In a recent post, the FCPA Professor questioned the broad application of the label “declination” to any instance of FCPA scrutiny that does not result in an FCPA enforcement action.
He offered strong arguments for a more narrow definition of the term as “an instance in which an enforcement agency has concluded that it could bring a case, consistent with its burden of proof as to all necessary elements, yet decides not to pursue the action.” The FCPA Professor concluded that “anything less ought not be termed a ‘declination’” since “it is what the law commands….”
In the abstract, I think the FCPA Professor is right; his proposed definition for declinations represents the ideal. As a practical matter, however, the definition runs into difficulties, primarily because of the dearth of information surrounding decisions by the DOJ and SEC to conclude investigations without pursuing enforcement actions.
Outside of a handful of exceptions, the agencies have not publicly acknowledged these decisions, much less explained the reasoning behind them. As a result, it is nearly impossible for those not directly involved in a matter to conclude why the agencies have decided not to pursue an enforcement action—even those directly involved may not have a full understanding.
While outside observers can speculate about the rationale for these enforcement decisions based on a company’s public filings, drawing any definitive conclusions from the limited information available in these disclosures is problematic. Unless explicitly stated, it generally is not possible to determine from such filings whether an agency’s non-enforcement decision represents a benefit in recognition of a company’s self-reporting, cooperation, and/or remediation, or whether the agency simply lacked the facts necessary to establish elements of the offence (see, e.g., Deere & Co.). In fact, there are likely many considerations that inform an agency decision not to pursue a case. Given the agencies’ aggressive interpretations of the jurisdiction and knowledge elements of the FCPA—something the FCPA Professor has frequently drawn attention to (see, e.g., here)—it is likely rare that an agency’s decision not to pursue an enforcement action is based on its determination that there were insufficient facts to do so. This is particularly true in the case of issuers, against whom the agencies can more easily build FCPA-cases by focusing upon violations of the statute’s accounting provisions.
Without more transparency from the agencies on the rationale behind their enforcement decisions, I think it is appropriate to apply the short-hand label “declination” more broadly to each instance where the DOJ or SEC has notified a company that it does not intend to bring an enforcement action. Including all such agency decisions is really the only way to consistently and systematically track possible declinations writ large.
Moreover, there is value in adopting this broader definition, particularly in instances where the issues involved were serious enough that a company opted to self-report the matter to the government and the agencies, in turn, followed-up with requests for additional information. In the wake of such self-reports, decisions by the agencies not to take the next step and pursue enforcement actions are significant and worth recognizing.
With the current lack of transparency on the part of the agencies, there is no perfect definition for “declination.” To avoid miscommunication, the real key is to be clear in how one is using the term.