Ex-prosecutor urges caution on FCPA self-reporting

Mar 28, 2017
<p>DoJ recently extended pilot program on how firms can get credit in bribery cases</p>
Pravin Rao

Pravin Rao

It remains unclear how the US Department of Justice (DoJ) will handle corporate bribery cases in the future, but that shouldn’t lead companies to self-report problems without giving the decision to do so careful thought, a former prosecutor has warned.

The DoJ and SEC have in recent years stepped up their enforcement of the FCPA, which outlaws the bribery of foreign government officials. But the Trump administration’s anti-regulatory agenda and the absence of new leadership in certain DoJ posts means it is uncertain whether such cases will continue to be a priority, or whether there will be more of a focus on bringing cases against foreign rather than US firms, Perkins Coie partner Pravin Rao tells Corporate Secretary.

Adding to the uncertainty about the DoJ’s approach is the potential fate of guidance on how companies can get credit. The FCPA unit of the DoJ’s fraud section last April launched a one-year pilot program offering guidance to prosecutors on corporate resolutions in such cases. Acting assistant attorney general Kenneth Blanco on March 10 said that when the pilot program ends on April 5, the department will start evaluating its ‘utility and efficacy’, whether to extend it and what revisions, if any, it needs. ‘The program will continue in full force until we reach a final decision on those issues,’ Blanco added.

The pilot was designed to provide consistency and clarity regarding corporate settlements of FCPA-linked cases and to motivate companies to voluntarily self-disclose FCPA-related misconduct, fully co-operate with the section and, where appropriate, remediate flaws in their controls and compliance programs.

The guidance gives prosecutors and companies metrics for what constitutes voluntary self-disclosure, full co-operation and full remediation. It also states that if a company chooses not to voluntarily disclose its FCPA misconduct, it may receive limited credit if it later fully co-operates and remediates in a timely and appropriate way. But any such credit will be markedly less than that granted to companies that self-disclose.

If a company not only co-operates and remediates but also voluntarily self-discloses misconduct, it is eligible for the full range of potential mitigation credit. This means that in the event of a criminal resolution, the DoJ may cut a fine by up to 50 percent below the low end of the applicable US Sentencing Guidelines range.

During the pilot so far, five companies have received notices – known as declinations – that the DoJ has chosen not to bring a case against them regarding possible FCPA violations. According to the notices, the reasons for doing so vary but include factors such as self-discovery, self-reporting, co-operation, remediation and improvements to compliance programs and internal accounting controls.

While companies may feel tempted to self-report issues now while the offer of decent terms is still on the table, they should not rush into doing so, says Rao, who was formerly an assistant US attorney and SEC enforcement branch chief.

For one thing, he says, it’s unlikely the pilot will be cancelled over the summer followed by the DoJ taking a tougher stance. Indeed, the department might take a more lenient and flexible approach down the road, he adds. The pilot program has only formalized some actions the DoJ was taking on a case-by-case basis anyway, Rao adds.

Although the declinations are a new tactic, there are too few for companies and their lawyers to be able to rely on as guidance, according to Rao. Companies need to consider all the potential implications of self-disclosure, including the effect on various stakeholders, and while it remains unclear how and when the DoJ will grant lenience, companies should continue to make the same measured, case-by-case analysis of whether to volunteer information if they suspect there is an FCPA problem, he says. 

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