The fall is upon us, the academic year has begun, and the season is right for reflecting on all that is good and all that could be better. In the FCPA space, among the biggest stories of the last year has been the Pilot Program — an experimental enforcement policy first announced in April 2016.
The Department of Justice, to its credit, has invited the public to share comments on how the program is working and how it might be better. In a series of posts over the next several weeks, I’d like to do exactly that.
Too much commentary on the Pilot Program has been sour; I think much of it largely misses the point. I’m a fan of the program, and believe it marks an important step forward in FCPA enforcement policy. But I want to identify one area where it might be better. And after workshopping these ideas in multiple venues over the last year, I think I can say that my proposals command a fair amount of public support. They’re non-divisive, and may even be obvious — a point that is almost embarrassing to concede — but they’re fundamental to the continued success of anti-bribery policy.
To get us all up to speed, what exactly is the Pilot Program? It provides a number of specific requirements — or perhaps, factors — that a defendant should satisfy as part of the investigation and settlement. In return, the DOJ offers a series of rewards for satisfying these factors.
Let’s lay out those factors. Notably, much of the public seems to believe that the Pilot Program established only three. But look more carefully — there are actually four.
The first of the three numbered factors is voluntary disclosure, which is now defined to require that the defendant disclose “all relevant facts about the individuals involved in any FCPA violation.” This new requirement of course stems from the Yates Memo, which we’ll discuss later.
The second numbered factor is cooperation which, like the new definition of voluntary disclosure, reflects the DOJ’s recent focus on individual liability. Perhaps most controversially, cooperation now includes the practice of “de-confliction,” which means that the company has not interviewed its employees before the DOJ.
The third factor in determining eligibility for the Pilot Program’s rewards is timely and appropriate remediation, to include disciplining employees and implementing an “effective compliance program.” That phrase is critically important, as we’ll discuss in time.
But although the Guidance is widely understood to impose three factors, there is actually a fourth. It is not numbered, and does not appear in same section as disclosure, cooperation, and remediation. It actually precedes them, almost buried in the prefatory language of page 2. There, the Pilot Program provides that “to be eligible for [the credit detailed in the memo] even a company that voluntarily self-discloses, fully cooperates, and remediates will be required to disgorge all profits resulting from the FCPA violation.” Did you catch that? It’s huge.
So the Pilot Program establishes four factors — voluntary disclosure, cooperation, remediation, and disgorgement. In exchange, it promises a couple different kinds of rewards. But something is missing here. In the next posts I’ll describe the rewards, the policies the Program is trying to advance, and what I (and many others) see as a remaining gap to fill.
More to come. But if you just can’t bear the suspense, the academic paper is here.
Andy Spalding is a lecturer at the International Anti-Corruption Academy, Professor at the University of Richmond School of Law, and Senior Editor of the FCPA Blog.
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