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Andy Spalding: The strange disappearance of pre-existing compliance

The word “disappearance” does not suggest that the thing has ceased to exist. It simply means we can’t see it. Maybe it still exists, maybe it does not. But because it’s no longer visible, we wonder.

And I argue that this is precisely what has happened to pre-existing compliance under the Pilot Program. Look at the seven declinations issued under the program so far. In each case a (possible) FCPA violation occurred. In each case the DOJ determined that the company should not bear responsibility for that violation. In each case the determination of corporate non-liability was justified through reference to voluntary disclosure, a thorough investigation, cooperation, remediation, and disgorgement.

And in each case, no mention is made of the compliance program the company had in place at the time of the violation.

Put another way, the company was apparently released from liability irrespective of the quality of its compliance program.

We can’t be doing that on purpose. I can think of no reason why we would.

In fairness, the Pilot Program makes clear that the four factors it emphasizes — voluntary disclosure, cooperation, remediation, and disgorgement — do not replace the Sentencing Guidelines or Attorney’s Manual. And the state of pre-existing compliance is certainly central to those documents. This is why I use the term “disappearance.” Pre-existing compliance may well still be a central part of the declination determinations.  It is quite likely central to what I’m calling the clandestine declinations — those declinations issued without formal DOJ announcement and without an explicit compliance policy. I completely suspect that it is. But we cannot see it. It is not mentioned in the declination announcements.

Why does that matter?

Because we’re trying to deter bribery. And incentivizing compliance programs is probably the best deterrence tool we’ve got.

Indeed, as mentioned in this prior post the DOJ believes that encouraging investment in compliance programs is one of the measures of the program’s success. But I can’t see how we can encourage investing in compliance programs if we issue declinations without mention of it.   

When presenting this paper at a workshop, a former GC in the audience said, “We need to be able to take settlement announcements to the board and say, ‘See? This is why we invest in compliance.’ But if we take these Pilot Program declinations to the board, they’ll think compliance programs don’t matter very much anymore.”

That’s a problem. As much good as the Pilot Program has done and is doing, it has (perhaps unwittingly) moved pre-existing compliance away from the center of public FCPA enforcement policy. And as I explain in the next and final post in this series, this is a problem we really need to fix.

This post is the fifth in a series. The first post is here, the second is here, the third is here, and the fourth 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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1 Comment

  1. The concern remains even though the company engaging in a settlement. We’ve got several examples that Compliance Program becomes weaker after the scandal. It seems that people forget those things. This is one of the reasons I defend the certification processes.

    If an independent organism could audit annually the companies, by comparison it would be possible to signalize a potential decreasing of interest in the Compliance System. To keep its "certificate" companies must demonstrate the continuous improvement.

    What if the companies under FCPA investigation were demanded to submit its program to an external audit process during at least 10 or 15 years in a roll?

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