Update on DOJ Declinations and Corporate Compliance Program Evaluations

Boston Consulting Group (BCG) Case

In a recent case, the Department of Justice (DOJ) issued a declination of prosecution for the Boston Consulting Group (BCG) related to violations of the Foreign Corrupt Practices Act (FCPA). This decision was made after BCG voluntarily disclosed misconduct involving its employees in Portugal, who had engaged in a bribery scheme between 2011 and 2017. The scheme involved paying $4.3 million in commissions to an agent in Angola to secure government contracts, resulting in $14.4 million in ill-gotten profits.

BCG’s proactive measures, including self-disclosure, full cooperation with the DOJ, and significant remediation efforts, were crucial in the DOJ’s decision to decline prosecution. These efforts included terminating the involved employees, enforcing compensation clawbacks, and forfeiting equity from implicated partners. The company also took steps to strengthen its compliance programs by enhancing employee training, improving third-party due diligence, and establishing risk committees.

Trends in DOJ Declinations

The BCG case reflects several broader trends in DOJ declinations under FCPA enforcement:

1. Emphasis on Self-Disclosure and Cooperation: The DOJ increasingly rewards companies that voluntarily disclose potential violations and fully cooperate with investigations. BCG’s swift action in disclosing the misconduct and cooperating with the DOJ’s investigation was pivotal in receiving a declination. This trend aligns with the DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy, which encourages companies to come forward with any discovered misconduct.

2. Focus on Individual Accountability: The DOJ has been emphasizing the importance of holding individuals accountable for corporate misconduct. Although BCG as a company received a declination, the individuals involved faced significant consequences, including termination and forfeiture of equity. This aligns with the DOJ’s goal of ensuring that corporate misconduct has real consequences for those responsible.

3. Comprehensive Remediation Efforts: The DOJ expects companies to implement meaningful and lasting changes to prevent future misconduct. BCG’s response included comprehensive remediation, such as enhancing compliance training and strengthening internal controls, which contributed to the DOJ’s decision. This reflects a broader trend where the DOJ looks for companies to not only address the specific misconduct but also to demonstrate a commitment to preventing future violations.

4. Avoidance of Aggravating Factors: The DOJ also considers the absence of certain aggravating factors, such as executive management involvement or a history of violations, in its decision to decline prosecution. In the BCG case, the lack of such factors worked in the company’s favor. This trend highlights the importance of maintaining a strong ethical culture and robust internal controls to mitigate the risk of misconduct.

Application to Corporate Compliance Program Evaluations

The DOJ’s approach to declinations has direct implications for the evaluation of corporate compliance programs. Key considerations include:

1. Effectiveness of Compliance Programs: The DOJ evaluates whether a company’s compliance program is well-designed and effectively implemented. In BCG’s case, its enhanced compliance training, third-party due diligence, and the establishment of risk committees demonstrated a strong compliance framework. Companies must ensure that their compliance programs are robust, tailored to their risk profiles, and capable of preventing and detecting misconduct.

2. Proactive Measures and Continuous Improvement: The DOJ expects companies to continuously assess and improve their compliance programs. BCG’s efforts to scale its compliance functions and adopt data-driven risk management practices were critical in the DOJ’s favorable decision. Companies should regularly review and update their compliance programs to address emerging risks and ensure they remain effective.

3. Culture of Compliance: The DOJ places significant importance on a company’s culture, particularly how it encourages ethical behavior and prevents misconduct. BCG’s actions to penalize wrongdoers and reinforce a strong compliance culture were key factors in the DOJ’s decision. Companies should strive to embed compliance into their corporate culture, ensuring that it is a core value across all levels of the organization.

4. Tailoring Compliance Programs to Risk Profiles: The DOJ encourages companies to tailor their compliance programs to their specific risks, including geographic and industry-specific risks. BCG’s response included enhancing due diligence and monitoring efforts in high-risk markets, which likely contributed positively to the DOJ’s evaluation. Companies should ensure that their compliance programs are customized to address the unique risks they face in their operations.

Conclusion

The BCG case provides valuable lessons for corporate boards and compliance professionals. It underscores the importance of timely self-disclosure, full cooperation with regulatory authorities, comprehensive remediation, and the continuous improvement of compliance programs. By adopting these practices, companies can significantly reduce the risk of prosecution and demonstrate their commitment to ethical business practices.

For those involved in overseeing or managing corporate compliance programs, the BCG case serves as a reminder that maintaining a strong compliance culture, proactively addressing risks, and ensuring the effectiveness of Compliance measures are critical to successfully navigating complex legal and regulatory challenges.

Jonathan M.

Note: While the case of the Boston Consulting Group (BCG) serves as a valuable learning opportunity, it’s important to note that our discussion of BCG is not intended to single them out as a “bad actor.” Instead, we have highlighted their situation to provide broader lessons in governance, risk management, and compliance that can benefit all organizations. BCG recognized its mistakes and took substantial steps to rectify them, demonstrating a commitment to ethical conduct and robust compliance. The steps BCG has taken can serve as a model for other companies looking to strengthen their own compliance frameworks and navigate similar challenges effectively.