Guilty Partes to Receive Carrots to Help Comply?
In its efforts to encourage corporations to both comply with the Foreign Corrupt Practices Act (FCPA) and to cooperate with government enforcement efforts, the U.S. Department of Justice (DOJ) has historically relied on announcements of large penalties combined with vague assurances that companies were treated more favorably if they made voluntary disclosures and cooperated with government investigations. The business community has largely been skeptical of these assurances, fearing that disclosure will embroil them in lengthy and costly investigations with no guaranteed benefit.
INDUCING SELF-DISCLOSURE
With this backdrop, in April 2016, the DOJ announced a one-year pilot program intended to provide more specific incentives to induce self-disclosure of potential FCPA violations, full cooperation with ensuing investigations, and remediation of conditions that led to violations.
In 2016, the DOJ used the pilot program to significantly emphasize voluntary disclosure, while also announcing very significant penalties in matters in which the settling company did not disclose its misconduct to the DOJ.
Thus the DOJ appears to be brandishing both an increasingly formidable stick and a more appealing carrot in its effort to incentivize compliance and cooperation.
The pilot program conditions favorable treatment — including the type of disposition, the size of any fine and the avoidance of a compliance monitor — on whether a company satisfies the DOJ's requirements for disclosure, cooperation and remediation.
If those requirements are met, the DOJ says it will consider a favorable disposition, including declination of prosecution notwithstanding a finding of misconduct and a significant reduction in the monetary penalty based on the DOJ's calculation of the fine under the federal sentencing guidelines.
If the requirements are not met, the DOJ may seek higher penalties and imposition of a potentially burdensome compliance monitor.
FCPA resolutions in 2016 reflected both extremes of the DOJ's enforcement strategy.
In an unprecedented series of letters, the DOJ announced that, pursuant to the pilot program, it had declined prosecution in five matters in which it found FCPA violations but where the companies disclosed, cooperated, remediated, and agreed to disgorge the pecuniary gain from the misconduct.
But in other matters, the DOJ also sought and obtained extraordinary fines.
Six cases included monetary components topping $100 million. Two of them, each resolved on a global basis where U.S. authorities split the fines with foreign authorities, took monetary penalties to new heights: Odebrecht, a Brazilian construction conglomerate, agreed to a $2.6 billion resolution for a worldwide bribery scheme, and VimpelCom, a Dutch telecommunications company, agreed to a $795 million resolution in connection with a subsidiary's bribery scheme.
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