On May 9 the DOJ announced a new policy concerning the coordination of penalties imposed by more than one regulator or law enforcement authority in corporate resolutions.
This new policy (pdf) against “piling on” requires DOJ attorneys to “coordinate with one another to avoid the unnecessary imposition of duplicative fines, penalties, and/or forfeiture against [a] company,” and further instructs DOJ personnel to “endeavor, as appropriate, to . . . consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign law enforcement authorities that are seeking to resolve a case with a company for the same misconduct.”
This policy has the potential to avoid unfair outcomes caused by a lack of coordination among enforcement authorities and the imposition of redundant fines and penalties.
Historical FCPA resolutions may provide insight into how the DOJ is likely to implement the new policy. In recent FCPA resolutions, the DOJ has provided companies with substantial credit for payments made to foreign authorities.
For example, in its settlement with Keppel Offshore Marine last December, which Deputy Attorney General Rod J. Rosenstein referenced when announcing the new policy, the DOJ credited penalties of $211 million paid to Brazil and $105.6 million paid to Singapore. Offsets for fines paid to foreign regulators were also a feature of 2016 settlements with Odebrecht S.A. and Braskem S.A.
Notably, in the FCPA context, the new policy arguably goes further than Article 4 of the OECD Convention (pdf), which requires signatories with shared jurisdiction over a foreign bribery case to consult with each other “with a view to determining the most appropriate jurisdiction for prosecution.”
However, the first impact of the DOJ’s new policy may perhaps be seen outside of the FCPA arena in the proposed $4.9 billion settlement between Royal Bank of Scotland (RBS) and the DOJ Residential Mortgage-Backed Securities (RMBS) Task Force, which was reported the day after the announcement of the new policy.
The settlement, which the parties have agreed to in principle, is for less than half of what analysts predicted. Analysts had predicted a larger penalty amount based in part on RBS’s payment of $5.5 billion to the Federal Housing Finance Agency (FHFA), among other agencies. The RBS agreement is the first time that the DOJ has settled an RMBS matter with a bank for less than the amount paid to FHFA.
In addition to the proposed $4.9 billion settlement with the DOJ and the $5.5 billion settlement with FHFA, RBS has paid $1.25 billion to the National Credit Union Administration, $500 million to the New York Attorney General’s office, and $150 million to the SEC, to resolve RMBS matters.
It appears that the lower-than-expected settlement with the DOJ by RBS may be the first evidence of the Department’s willingness to curb its own appetite for penalties when other regulators have already taken their places at the table.
It will be interesting to see how effective companies are in holding the DOJ to the terms of the new policy and convincing other agencies in the U.S., as well as foreign regulators, to follow suit. The result could well be quicker, more efficient resolutions and fairer outcomes.
Brad Karp, pictured above left, is Chairman and partner at Paul, Weiss, and is one of the country’s leading litigators and corporate advisers. Brad has successfully defended financial institutions and other companies in numerous “bet the company” litigations and regulatory matters.
Mark Mendelsohn, above right, is a litigation partner at Paul, Weiss, where he is co-chair of the Anti-Corruption & FCPA Group and a member of the White Collar and Regulatory Defense, Internal Investigations, and Securities Litigation Practice Groups.