On Nov. 20, 2019, the U.S. Department of Justice (DOJ) amended the Foreign Corrupt Practices Act's (FCPA) Corporate Enforcement Policy (the Policy) in an effort to provide clarity on what constitutes voluntary self-disclosure and full cooperation for companies in FCPA matters. U.S. Dep't of Justice, U.S. Attorneys' Manual §9-47.120 (2019) (FCPA Corp. Enfor. Policy). The recent changes to the Policy show an ongoing trend and effort by DOJ to make its guidance clear, in part, to encourage companies to make earlier disclosures. The changes also reflect a better understanding by DOJ of the practical implications of business operations and internal investigations.

This article will summarize the evolution of the Policy and conclude with steps companies should take if they are subject to the FCPA.

The Policy's Evolution

The Pilot Program. DOJ launched the Policy's Pilot Program on April 5, 2016. Under the Pilot Program, DOJ could decline to pursue an enforcement action when three requirements were met: (1) voluntary self-disclosure, (2) full cooperation, and (3) timely and appropriate remediation. Memorandum from DOJ, The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance (April 5, 2016). (In terms of timing, the DOJ placed and still does place the burden on the company to demonstrate the timeliness of the disclosure stating it must be disclosed: (i) "within a reasonably prompt time after becoming aware of the offense"; and (ii) "prior to an imminent threat of disclosure or government investigation." FCPA Corp. Enfor. Policy §9-47.120(3)(a).) Limited credit also could be provided where some but not all requirements were met. Id.

However, even where all of the requirements were met, in some cases DOJ considered other factors, such as "the nature and seriousness of the offense," when determining whether a declination was warranted. For example, DOJ entered into a Non-Prosecution Agreement with General Cable Corporation in a case concerning the bribery of government officials. Despite the company's timely self-reporting, full cooperation, extensive remediation, and restructuring its compliance policies, the company did not receive a declination. The decision was attributable to the failure of high-level executives to implement adequate internal controls that may have prevented the bribery scheme. Instead, the company received a discount of 50% off the bottom of the U.S. Guidelines fine range. In re General Cable Corporation (Dec. 22, 2016). This result signaled to companies that meeting the requirements was a necessary but not always a sufficient condition to receive a declination.

November 2017 Launch. The Policy was formally launched and incorporated into the United States Attorneys' Manual on Nov. 29, 2017. Rod. J. Rosenstein, Deputy Attorney Gen., DOJ, Remarks at the 34th International Conference on the FCPA (Nov. 29, 2017). Unlike the Pilot Program, the Policy now presumed a case to be resolved via declination where the requirements were met. Id. Nevertheless, the Policy added that the presumption may be overcome where aggravating circumstances relating to the nature and seriousness of the offense are present. Id. Aggravating circumstances changed the chances of receiving a declination to a 50% reduction off the bottom of the U.S. Guidelines fine range. Id. Additionally, where the standard of voluntary disclosure is not met, but cooperation and remediation are, prosecutors may recommend up to a 25% reduction in fine. Finally, the Policy detailed how DOJ evaluates an appropriate compliance program.

Written in stone—or so it appeared—companies now had a policy to reference when deciding to self-disclose misconduct. After the Policy's formal launch, DOJ declined to bring actions against those companies that followed the Policy. For example, Dun & Bradstreet Corporation received a declination despite bribery committed by the employees of its subsidiaries because the company voluntarily self-disclosed, cooperated, and fully remediated. Mentioned in the settlement were the company's efforts to enhance its compliance program and the termination of 11 individuals involved in the misconduct. In re The Dun & Bradstreet Corporation (April 23, 2018). This declination underscored the significance of a robust compliance program as well as a company's remediation efforts.

