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DOJ Eases Requirements in Corporate Enforcement Policy UpdateNovember 26, 2019
Last week, the Department of Justice (DOJ) revised the Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy (the “CEP”) in ways that continue to underscore the DOJ’s push for a more lenient enforcement regime for cooperating companies. The DOJ eliminated language that appeared to require companies, in disclosing conduct, to characterize that conduct as a violation of criminal law. The DOJ also clarified that companies, when identifying information not in their possession, need only identify evidence actually known to the companies at the time. The changes respond to concerns raised by companies and the defense bar about language in the CEP, and reflect the current Administration’s push to make DOJ policy towards corporate enforcement more reasonable.
Background on the CEP
The CEP, which began as a pilot program in 2016,1 offers companies cooperation credit beyond that available under the Sentencing Guidelines, and the presumption of a declination of prosecution in certain circumstances. Companies that voluntarily disclose violations, fully cooperate in DOJ investigations, and timely and appropriately remediate underlying conduct, are given a presumption that, absent aggravating circumstances, they will receive a declination of prosecution.2 Even when aggravating circumstances lead DOJ to determine that a declination is not appropriate for a company that otherwise satisfied the CEP’s criteria, the DOJ may consider charging alternatives such as a non-prosecution agreement (NPA) or deferred prosecution agreement (DPA). For purposes of the sentencing guidelines, the DOJ may recommend a 50% reduction in fines and forego the appointment of a monitor.3 For companies that do not voluntarily self-disclose but fully cooperate and timely and appropriately remediate, the DOJ will recommend up to a 25% reduction in any criminal penalty.4
In March 2018, the DOJ formally adopted the CEP. The Criminal Division has expanded the CEP beyond FCPA cases,5 and stated that it will act as non-binding guidance in Criminal Division cases involving healthcare, financial fraud, and other violations.6 The CEP was last updated in March 2019.
Clarifying Self-Disclosure Requirements
The updated CEP clarifies the information a company must disclose to receive voluntary self-disclosure credit. The March 2019 version of the CEP stated that a company must disclose “all relevant facts known to it, including all relevant facts about all individuals substantially involved in or responsible for the violation of law” to receive credit.7 The CEP now states that the company must “disclose all relevant facts known to it at the time of the disclosure, including as to any individuals substantially involved in or responsible for the misconduct at issue.”8 The inclusion of a timeframe (time of disclosure) and the slight language alterations (from “violation of law” to “misconduct at issue”) indicate that the DOJ recognizes that a company’s knowledge of the relevant facts may be limited at the self-disclosure stage. This recognition is also explicitly stated in a new footnote.9 The footnote goes on to advise that in situations of limited knowledge, “a company should make clear that it is making its disclosure based upon a preliminary investigation or assessment of information.”10
These revisions benefit companies because they remove any apparent requirement that companies must assess for DOJ whether there has been a “violation of law.” Indeed, companies are usually best served by not characterizing facts for the government as violations of law, but by describing the facts as found through an internal investigation that will have credibility with DOJ. Further, the updates are reasonable as they acknowledge that a company may not know if there has been a “violation of law” at the initial stages of its investigation. Thus, the revisions make clear the focus is the disclosure of facts.
Relaxing the Knowledge Threshold for Full Cooperation Credit
Additionally, the November 2019 version of the CEP changed the requirements for full cooperation by removing the constructive knowledge element from the proactive cooperation provision. Under the March 2019 version, the CEP required a company to:
[T]imely disclose all facts that are relevant to the investigation, even when not specifically asked to do so, and, where the company is or should be aware of opportunities for the [DOJ] to obtain relevant evidence not in the company’s possession and not otherwise known to the [DOJ], it must identify those opportunities to the [DOJ].11
Unlike the March 2019 version, the revised CEP only requires a company to disclose information of which it is actually aware, removing the requirement to disclose information that a company “should be aware of.”12 The updated CEP still requires a company to “timely disclose all facts that are relevant to the investigation, even when not specifically asked to do so.”13 Nevertheless, the remainder of the provision simply states that “where the company is aware of relevant evidence not in the company’s possession, it must identify that evidence to the [DOJ].”14 This softening acknowledges the difficulties companies might have faced attempting to access information outside of their control to find evidence they “should be aware of.” The previous ambiguous language made the scope of companies’ investigatory obligations unwieldy and unworkable. By narrowing the identification mandate to information of which the company is actually aware, these revisions conform the policy to how self-disclosures actually work in practice.
The November 2019 changes continue this Administration’s trend towards increasing leniency for companies by relaxing aspects of the voluntary self-disclosure and full cooperation requirements in order (i) to increase the number of self-disclosures, and (ii) to reflect the practical realities of companies’ internal investigations.15 While these changes are moves in the right direction, a company’s decision to self-disclose to the DOJ is a critical one that requires consideration of a variety of factors, and consultation with outside counsel familiar with the risks and benefits of such a decision.
1 DOJ Criminal Division Launches One-Year Pilot Program as Part of Enhanced FCPA Enforcement Strategy, O’Melveny (Apr. 20, 2016).
2 9-47.120 - FCPA Corporate Enforcement Policy (Nov. 2019 update). Such a declination often requires disgorgement of any criminal proceeds, but no additional criminal penalties.
5 DOJ Eases Requirements for Cooperation Credit in Corporate Prosecutions, O’Melveny (Dec. 6, 2018).
7 9-47.120 - FCPA Corporate Enforcement Policy (Mar. 2019 update).
8 9-47.120 - FCPA Corporate Enforcement Policy (Nov. 2019 update) (emphasis added).
9 See id. (“The Department recognizes 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. In such circumstances, a company should make clear that it is making its disclosure based upon a preliminary investigation or assessment of information, but it should nonetheless provide a fulsome disclosure of the relevant facts known to it at the time.”).
11 9-47.120 - FCPA Corporate Enforcement Policy (Mar. 2019 update) (emphasis added).
12 9-47.120 - FCPA Corporate Enforcement Policy (Nov. 2019 update).
15 See DOJ Eases Requirements for Cooperation Credit in Corporate Prosecutions, O’Melveny (Dec. 6, 2018).
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