The FCPA Corporate Enforcement Policy in Action-Part II

How should a compliance practitioner use the information from these three Foreign Corrupt Practices Act (FCPA) enforcement actions going forward? Do the differing results in these three enforcement actions (Dun & Bradstreet [D&B], Panasonic Avionics [PAC] and Credit Suisse [CSAG] & [CSHK]) assist a company in incentivizing self-disclosure? Do they even come into the debate on whether or not a company should self-disclose a FCPA? Should a company simply remediate and hope the Department of Justice (DOJ), Securities and Exchange Commission (SEC) or any foreign regulator never finds out by the FCPA violation? Finally what light, if any do they shed for companies which do not self-disclose but want to avail themselves of the discounts under the FCPA Corporate Enforcement Policy.

FCPA Corporate Enforcement Policy

The FCPA Corporate Enforcement Policy is aimed at providing additional benefits to companies based on their corporate behavior once they learn of misconduct. When a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, all in accordance with the standards in the FCPA Corporate Enforcement Policy, there will be a presumption that the company will receive a declinationabsent aggravating circumstances involving the seriousness of the offense or the nature of the offender.

In Section 2 of the FCPA Corporate Enforcement Policy its states:

Limited Credit for Full Cooperation and Timely and Appropriate Remediation in FCPA Matters

Without Voluntary Self-Disclosure

If a company did not voluntarily disclose its misconduct to the Department of Justice (the Department) in accordance with the standards set forth above, but later fully cooperated and timely and appropriately remediated in accordance with the standards set forth above, the company will receive, or the Department will recommend to a sentencing court, up to a 25% reduction off of the low end of the U.S.S.G. fine range.

Dun & Bradstreet

One cannot say enough about the response of D&B which led to the Justice Department’s declination, in the face of clear evidence of what the government said was “the bribery committed by employees of the Company’s subsidiaries in China”. There were several levels to D&B’s robust response. The first was that the company uncovered the conduct and self-reported to the Justice Department and SEC. Next the company engaged in a thorough investigation, fully cooperating with the DOJ; including reporting all relevant facts to the Justice Department, making both former and current employees available for interviews by flying them to the US. Finally, and per the Yates Memo, the company identified “all individuals involved in or responsible for the misconduct”.

Equally significant was the remediation engaged in by D&B. The company created one of top compliance programs since the self-disclosure and engaging is significant discipline. The company terminated those involved directly in the misconduct but went much further “disciplining other employees by reducing bonuses, reducing salaries, lowering performance reviews, and formally reprimanding them”. The level and degree of discipline demonstrated a significant level of commitment to a culture of compliance far beyond the company’s compliance program.

The D&B settlement put real teeth into the new FCPA Corporate Enforcement Policy. It showed the presumption of a declination is not only a powerful incentive but a useful tool in the government’s desire to reward companies who step forward to self-report, extensively cooperate and thoroughly remediate. It was a welcome step for the compliance profession who can now point towards a real and tangible benefit to using the Justice Department process. While companies will always need to return any ill-gotten gain in the form of profit disgorgement, the D&B declination and FCPA resolution demonstrates the government’s twin goals of robust enforcement and rewarding of companies which follow the prescripts of the new FCPA Corporate Enforcement Policy.

Neither Panasonic Avionics nor Credit Suisse self-disclosed their FCPA violations to the DOJ so they did not fall under the presumption of a declination. Further since neither did self-disclose the DOJ did not make comments on whether the conduct of either subsidiary presented “aggravating circumstances” as identified above which would preclude a declination. Yet the new FCPA Corporate Enforcement Policy also gave credit to those entities which do not meet all four prongs to secure their presumed declinations, specifically including those companies which do not self-disclose FCPA violations.

Panasonic

Neither PAC nor its parent, Panasonic self-disclosed their illegal conduct. This is in the face of actual knowledge by PAC’s internal audit function as early as 2009 of the illegal conduct. Further, there was C-Suite involvement in the bribery scheme by PAC Executives. Some of these senior executives were even seconded to PAC from the parent entity Panasonic.

Yet even with all the above and bribery schemes that lasted 13 years the company received a 20% discount off the minimum range of the US Sentencing Guidelines. If there was ever a glowing endorsement for a company cooperating with the government and extensively remediating, this enforcement action was it. Panasonic, take together with the D&B declination, demonstrate the full power and effect of the new FCPA Enforcement Policy. If you are like PAC and have corrupt senior executives not only approving and engaging in the bribery scheme and they do not want to admit their own criminal liability, you can still make a comeback if you cooperate and remediate. PAC saved itself over $34 million by meeting requirements two and three of the FCPA Corporate Enforcement Policy. At the end of the day, that may be the most significant lesson learned by compliance professionals and perhaps the most lasting lesson from this enforcement action for company’s who find themselves in FCPA hot water.

Credit Suisse

CSHK did not receive any credit for self-disclosing the FCPA violations and “because neither it nor CSAG voluntarily and timely disclosed to the Offices the conduct described in the Statement of Facts”. However, CSHK did receive “partial credit for its and CSAG’s cooperation with the Offices’ investigation, including credit for conducting an internal investigation, making factual presentations to the Offices, voluntarily making foreign-based employees available for interviews in the United States, producing documents to the Offices from foreign countries in ways that did not implicate foreign data privacy laws, providing translations of foreign language documents, and collecting and presenting evidence to the Offices”. Tellingly, it did not receive full credit for its cooperation “because its cooperation was reactive, instead of proactive.”

Yet here CSHK did not receive full credit as it did not discipline those within the organization who “engaged in the misconduct, and instead only recorded policy infractions internally and provided notices of infractions”. For all of the above and some other efforts, the company did receive a 15% discount off the bottom range in the Sentencing Guidelines. It is also important to note that the SEC stated in its Order, “Respondent acknowledges that the Commission is not imposing a civil penalty based upon the imposition of a $47 million criminal fine as part of Credit Suisse’s settlement with the United States Department of Justice.”

However both the PAC and CSAG FCPA resolutions also demonstrated the effectiveness of the FCPA Corporate Enforcement Policy. While both companies were less successful in reducing their overall liability for the failure to self-disclose their FCPA violations, they showed the Policy’s prescription. While PAC made a stunning comeback from some very egregious facts to receive a 25% discount off the low end of the Sentencing Guidelines, even CSAG, which did not fully cooperate or as thoroughly remediate, received a specified discount.

While companies will always need to return any ill-gotten gain in the form of profit disgorgement, the D&B declination and the PAC and CSHK FCPA resolutions demonstrate the government’s twin goals of robust enforcement and rewarding of companies who follow the prescripts of the new FCPA Corporate Enforcement Policy.

By: Thomas Fox

https://www.jdsupra.com/legalnews/the-fcpa-corporate-enforcement-policy-87191/