DOJ Updates FCPA Corporate Enforcement Policy Again

There is no question that the DOJ has landed on a Corporate Enforcement Policy that took years to develop. The FCPA Corporate Enforcement Policy now applies to all corporate criminal prosecutions except Antirust Division criminal prosecutions that are guided by the Leniency Program. The DOJ is consistently applying the principles and appears to be very comfortable with the results.

At the same time, the DOJ has increased transparency in its resolution of corporate enforcement actions; it now publishes declination letters and provides specific descriptions of how factors are applied to a corporate resolution.

At bottom, the Policy is intended to encourage corporations to self-report, cooperate and remediate – in exchange for a possible declination or significant reductions in penalties. The new Policy tilts in favor of prosecution of responsible individuals.

Modifications

The Policy now states that a company must disclose “all relevant facts known to it at the time of the disclosure.” The DOJ added a footnote, stating it “recognizes that a company may not be in a position to know all relevant facts at the time of a voluntary self-disclosure.” A company that makes a disclosure while continuing its investigation should make this fact known to the DOJ.

Further, to encourage companies to make an early disclosure, the Policy now requires companies to disclose facts “as to any individuals” who played a substantial part in the “misconduct at issue.” The previous Policy required companies to disclose “all relevant facts” regarding individuals substantially involved in a “violation of law.” A company making a disclosure no longer has to reach a determination (and inform the DOJ) that a “violation” occurred at the beginning of an investigation.

Similarly, companies now need only alert the DOJ of evidence of the misconduct when they become aware of it. Previously, in order to gain credit, where the company was or should have been aware of relevant evidence outside of its possession, the company had to identify such evidence to the DOJ. The Policy has been updated to remove the conditional language, which should ease the burden on companies seeking to comply with the Policy.

The updates to the Policy highlight the DOJ’s desire for self-disclosures that are both substantive and made at an early stage. They are also practical, in particular removing the requirement that a company identify evidence of which it “should be” aware. The changes are in line with other recent DOJ policy changes, seeking to recognize practical realities of the policies.

With the recent changes to the policy, companies now are obligated only to disclose relevant facts known “at the time of the disclosure” and to provide information regarding any — not all — “individuals substantially involved in or responsible for the misconduct at issue.”

Importantly, companies need not wait to determine that a violation of law has occurred and may report suspected misconduct. As stated in a footnote, this modification reflects the DOJ’s recognition that disclosing companies “may not be in a position to know all relevant facts at the time of a voluntary self-disclosure.” In that case, companies are urged to fully disclose suspected misconduct “based upon a preliminary investigation or assessment of information.”

These changes are important, because the DOJ has clarified the precise information that a self-disclosing company must provide to trigger the potential benefits possible under the policy. From a practical standpoint, companies faced a difficult choice: disclose a potential violation based on a cursory investigation subject to the DOJ’s determination that the company failed to disclose “within a reasonably prompt time.”

The DOJ’s modification directs companies to report what they know upon discovery of a suspected violation, while making clear to the DOJ that the disclosure is based on a preliminary investigation.

Under the recent revisions, companies are no longer expected to identify every piece of evidence of which they should have been aware for potential collection by the DOJ. Instead, companies now are obligated only to identify relevant evidence not in their possession of which they actually are aware.

The modifications eliminates some of the risk that the DOJ could determine that a company was not entitled to cooperation credit when the DOJ identifies evidence that a company should have known about.

The DOJ’s recent revisions indicate that it is satisfied with its Policy and want to make it work even better. By addressing some theoretical concerns that may have caused companies not to disclose potential violations, the DOJ is taking steps to encourage companies to step forward and disclose potential violations. Companies have to take notice of the DOJ’s policy changes and its attempts to encourage such disclosures.

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.