United States: what lies ahead?

This was truly a Department-wide effort, involving hundreds of employees collaborating from many different Department components. To mark this significant undertaking, and to emphasize that the Manual applies beyond the United States Attorneys’ Offices, we have renamed it the Justice Manual. Though the name has changed, the Manual will continue as a valuable means of improving efficiency, promoting consistency, and ensuring that applicable Department policies remain readily available to all employees as they carry out the Department’s vital mission.

DOJ updates the Manual

Previous versions of the Manual were in need of a rewrite. By 2017, many provisions no longer reflected current law or DOJ practice. In DOJ’s view, this diminished the Manual’s effectiveness as an internal resource. And it reduced its value as a source of transparency and accountability for the public. To update the Manual, DOJ attorneys undertook a year-long, top-to-bottom review. DOJ’s goals were to identify redundancies, clarify ambiguities, eliminate surplus language, and update the manual to reflect current law and practice.

Changes include expanding the Principles of Federal Prosecution to incorporate current charging and sentencing policies, and adding new policies on religious liberty litigation, third-party settlement payments, and disclosure of foreign influence operations. Other policy changes, more directly relevant to FCPA enforcement, are explored below. Although we discuss these policies in the FCPA context, they apply more broadly to DOJ’s enforcement decisions under other statutes.

The enforcement policy also outlines steps needed for cooperation. First, companies must disclose on a timely basis all facts relevant to the wrongdoing at issue. This disclosure must include all relevant facts gathered during a company’s independent investigation. It must attribute facts to specific sources where such attribution does not violate the attorney–client privilege, rather than a general narrative of the facts. It must include timely updates on a company’s internal investigation, including but not limited to rolling disclosures of information. It must include all facts related to involvement in the criminal activity by the company’s officers, employees, or agents. And it must include all facts known or that become known to the company regarding potential criminal conduct by all third-party companies (including their officers, employees, or agents).

Proactive cooperation

Second, cooperation must be proactive, rather than reactive. This means the company timely discloses facts that are relevant to the investigation, even when not specifically asked to do so. Where the company is or should be aware of opportunities for DOJ to obtain relevant evidence not in the company’s possession and not otherwise known to DOJ, it must identify those opportunities to DOJ.

Third, cooperation means that the company must ensure the timely preservation, collection, and disclosure of relevant documents and information relating to their origin. These steps must include disclosure of overseas documents, where such documents were found, and who found them; facilitation of third-party production of documents; and, where requested and appropriate, provision of translations of relevant documents in foreign languages. If a company contends that there are legal impediments to transferring data, such as blocking statutes or data protection laws, the company must provide the legal basis and seek alternative means by which to disclose the information.

Extra cooperation

Fourth, DOJ may request additional cooperation at its discretion. Where requested, the company must deconflict witness interviews and other investigative steps that a company intends to take as part of its internal investigation with steps that DOJ intends to take as part of its investigation. This means that the company may need to hold off on certain steps to allow DOJ to conduct its own investigative steps. In addition, the company may need to make company officers and employees who possess relevant information available for DOJ interviews. Where appropriate and possible, these interviews may include officers, employees, and agents located overseas as well as former officers and employees (subject to the individuals’ Fifth Amendment rights), and, where possible, the facilitation of third-party witness interviews.

Corporate compliance programs

The enforcement policy also restates the factors DOJ uses to evaluate the effectiveness of corporate compliance programs. These factors include the company’s culture of compliance, the resources the company has dedicated to compliance, the quality and experience of the compliance personnel, the authority and independence of the compliance function and its reporting relationship with management and the board of directors, the effectiveness of the company’s risk assessment program, the compensation and promotion of compliance personnel, and the auditing of the compliance function to ensure its effectiveness. The enforcement policy also points to appropriate discipline of employees, appropriate retention of business records, and any additional steps that demonstrate the seriousness with which the company takes the misconduct at issue.

Declination letters in 2018

DOJ issued four declination letters under the FCPA Corporate Enforcement Policy in 2018 in In re: Dun & Bradstreet Corporation (23 April 2018) (represented by Hogan Lovells and the author), In re Guralp Systems Limited (20 August 2018), In re Insurance Corporation of Barbados Limited (23 August 2018), and In re Polycom, Inc. (20 December 2018). The detail in each declination letter is limited. But each letter makes clear that DOJ believed that there was sufficient evidence of a violation of the anti-bribery and/or the books and records violations of the FCPA. DOJ based the declinations on a number of common factors: the fact that the company identified the misconduct; the company’s prompt voluntary self-disclosure; the thorough investigation undertaken by the company; the company’s full cooperation, including identifying all individuals involved in or responsible for the misconduct, providing DOJ all facts relating to that misconduct, making current and former employees available for interviews, and translating foreign language documents to English; enhancement of the company’s compliance program and its internal accounting controls; the company’s full remediation, including disciplining individuals involved in the misconduct; and disgorgement of profits to DOJ or the SEC. DOJ also issued at least 14 other declinations that were reported in companies’ public filings, including to Hogan Lovells’ clients Teradata Corporation and Centrais Elétricas Brasileiras S.A.

Discretion to grant cooperation credit 

Of course, DOJ retains enforcement discretion under the policy. A company still may face criminal prosecution if aggravating circumstances are present. These “aggravating circumstances that may warrant a criminal resolution include, but are not limited to, involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism.” Moreover, the decision to grant cooperation credit is not binary. Even if a company does not meet all the requirements of the policy, it still may get 25% off the low end of the Guidelines for cooperation. So, DOJ entered into a number of non-prosecution agreements, including In re Credit Suisse, In re Legg Mason, and In re Petróleo Brasileiro S.A., and deferred prosecution agreements and plea agreements, including United States v. Panasonics Avionics Corporation, United States v. Société Générale, and United States v. Transport Logistics, where it found cooperation to be good but less than perfect, and therefore worthy of a reduction in the criminal fine of 25% or less — even if aggravating circumstances were present.

