DOJ’s New Guidance for Cooperation Credit in FCPA Resolutions
On April 5, the Fraud Section of the U.S. Department of Justice issued new guidance to its enforcement of the Foreign Corrupt Practices Act (FCPA). Simultaneously, it announced enhancements to the government’s FCPA enforcement capabilities, with the addition of 10 new prosecutors to the Fraud Section’s FCPA unit (an increase of 50 percent) and three new squads of FBI agents devoted to FCPA investigation and prosecution.
These enhancements follow the department’s retention last fall of Hui Chen as full-time compliance counsel to provide guidance to prosecutors evaluating companies’ compliance programs and remediation efforts. The expansion of DOJ’s FCPA resources signals that FCPA enforcement will not flag any time soon, and indeed that after 10 years of extremely active enforcement, the government is placing new emphasis on the sophistication of its anti-corruption investigative and prosecutorial capabilities. In addition, the guidance notes that DOJ is strengthening its coordination with law enforcement in other countries, sharing leads and working together to investigate and prosecute international bribery schemes.
The new guidance, which is laid out in a nine-page memorandum issued by Fraud Section Chief Andrew Weissmann, will be implemented for one year in pilot form. It articulates for the first time what standards business organizations must meet in order to receive cooperation credit from DOJ (i.e., a reduction in fine beyond that provided for by relevant factors in the United States Sentencing Guidelines). While companies have long known that voluntary disclosure, cooperation with the government’s investigation and remediation are the three touchstones to which DOJ looks in determining cooperation credit, it has heretofore been unclear what, if any, specific guidelines and benchmarks DOJ has used to determine the amount of credit a company may receive.
The new guidance spells out what constitutes voluntary disclosure, what specific actions a company will be expected to take to be deemed to have fully cooperated and what actions generally will be required before a company is considered to have timely and appropriately remediated an FCPA violation. The guidance is explicitly aimed at incentivizing corporate self-disclosure of FCPA misconduct, so that DOJ can pursue culpable individuals. In this regard, it goes hand-in-hand with both the policy on individual accountability the department issued last September in the Yates Memo and the increasing number of DOJ enforcement actions against individuals in FCPA matters.
Notably, the guidance provides that a company that does not voluntarily disclose wrongdoing can receive at most a 25 percent reduction off the bottom of the Sentencing Guidelines fine range, even if it otherwise fully cooperates and remediates. This is a major, and highly specific, incentive for self-disclosure, which must occur “within a reasonably prompt time” after the disclosing company becomes aware of the offense, with the burden on the company to demonstrate timeliness.
In contrast, a company that self-discloses misconduct, fully cooperates, timely and appropriately remediates and otherwise meets the guidance in the Yates Memo and the Principles of Federal Prosecution of Business Organizations can receive up to a 50% fine reduction from the bottom end of the Sentencing Guidelines range. Additionally, in such cases DOJ will generally not require a monitor. Finally, a company that has met all of the conditions set forth in the new guidance is a candidate for declination of prosecution, although other factors, such as the seriousness of the offense, will continue to be considered in weighing whether a declination is appropriate.
The guidance sets out requirements for a company to receive credit for “full cooperation” with DOJ, including “provision of all facts relevant to potential criminal conduct by all third-party companies (including their officers and employees) and third-party individuals.” With the onus placed squarely on the company to make a prompt disclosure of misconduct and to provide relevant facts that enable DOJ to pursue culpable individuals, the importance of swift and thorough investigation of potentially corrupt conduct is greater than ever.
Reprinted with permission from the April 12, 2015 issue of Corporate Counsel. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.