On October 28, 2021, Deputy Attorney General Lisa Monaco released a memo setting out “Initial Revisions to Corporate Criminal Enforcement Policies.” The memo indicated that the Department of Justice would place greater emphasis on a corporation’s “history of misconduct” in reaching determinations about whether to criminally charge a corporation. Noting that past misconduct is potentially indicative of the strength of internal controls to prevent criminal activity, the Monaco memo made waves for directing prosecutors to take into account “all misconduct by the corporation” as a part of a holistic assessment in charging decisions. Past misconduct is understood as prior violations of criminal laws, civil laws, or regulatory rules discovered in any prior domestic or foreign action.
The decision to take into account all prior misconduct generated waves among the white collar bar. Partially in response to feedback, Deputy Attorney General Monaco updated the memo on September 15, 2022, providing additional guidance as to how prior charges should be considered. In the memorandum Further Revisions to Corporate Criminal Enforcement Policies,” the Department of Justice clarified the weight that should be assigned to different instances of past misconduct. In particular, the memo sets out the following:
- Not all instances of prior misconduct are equally relevant or probative. Recent misconduct should be weighted more heavily than that long in the past; criminal misconduct should be accorded greater weight than regulatory violations. In particular, criminal conduct that occurred more than ten years before the conduct currently under investigation, and civil or regulatory resolutions that took place more than five years before the current conduct will be accorded less weight;
- The similarity of prior and current misconduct should be assessed, even where different statutes are being applied;
- Misconduct which occurs under supervision or monitorship should be understood in that context; similarly, when reaching charging decisions, the regulatory atmosphere should be taken into account, with corporations operating in a highly regulated industry being compared to their peers;
- Prior misconduct involving entities that do not share common management should receive less weight, particularly if that entity was subsequently acquired and incorporated into a corporation with a robust compliance program;
- Likewise, where separate instances of misconduct involve the same individuals or entities under shared management, DoJ suggests that this may be indicative of cultural problems which should be addressed;
- Multiple non-prosecution or deferred prosecution agreements are “generally disfavored,” especially in the event that the same personnel or leadership is involved in both;
- None of the above is intended to discourage voluntary disclosure, which will still be appropriately credited by the DoJ.
During a December 1, 2022 speech at the ACI Conference on the FCPA, Acting Principal Deputy Assistant Attorney General Nicole Argentieri elaborated on this last point relating to voluntary self-disclosures. Noting that the Department sought to balance corporate recidivism with mitigating factors, the Deputy Attorney General stated that companies with a history of misconduct who self-disclose may still avoid a guilty plea so long as other aggravating factors are not present. While those other factors, such as involvement by executive management or egregious misconduct, may result in a harsher penalty even for a company that self-discloses, the Deputy Attorney General was clear: “Recidivism is purposefully not one of these aggravating factors.” Put another way, even repeat offenders will see a benefit if they self-disclose under the new Department policy, according to DOJ.
At least two “recidivist” enforcement actions have already taken place in 2022 prior to these recently announced clarifications. In June, manufacturer Tenaris reached a settlement with the SEC to pay US$ 53 million in disgorgement and a civil penalty of US$ 25 million for violations of the FCPA by its Brazillian subsidiary. Tenaris had previously entered into a Non-Prosecution Agreement with the Department of Justice and a Deferred Prosecution Agreement with the SEC arising from separate misconduct allegations in Uzbekistan. And in September, the Austin-based technology company Oracle Corporation reached a settlement agreeing to pay US$ 7.9 million in disgorgement and a civil penalty of US$ 15 million arising out of Oracle Turkey’s use of a slush fund to pay for travel and accommodation expenses of its customers. Oracle had previously been hit with an enforcement action in 2012 relating to violations of the FCPA by its employees in India. However, the relationship of these new charges to the updated guidelines remain unclear.
The Wall Street Journal has reported that Swiss-based ABB Ltd. is close to finalizing a settlement to resolve FCPA claims lodged against its South African subsidiary. While the settlement appears to still be under negotiation, the Wall Street Journal has reported that the corruption allegations concern ABB’s work on the Kusile power plant, which is run by Eskom, South Africa’s state-owned energy utility.
If true, this will be ABB’s third FCPA enforcement action in the past twenty years. In 2004, ABB Ltd. admitted that its Jordan-based subsidiary had paid kickbacks to former Iraqi government officials, and agreed to adhere to enhanced compliance and reporting obligations, as well as pay a fine of roughly US$ 16.4 million. In 2010, ABB Ltd.’s U.S. subsidiary, ABB Inc., pleaded guilty to bribing Mexican officials and paid a fine of US$ 17.1 million.
The ABB case – assuming the press reports are true — is poised to be the first major test of DoJ’s application of its new guidelines regarding charging of repeat offenders. The Wall Street Journal’s reporting indicates that the terms of ABB’s latest settlement include an agreement to pay fines and disgorgement amounting to around US$ 325 million, but do not include a guilty plea by the Swiss parent-entity or the imposition of a corporate monitor.
The final terms of the ABB settlement – which appear to be coming soon — will provide important information as to the application of the new DoJ guidelines and whether they really have teeth. Stay tuned.