Suggestions for a new leniency policy for investigations into FCPA breaches
It’s often said that what business hates most is uncertainty. Unfortunately, the current economic environment is very long on uncertainty. Throw in some sweeping regulatory reform, and companies are right to be worried. But perhaps the biggest concern at many firms right now is the increasingly aggressive stance the Department of Justice (DoJ) and SEC are taking on violations of the Foreign Corrupt Practices Act (FCPA).
According to a report from Gibson Dunn & Crutcher, 2010 is on track to be a record year in terms of enforcement action. The six months to June 30 saw 36 actions, compared with 40 for all of 2009. A report from McKenna Long and Aldridge cites assistant
attorney general Lanny Breuer as saying the DoJ has another 140 active FCPA investigations.
Robert Tarun and Peter Tomczak, partners at Baker & McKenzie, have written a paper urging the DoJ to bring more certainty to the FCPA field and clearly lay out the considerations that will be given to firms that self-report or cooperate with investigations. The paper argues that ‘the benefits to companies that conduct costly, lengthy, global internal investigations and self-report misconduct are uncertain and inadequate.’ The suggested leniency policy would also ‘provide predictability and substantial rewards, acknowledging the real and immense benefits self-reporting provides to the DOJ [and the SEC].’
The policy does not just seek discounts for firms that promptly and responsibly disclose and address fraud, but also suggests penalties of 10 percent greater than the maximum fine under the Sentencing Guidelines for companies that fail to conduct an internal investigation or take action when violations are uncovered.
Benefits of cooperation:
- Cooperation Credit A: A corporation that self-reports bribery and cooperates before any investigation has begun is eligible for non-prosecution and a 40 percent discount off the minimum fine in the range set by the US Sentencing Guidelines.
- Cooperation Credit B: A corporation that self-reports bribery and cooperates after an investigation has begun remains eligible for non-prosecution and a 20 percent discount off the minimum fine.
- Rigorous FCPA Compliance Program Discount: A corporation that has in place at the time of the improper payment activity a rigorous FCPA compliance program shall be eligible for an additional 20 percent discount off the minimum fine.
- Third Party Assistance and Prosecution Discount: A corporation that provides information leading to the investigation and prosecution of another company or its officers or employees is eligible for an additional 20 percent discount off the minimum fine. Under the proposed leniency policy, most directors, officers and employees of leniency applicants are eligible for amnesty.
