DoJ's New FCPA Framework Encourages Disclosure of Employee Misconduct, Offers Significant Credit

April 8, 2016 Advisory

On April 5, 2016, Assistant Attorney General Leslie Caldwell announced that the U.S. Department of Justice ("DoJ") was instituting a new, one-year Foreign Corrupt Practices Act ("FCPA") enforcement pilot program. A company in total compliance with the pilot program requirements is eligible for a 50% reduction in the amount of the fine otherwise called for by the U.S. Sentencing Guidelines, a potential declination, and the possibility of avoiding the imposition of a compliance monitor. While each of these potential credits presents incredible value to a company dealing with an FCPA misconduct matter, DoJ designed the pilot program to enhance its own FCPA enforcement capability, so these potential corporate credits come at a price.

Concurrent with Assistant AG Caldwell's announcement, DoJ released the Fraud Section's FCPA Enforcement Plan and Guidance (the "Guidance"). The Guidance, intended primarily to assist DoJ personnel charged with enforcing the FCPA, explains the pilot program and two additional DoJ FCPA initiatives. The Guidance also explains how DoJ is increasing its FCPA law enforcement resources and strengthening its cooperation with foreign law enforcement counterparts.

Together, the three initiatives comprise DoJ's enhanced FCPA enforcement strategy and, by formally linking a company's opportunity to receive reduced fines with the requirement of the company's full cooperation, the initiatives put significant pressure on companies to self-report and cooperate with DoJ on FCPA matters.

In welcome news for companies trying to evaluate their FCPA exposure, the Guidance provides much-needed transparency into DoJ's FCPA enforcement perspective by articulating the standards for what constitutes (1) voluntary self-disclosure of criminality; (2) full cooperation; and (3) remediation for the purposes of qualifying for mitigation credit in an FCPA enforcement action. While the definitions are broad and very demanding, they do serve as valuable insight into DoJ's foundational viewpoint when it learns of potential FCPA misconduct.

The New FCPA Enforcement Pilot

Effective April 5, DoJ establisheda one-year enforcement pilot program designed "to promote 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." Limited to DoJ's FCPA Unit, the pilot program is designed to rewardcompanies that meet certain strict criteria with a range of FCPA mitigation credits.

The credit offered through the pilot program is "above and beyond" that provided by the Sentencing Guidelines and may consist of a declination, a reduced fine, or avoidance of the need for a corporate monitor. This credit will be difficult to earn and is contingent upon a company's compliance with enhanced levels of cooperation.

Key Definitions. A company only qualifies for the "full range" of FCPA mitigation credit if it (1) voluntarily self-discloses, (2) cooperates fully, and (3) timely and appropriately remediates its FCPA misconduct. The Guidance defines these terms expansively, but they can be roughly summarized as follows:

(1) Voluntary Self-Disclosure. To be considered "voluntary," a company's disclosure must not be required by law, agreement, or contract, and it must occur "prior to an imminent threat of disclosure or government investigation." In addition, the disclosure must be made "within a reasonably prompt time" after the company becomes aware of the FCPA misconduct, and—consistent with the recently released Yates memorandum — the company must disclose "all facts known to it, including relevant facts about the individuals involved in any FCPA violation." This broadly defined final requirement may serve to trip up companies otherwise complying with the requirements of the pilot program, and a company should think carefully about whether DoJ will perceive that the company is indeed disclosing "all" known facts about the matter.

(2) Full Cooperation. "Full cooperation" sounds like an easy concept , but it is defined expansively and may be a deceptive trap for the unwary. The Guidance sets forth 11 items a company must fulfill to receive credit for full cooperation under the pilot program. These items generally require a company to timely, proactively, and continuously disclose all facts related to the wrongdoing at issue (even as related to criminal conduct by third-party companies and individuals), and keep DoJ abreast of its internal investigation of the matter, yielding to DoJ's investigation when asked. Companies must also disclose all facts developed during the internal investigation and must attribute them to specific sources (unless doing so would violate the attorney-client privilege).

To receive credit for full cooperation, companies must also be willing to disclose overseas documents, to identify who found the documents and where, and to facilitate the production of third-party documents and witnesses from foreign jurisdictions, providing document translation when necessary. If disclosure is prohibited by a local law, the company has the burden of proving that fact.

Critically, to obtain credit for full cooperation under the pilot program, a company must be prepared to provide DoJ with all facts "related to involvement in the criminal activity by the corporation's officers, employees, or agents." DoJ requires that companies make available for interview current and former officers and employees, whether based in the United States or abroad. Companies may find these last two requirements unpalatable or even disloyal in some instances. To avoid this type of internal conflict, companies should provide their employees regular and robust compliance training. Proper training not only prevents FCPA issues in the first place, but also puts employees on notice regarding the company's responsibilities and obligations should a matter arise.

Companies should also note that DoJ considers these requirements supplemental to the threshold requirements established in the Yates Memo, DoJ's September 9, 2015 Deputy Attorney General Memo on Individual Accountability. The Guidance provides that companies will receive only limited credit for meeting the threshold requirements in the Yates Memo, but not the full set of requirements listed above. In fact, DoJ will offer "markedly less" credit to a company completing only some of the requirements than it otherwise would offer for a company completing all of the cooperation requirements.

