What can a company do to convince prosecutors, regulators, and sentencing judges that it is committed to compliance? The question needs an answer because commitment is the feds’ threshold issue and the top-ranked hallmark when evaluating compliance programs. Even the United States Sentencing Commission zeroes in on commitment (along with due diligence) as the first essential element of an effective compliance program.
So, how does a company prove its commitment to compliance?
It’s not easy. Commitment isn’t visible. You can’t produce it on demand, mark it as an exhibit, and let the jury pass it around hand to hand. The only way to prove commitment is through circumstantial evidence.
From countless fictional courtroom dramas, we know about circumstantial evidence: It is “indirect evidence that does not, on its face, prove a fact in issue but gives rise to a logical inference that the fact exists.”
So, you prove commitment by using other evidence that shows commitment should or must be there. For example, the DOJ and SEC say due diligence shows a commitment to compliance when reasonably designed to uncover corruption. That makes sense. Trying to expose potential FCPA problems must mean you want to expose those problems.
Other circumstantial evidence of commitment can be the other hallmarks of an effective compliance program. The DOJ and SEC enumerate them in their FCPA Resource Guide. Clear and well-communicated policies, adequate training, reasonably autonomous and resourced compliance personnel, risk assessment, proper incentives and discipline, whistleblower mechanisms, and ongoing review and improvement — any or all can evidence a company’s commitment to compliance.
There’s a different twist in the DOJ’s Evaluation of Corporate Compliance Programs. It instructs prosecutors to gauge commitment by determining “whether the corporation’s employees are adequately informed about the compliance program and are convinced of the corporation’s commitment to it” (quoting from the Justice Manual at JM 9-28.800, with my emphasis).
That second part that I’ve highlighted is strange, isn’t it? Prosecutors are told to look into employees’ subjective views — their opinions — about the corporation’s sincerity toward compliance. But if a company has the other hallmarks of an effective compliance program, shouldn’t that circumstantially prove its commitment? Not quite.
The problem is that some companies are capable of subtle deceit when it comes to compliance. The FCPA Resource Guide puts the deceit problem this way,
A well-designed compliance program that is not enforced in good faith, such as when corporate management explicitly or implicitly encourages employees to engage in misconduct to achieve business objectives, will be ineffective.
Conclusion: If a company has the other hallmarks but doesn’t have commitment, the other hallmarks don’t matter.
How can anyone from outside discern a company’s motives — its sincerity or cynicism about compliance? Remember that strange instruction to prosecutors? Gauge a compliance program by determining whether employees “are convinced of the corporation’s commitment to it.”
Experience and intuition give employees a surprisingly deep understanding of their company and its leaders. And employees are sensitive. They detect tiny signals and cues, spoken or unspoken, about what management wants. So it’s logical for prosecutors to determine what employees think about the corporation’s commitment to compliance.
Are you convinced your company wanted to prevent and detect corruption? Most employees will answer honestly. If they doubt the sincerity of management’s commitment, they’ll say so. If enough employees give the same answer, why shouldn’t the feds and sentencing judges believe them?
What’s the application to everyday compliance? Simple: Don’t fake it.
To paraphrase the DOJ and SEC, make sure your company’s compliance program is well designed and enforced in good faith, and that management always explicitly and implicitly encourages employees to avoid misconduct as a way to achieve business objectives.
Oh, I almost forgot this final point. The Justice Manual (the federal prosecutors’ handbook) says even if a company lacks formal elements of an effective compliance program, prosecutors may consider “management’s commitment to the compliance program” before making a charging decision or sentence recommendation, among all other circumstances. That means commitment alone might cover a multitude of compliance sins.
You just have to prove it’s there.