During a July 12, 2017 webinar regarding how companies can better minimize Foreign Corrupt Practices Act (FCPA) risks, we shared how savvy practitioners are helping their companies along this journey by properly configuring their travel and expense tool, providing big picture data visibility into employee spend and providing various reports for compliance, security, finance, auditing, HR and other teams to help manage this risk further.
The summary below highlights two recent enforcement actions. I tend to wonder how much, if at all, the company was able to utilize their employee spend or travel data or tools to help manage this instance or produce details needed. Obviously, I cannot answer this question but can provide for you below some insight into these recent settlements to help understand this complex risk a bit more.
Over the summer, the Department of Justice quietly released two corporate FCPA enforcement actions in which the government stated that its decision to resolve the actions in the (relatively speaking) lenient manner in which they were resolved was based on the companies’ timely and voluntary self-disclosure as well as full cooperation in the DOJ’s investigation.
As highlighted on Professor Mike Koehler's FCPA Professor website, the first enforcement action was resolved through a so-called “declination with disgorgement” in which the company agreed to pay approximately $11.2 million based on allegations that an acquired entity made improper payments to high-level officials in the Republic of Georgia in connection with a business transaction.
As further highlighted on the FCPA Professor website, the subsequent enforcement action was likewise resolved through a “declination with disgorgement” in which the company agreed to pay approximately $4 million based on allegations that employees and agents of its Indian subsidiary made improper payments to Indian officials in connection with various infrastructure projects.
“Declinations with disgorgement” are a form of resolving corporate FCPA enforcements invented by the DOJ in April 2016 as part of its FCPA Pilot Program, a program designed in part to “motivate companies to voluntarily self-disclose FCPA-related misconduct” and fully cooperate with the DOJ’s investigation. Compared to the other options the DOJ has for resolving corporate FCPA scrutiny (such as plea agreements, deferred prosecution agreements, or non-prosecution agreements) “declinations with disgorgement” are generally viewed as the least harsh DOJ sanction including – at least what the DOJ says – are lower settlement amounts.
While it is obviously too soon to draw any meaningful conclusions regarding FCPA enforcement in the Trump administration, these two enforcement actions were near carbon copies of the previous “declinations with disgorgement” enforcement actions that occurred during the Obama administration in September 2016. In short, at present not much appears to have changed in terms of FCPA enforcement including the DOJ’s stated decisions to reward companies’ timely and voluntary self-disclosure as well as full cooperation in the DOJ’s investigation.
In the FCPA Pilot Program, the DOJ provided the following framework for “voluntary self-disclosure:"
“In evaluating self-disclosure during this pilot, the Fraud Section will make a careful assessment of the circumstances of the disclosure. A disclosure that a company is required to make, by law, agreement, or contract, does not constitute voluntary self-disclosure for purposes of this pilot. Thus, the Fraud Section will determine whether the disclosure was already required to be made. In addition, the Fraud Section will require the following items for a company to receive credit for voluntary self-disclosure of wrongdoing under this pilot:
- The voluntary disclosure [occurs] “prior to an imminent threat of disclosure or government investigation;"
- The company discloses the conduct to the Department “within a reasonably prompt time after becoming aware of the offense,” with the burden being on the company to demonstrate timeliness; and
- The company discloses all relevant facts known to it, including all relevant facts about the individuals involved in any FCPA violation.”
In the FCPA Pilot Program, the DOJ listed the following items that will be required for a company to receive credit for full cooperation:
- “[D]isclosure on a timely basis of all facts relevant to the wrongdoing at issue, including all facts related to involvement in the criminal activity by the corporation’s officers, employees, or agents;
- Proactive cooperation, rather than reactive; that is, the company must disclose facts that are relevant to the investigation, even when not specifically asked to do so, and must identify opportunities for the government to obtain relevant evidence not in the company’s possession and not otherwise known to the government;
- Preservation, collection, and disclosure of relevant documents and information relating to their provenance;
- Provision of timely updates on a company’s internal investigation, including but not limited to rolling disclosures of information;
- Where requested, de-confliction of an internal investigation with the government investigation;
- Provision of all facts relevant to potential criminal conduct by all third-patty companies (including their officers or employees) and third-party individuals;
- Upon request, making available for Department interviews those company officers and employees who possess relevant information; this includes, where appropriate and possible, officers and employees located overseas as well as former officers and employees (subject to the individuals’ Fifth Amendment rights);
- Disclosure of all relevant facts gathered during a company’s independent investigation, including attribution of facts to specific sources where such attribution does not violate the attorney-client privilege, rather than a general narrative of the facts;
- Disclosure of overseas documents, the location in which such documents were found, and who found the documents (except where such disclosure is impossible due to foreign law, including but not limited to foreign data privacy laws);
- Unless legally prohibited, facilitation of the third-party production of documents and witnesses from foreign jurisdictions; and
- Where requested and appropriate, provision of translations of relevant documents in foreign languages.”
When learning of FCPA issues, a business organization does not have a legal obligation to voluntarily disclose and cooperate with the government’s investigation (something even the FCPA Pilot Program recognizes), but in the above-referenced enforcement actions the DOJ stated that its decision to resolve the actions in the (relatively speaking) lenient manner in which they were resolved was based on these factors.
To learn more, download this executive summary that highlights key points from an educational webinar held on Wednesday, July 12 led by Professor Koehler. This session explored recent FCPA enforcement actions based on corporate hospitality, and compliance take-away points from those actions. Also, former practitioner and now Sr. Functional Consultant at Concur, Lacey Hughes, shared some real practices companies are taking today to mitigate this risk within their T&E programs.