DOJ ENHANCES AND MAKES PERMANENT FCPA SELF-DISCLOSURE PILOT PROGRAM

On November 29, 2017, the US Department of Justice (DOJ) announced that the Pilot Program it launched in 2016 to encourage companies to self-report potential violations of the federal anti-bribery Foreign Corrupt Practices Act (FCPA) would be made permanent, subject to some amendments. The Pilot Program offers incentives to companies, including leniency, that self-report FCPA violations and cooperate with DOJ investigations.

In April 2016, DOJ implemented the Pilot Program, which was initially set to run for one year and was later temporarily extended. The program encourages companies to self-report suspected bribery, cooperate with the government's subsequent investigation, and implement remediation measures. The DOJ has disclosed that 30 companies have participated in the Pilot Program since its launch. Participants are eligible for incentives, including a reduction in applicable financial penalties and avoiding the appointment of a corporate monitor. A number of companies that self-reported received declination letters with the payment of disgorgement, confirming that the DOJ had declined to pursue penalties despite evidence of FCPA violations.

On November 29, 2017, Deputy Attorney General Rod Rosenstein announced that the Pilot Program would be made permanent and discussed the guidelines at an FCPA conference in Maryland. In prepared remarks, he stated that under the revised FCPA Corporate Enforcement Policy, where a company "satisfies" the DOJ's standards of self-reporting, cooperating, and remediating, there will be a "presumption" that the government will resolve the matter with a declination, unless there are "aggravating" circumstances, such as recidivism. Even where circumstances "compel" an enforcement action, the DOJ will recommend a 50% reduction in the low end of the range for fines under the Sentencing Guidelines for self-reporting companies. Where a company fails to self-report but nevertheless cooperates in the government's investigation, the DOJ will recommend a 25% reduction. In the case of either a declination or a fine reduction, full disgorgement, forfeiture and/or restitution resulting from the offense will be required.

During his speech, Rosenstein also reemphasized the DOJ's focus on holding individuals accountable, highlighting that 19 individuals have pleaded guilty or been convicted in FCPA-related cases this year.

The prospect of declination in the resolution of an FCPA matter will likely provide a stronger incentive for companies to self-report. Even though the reduction of fines under the Pilot Program was attractive, it is usually difficult for companies to consider self-reporting to know the potential amount of fine reduction to make an informed decision. The declination presumption under the revised program, even though short of a complete immunity, combined with the actual cases in which a declination was granted to several companies, make it more likely that companies with potential FCPA liabilities will regard self-reporting as a more attractive option. That being said, self-reporting should never be taken lightly, and should only be made after a proper investigation and careful advice from counsel, given the potential high costs that can arise from cooperating with a DOJ investigation.

The revised program, which will be incorporated into the United States Attorneys' Manual (9-47.120), includes guidance about the "hallmarks" of an effective compliance and ethics program. Mr. Rosenstein stated that the program is intended to incentivize "responsible" corporate behavior and reduce "cynicism" about the government's enforcement efforts. His remarks are available here. Herbert Smith Freehills' prior alert about the Pilot Program is available here.