(3) Remediation. DoJ has established three broad items it will use to evaluate a company's remediation efforts: (a) the quality of a company's compliance and ethics program, (b) "appropriate" discipline of employees involved in FCPA misconduct, and (c) additional remedial efforts.

A quality compliance and ethics program under the Guidance will contain the following elements:

  • Corporate culture of compliance
  • Sufficient compliance-dedicated resources
  • Competent compliance personnel who are sufficiently compensated and promoted
  • Compliance function independence and reporting structure
  • Compliance program crafted from an effective risk assessment
  • Compliance program audited regularly to assess its effectiveness

An appropriate discipline program under the Guidance will contain the following elements:

  • Proper identification and discipline of responsible employees
  • Supervisor liability and discipline
  • Individual misconduct and supervisory failure both negatively impact compensation

Additional remedial efforts under the Guidance include evidence of the following elements:

  • Additional steps demonstrating recognition of seriousness of misconduct
  • Acceptance of responsibility
  • Implementation of measures to prevent recurrence of misconduct
  • Implementation of measures to identify future risks

Importantly, a company will receive no credit for these remediation efforts unless it first cooperates. That is, cooperation is a threshold requirement before DoJ will evaluate a company's remedial efforts.

Credit under the Pilot Program. The pilot program offers companies several opportunities to earn credit for cooperating with DoJ. First, companies may be eligible for a 50% reduction in the fine amount otherwise called for by the Sentencing Guidelines. In addition, a company complying with the Government's requirements may also escape prosecution entirely. Finally, as long as a company has in place an effective compliance program, a company may be able to avoid the appointment of a monitor.

These benefits come at a cost. First, to qualify for any credit, a company must disgorge all profits from the FCPA misconduct. Second, to receive the full amount of credit, DoJ requires that a company self-disclose its FCPA misconduct. Even if a company later cooperates with DoJ fully and engages in appropriate remediation, if it fails to self-disclose, it will receive at most a 25% reduction off the bottom of the Sentencing Guidelines fine range. Third, DoJ is offering this credit for the purpose of encouraging companies to provide DoJ with as much information as possible on their employees so that DoJ may prosecute individuals whose misconduct might otherwise go unpunished. Companies desiring to protect their employees' actions face significantly diminished credit.

Increased FCPA-Dedicated Resources

While the Guidance focuses predominantly on explaining the details of the pilot program, the Guidance also confirms that DoJ is increasing the resources dedicated to its FCPA enforcement effort. Specifically, DoJ is increasing staffing in its FCPA unit by more than 50% and adding 10 more prosecutors to its ranks. Additionally, the Federal Bureau of Investigation is adding three new squads of FCPA-devoted special agents.

This information came as no surprise—DoJ announced previously that it planned to increase its FCPA-dedicated staffing. Rather, the importance of DoJ's FCPA staffing initiative is that it signals a level of sustained pursuit of FCPA misconduct. As Fraud Section Chief Andrew Weissmann wrote in the Guidance, "[t]he Department's demonstrated commitment to devoting additional resources to FCPA investigations and prosecutions should send a message to wrongdoers that FCPA violations that might have gone uncovered in the past are now likely to come to light."

Increased Cooperation with Foreign Law Enforcement

Lastly, the Guidance acknowledges DoJ's continued, increased reliance on foreign law enforcement to assist in FCPA enforcement operations. According to DoJ, "[l]aw enforcement around the globe has increasingly been working collaboratively to combat bribery schemes that cross national borders."

The Guidance states, unsurprisingly, that this collaboration is leading to greater sharing of leads, documents, and witnesses with foreign law enforcement. Companies should be aware how this affects their FCPA response calculus. Documents previously difficult for DoJ to obtain or witnesses previously impossible to question due to their location overseas may be accessible and available now given increasing levels of cooperation between international law enforcement agencies.


The Guidance represents a significant development in FCPA enforcement. For the first time, DoJ has made public a written framework explaining how a company's actions related to an FCPA matter affect DoJ's decision making regarding the employment of potential fine reductions and other incentives.

The initiatives set forth in the Guidance will be central to DoJ (is DoJ necessary) FCPA enforcement over the next year as DoJ continues to execute its intent to "promote aggressive enforcement of the FCPA and the investigation and prosecution of culpable individuals." Nevertheless, as the Guidance notes, DoJ cannot require businesses to self-disclose, cooperate, or remediate.

So, while the initiatives are designed to encourage companies to improve their anti-corruption compliance programs, to prevent FCPA violations, and to boost DoJ's ability to prosecute individuals, businesses must reach their own conclusions regarding how best to handle potential FCPA-related misconduct. There is only one surefire mistake a company can make, and that is inaction. In this "aggressive enforcement" environment, more than ever before companies with FCPA exposure should have an effective compliance program and a strategy for responding quickly to matters of FCPA–related misconduct. This week's new Guidance removes any doubt — if DoJ knocks on your door before you have developed your strategy or played your hand, you've probably just squandered your only opportunity to receive significant credit. And that would be a costly error.