Department of Justice Foreign Corrupt Practices Act Enforcement Initiatives

In the past year, the DOJ has continued to take an aggressive stance in the criminal enforcement of the U.S. foreign anti-bribery statute, the Foreign Corrupt Practices Act (“FCPA”).  In fact, two of the largest fines ever imposed in an FCPA-related action occurred in 2016 with VimpelCom Ltd. and Och-Ziff Capital Management Group, each with combined penalties to the DOJ and the SEC of approximately $400 million. 

The past year has also seen enhanced transparency by the DOJ in connection with its April 2016 FCPA Pilot Program, articulating the circumstances in which the DOJ will accord credit to companies based on self-reporting violations, cooperation during the investigation and remediation.  Under the one-year Pilot Program, a company that meets the stated criteria can—at the discretion of the DOJ—receive up to a 50 percent reduction in penalties or even a declination to prosecute, provided the company disgorges the ill-gotten profits.  Both in public remarks by DOJ officials and in connection with its announcement of resolutions of FCPA violations, the DOJ has continued to tout individual accountability as a primary means of deterring corruption in its focus on individual actors at the outset of an investigation and on remedial disciplinary action taken by companies against culpable individuals, including in the executive ranks.

In light of these trends, we believe boards should consider the following observations in 2017:

• The DOJ has expressed an expectation that boards will be knowledgeable about, and exercise reasonable oversight over, anti-corruption compliance programs.  Directors can be liable for bribery violations and internal control deficiencies for failure to properly exercise oversight.  While we have not seen precedent for this, boards should be wary of the DOJ’s heightened focus on individual accountability, especially among senior executives and its increased reliance on the books and records provisions of the FCPA, which require an appropriate system of internal controls.
• It is critical that boards take action when potential misconduct under the FCPA is uncovered, depending on the gravity of the potential misconduct and other specific facts and circumstances.  When entering the realm of a possible DOJ investigation, boards should bear in mind that the DOJ has expressed that:
  • Voluntary self-reporting will determine mitigation credit and may weigh against the imposition of an independent compliance monitor.
  • Companies seeking credit for full cooperation should expect that the DOJ will want the company to provide facts concerning culpable individuals.
  • Remediation credit will be dependent  on appropriate discipline of employees, in addition to implementation of an effective compliance and ethics program.

Of course, in light of the upcoming administration change, any number of these trends could change FCPA enforcement.  While it is impossible to predict with any certainty, it seems probable that the new attorney general would adapt the approach or scope of FCPA enforcement—such as revising DOJ initiatives like the Pilot Program or pursuing only cases with a strong U.S. nexus—rather than abandoning the law entirely.   In addition, the change in administration could impact the level of international cooperation that currently exists between the DOJ and foreign authorities.  The bottom line is: an effective anti-corruption compliance program remains a critical feature of responsible corporate governance.