March 2019 Amendment. On March 8, 2019, DOJ amended the Policy as part of an "ongoing process of refinement and reassessment." Brian A. Benczkowski, Assistant Attorney General, DOJ, Remarks at the 33rd Annual ABA National Institute on White Collar Crime Conference (March 8, 2019). Specifically, DOJ: (1) removed the prohibition against ephemeral messaging systems and asked companies to implement appropriate policies for the retention of employee communications; (2) added a footnote providing that DOJ will not direct a company's internal investigation; (3) added a presumption of declination for companies undergoing mergers or acquisitions that identify misconduct at the target company; and (4) required disclosure of individuals substantially involved in wrongdoing instead of all individuals involved. FCPA Corp. Enfor. Policy §9-47.120(3)(a), (b) n.1, (c), (4). While these changes show some appreciation by DOJ of the challenges faced by companies in the throes of internal investigations, a line of companies looking to self-report was still not forming along Constitution Avenue, suggesting that there was still room for clarification and reassurance.

November 2019 Amendment. The November 2019 amendment suggests an appreciation by DOJ that companies may be reluctant to come forward before all relevant facts have been analyzed in a company's internal investigation, which could result in delaying self-disclosure and cooperation. Specifically, DOJ modified the definitions of "Voluntary Self-Disclosure in FCPA Matters" and "Full Cooperation in FCPA Matters." FCPA Corp. Enfor. Policy §9-47.120(3)(a), (b). DOJ also clarified that, where a company undertakes a merger or acquisition, and uncovers, through appropriate measures, misconduct by the merged or acquired entity, there will be a presumption of declination if the company self-discloses the misconduct. Id. at §9-47.120(4).

In a new footnote, DOJ stated its recognition that, "a company may not be in a position to know all relevant facts at the time of a voluntary self-disclosure, especially where only preliminary investigative efforts have been possible." Id. at §9-47.120(3)(a) n.1. In those cases, DOJ insists a company should still make a fulsome disclosure, but announce that it is being made based on a preliminary investigation. Additionally, where the Policy used to require disclosure of all facts as to "all individuals substantially involved in or responsible for the violation of law," it now requires disclosure of facts "known to it at the time of disclosure, including any individuals substantially involved in or responsible for the misconduct at issue." Id. at §9-47.120(3)(a) (emphasis added).

Historically, the Policy required companies to identify opportunities for DOJ to obtain relevant evidence not in the company's possession when the company "is or should be aware" of such opportunities. Now, the Policy no longer places a burden on a company to identify evidence it should be aware of, and instead requires companies to identify for DOJ evidence outside of its possession of which it is aware. Compare FCPA Corp. Enfor. Policy §9-47.120(3)(b) (March 2019) with §9-47.120(3)(b) (November 2019) (emphasis added).

These changes encourage companies to self-disclose to DOJ sooner as the provisions indicate that the company is only responsible for what it knows at the time of disclosure, which can ease a company's anxiety that it is required to conduct a scorched earth investigation prior to self-disclosing.

It remains to be seen whether companies will more actively and promptly self-report because of these changes. And although DOJ has, through this evolution, seemed willing to let companies conduct their own investigations, time will tell how many stones DOJ will insist be unturned before concluding an investigation meets these requirements.

Conclusion

The changes to the Policy suggest that DOJ is: (1) making an effort to be more transparent and clear; (2) more understanding of the practical implications of business operations; and (3) encouraging companies to disclose misconduct sooner. In light of the Policy's requirements, companies that are subject to the FCPA should consider taking proactive steps, including:

• Develop a comprehensive compliance and ethics program that is designed to reasonably detect and prevent potential violations, the criteria for which should be periodically updated based on a detailed anti-corruption risk assessment that addresses both company and industry-specific risks.

• Implement an independent compliance function that has the ability and authority to monitor and enforce company policies and procedures.

• Conduct training, testing, and auditing of the compliance program to assure its effectiveness.

• If alleged misconduct arises, conduct a thorough analysis of the root causes of the underlying conduct and remediation to address those causes.

(a) Discipline responsible employees, both those who participated in the misconduct and those who supervised where the misconduct occurred. In certain circumstances, the appropriate discipline may be termination of the responsible employees.

(b) Address additional steps the company has taken, including undertaking company culture assessments, to demonstrate an understanding of the seriousness of its misconduct and to reduce the risk that the misconduct will be repeated.

David N. Kelley is a co-leader of the white-collar and securities litigation practice of Dechert and former U.S. Attorney for the Southern District of New York. Matthew M. McDonagh and Kaitlyn Walsh are associates at the firm.