Major Development In White Collar Law: The DOJ Extends FCPA Corporate Enforcement Policy To Non-FCPA Cases

Yesterday, at the American Bar Association's White Collar Conference, John Cronan, the acting head of the DOJ's Criminal Division, and securities and financial fraud unit chief Benjamin Singer, announced that criminal division prosecutors will use the FCPA Corporate Enforcement Policy as non-binding guidance for when to offer leniency or declinations in non-FCPA cases. According to Cronan “We intend to embrace, where appropriate, a similar approach and similar principles — rewarding voluntary self-disclosure, full cooperation, timely and appropriate remediation — in other contexts.” Contemporaneous to this announcement, the DOJ announced that it had issued a declination to Barclays PLC in a front-running case, based on factors set forth in the FCPA Corporate Enforcement Policy. Barclays was required to pay disgorgement of ill-gotten gains, which is a requirement under the Policy. There is a link to the declination letter below. 

For those looking for background on this, on November 29, 2017, Deputy U.S. Attorney General Rod Rosenstein announced a DOJ "FCPA Corporate Enforcement Policy" at the ACI FCPA Conference in Washington DC. While at first blush the temptation might be to conclude that the Policy is merely a codification into the US Attorneys' Manual (USAM) of the FCPA Pilot Program, which provided an up to a 50% break off the bottom end of the sentencing guidelines range for companies that voluntarily disclose FCPA issues and fully cooperate and remediate, with the possibility of a declination, upon a closer read, the Policy could ultimately provide some additional meaningful incentives to voluntarily disclose potential FCPA violations. However, the devil always resides in the details, and the extent to which the Policy would result in a meaningful benefit to a company in any given case is fact-specific. Baker McKenzie's FCPA lawyers in its Litigation and Government Enforcement Group are available to discuss the Policy in greater depth.

Key Aspects of the Policy

The Policy expressly provides for a "presumption" of a declination where a company voluntarily discloses, cooperates and remediates. Under the old FCPA Pilot Program, if a company did all of this, all it was entitled to was the possibility of a declination. 

As a side note, one aspect of the Policy that has received, perhaps, undue attention is that a condition to qualifying under the Policy is the payment of all disgorgement, forfeiture and/or restitution. This does not appear to be a departure in any meaningful way from the approach under the Pilot Program, which specifically stated "[m]oreover, to be eligible for such credit, even a company that voluntarily self-discloses, fully cooperates, and remediates will be required to disgorge all profits resulting from the FCPA violation." While it is true that the Pilot Program did not expressly include language relating to restitution or forfeiture, the practical implication of that omission is immaterial in most cases to settling companies. Perhaps the only meaningful difference is that since the DOJ does not routinely request disgorgement, but rather the SEC does, the Policy clarified that the full benefits of the Policy are available in cases where there is no SEC enforcement interest (e.g., in the case of a non-issuer case). Or, it could be read to mean that the lack of an SEC interest can no longer be used as a basis for the company to divest itself of improperly obtained gains.

Mandatory 50% Discount For Complete Adherence to Policy: Under the Policy, a company that takes all of the above steps also appears to entitled to a mandatory fine recommendation of 50% of off the low end of the sentencing guidelines range. Under the old Pilot Program, the DOJ could award up to a 50% departure off the low end of the sentencing guidelines, but was not actually required to aware 50%.

25% Discount Still Available for Companies that Do Not Voluntarilly Self-Disclose: Companies that do not voluntarily disclose but which do cooperate and remediate appear to be entitled to up to a 25% discount off the low end of the sentencing guidelines. This is the same as under the Pilot Program, and it seems clear that by setting a mandatory 50% departure for voluntary disclosure, the DOJ is sending a message that disclosure matters in its eyes.

A Slight, But Potentially Significant, Change to "Voluntary Self-Disclosure" Definition:  Both the Pilot Program and the Policy contain a three-prong test for voluntary self-disclosure. There first two are identical: (i) voluntary disclosure must occur prior to an imminent threat of disclosure or government investigation; and (ii) the company must discloses the conduct to the DOJ "within a reasonably prompt time after becoming aware of the offense," a burden which the company bears. However, the third prong is different. The Pilot Program required disclosure of all relevant facts known to it, including all relevant facts about all indiviuduals involved in an FCPA violation. The Policy is not limited to an FCPA violation, and instead requires disclosure of facts related to "all individuals involved in a violation of law." The DOJ has not clarified its intent in making this change, but we note that in anti-corruption investigations, often times it is difficult to establish with clear evidence that an individual violated the FCPA, which will often require a jurisdictional connection with the US, as opposed to local law. One possible interpretation is that the DOJ is interetsed in learning about all violations of law in connection with a foreign bribery investigation, not simply those that result in a violation of the FCPA.

If you have any questions about this, I am happy to discuss at 312-861-8616 or [email protected].

 https://dlbjbjzgnk95t.cloudfront.net/1017000/1017798/barclays-plc-fx-declination-2-28-18.pdf