A common refrain in the white collar bar is that American government agencies don’t often get along and play well together. This can result in challenging issues for companies doing business in the United States that have run afoul of the law.
They have historically faced repetitive punishment from different government agencies and departments for conduct that commonsense dictates should be punished just once.
Looking to combat this inequity, last week Deputy Attorney General Rod Rosenstein announced a new policy to discourage “piling on” duplicative corporate penalties, which has now been incorporated into the U.S. Attorney’s Manual (USAM) at Section 1-12.100.
In his remarks, Rosenstein signaled a desire for fairness by encouraging government agencies to coordinate better efficiencies to reduce multiple penalties for the same conduct. While corporate America welcomes the new policy and its incentives, companies doing business in the United States shouldn’t celebrate just yet. The new policy provides many exceptions for those not obeying its conditions.
In a speech given to the New York City Bar White Collar Crime Institute, Rosenstein identified the predicament global companies in highly-regulated industries face being accountable to multiple regulatory bodies in their own country and abroad. He focused on the DOJ’s respected reputation for fairness and questioned whether repeat punishment for identical behavior was necessary to rectify the harm done and provide adequate deterrence. In introducing the new policy, Rosenstein said he hoped companies would have greater certainty and finality in settlements while also considering the impact on innocent employees, customers, and investors.
Rosenstein’s speech identified four key features of the new policy. The first was a reaffirmation of the principles of fairness that guides the DOJ; that is, that the government will not use its criminal enforcement authority to threaten companies or gain some other advantage unrelated to the investigation and prosecution of crimes. Though he remarked that this was not a policy change and just “a reminder of and commitment to principles of fairness and the rule of law,” this language was not in the USAM until now.
The second two features involve the coordination of investigations, including the direction for different offices and components within the DOJ to coordinate with each other to achieve an equitable result and avoid disproportionate punishment, and the encouragement for prosecutors to coordinate with other federal, state, local, and foreign enforcement authorities.
As Rosenstein said, the notion of inter-DOJ cooperation is not new. As prior Deputy Attorney General Sally Yates wrote in 2015’s Yates Memo (pdf), there are six significant steps to ensure that corporate investigations are handled consistently across the DOJ. The Yates Memo is in the USAM at 1-12.000, and the Rosenstein policy follows it at 1-12.100. Indeed, Rosenstein’s remarks detailed the ways the DOJ is already coordinating its efforts within the department and with other agencies.
And Rosenstein’s policy reiterated another procedure championed by Yates; namely, a focus on the prosecution of individual persons. The Yates Memo laid out a policy linking cooperation credit for corporations to their willingness to hold individuals accountable for their behavior. In his remarks, Rosenstein repeated the DOJ’s commitment to that policy. He questioned the deterrent effect of corporate settlements on individual actors and said the DOJ’s goal in every case should be to “make the next violation less likely to occur by punishing individual wrongdoers.”
The last, and arguably most interesting feature, is a set of four factors for DOJ attorneys to evaluate in determining whether multiple penalties serve the interests of justice. Those factors are:
(a) the egregiousness of a company’s misconduct
(b) statutory mandates regarding penalties, fines, and/or forfeitures
(c) the risk of unwarranted delay in achieving a final resolution, and
(d) the adequacy and timeliness of a company’s disclosures and its cooperation with the DOJ, separate from any such disclosures and cooperation with other relevant enforcement authorities.
These four factors operate as exceptions to the policy against piling on. For example, a company that discovers egregious FCPA violations spanning multiple jurisdictions, may still be subject to large fines and penalties in those other jurisdictions. The seriousness of the violation is something a company has little control over however. The most interesting factor is thus the last. Any company that does not meet the DOJ’s standard for adequate or sufficient disclosure faces multiple penalties for discovered violations.
Rosenstein’s new policy, therefore, compliments and bolsters the revised FCPA Corporate Enforcement Policy he announced in November 2017 ( USAM 9-47.120). Under that policy, companies receive discounts from potential penalty amounts based on the adequacy of their voluntary self-disclosure, cooperation, and remediation.
(A company that voluntarily self-discloses, fully cooperates, and timely and appropriately remediates can receive a 50 percent reduction off of the low end of the U.S. Sentencing Guidelines (U.S.S.G.) fine range (unless it is a recidivist) and generally will not require a monitor (if it has an effective compliance program). If the company does not voluntarily disclose, but fully cooperates and timely and appropriately remediates, it can receive a 25 percent reduction. The definitions and assessment factors for the terms voluntary self-disclosure, full cooperation, and timely and appropriate remediation are spelled out in the FCPA Corporate Enforcement Policy.)
Voluntary self-disclosure earns a company the greatest possible penalty discount. Thus, to the extent a company fails to adequately and timely disclose a violation, it loses its chance to receive the maximum penalty discount, and also faces penalties from multiple stakeholders. As Rosenstein said, “to reduce white collar crime, we need to encourage companies to report suspected wrongdoing to law enforcement and to resolve liability expeditiously.”
Of course, Rosenstein’s new policy applies to all cases, not just FCPA violations. It remains to be seen whether the disclosure and cooperation factors, which are already included in the factors used to determine whether the DOJ will pursue charges against a corporation, will be tools to strengthen the push for voluntary disclosure.
It is also important that in an era of increased foreign anti-corruption enforcement, Rosenstein appears to be reminding companies that DOJ (and America) should come first: “Cooperating with a different agency or a foreign government is not a substitute for cooperating with the Department of Justice. And we will not look kindly on companies that come to the Department of Justice only after making inadequate disclosures to secure lenient penalties with other agencies or foreign governments. In those instances, the Department will act without hesitation to fully vindicate the interests of the United States.”
Though Rosenstein’s new policy endeavors to end a perceived unfairness in how criminal penalties are levied, it does so with many strings and conditions attached, and thus should be celebrated guardedly by corporate America.
Lara A. Covington (above left) and Michael E. Hantman (above right) are Holland & Knight LLP partners based in the firm’s Washington, D.C. and Miami offices respectively. Both concentrate their practices on white collar criminal defense, internal corporate investigations, and compliance counseling.