Wednesday, November 18, 2015

DOJ Ramping Up FCPA Prosecution, Companies Urged to Self-Disclose

By Kevin Kulling, J.D.

As federal prosecutors increase their focus on the investigation and prosecution of corruption under the Foreign Corrupt Practices Act, the government is strongly encouraging companies who become aware of misconduct to voluntarily self-disclose, fully cooperate, and timely and appropriately remediate, according to remarks from Leslie Caldwell, the U.S. Assistant Attorney General for the Criminal Division. Caldwell said that the DOJ was increasing the size of its FCPA force. Three fully operational squads were added to the FBI’s international corruption unit, and 10 new prosecutors are slated to join the Fraud Section’s FCPA Unit.

Caldwell made the remarks in an address to the American Conference Institute’s Conference on the FCPA, held in National Harbor, MD.

Efforts to increase transparency. Caldwell noted that there were limits to how much the government can disclose about investigations and prosecutions, particularly for investigations that do not result in charges being brought. However, Caldwell said that the Criminal Division was attempting to be clearer about its expectations in corporate investigations and the bases for corporate pleas and resolutions, especially involving mitigation.

Self-disclosure. To be considered for mitigation credit, prosecutors consider cooperation alone to be insufficient, according to Caldwell’s remarks. But when a company voluntarily self-discloses, fully cooperates and remediates, it is eligible for a full range of consideration with respect to both charging and penalty determinations. Companies that fail to self-disclose but nonetheless cooperate and remediate will receive some credit, although measurably less credit than had it also self-reported, according to the remarks.

Caldwell noted that overseas bribery schemes can be especially difficult to detect, investigate and prosecute. Individual FCPA offenders and relevant evidence often are located overseas. The company is often best positioned to fully investigate in an efficient and timely fashion. Accordingly, voluntary self-disclosure in the FCPA context does provide a tangible benefit when it comes time to make a charging decision, according to Caldwell.

Caldwell also noted that self-disclosure means that within a reasonably prompt time after becoming aware of an FCPA violation, the company discloses the relevant facts known to it, including all relevant facts about the individuals involved in the conduct.

Disclosure must occur before an investigation is underway or is imminent, including a regulatory investigation by an agency such as the SEC. Disclosures that the company is required to make by law, agreement, or contract do not qualify.

Cooperation. Companies seeking credit must affirmatively work to identify and discover relevant information about the individuals involved, through independent, thorough investigations. Companies cannot just disclose facts relating to general corporate misconduct and withhold facts about the individuals involved.

In addition to identifying the individuals involved, full cooperation includes providing timely updates on the status of the internal investigation, making officers and employees available for interviews to the extent that is within the company’s control, and proactive document production, especially for evidence located in foreign countries, Caldwell said.

Remediation. Remediation includes the company’s overall compliance program as well as its disciplinary efforts related to the specific wrongdoing at issue. Whether and how the company has disciplined the employees involved in the misconduct will be considered. There will also be an examination of the company’s culture of compliance, including employee awareness that criminal conduct will not be tolerated.

The DOJ will be looking for a well-designed and fully implemented compliance program, with sufficient resources, relative to the company’s size, made available to train employees on their legal obligations and to uncover misconduct in its earliest stages. Compliance personnel should be sufficiently independent in order to be free to report misconduct, even if committed by high-ranking officials.

Caldwell reiterated that there was no requirement that a company self-disclose, fully cooperate, or remediate FCPA offenses. However, for serious, readily provable offenses, companies seeking leniency on the basis they took steps to mitigate the offense after it was discovered are on notice of what the Criminal Division looks for when considering mitigating factors.