We explained in the prior post that over 20 years ago, federal enforcement authorities devised a way to fund community service projects while still complying with the MRA. The trick is to let the defendant fund and manage the service project, then have the enforcement agency offer a penalty reduction to cover (most of) the cost. The enforcement agency never “receives” the money.
No “miscellaneous receipt,” no MRA bar. It’s (almost) that simple (for a discussion of the additional guidelines applicable to these settlements, see part III.B. of this paper).
This 2012 United States Attorneys Bulletin (pdf) provides a recent statement of the DOJ’s position on how to fund community service projects with settlement money while complying with the MRA. But here are a few recent examples of how it has worked. They’re all from the environmental context, where this model has been used most robustly.
When Southern Union (a gas company) admitted in 2009 to illegally storing mercury, it entered into an $18 million dollar settlement in which $12 million funded various environmental remediation and education projects.
As we have blogged about so many times before, BP entered into the largest criminal settlement in U.S. history, totaling $4 billion. Of that, $2.4 billion was set aside to fund a variety of projects in the affected region. These projects generally involve ecosystem restoration and oil spill prevention through a combination of environmental clean up, research, and education.
And even more recently, in 2013, Wal-Mart pled guilty to improperly disposing of hazardous materials, and entered into a $60 million settlement. $20 million of the settlement funded numerous projects, including a $6 million retail compliance center that would educate retailers across the nation on how to properly handle hazardous waste.
In all these cases, the cost of the project was included in the announced settlement amount. But the funds to cover the projects generally do not go to the enforcement agencies; there is never a “miscellaneous receipt” to trigger the prohibition of the Miscellaneous Receipts Act. The defendants funded and managed the programs and received a penalty reduction in return.
Why does the DOJ like these settlements so much? Why do we see their increasing use, even to the tune of a whopping 60% of a $4 billion settlement?
We’ll address these questions as we wrap up this series in the next post.
Andy Spalding is a senior editor of the FCPA Blog. He is an Assistant Professor at the University of Richmond School of Law.