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ABA FLASH REPORT-Self-Reporting Under the New FCPA Policy: A Limited Presumption of No Prosecution

Posted on January 4, 2018 in

The following is a reposting of the Self-Reporting Under the New FCPA Policy: A Limited Presumption of No Prosecution written by Brett M. Amron, Development Chair of the D&O Liability Committee for the Business Law section of the ABA.

On November 29, 2017, the United States Department of Justice revealed its revised Corporate Enforcement Policy of the Foreign Corrupt Practices Act (“FCPA”). The new policy expands on the previous policy, which was initiated as a pilot program during the Obama era, and provides key benefits to those companies who self-report violations of the FCPA.  These benefits come only with strict compliance with the requirements under the new policy, however, and companies will need to give serious thought to balancing the risks and benefits before deciding to self-report.

The primary benefit of the new policy is the presumption of no prosecution if a company self-reports violations of the FCPA. The new policy states that “[w]hen a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated [in accordance with standards set forth in the policy], there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender.”  In addition, the company is required to pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.

Voluntary self-disclosure, as defined under the new policy, must occur “prior to an imminent threat of disclosure or government investigation” and “within a reasonably prompt time after becoming aware of the offense.” The burden to demonstrate timeliness rests with the company, and the company must “disclose all relevant facts known to it, including all relevant facts about all individuals involved in the violation of law.” The policy does not provide more specific guidance as to what is a “reasonable” amount of time, what constitute “relevant facts,” and who determines what is relevant.  As a result, companies are faced with significant uncertainty in determining whether to self-report, as non-compliance with these requirements may put their declination in jeopardy.

Moreover, in an effort to comply with the timeliness requirement, a complete investigation of the alleged FCPA violation likely will not be completed by the company and potentially aggravating circumstances may not be brought to the company’s attention prior to self-disclosure. A non-exhaustive list of aggravating circumstances mentioned in the policy includes (1) involvement of the company’s executive management in the misconduct; (2) a significant profit to the company from the misconduct; (3) pervasiveness of the misconduct within the company; and (4) criminal recidivism. An analysis of these circumstances adds another complex layer to the analysis of deciding whether to self-report.

Nevertheless, the new policy attempts to protect those companies that self-report but are subject to aggravating circumstances by providing a 50 percent reduction off the low end of the applicable sentencing guidelines fine range. Additionally, these companies will not be required to appoint an independent monitor if they have implemented an effective compliance program, which is required under the new policy for all companies that self-report to receive full credit for timely and appropriate remediation.

Lastly, companies must be cognizant of the fact that this policy protects the company and not individuals. Corporate directors, officers, executives, employees, agents, etc., will not enjoy the same leniency offered to the company for their past or future misconduct. Accordingly, those companies that decide not to self-report but that do take appropriate remedial steps will receive a 25 percent reduction of the applicable sentencing guidelines.

In sum, companies are left with a difficult decision. Although the new policy provides numerous benefits to self-reporting and strives to reward self-reporting, there remains significant ambiguity and risk. As Deputy Attorney General Rod Rosenstein stated, “the new policy does not provide a guarantee.  We cannot eliminate all uncertainty.  Preserving a measure of prosecutorial discretion is central to ensuring the exercise of justice. But with this new policy, we strike the balance in favor of greater clarity about our decision-making process.”

Also, companies must remember that the considerations impacting a decision to self-report necessarily extend beyond white collar concerns. To what extent will the amounts required to be paid by the company be covered by insurance? Are the company’s executives whose identities will be disclosed as being implicated even to a minor extent in reportable conduct appropriately insured for the costs of proving their innocence? Will this initiative come to set the standard in all areas of corporate compliance?