- DOJ revised its Corporate Enforcement Policy (CEP) to further incentivize robust voluntary disclosures by corporations when they discover misconduct.
- Even when aggravating circumstances would otherwise warrant criminal resolution, prosecutors will now have discretion to decline to prosecute when a company provides extraordinary cooperation.
- Recognizing the unique opportunity to encourage disclosure and remediation in M&A transactions, DOJ took the opportunity to highlight particular benefits available in that context.
- Companies, in consultation with outside counsel, must be prepared to act quickly and proactively should they uncover misconduct to take maximum advantage of the CEP.
Earlier in January 2023, the U.S. Department of Justice (DOJ) announced revisions to its Corporate Enforcement Policy (CEP) under the Foreign Corrupt Practices Act (FCPA) for the first time since 2017. In his speech announcing the revisions, Assistant Attorney General Kenneth A. Polite emphasized that the revisions “provide specific, additional incentives to companies for voluntary self-disclosures [of misconduct], as well as for cooperation and remediation…[and] that there will be very different outcomes for companies that do not self-disclose, meaningfully cooperate with [DOJ] investigations, or remediate.” This is the latest development in DOJ’s decade-long effort to provide greater transparency and predictability in how it will respond to a voluntary disclosure. DOJ’s revised policy remains focused on individual accountability, with AAG Polite emphasizing in his speech that the revised policy will “further [DOJ’s] ability to bring individual wrongdoers—the corporate executives, employees, and agents who engage in misconduct—to justice,” including by focusing on the extent to which companies “discipline bad actors and reward the good one.” The revised policy continues to emphasize the requirement that companies identify specific individuals involved in the misconduct to receive credit for full cooperation and self-disclosure.
In this revised policy, DOJ has included a number of enhancements and clarifications of the incentives to encourage companies to disclose misconduct. In general, these revisions represent DOJ’s ongoing promotion of the value of self-disclosure and remediation—that a company’s voluntary and timely self-disclosure and effective remediation may carry tangible benefits. Notable revisions include the following:
Declinations in the Face of Aggravating Circumstances. Perhaps most notable is that the CEP now explicitly allows a prosecutor to determine that a declination is still appropriate, despite the presence of “aggravating circumstances,” where the company has provided “extraordinary” cooperation and remediation. Prior to the revisions, the presence of any aggravating circumstance generally was seen as disqualifying.
The CEP now makes clear that prosecutors may find a declination is appropriate in the face of aggravating circumstances if the company: self-disclosed immediately upon the company’s becoming aware of the misconduct; had an effective compliance system that led to the self-disclosure; paid disgorgement, forfeiture or restitution resulting from the misconduct; and provided “extraordinary cooperation” and “extraordinary remediation.” While these criteria set a high bar, DOJ’s acknowledgement of a pathway to declination in the face of aggravating circumstances does provide an additional incentive to disclose for a company facing that difficult situation.
DOJ considers concepts of immediacy, consistency, degree, and impact when it assesses a company’s level of cooperation, and has expanded its description of what it views as “full” cooperation, including its continued emphasis on the identification of individuals involved in the misconduct regardless of their position within the company. Of course, DOJ’s assessment of cooperation will vary on a case-by-case basis. The revised policy makes clear that a company starts with zero credit and must affirmatively earn credit up to “full” cooperation (rather than starting with a presumption of 100% credit and “losing” credit for deficiencies in cooperation). That said, DOJ did not specify what constitutes “extraordinary” cooperation, except to say that it must “exceed” the factors set out in the policy that define “full” cooperation. As with other aspects of the CEP over the past half-dozen years, DOJ will undoubtedly use future cases to provide case-by-case guidance.
DOJ has also expanded its description of “appropriate” remediation. Factors such as the company’s commitment to instilling corporate values that promote compliance; the effectiveness of the company’s risk assessment and the manner in which it was utilized; the resources a company has dedicated to compliance; the quality and experience of personnel involved in compliance, the authority and independence of the compliance function, and the ongoing testing of the compliance program to ensure effectiveness figure into DOJ’s remediation analysis. As with the concept of cooperation discussed above, DOJ will look for a company’s remediation efforts that exceed the factors listed in order to find “extraordinary” remediation.
Polite’s speech highlighted the DOJ’s “undeniable message” in releasing these revisions—companies must “come forward, cooperate, and remediate.”
Additional Tangible Benefits for Self-Disclosure Where a Criminal Resolution Is Warranted. DOJ has expanded the range of benefits available to companies facing a criminal resolution in situations where they have voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated. In such instances, DOJ will accord or recommend a 50% to 75% reduction of the low end of sentencing guideline fine ranges. Where a company is a “criminal recidivist,” the 50% to 75% reduction will generally not be from the low end of the range—prosecutors have discretion to determine the starting point for reductions. DOJ will generally not require a guilty plea, even for recidivist companies, unless there are “particularly egregious” or multiple aggravating circumstances. Further, DOJ will generally not require a compliance monitor if the company has demonstrated an effective compliance program.
Highlighting the Benefits of Self-Disclosure in the M&A Context. Recognizing that corporate mergers and acquisitions present a unique opportunity to incentivize voluntary disclosure and to encourage the swift implementation of a compliance program, the CEP now highlights particular benefits available to an acquiring entity. Where a company that has a robust compliance program in place undertakes an acquisition, then uncovers misconduct at the target company either during pre-acquisition due diligence or post-acquisition integration, and voluntarily discloses the misconduct and rapidly remediates and implements an effective compliance program at the target, there will be a presumption of declination, even in the face of aggravating circumstances at the target. This represents some acknowledgment of the benefits of enabling a company that has been “doing the right thing” to acquire a company that historically has not been compliant and bring it into compliance.
A company’s decision regarding whether, and the extent to which, it will voluntarily self-disclose is one that should be made with care, in consultation with counsel. The bar to receive credit for such voluntary self-disclosure and cooperation is high—especially in situations where aggravating circumstances are present. As before, the revised CEP continues to give DOJ a great deal of flexibility in determining whether a company has met the requirements for full cooperation and disclosure. DOJ may make such determinations on a case-by-case basis. Further, it remains to be seen exactly what level of cooperation constitutes “extraordinary” cooperation in practice.
We help guide companies through the decision-making process when it comes to voluntary self-disclosure. Companies with questions about how to enhance their anti-corruption compliance program or address any particular compliance concerns should contact us.