Foreign Corrupt Practices Act

Several senior officials with the Department of Justice have sounded a warning in recent weeks: Prosecuting individuals who engage in corporate crimes will be central to the agency’s reinvigorated criminal enforcement efforts, and the bar for companies seeking to receive cooperation credit has been reraised as well.

“The Justice Department’s interest in prosecuting corporate crime wax and wane over time. Today, it is waxing again,” Attorney General (AG) Merrick Garland stated in remarks before the ABA Institute on White-Collar Crime in March.

In particular, the agency’s top priority in corporate criminal cases is “to prosecute the individuals who commit and profit from corporate malfeasance,” AG Garland stressed. In his remarks, he listed four reasons for why individual prosecutions are a top priority: (1) “corporations only act through individuals”; (2) “penalties imposed on individual wrongdoers are felt by those wrongdoers, rather than by shareholders or inanimate organizations”; (3) “the prospect of personal liability … is the best deterrent to corporate crime”; and (4) “it is essential to Americans’ trust in the rule of law.”

The agency’s focus on individual liability is not just rhetoric. In fiscal year (FY) 2021, “the U.S. Attorneys’ Offices charged 5,521 individuals with white-collar crimes, a 10 percent increase over the previous year,” AG Garland stated.

FY 2021 was also among “the busiest trial years on record for the Criminal Division’s Fraud Section,” AG Garland added. “In 2021, Fraud Section prosecutors publicly charged 333 individuals, convicted 296 individuals by plea, tried 23 cases in 18 districts, and secured convictions of 30 individuals at trial.”

The enforcement areas concerning individual liability are changing as well. AG Garland specifically called out environmental offenses as an example. The Environment and Natural Resources Division is currently trying or preparing to try 11 indicted cases against 11 companies and 34 individuals, including 14 current or former company executives, for a wide range of criminal environmental offenses, he said.

Antitrust violations have also been keeping the agency busy, as the Antitrust Division brought 25 criminal cases against 29 individuals and 14 companies last fiscal year, with 146 open grand jury investigations—the most in 30 years, AG Garland said. Additionally, the Antitrust Division is pursuing 18 indicted cases against 10 companies and 42 individuals, including eight current or former CEOs or company presidents, he added.

Cooperation credit

Most concerning to the legal and compliance profession is that the DOJ has brought back a controversial enforcement policy that frayed the nerves of many companies when it was first memorialized by then-Deputy Attorney General (DAG) Sally Yates in 2015. The so-called “Yates Memo” stated that, to be eligible for any cooperation credit in criminal cases, companies “must provide the Department all relevant facts about individuals involved in corporate misconduct.”

The policy was later relaxed under the Trump administration, insofar as it required companies to identify only individuals who were “substantially involved” in or responsible for the misconduct at issue, regardless of their position, status, or seniority.

Under current DAG Monaco, however, the original 2015 cooperation policy has been reinstated, a point that AG Garland stressed in his remarks: “When the Justice Department offers a company the opportunity to enter into a resolution for its misconduct, it is in that company’s best interest to provide us with a full picture of what happened and who was involved,” he said. “When we give a company the opportunity to come clean, it must come clean about everyone involved in the misconduct, at every level.”

Revival of the policy resurfaces the same concerns many companies had expressed when it was first introduced under Yates, mainly that, to receive cooperation credit, it will require having to undertake a broad and costly internal investigation if they make the choice to receive cooperation credit all.

A focus on recidivism

Rohan Virgincar, a former trial attorney at the Criminal Division’s Fraud Section and now a partner at Foley, said what’s even “more earthshattering” is the agency’s new focus on recidivism. “Prosecutors are now instructed to consider all of a company’s prior misconduct when resolving a case, even if the violations are unrelated to the current violations under investigation,” he said.

DAG Monaco explained the reasoning for this during a moderated discussion at the New York City Bar Association’s 2022 White Collar Crime Institute in April. “When I came back to the Justice Department after having been gone for a few years and was trying to evaluate where we were in the corporate criminal enforcement landscape, I asked my team for some data—and it turned out almost 20 percent of the major corporate resolutions that we had engaged in over the last several years involved companies that were repeat players,” she said.

These companies previously had been given either a non-prosecution agreement (NPA) or a deferred prosecution agreement (DPA). “That was an interesting revelation, and it told me we needed to be looking hard at how we are evaluating if a company should get successive DPAs,” Monaco said. “That is something we are looking very hard at.”

Currently, the DOJ’s view is that if the company had prior misconduct, “that that somehow reflects poorly on the company when, in reality, it’s hard to find a company that is not a recidivist, especially for a company that has tens of thousands of employees,” said Daniel Kahn, former acting Deputy Assistant Attorney General of the Criminal Division, chief of the Fraud Section, and chief of the FCPA Unit and now partner at DavisPolk.

The focus should be more on what the circumstances were for why the misconduct happened and what remedial measures the company is taking to prevent that misconduct from happening again, Kahn said. If a company is taking remedial measures, “that showcases a company that is doing the right thing,” he said.

Depending on how the DOJ chooses to revise its enforcement policies, that could have “a very significant impact on whether companies decide to voluntary disclose misconduct or decide to cooperate,” Kahn said. “All those things are in play right now and are significant issues being looked at by the Department, and companies should look closely to see what happens there.”

A focus on compliance programs

The Justice Department today places significant emphasis on having in place an effective compliance program that can go a long way in reducing the fines a company may receive in a criminal enforcement matter.

“There is a clear recognition by the Department that companies play a very important role in deterring crime and in helping the DOJ prosecute cases,” Kahn said. While DOJ prosecutes crimes, companies are the ones with the ability to earlier detect or proactively stop misconduct before it happens through their compliance programs, he said.

“That is more and more becoming a really big factor,” Virgincar said. “On the flip side, you have cases where the DOJ has specifically called out a poor compliance program.”

A robust compliance program is also a way to reduce the likelihood of the DOJ requiring an independent compliance monitor. “They’re looking for improvement over time and some assurance that the company, if left to its own devices, has the tools and processes in place to effectively detect and prevent any number of different kinds of legal violations,” Virgincar said.

He added, “The more a company can assure the government that it has made meaningful improvements, and those meaningful improvements are thoughtfully designed to get at whatever the problem was, those kinds of mitigation efforts by companies are looked upon quite favorably by the government.”

Dan Kahn will be presenting as co-chair at ACI’s “39^th International Conference on the FCPA,” taking place Nov. 30-Dec. 1, 2022, at the Gaylord National Resort and Convention Center in Washington D.C. | www.FCPAconference.com

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