Since June of this year, there have been five announced FCPA (Foreign Corrupt Practices Act) settlements. The US Department of Justice (“DOJ”) has declined enforcement actions in three of them:
The “declinations” (as they’re referred to) are rather remarkable considering the uproar caused by the Yates Memo when it was released in September 2015. The anti-corruption compliance and enforcement community was convinced that the Yates Memo marked a shift toward increased focus on the culpability of individuals (i.e., individual prosecutions) as well as higher hurdles for cooperation credit. In other words, more rigorous enforcement.
While 2 of the 3 companies above signed non-prosecution agreements with the SEC and all three disgorged the profits related to their illicit payments, they all avoided action by the DOJ. How so?
The primary explanation appears related to the DOJ’s FCPA enforcement “pilot program” implemented on April 5, 2016 with the stated aim of “greater accountability for individuals and companies that engage in corporate crime.” The practical result is more carrot, less stick if a company can meet the requirements:
- Voluntary Self-Disclosure in FCPA Matters
- Full Cooperation in FCPA Matters
- Timely and Appropriate Remediation in FCPA Matters
The DOJ’s memo provides considerable detail on each of the three requirements and makes it clear that it still expects information regarding the culpability of individuals consistent with the Yates Memo. All three declination letters above make it clear that the companies met these requirements in the DOJ’s view.
So how does a company position itself to potentially obtain a declination? In order to self-report (without which full credit may not be possible), the first step is to have an effective compliance program that identifies improper activities so that they can be triaged, investigated and remediated. Employees must have alternative reporting channels (such as hotlines) and be encouraged to utilize them to report concerns instead of utilizing the SEC or DOJ tip lines. Without this first step, companies will be fighting uphill to obtain a declination.
By one count, there are at least 87 ongoing FCPA investigations as of June 30, 2016. Future settlements will be closely watched to determine whether these three declinations are a trend or an anomaly.