the mid-point of the applicable U.S. Sentencing Guidelines fine range, and a guilty plea was warranted due to the seriousness and pervasiveness of the conduct. The company’s compliance program was found to be inadequate at the time of the offense and at the time of the resolution, and an independent compliance monitor was imposed.
In Glencore’s case ( also featured in my earlier post, “World’s most corrupt companies“), the company didn’t get a big reduction in its fine because it didn’t cooperate well with the investigation and didn’t take proper actions against people involved in the wrongdoing.
In the Bank of Nova Scotia case, the company was given a big fine because instead of fixing the problem, their compliance team actually contributed to the bad behavior.
The DOJ emphasizes that its “default is not a declination, it’s not an NPA, and it’s not a DPA” and reminds the reader that they have secured six parent-level corporate guilty pleas during Mr. Polite’s tenure to date, in cases involving a range of conduct, from foreign bribery and bank fraud to emissions testing fraud and spoofing.
They take a nuanced but tough approach and companies must earn a declination by following the policies.
The New Justice Department Revisions to the CEP
Most importantly for compliance programs however are the new announced revisions to the Corporate Enforcement Policy, which applies to all corporate criminal matters handled by the Criminal Division, including all Foreign Corrupt Practices Act (FCPA) cases.
These revisions provide specific, additional incentives for companies to voluntarily self-disclose, cooperate with investigations, and take steps to remediate any misconduct.
Whilst companies may have been hesitant to self-disclose under the previous version of the policy, the revised policy presents a new path that incentivizes stronger compliance and cooperation. Even if there are aggravating circumstances present, prosecutors may still choose to decline prosecution if the company can demonstrate that it has met 3 specific criteria:
- “The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct;
- At the time of the misconduct and the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the company’s voluntary self-disclosure; and
- The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation.”