The US Department of Justice has announced the creation of a one-year pilot program intended to encourage companies to self-report bribery violations and provide extensive cooperation in exchange for reduced penalties, ranging from reductions in fines to declinations.
On April 5, the Fraud Section of the US Department of Justice (DOJ) issued its “Foreign Corrupt Practices Act Enforcement Plan and Guidance” (Guidance) outlining the following “three steps in [its] enhanced FCPA enforcement strategy”:
While the first two steps have been championed in prior DOJ press releases and speeches, the third step—the creation of the FCPA enforcement pilot program—is an important development that has the potential to change the voluntarily disclosure calculus in connection with FCPA matters.
The Guidance applies “to organizations that voluntarily self-disclose or cooperate in FCPA matters during the pilot period, even if the pilot thereafter expires.”
The Fraud Section plans to more than double the size of its FCPA Unit by “adding 10 more prosecutors to its ranks”—a staffing goal that was previously announced by Assistant Attorney General for the Criminal Division Leslie Caldwell at an FCPA conference in November 2015. The Guidance also cites the FBI’s establishment of “three new squads of special agents devoted to FCPA investigations and prosecutions,” a hiring initiative that was announced approximately a year ago (and detailed in our April 2015 LawFlash “FBI Establishes ‘Dedicated International Corruption Squads’ to Bust FCPA Violators”).
The second part of the Guidance builds on previous statements by senior DOJ leaders that they “are greatly aided by our foreign partners” and “it is safe to say [in 2013] that we are cooperating with foreign law enforcement on foreign bribery cases more closely today than at any time in history.”
The most important part of the Guidance is the Fraud Section’s announcement of a one-year “FCPA enforcement pilot program,” which provides for “mitigation credit” that takes into consideration three essential factors: (1) voluntary disclosure, (2) full cooperation, and (3) remediation. In cases in which the above three factors are met but a criminal resolution is nonetheless warranted, “mitigation credit” can include “up to a 50% reduction off the bottom end of the Sentencing Guidelines fine range, if a fine is sought” and the avoidance of a third-party compliance monitor.” Moreover, the Guidance states that, in appropriate cases, where the above factors are fully satisfied, DOJ “will consider a declination of prosecution.”
A company must voluntarily disclose an FCPA violation to the Fraud Section in order to be eligible for the full mitigation credit. As a preliminary matter, the disclosure must be truly voluntary—a disclosure that the “company is required to make, by law, agreement, or contract” would not constitute voluntary self-disclosure for purposes of this pilot. Second, the disclosure must occur “prior to an imminent threat of disclosure or government investigation” and be “within a reasonably prompt time after becoming aware of the offense,” with the burden on the discloser to demonstrate timeliness. Finally, the disclosure must include “all relevant facts known to [the company], including all relevant facts about the individuals involved in any FCPA violation.”
DOJ’s voluntary disclosure requirement follows a recent announcement by the US Securities and Exchange Commission (SEC) that companies subject to FCPA enforcement actions are required to self-report their potential misconduct to be eligible for deferred prosecution agreements and non-prosecution agreements. For more information about the SEC’s voluntary disclosure expectations, read our December 2015 LawFlash titled “SEC Policy Change: Voluntary Disclosure Now Required for DPA/NPA Resolutions in FCPA Cases.”
The Guidance sets forth nearly a dozen requirements for companies seeking cooperation credit under the pilot program. Those requirements can be distilled into the following four categories:
The Guidance notes that “cooperation comes in many forms,” and that the Fraud Section “does not expect a small company to conduct as expansive an investigation in as short a period of time as a Fortune 100 company.”
The final requirement is that of “timely and appropriate remediation,” and the following items generally will be required in order for companies to receive remediation credit:
Where the above conditions are met but a criminal resolution is warranted, the Fraud Section’s FCPA Unit (1) may accord up to a 50% reduction off the “bottom end” of the Sentencing Guidelines fine range, if a fine is sought; and (2) generally should not require appointment of a monitor if a company has, at the time of resolution, implemented an effective compliance program.
Furthermore, where the same conditions are met, the Fraud Section’s FCPA Unit will consider a declination of prosecution. In doing so, prosecutors must balance the importance of encouraging disclosure against the seriousness of the offense. In assessing the seriousness of the offense, prosecutors are to consider the involvement by executive management in the FCPA misconduct, the size of the ill-gotten gains in relation to the overall revenue of the company, a history of noncompliance by the company, and any prior resolutions by the company with DOJ within the past five years.
Finally, if the company cooperates and remediates, but has not voluntarily disclosed, the Fraud Section’s FCPA Unit may provide partial mitigation credit, but will agree to no more than a 25% reduction off the bottom of the Sentencing Guidelines fine range.
This Guidance comes after what has been a growing perception that voluntary disclosures have slowed significantly due to a lack of transparency, consistency, and clarity as to what the benefits are, if any, to self-disclosing. Whether the pilot program succeeds in encouraging self-disclosures will likely depend on the perception of companies and defense counsel of the fairness and openness of the application of the criteria in the Guidance.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Rebecca L. Kelly
Susan D. Resley
 US Dep’t of Justice, Memorandum from Andrew Weissmann titled “The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance” (Apr. 5, 2016) (Guidance)
 Guidance at 3.
 Id. at 1.
 Stephen Dockery, “US Justice Dept. Boosting Foreign Corruption Staff,” Wall Street Journal (Nov. 17, 2015)
 US Dep’t of Justice, “Assistant Attorney General Leslie R. Caldwell Speaks at American Conference Institute’s 31st International Conference on the Foreign Corrupt Practices Act” (Nov. 19, 2014)
 See id.; see also US Dep’t of Justice, “Acting Assistant Attorney General Mythili Raman Delivers Keynote Address at the Global Anti-Corruption Congress” (June 17, 2013)
 Guidance at 8.
 Id. at 9.
 Id. at 4.
 Id. at 5-6.
 Id. at 6.
 Id. at 7-8.
 Id. at 8-9.