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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Are there ‘aggravating circumstances’ in all FCPA cases?

The FCPA guidance that became part of the U.S. Attorneys’ Manual in November creates a presumption of declination if companies do four things — voluntarily self-disclose, fully cooperate, properly remediate, and disgorge their profits. But there’s an important exception.

The guidance says a company “will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender.” Our emphasis.

If there are aggravating circumstances, the guidance says, there could be “a criminal resolution” instead of a declination. So what are those “aggravating circumstances”?

In the guidance, the DOJ provides this short and non-exclusive list:

The first aggravating circumstance is involvement by executive management of the company in the misconduct.

So question number one is, who’s part of the executive management of the company? Organizations are more decentralized than they were 50 or even 25 years ago. Today’s managers are spread around the globe. Some are sent by the home office. Many others are now local employees hired for management positions or promoted into them. Most companies with major operations in China, for example, have both types of executive managers there.

The next question is, what does the DOJ mean by executive management’s “involvement in the misconduct”? Helping conceive of, plan execute, or cover up a bribery scheme is clearly “involvement in the misconduct.” But what about a more passive and subtle role — hiring an agent with a questionable record, or hiring a clean agent but not putting a lot of controls on him or her? What about hiring staff who later commit bribery? Is executive management in the field responsible for hiring decisions, and the extent of vetting for new employees?

There’s a wide range of executive behavior that wouldn’t leave any fingerprints. But could the DOJ say that remote behavior was still “involvement in the misconduct”?

The second aggravating circumstance in the guidance is whether “a significant profit to the company [came] from the misconduct.”

How will the DOJ measure profit and decide if it’s “significant”? In some industries, a profit of 5 percent looks good. In other industries, profits of 50 percent are the aim. If a company achieves its industry norm, is that “significant profit”? What about profit below the industry norm? Does any successful contract that’s tainted by misconduct put the presumption of declination at risk or out of reach?

The third aggravating circumstance is “the pervasiveness of the misconduct within the company.”

A rogue employee or agent, we know, wouldn’t be pervasive misconduct. But most corporate bribery involves more than a single miscreant. How many does it take to make the misconduct pervasive? Is it five employees, is it eight, is it ten or more? And does it matter if the company is small or big? If ten cheating employees is “pervasive misconduct” for a small company, would ten cheating employees in a giant company be counted and weighed the same way?

The fourth aggravating circumstance is criminal recidivism.

This one is more objective and fact based. If the company was busted before for FCPA violations, then it’s a recidivist and shouldn’t look for a presumption of declination (or a 50 percent fine reduction).


That’s the list of aggravating circumstances from the DOJ that now appears in the U.S. Attorneys’ Manual. But the DOJ doesn’t stop there.

The guidance adds this: “Aggravating circumstances that may warrant a criminal resolution include, but are not limited to . . . ” the four items just discussed. Our emphasis.

That non-exclusivity means prosecutors can still assert other aggravating circumstances as a reason to deny declinations.

For example, will all industries be judged the same? Should pharmas be held to a higher standard than others? What about casino operators? Investment banks? Oil and gas firms? Does being in an industry facing special compliance challenges automatically create the potential for an “aggravating circumstance”?

Can choosing to do business in a high-risk country be an aggravating circumstance? What about dealing with an overseas government agency that was implicated in graft a year ago, or five or ten years ago?

Can relying on remote training instead of in-person training because of budget concerns be an aggravating circumstance?

And so on.

We’re not saying the feds have any intention of creating additional aggravating circumstances as a reason to disqualify companies from the presumption of declination under the new guidance. But it’s true that the aggravating circumstances described in the guidance might not be the only ones.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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