The one-year FCPA pilot program announced in April 2016 is barely halfway through its existence, and already one prominent legal voice is going public in criticizing the inherent flaws in the program, which was intended to encourage companies to aggressively and comprehensively self-disclose all relevant facts related to potential FCPA violations with no guarantee of a reward for their actions. Former Assistant Attorney General Lanny Breuer, who is probably more responsible for expanding the federal government’s enforcement actions with regard to FCPA violations than any other person, gave a speech in late October in which he criticized the pilot program as essentially adding nothing to previous DOJ guidance while making extraordinary demands on companies to give up their rights in return for what amounts to a promise to merely consider giving them credit for doing so.
The Shaky Promises of the FCPA Pilot Program
Announced in a publicly-released memo in April 2016, the FCPA pilot program has the stated goal of promoting “greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Although many companies had in many ways been voluntarily self-disclosing misconduct for years by cooperating with federal investigators through sharing findings of internal investigations, the memo asked companies to go quite a bit further in essentially doing the government’s job for them. Some of the requirements listed in the pilot program include:
- Disclosures must be made before any government investigation takes place, and even before an investigation is “imminent,” suggesting that some self-disclosures made before investigations even begin would still not qualify.
- Self-disclosures must be “prompt” and the burden will be on the companies to prove that their self-disclosure was timely.
- Self-disclosure must include “all relevant facts” and attribute information to specific sources within the company, including all relevant facts gathered through internal investigations.
- Disclosure of information related to conduct at third-party companies must be made.
- Companies should potentially halt internal investigation efforts in order to allow the government to interview employees prior to the company doing so (so-called “de-confliction”).
Those are just a few of the extraordinary requirements for participation in the program. And what do companies get in return for voluntarily reporting any and all potential relevant self-incriminating facts as quickly as they possibly can? (emphasis added below)
- The DOJ “may accord up to a 50% reduction” in fine penalties.
- The DOJ “generally should not require appointment of a monitor…”
- The DOJ “will consider a declination of prosecution…”
Breuer’s Well-Reasoned Criticism of the Program
It does not take a seasoned lawyer to see that language like “may,” “generally,” and “will consider” in a legal document essentially means that the other party is promising nothing. And former Assistant Attorney General Breuer – who, we all remember, recovered billions from companies for FCPA violations during his tenure – made that clear in his remarks at an FCPA legal conference in late October, pointing out that, while a 50% reduction in fines is certainly appealing to companies facing huge fines, the fact that the reductions remain discretionary no matter how much sacrifice the companies put into self-disclosure calls into question the worth of voluntary participation in the program.
Because companies have no guarantee that their immense efforts to provide self-incriminating information to the government about their own employees, officers, and even third parties will result in any sort of reduction in penalties, it is not clear why companies would want to participate in the program, and, as Breuer pointed out, the pilot program does not appear to make any changes to existing DOJ protocol which already provided for discretionary credit for cooperation. Breuer also criticized the “de-confliction” requirements of the program, suggesting that keeping company insiders and owners in the dark about investigations was unwarranted, saying, “In general, publicly traded companies can’t just stand down from doing an investigation when such an allegation comes in.”
With five months to go in the year-long FCPA pilot program, we shall see what comes of it, but for now it appears to be a deeply unpromising proposition for companies and individuals alike.