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The Skinny on the DOJ’s FCPA Pilot Program

by Amy Conway-Hatcher
April 26, 2016
in Uncategorized
Incentives to report FCPA violations greater than ever for compliance officers

with co-authors Jeremy Levin, Mark Miller, Lynn Neils and Regan Gibson

On Tuesday, April 5, 2016, the Fraud Section of the Department of Justice’s Criminal Division announced a one-year pilot program under which companies that self-report violations of the Foreign Corrupt Practices Act (FCPA) will receive specific mitigation credit in exchange for their cooperation.1 The Department is implementing the program to encourage companies to disclose conduct that may have gone undiscovered and to try to provide greater transparency around the requirements to obtain cooperation credit and the resulting benefits of that cooperation. The program is effective for one year from April 5, 2016 and applies to all FCPA matters handled by the Fraud Section.

The Requirements

To obtain credit under the pilot program, a company must satisfy three requirements:

  1. The company must voluntarily disclose the criminal conduct within a “reasonably prompt” period of time after becoming aware of the offense and prior to an imminent threat of disclosure or government investigation. No specific guidance is offered as to what “reasonably prompt” means, other than that the burden is on the company to establish timeliness.
  2. The company must fully cooperate with the Fraud Section, including proactively disclosing facts relevant to the investigation, providing relevant documents and information and making officers and employees available for interviews by the Fraud Section. Consistent with current Department policy, waiver of the privilege is not required to obtain cooperation credit.
  3. The company must conduct timely and appropriate remediation, including implementing an effective compliance program and ensuring appropriate discipline of employees responsible for the misconduct. The Department has also made clear that, as part of fulfilling these requirements, the company will have to disgorge to the U.S. government all profits resulting from the violation (even, apparently, in cases where a declination results).

Per the Department’s new policy, if a company fulfills these requirements, it will qualify for the full range of potential mitigation credit, including up to a 50 percent reduction off of the low end of the U.S. Sentencing Guidelines’ fine range and the possibility that the Fraud Section will decline to prosecute the offense.2 In addition, an independent compliance monitor – which settling companies are sometimes made to retain – will generally not be required at the time of the resolution, provided that the company has implemented an effective compliance program.

The Department has long emphasized that it rewards companies that self-report and cooperate and long recognized the importance of demonstrating this point clearly so as to properly incentivize would-be self-reporters. The announcement of the pilot program, which is consistent with these messages, also comes about seven months after the issuance of the “Yates Memo,” which, among other things, emphasized that cooperating companies must be prepared to turn over all relevant information implicating individuals. This week’s announcement balances the Department’s prior messages, signaling that while it remains extremely keen to hold individuals accountable for misconduct, it will reward companies for providing information allowing it to do so.

The extent to which the new program will further incentivize self-reporting or otherwise affect current practice remains to be seen, of course. On the one hand, the DOJ retains considerable flexibility under the terms of the program. Under the policy, it only says that it “will consider” a declination. Self-reporting companies qualify for “up to” a 50 percent reduction off the low end of the Guidelines’ range and “generally” will not need a monitor if they have an effective compliance program. Taking the point even further, when a case settles, the numbers that feed into the Sentencing Guidelines calculation are typically negotiated, meaning the 50 percent discount is coming off of a number that is negotiated to begin with.

The counterweight here is that the Department will be highly incentivized to show that it is honoring the terms of the pilot program and to demonstrate that it the program will result in significant, transparent benefits to self-reporting companies. Moreover, such companies now have an additional basis to argue for reduced penalties and even declinations in cases worked up by the trial attorneys in the FCPA Unit.

One other question mark is what will happen when the year is up. The Department could rescind the program, make it permanent or perhaps come up with additional ideas to draw out more self-reporting. However, despite the uncertainty ahead, the Fraud Section is continuing its attempt to communicate clearly to the business community about its policies and objectives, providing useful information for corporate decision makers.

1 The Department’s announcement can be found at https://www.justice.gov/opa/file/838386/download.

2 Criminal resolutions will typically include an agreed-upon fine. Resolutions other than nonprosecution agreements are subject to judicial review but are typically left intact


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Amy Conway-Hatcher

Amy Conway-Hatcher

Amy Conway-HatcherAmy Conway-Hatcher is a partner in Baker Botts’ Washington, D.C. office.  Amy’s practice focuses on corporate internal investigations, corporate compliance and defending corporate and individual clients in criminal and civil enforcement matters. She has appeared before the Department of Justice, U.S. Attorneys’ Offices, the Securities and Exchange Commission, the U.S. Commerce Department, the Department of Treasury’s Office of Foreign Assets Control (OFAC), the New York Attorney General’s Office and other federal and state regulators. Amy’s representations cross numerous industries, including life sciences, financial services, private equity, aerospace, infrastructure, construction, energy and technology, and range from addressing discrete compliance problems to organizational compliance failures that require crisis management experience. She regularly works with management and other advisers to assess the impact of investigative findings or compliance matters on financial reporting in the U.S. and abroad and develops strategies to minimize the legal and business impact of possible transgressions—both direct and collateral—including government and shareholder disclosures, as well as relations with employees, customers, affiliates, investors, insurers, the media, the public and Congress. Amy has a proven track record of helping companies navigate sensitive matters to reduce the impact of compliance problems on their businesses. She has handled a broad range of matters including cross-border investigations involving the Foreign Corrupt Practices Act (FCPA), antitrust issues (international cartel, bid rigging issues) and export/trade compliance, as well as matters involving securities, banking, health care, tax, environmental, workplace health and safety laws and sensitive employment matters that potentially implicate management.

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