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Billy Jacobson on the New FCPA Guidance: DOJ swings and misses

On April 5 the DOJ’s Fraud Section of the Criminal Division released a policy document called The Fraud Sections’ Foreign Corrupt Practices Act Enforcement Plan and Guidance. The new Guidance is an attempt to bring greater transparency to the benefits corporations will achieve by voluntarily disclosing FCPA problems and fully cooperating with investigations of these problems. 

Unfortunately, the Guidance falls short of accomplishing its intended goal and certainly is not the bold policy pronouncement for which many were hoping. 

The Guidance sets out “three steps” in what DOJ is calling its “enhanced enforcement strategy.”

The first step describes enhanced resources being brought to bear in FCPA cases by increasing the DOJ and FBI resources assigned to the FCPA beat. These increased resources have been known for some time. 

The second step concerns the increased cooperation DOJ is giving to and receiving from foreign law enforcement agencies. International cooperation around corruption has increased slowly but steadily since at least 2007 and so is neither new policy nor particularly noteworthy. 

The real news in the Guidance concerns the “FCPA enforcement pilot program” being launched by DOJ, effective immediately.

The pilot program’s primary goal is “to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA related-misconduct, fully cooperate with the Fraud Section, and, where, appropriate, remediate flaws in their controls and compliance programs.” 

DOJ states in the Guidance that it hopes to achieve this goal by “providing greater transparency about what we require from companies seeking mitigation credit” and “what sort of credit those companies can receive[.]”

The Guidance then explains how its pilot program will work and how the Fraud Section might accord credit over and above what is currently provided for by the U.S. Sentencing Guidelines and the Principles of Federal Prosecution of Business Organizations found in the United States Attorneys’ Manual.

To qualify for this enhanced credit, a company must engage in the following steps:

1. Voluntarily disclose the potential FCPA violation. A company that does not voluntarily disclose, may still receive some credit under the program, but that credit will be “at most” a 25 percent reduction off the bottom of the Sentencing Guidelines fine range.

2. Fully cooperate with DOJ’s investigation of the potential violation. The Guidance incorporates the policy of the recent “Yates Memo” which was focused on individual prosecutions, and provides helpful detail about what is meant by cooperation. It requires, in essence, that such cooperation be pro-active and fulsome.  It notes that less-than-prompt and complete cooperation might result in some some degree of credit under the program but that such credit will be “markedly less than for full cooperation[.]”

3. Timely and appropriate remediation of the potential violation. The Guidance makes clear that remediation includes improvements to a corporate compliance program and discipline of culpable employees.

When a company has fully met the standards set forth by the Guidance: (1) DOJ may reduce by 50 percent the bottom end of the otherwise-applicable sentencing guideline fine range, (2) a monitor will generally not be appointed if the company has implemented an effective compliance program, and (3) DOJ will consider declining prosecution altogether.

While this guidance is a step forward in terms of providing clarity and providing more incentive for companies to voluntarily disclose FCPA problems, it falls short of what could have been.

First, the Guidance itself acknowledges that DOJ often already provides companies that disclose, cooperate and remediate with a reduction below the bottom end of the guidelines range. 

Second, the benefits set forth in the Guidance are articulated in such a way as to leave DOJ with ample room to avoid according the full benefit. The Guidance says that DOJ “may accord up to a 50 percent reduction,” that cases in which companies meet the designated criteria “generally should not require the appointment of a monitor” and, in those cases DOJ “will consider a declination of prosecution.” (emphasis added).  

Third and most importantly, the Guidance does not go nearly as far as it could have in serving the goals of law enforcement, while also providing more certainty to companies.

In 2012, I proposed a more robust policy (pdf) which provides that so long as companies satisfy the following five criteria, DOJ would decline to bring a corporate prosecution altogether. 

These five criteria are:

  • The company must voluntarily disclose the violation
  • The potential violation must not include illegal conduct by senior leaders (C-Suite and Board) within the company
  • The company must cooperate fully with the government, including providing evidence and information against employees, officers, directors, and agents of the company
  • The company must agree to implement appropriate remedial measures to mitigate the chances for future violations, and
  • Prior to discovering the misconduct, the company must have implemented a robust compliance program.

And, consistent with the new Guidance, my proposal provides that a company would not be allowed to keep its ill-gotten gains, but that profits from corruption could be disgorged through a civil action by either DOJ or the SEC.

