DOJ’s Sales Pitch Continues, But It’s Not All Bad

April 14, 2016

By: Sara Kropf

A few weeks ago, I wrote a blog post about my disappointment that white-collar criminal defense attorneys too often treat cooperation with the government as a default position.

Well, the government just sweetened the cooperation pot a little bit more.

In a recent policy announcement titled “The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance,” DOJ puts into writing a fairly concrete calculation for how much cooperation and self-disclosure are worth in FCPA cases. Turns out they are worth quite a bit—from 25% off fines to full declination.

Here’s the quick summary:

The principal goal of this program is to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.

None of this comes as any big surprise. DOJ has long had an informal practice across most sections that companies that self-disclose wrongdoing, cooperate in the investigation and engage in remediation will get cooperation credit. This is the “Tell, Help and Fix” approach. Tell DOJ what you did wrong, help DOJ investigate you and fix the problem. Bingo, you win.

I read the policy with interest and was fully prepared to disagree with every word. Turns out I didn’t disagree with every word (just most of them).

The Good and the Bad

Let’s start with the good:

  • DOJ (finally) admits that it desperately needs self-disclosure, noting that the program will increase the Fraud Section’s “ability to prosecute individual wrongdoers whose conduct might otherwise have gone undiscovered or been impossible to prove.” (emphasis mine) It’s nice to feel needed.
  • To its credit, DOJ offers some helpful guidance about what constitutes self-disclosure, cooperation and remediation. There’s nothing more frustrating when you are advising a client than to say “well, I think DOJ will consider that cooperation but I don’t really know.” There has been other guidance out there—the U.S. Attorney’s Manual, the Sentencing Guidelines—but the more information we have, the better we can advise our clients.
  • DOJ emphasizes that waiver of the privilege is not required. This is not a change in DOJ policy (see, e.g., McNulty and Filip memos), but it’s reassuring to see DOJ concede that it is not necessary.
  • Declination is formally on the table: If the company Tells, Helps and Fixes, then the “FCPA Unit will consider a declination of prosecution.” Again, this is nothing new but it’s significant to hear DOJ say it out loud. Too many prosecutors seem to think that declination in light of something–anything–wrong is never a possibility. It should be, if only to encourage more self-disclosure.

And now for the bad (in no particular order):

  • You have to Tell, Help and Fix to get anything at all: “Mitigation credit will be available only if a company meets the mandates set out below, including all relevant facts about the individuals involved in the wrongdoing.”(again, emphasis mine)
  • You have to “disgorge all profits resulting from the FCPA violation.” Presumably, DOJ determines what profits resulted from the violation, and one can only imagine the extent of financial disclosures necessary to satisfy DOJ that you’ve disgorged everything.
  • It’s a one-year pilot program. This sounds like my cable company. They give me a great deal for a year and then turn around and jack the rates. Will DOJ offer these great incentives for a year and then back away? Do you stay within the pilot program if you self-disclose on day 364 of it? (I assume so, since most cases take well over a year to complete.)
  • Self-disclosure must happen pretty darn early to count. The guidance reminds us that disclosure must occur before an “imminent threat” of a government investigation; it must be “reasonably prompt” after learning of the problem and so forth. There’s no time to give your client considered advice based on an internal investigation and evaluate all of the risks. When you get that compliance hotline call and there’s some basis for it, you had better report it to DOJ.
  • There are two sentences saying that the government cannot require companies to Tell, Help and Fix and that companies “remain free to reject these options and forego the credit available under the pilot program.” Duh. This feels a bit like a throwaway. If you offer enough carrots, then saying no feels an awful lot like a stick.
  • The company must provide “proactive cooperation.” This is confusing. If you are “cooperating” with DOJ, isn’t DOJ telling you what to investigate in most instances? But the policy says that the company has to disclose all the relevant facts and even inform the government where to search for “evidence not in the company’s possession and not otherwise known to the government.”So you really do need to be thinking ahead about how to help the government build the strongest possible case against your company and its executives/employees.
  • The policy is aimed at companies and pretty much leaves executives and employees out in the cold. It reiterates the Yates Memo in several places, but this policy is all about getting companies in the door at the expense of their (loyal) workers.

And the Ugly?

The policy, for all its specificity, gives DOJ complete and utter discretion. DOJ gets to determine whether the company has met all three parts of the standard. DOJ gets to decide the resulting cooperation credit. The policy certainly makes no promises, saying only that DOJ will take these factors into account “based on the circumstances of each case.”

Again, this is nothing new. DOJ has all the discretion now anyway. But the attractiveness of this “offer” may fade a bit when your client realizes that it could self-disclose as best it can, spend millions on cooperation, mediate the heck out of the problematic overseas business unit and then still face significant penalties. There’s no going back then, right?

I also wonder if this policy could have a perverse effect. If a company doesn’t self-disclose early—either because it truly did not realize it should have or because it had not made up its mi

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