DOJ Appoints Compliance Counsel to Provide Advice in FCPA Investigations
- The DOJ is creating a new compliance counsel position in the Criminal Division’s Fraud Section to scrutinize the compliance programs of companies under investigation for possible Foreign Corrupt Practices Act (FCPA) violations.
- The creation of an official compliance specialist position demonstrates the government’s commitment to carefully investigate an entity’s compliance program before making a decision to prosecute a company or impose certain penalties.
- There is a significant benefit for companies to invest in a strong and comprehensive compliance program for helping to avoid FCPA charges and, should charges be brought, limiting the penalties.
The U.S. Department of Justice (DOJ) is creating a new compliance counsel position in the Criminal Division’s Fraud Section to scrutinize the compliance programs of companies under investigation for possible Foreign Corrupt Practices Act (FCPA) violations.1 On July 30, 2015, The Wall Street Journal reported that this compliance specialist will help prosecutors with their charging decisions and provide advice as to what type of resolution would be appropriate for entities that failed to prevent or detect bribes to foreign officials. The new counsel also will assist the Fraud Section in other investigations, including healthcare fraud and securities fraud. While the name of the new in-house specialist has not yet been revealed, Fraud Section Chief Andrew Weissmann confirmed that a compliance counsel has been selected and is currently being vetted by DOJ. Weissmann stated that the compliance specialist will help prosecutors differentiate the companies that have implemented a robust compliance program from those that have adopted “mere window dressing.” The compliance counsel will also provide companies with specific guidance regarding compliance measures appropriate for the risk level of the business.
FCPA Acknowledges Mistakes Will Occur
The creation of an official compliance specialist position to weigh in on FCPA prosecutions demonstrates the government’s commitment to carefully investigate an entity’s compliance program before making a decision to prosecute a company or impose certain penalties. It also reflects a more practical approach to FCPA enforcement insofar as it demonstrates an acknowledgment that sometimes – despite a well-crafted compliance program – mistakes will happen. While the move stops short of creating a formal compliance defense to allegations of FCPA violations, it should be seen as an effort to address the widely held perception that in crafting resolution proposals, the DOJ fails to give adequate consideration to a company’s good-faith compliance efforts.
Over the last few years, a number of cases have highlighted the concrete and measurable impact that investing in a strong compliance program has had on the outcome of an FCPA investigation along with the adverse consequences of not doing so.
- Morgan Stanley: In April 2012, citing the company’s strong compliance program, prosecutors declined to prosecute Morgan Stanley after a former managing director for its real estate business in China pleaded guilty to evading its internal controls. The DOJ issued the following statement:
“After considering all of the available facts and circumstances, including that Morgan Stanley constructed and maintained a system of internal controls, which provided reasonable assurances that its employees were not bribing government officials, the Department of Justice declined to bring any enforcement action against Morgan Stanley related to [Garth] Peterson’s conduct.”2
- Alstom S.A.: On Dec. 22, 2014, Alstom, a French power and transportation company, pleaded guilty and agreed to pay $772 million to resolve foreign bribery charges for falsifying its books and records and failing to implement adequate internal compliance controls. The plea agreement cited a number of factors the DOJ considered in reaching the resolution, including Alstom's:
- failure to voluntarily disclose the misconduct despite its awareness of related misconduct at a U.S. subsidiary
- refusal to cooperate fully with the investigation
- lack of an effective compliance and ethics program at the time of the conduct
- prior criminal misconduct, including conduct that led to resolutions with various other governments and the World Bank
In announcing the settlement, the Justice Department encouraged companies “to maintain robust compliance programs, to voluntarily disclose and eradicate misconduct when it is detected, and to cooperate in the government’s investigation” but asserted that it would “not wait for companies to act responsibly” before identifying criminal activity and initiating an investigation.3
- Marubeni Corporation: On March 19, 2014, Japanese trading company Marubeni Corporation pleaded guilty to conspiracy and FCPA violations and agreed to pay an $88 million fine. The plea agreement cited Marubeni’s decision “not to cooperate with the department’s investigation when given the opportunity to do so, its lack of an effective compliance and ethics program at the time of the offense, its failure to properly remediate and the lack of its voluntary disclosure of the conduct” as some of the factors it took into account in reaching an appropriate resolution.4
Compliance Programs Need to Be Customized to Each Company's Risk Profile
The Justice Department’s addition of a specialized compliance counsel underscores the importance of employing a robust and effective corporate compliance program specifically tailored to a business’s risk profile. As Assistant Attorney General Leslie Caldwell recently recognized, “[t]he lack or insufficiency of a compliance program can have real consequences for a company when a violation of law is discovered.”5 The government’s recent action reaffirms the significant benefit a company’s decision to invest in a strong and comprehensive compliance program can have on avoiding FCPA charges and, should charges be brought, limiting the penalties.
1 See Joel Schectman, Compliance Counsel to Help DoJ Decide Whom to Prosecute, The Wall Street Journal, July 30, 2015.
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