The new policy has four key features. First, federal criminal enforcement authority should not be used against a company for purposes unrelated to the investigation and prosecution of a possible crime. “We should not employ the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case,” Rosenstein said in announcing it. Second, DOJ lawyers and groups in different departments or offices are “to coordinate with one another, and achieve an overall equitable result.” That might mean crediting and apportioning financial penalties, fines, and forfeitures to avoid disproportionate punishment. Third, when possible, prosecutors should coordinate with other federal, state, local, and foreign enforcement authorities that are working to resolve a case with a company for the same misconduct. Fourth, prosecutors can evaluate the following factors to determine if or when multiple penalties “serve the interests of justice in a particular case”: the egregiousness of the wrongdoing; any statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with DOJ.

Anti-piling on policy in practice

In the FCPA context, the anti-piling on policy saw some application in In Re Petróleo Brasileiro S.A., the resolution of the long-running Petrobras bribery scandal that sent shock waves across Brazil and most of Latin America. Although some observers noted that Petrobras deftly raised its sovereign immunity as an obstacle to DOJ’s jurisdiction, DOJ and the SEC each took only 10% of the overall US$853 million settlement. The rest went to the government of Brazil to establish an anti-corruption fund. Brazil’s 80% share of the settlement recognized the country’s extensive cooperation with the U.S. and its relentless pursuit of individuals in its own country. DOJ also pointed to Petrobras’s US$2.95 billion shareholder class action settlement as a vindication of the American Deposit Receipt holders’ interests.

Similarly, Société Générale S.A. and its wholly owned subsidiary, SGA Société Générale Acceptance N.V., entered into settlements with DOJ consistent with the anti-piling on policy. The French companies resolved multiple issues when they agreed to pay a combined total penalty of more than US$860 million to resolve charges with criminal authorities in the U.S. and France. This included US$585 million relating to a multi-year scheme to pay bribes to officials in Libya and US$275 million for violations arising from its manipulation of the London inter-bank offered rate (LIBOR). SGA Société Générale Acceptance N.V. pleaded guilty in the Eastern District of New York in connection with the resolution of the foreign bribery case. Société Générale reached a settlement with the Parquet National Financier (PNF) in Paris relating to the Libya corruption scheme. DOJ credited US$292,776,444 that Société Générale paid to the PNF under its agreement, equal to 50% of the total criminal penalty otherwise payable to the U.S.. As noted in DOJ’s press release, the case is the first coordinated resolution with French authorities in a foreign bribery case.

Although acknowledging that corporate monitors can be appropriate in the right cases, DOJ must evaluate the potential benefits of a monitor. These factors include whether the misconduct at issue involved the exploitation of weak internal financial controls or an inadequate compliance system, how pervasive and high up the misconduct reached, what improvements the company has made in its compliance and internal control systems, and whether the company has tested the enhancements to demonstrate that they would prevent or detect similar misconduct in the future. DOJ can also consider changes in leadership as a positive enhancement of compliance and internal control systems.

The new policy establishes a standing committee of supervisory officials within the Criminal Division to consider monitor candidates, as well as the mechanisms by which to nominate them and establish their qualifications and experience. Monitor candidates must certify in writing that they have notified any clients’ other matters with the relevant DOJ Section and has either obtained a waiver from those clients or withdrawn from representing them. Records of the selection process are to be retained in the case file by the attorneys handling the process.

First, he pointed to deterrence theory, a favorite theme of his when discussing enforcement policy. As Rosenstein puts it, “Individual prosecutions are the best way to deter crime, and companies wishing to receive cooperation credit must provide the goods.” Because the most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes. As a result, DOJ revised its policy to make clear that absent extraordinary circumstances, a corporate resolution should not protect individuals from criminal liability. In addition, the revised policy also makes clear that any company seeking cooperation credit in criminal cases must identify every individual who was “substantially” involved in or responsible for the criminal conduct.

Although the term “substantially” is not defined by DOJ, the use of that term is an effort to provide some relief and rationality to corporate internal investigations. Companies that wish to receive credit for their internal investigations should focus on who authorized the criminal conduct and what they knew, not every conceivable person who was involved. In response to concerns raised about the inefficiency of requiring companies to identify every employee involved regardless of relative culpability, DOJ has now made clear that investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted. Instead, DOJ wants companies to focus on the individuals who play “significant roles” in setting a company on a course of criminal conduct by authorizing the misconduct, and what they knew about it.

The process of resolving investigations 

DOJ has also injected some much-needed realism into the process of resolving corporate criminal investigations. When the government alleges violations that involved activities throughout the company over a long period, DOJ recognizes that it is not practical to require the company to identify every employee who played any role in the conduct. And those issues may be more challenging when the company and DOJ want to resolve the matter even though they disagree about the scope of the misconduct. In all situations, companies can and should discuss the reasonable limits of internal investigations with DOJ if they want cooperation credit.

DOJ, again, retains discretion to decide whether cooperation is done in good faith. Companies that want to cooperate in exchange for credit are encouraged to have full and frank discussions with prosecutors about how to gather the relevant facts. If DOJ finds that a company is not operating in good faith to identify individuals who were substantially involved in or responsible for wrongdoing, DOJ warns that it will not award any cooperation credit.