Such a policy would serve the interests of law enforcement by virtually guaranteeing an increase in voluntary disclosures which would give DOJ more of an opportunity to prosecute culpable individuals — given the recent Yates Memo (pdf) a big priority for DOJ — and give DOJ more of a window into corrupt activity worldwide which would assist it with both bringing cases against related companies that do not disclose (such as the series of prosecutions in both the Panalpina and medical device cases) and helping law enforcement agencies in other countries with bringing such cases. 

This policy would also provide further incentive for companies to establish robust compliance programs. Such a policy would give companies the assurance of knowing they would not be prosecuted at all if they did everything the government wanted them to do while at the same time better serving the ends of law enforcement than does the new Guidance.

In November 2015, the Washington Post reported that the Fraud Section was considering a policy which was described so as to make it sound quite similar to my 2012 proposal. We have been waiting since then to see what would emerge from behind DOJ’s closed doors with the hope that the new policy would be truly innovative. Alas, it was not to be.

With the new Guidance, DOJ has missed a wonderful opportunity to establish bold and clear guidance that would both provide real transparency to companies and serve the ends of law enforcement.

Instead, a distinct lack of clarity remains — companies are still forced to guess at how they will be treated at the hands of DOJ — and law enforcement does not get nearly the assist it could have received. Unfortunately, this guidance, issued just as the baseball season gets underway, is — and as a lifelong fan of the New York Mets I know something about this — a swing and a miss.


Billy Jacobson, a partner at Orrick, Herrington & Sutcliffe, served in the Fraud Section for approximately six years, including as Assistant Chief of FCPA Enforcement, and was Co-General Counsel and Chief Compliance Officer of Weatherford International for 5.5 years. He can be contacted here.

Caroline McInerney, an Orrick associate, assisted in the preparation of this post.

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  1. I completely agree with you. Particularly on the point about having a compliance programme in place prior to the misconduct (as opposed to after the misconduct is discovered). If the DOJ wants to value compliance programmes, they need to be more than just a reaction to the wrongdoing. The US doesn't seem to be going down the path of a compliance defence, but where there is a compliance defence (ie the UK Bribery Act), you only get credit if the compliance programme was in place at the time of the offence. Letting companies spackle over the cracks after the fact just doesn't empower compliance the same way.

  2. Of course it takes a Mets fan to identify a swing and a miss! While DOJ should be commended for taking baby steps to entice self-reporting, Billy hits it squarely on the head of the bat (very unMet-like) concluding that the Pilot Program falls short by failing to provide a reliable metric of certain benefits sufficient to entice businesses to more frequently self report. As Billy notes, businesses desire some modicum of certainty before prostrating themselves before the DOJ. The missed opportunity of the Pilot Program to provide more definitiveness with respect to the financial, logistical and penal consequences of self-reporting is in and of itself at least perplexing. The Pilot Program further fails to sufficiently address controlling the sometimes absurd duration of FCPA investigations which can cause the expenditure of extraordinary sums in non-penalty costs — an obvious factor that can drive some business to decline the invitation to self report. Those hoping for more certainty, like the mantra of a loyal Red Sox fan, will just have to wait till next year.

  3. We should also be looking at the guidance this document provides regarding compliance programs. Pages 7-8 touch on some important points that deserve serious attention. These points indicate real insight into what makes a compliance program effective.

    According to the Guidance prosecutors will look at “How a company’s compliance personnel are compensated and promoted compared to other employees.” Why is this so important? This is spelled out in SCCE’s white paper, “Using Incentives in Your Compliance and Ethics Program” pages 32-33 (SCCE; 2012), . How a company pays and promotes people is the clearest signal of what the company’s values and culture really are.

    They also consider “The independence of the compliance function.” Compliance and ethics professionals need to pay very careful attention to this point. It represents a growing recognition among enforcers that if compliance people are kept under the thumbs of the managers they are supposed to be monitoring and are buried in some other department, they are being set up to fail.

    The Department also looks at whether the program provides for the possibility of “disciplining others with oversight of the responsible individuals” and considering how compensation is affected by “failure to supervise adequately.” Again, DOJ recognizes the importance of the incentive system, but they also focus on one of the important references in the Sentencing Guidelines that is most consistently ignored in companies. The Guidelines call for discipline “for failing to take reasonable steps to prevent or detect criminal conduct.” See “Discipline for “failure to take reasonable steps”: Could you find even one example in your company?” Compliance and Ethics Professional 76 (May/Jun. 2013). Companies do discipline for actual wrongdoing, but how often do they go up the management chain to hold senior managers responsible for what happens on their watch?

    It might be that the Criminal Division’s decision to bring in expertise on compliance programs is starting to show. Those who do compliance and ethics work need to read these reference carefully and take them to heart. Cheers, Joe

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