DOJ launches new FCPA pilot program to encourage voluntary self-disclosure of misconduct: key takeaways

White Collar Alert


DOJ has announced a one-year pilot program to encourage companies to voluntarily self-disclose FCPA-related misconduct, cooperate with the Criminal Division’s Fraud Section and remediate flaws in their internal controls and compliance programs.

The specifics of the pilot program, announced April 5, were issued by DOJ Fraud Section Chief Andrew Weissmann in a memorandum called “The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance.” This pilot program builds on the requirements detailed in the Deputy Attorney General’s Individual Accountability memorandum issued last September, popularly known as the Yates Memo. This pilot program only applies to FCPA matters brought by the Criminal Division’s Fraud Section. The full text of the Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance may be found here.

Under the pilot program, a company that voluntarily and promptly discloses all relevant facts known to it (including facts about individual misconduct), fully cooperates with the government’s investigation and timely and appropriately remediates is eligible to receive up to a 50 percent reduction off the bottom end of the applicable US Sentencing Guidelines fine range calculation. Appointment of a monitor will not be required if a company has implemented an “effective compliance program” by the time of resolution. In addition, the government will consider declining prosecution for companies that timely disclose, cooperate and remediate.

While acknowledging what constitutes an “effective compliance program” will vary based on the size and resources of the company, the memo instructs Fraud Section attorneys on what they should look for when evaluating compliance program adequacy. The guidance highlights the need for an organizational culture of compliance that makes all employees aware that criminal conduct, including the conduct under investigation, is not tolerated. Fraud Section attorneys are directed to gauge the reporting structure of compliance personnel and whether the compliance function is adequately resourced and independent; whether compliance personnel are sufficiently experienced and knowledgeable about the business to identify and appreciate risky transactions or conduct; whether the compliance program design is tailored to address risks based on an effective risk assessment and then audited to ensure efficacy; and whether compliance personnel are compensated and promoted in a way that does not compromise their independence or the fulfillment of their responsibilities. A framework for disciplining employees responsible for misconduct, and potentially others who oversee them, and that takes into account how disciplinary infractions and oversight lapses affect compensation also are features identified for scrutiny in terms of assessing compliance program effectiveness. Finally, Fraud Section attorneys are instructed to take note of other actions a company may take that demonstrate its understanding of the seriousness of the misconduct, responsibility for its actions, and efforts to reduce recurrence and other risky behavior.

Disclosures already required by law, agreement or contract will not qualify as a voluntary self-disclosure. Cooperation will be evaluated by the scope, quantity, quality and timing of cooperation appropriate for the particular circumstances. To receive credit for timely and appropriate remediation, the Fraud Section will generally require the company to implement an effective compliance and ethics program and to discipline responsible employees. Additional steps demonstrating company recognition of the misconduct’s seriousness, acceptance of responsibility and implementation of measures to reduce the risk of repetition may also be required.   

Companies failing to voluntarily disclose FCPA-related misconduct may still receive limited credit if they later cooperate and appropriately remediate. In such circumstances, however, cooperation credit will be limited to, at most, a 25 percent reduction off the bottom of the Sentencing Guidelines fine range calculation.     

While announcing the pilot program, DOJ repeatedly referenced the Yates Memo, which stressed priority on prosecution of individuals, and stressed that company cooperation on FCPA matters will focus on company assistance in providing evidence leading to the prosecution of the responsible individuals. To show it had the muscle to follow up on these leads, DOJ touted its enhanced FCPA investigative capabilities, including 10 new prosecutors for the Fraud Section’s FCPA Unit (making it 50 percent larger than before) and increased cooperation with international law enforcement counterparts. 

Key takeaways

DOJ's latest policy prescription for FCPA enforcement seems to recognize that lack of clarity and predictability in FCPA enforcement provided little incentive for companies to voluntarily disclose violations. Often companies found it difficult to calculate the amount or likelihood of receiving any benefits by voluntarily self-reporting a violation, whereas the drastic consequences of facing a government investigation were guaranteed following such a disclosure. 

DOJ’s new FCPA pilot program seeks to change that calculus. By offering greater transparency to the benefits of early and complete cooperation with the government − as well as greater predictability for the potential negative consequences for not voluntarily disclosing such conduct − DOJ hopes more companies will disclose and cooperate with authorities. It remains the case, however, that DOJ retains discretion to judge the completeness of a company’s cooperation and how much to credit a company’s voluntary disclosure or remediation in a particular case.

Find out more about the implications of the pilot program by contacting any of the authors.