In an recent article on Law360, Robert W. Kent, Jr. looked at lessons to be learned from the first six months of the Department of Justice’s Foreign Corrupt Practices Act (FCPA) Pilot Program. Announced in April 2016, the year-long pilot program is designed to up the ante for companies during FCPA investigations by offering sentencing reductions or declinations (with disgorgement of all profits from the alleged misconduct) to companies that voluntarily disclose misconduct and cooperate fully while ostensibly restricting any cooperation credit for companies that no not meaningfully participate in an investigation.
Mr. Kent offers a number of insightful observations on the first six months of the pilot program. Among his many insights are a few key take-aways for companies of all sizes.
First, FCPA enforcement actions have increased dramatically. As of October, there have already been more enforcement actions announced in 2016 than in any full year prior. Whether this surge will continue remains to be seen, but companies must assume that this heightened level of vigilance is the new standard.
Second, the DOJ is publicizing the details of alleged misconduct with more detail in the past. The factual recitations of the alleged conduct, even in letters declining further investigation or prosecution, clearly outline the alleged schemes and those involved, and may tarnish a company’s relationship with partners and the public.
Third, the Yates Memo’s focus on individual accountability appears to be taking root as the DOJ and SEC have appeared to coordinate efforts, leading to SEC enforcement actions against four individuals in the past six months. The specter individual enforcement actions or criminal charges is a powerful deterrent and one the DOJ and SEC seem ready to use as part of the current enforcement push.
Finally, a bit of good news for companies in the midst of the government’s enforcement surge, the DOJ and SEC are recognizing and crediting the value of robust FCPA compliance programs. In numerous releases regarding FCPA resolution, the DOJ and SEC have focused on the responsiveness of compliance programs when allegations of misconduct arise internally. Subsequent internal investigations which include the strict preservation of evidence and aid from internal investigators to government agencies in deciphering global financial data are similarly lauded. Nevertheless, the ability to identify and report potential misconduct will always require training employees and executives at every level. Therefore, while the yield from the internal investigations may garner leniency from the DOJ or SEC, training which will allow the company to identify misconduct and start the process of internal investigation and self-disclosure must not be understated.
At the half-way point, the FCPA pilot program is proving to be a genuine catalyst for changing how FCPA violations are reported and investigated. In April, the DOJ said that it would re-evaluate the need to continue the pilot program after a year. However, another six months like this and we may have arrived at a new FCPA enforcement status quo, pilot program or none.