The Takeaway
New policies provide specific advantages for companies that voluntary disclose potential violations of the Foreign Corrupt Practices Act. In the difficult situation where a violation is suspected but not certain, disclosure of the unconfirmed violation may be a practical and preferred route to avoid substantial penalties.
Background
The Foreign Corrupt Practices Act of 1977 (“FCPA”) prohibits the payment of bribes by certain individuals and companies to foreign officials to assist in obtaining or retaining business. The FCPA is jointly enforced by the U.S. Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”). Companies and individuals that violate the FCPA generally have to “disgorge their ill-gotten gains” plus pay prejudgment interest and substantial civil penalties. In the past, the DOJ has strongly encouraged companies to voluntarily disclose potential violations, but the advantages of doing so have not always been clear.
New FCPA Policy
On November 29, 2017, Deputy Attorney General Rod Rosenstein announced the addition of an FCPA Corporate Enforcement Policy - 9-47.120 - FCPA Corporate Enforcement Policy - to the U.S. Attorneys’ Manual (“USAM”). Deputy Attorney General Rod Rosenstein states that the new policy provides clarity, promotes consistency and fights perceptions of arbitrary prosecution decisions. Most notably, the new policy:
- Creates a presumption that companies who “voluntarily disclose” a FCPA violation, who fully cooperate and timely and appropriately remediate, will receive a “declination.” Such presumption is rebutted where “aggravating circumstances” exist or if the company is a recidivist.
- “Voluntary self-disclosure” occurs when the company makes disclosure “prior to an imminent threat of disclosure or government investigation…within a reasonably prompt time after becoming aware of the offense.” The company must also disclose all relevant facts that it knows.
- “Aggravating circumstances” include but are not limited to involvement by the executive management of the company in the misconduct, the finding that the company significantly profited from the misconduct, or if the company is a repeat offender.
- Even if aggravating circumstances exist, the DOJ “will accord, or recommend to a sentencing court, a 50% reduction off of the low end of the U.S. Sentencing Guidelines (“U.S.S.G.”) fine range, except in the case of a criminal recidivist” and “generally will not require appointment of a monitor if a company has, at the time of resolution, implemented an effective compliance program.”
- Even in the absence of voluntarily disclosure, companies that fully cooperate and timely and appropriately remediate, may still receive up to a 25 percent reduction off the low end of the requisite U.S.S.G. fine range.
What To Do Next
The new policy makes it easier for companies who discover an FCPA violation that does not involve “aggravating circumstances,” to make the choice to self-report, fully cooperate, and adequately remediate in FCPA matters. Notwithstanding the changes and improvements made by such new policy, uncertainty still exists. For example, how will the DOJ apply the “aggravating circumstances” test and how much profit is “significant” enough to meet such standard?
However, companies should still ascertain and understand federal, state and local anti-bribery and anticorruption laws. Questions often arise when companies make charitable contributions in other countries. As such, companies should be aware of the purpose of such contribution, whether a foreign official is involved or related to such contribution and whether the contribution is conditioned upon receiving business or other benefits. Though the new FCPA may lessen liability, companies should update their policies and procedures to account for these new guidelines.
If you have questions about FCPA, or any other issue relating to business and tax law, please contact one of our Corporate attorneys:
If you have questions about FCPA, or any other issue relating to business and tax law, please contact one of our Corporate attorneys:
Sepi Ghiasvand
Gail Hashimoto
Mark Heyl
Brendan Lund
Andy McCarthy
Peter Stone
Anthony Verdugo