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On April 23, Dun & Bradstreet, a commercial data and analytics firm, secured a declination letter from the DOJ regarding FCPA violations stating that, “consistent with the FCPA Corporate Enforcement Policy,” the DOJ would be declining to bring criminal charges against the company. Dun & Bradstreet simultaneously agreed to settle with the SEC regarding books and records and internal controls violations regarding the same conduct, and pay a total of $9 million, including a $2 million civil penalty and $6 million of disgorgement. Dun & Bradstreet had self-disclosed payments made by two Chinese subsidiaries through third party agents. One of the subsidiaries, part of a joint venture with a Chinese company, made payments to Chinese government officials to acquire non-public financial statement information on Chinese entities. The other subsidiary made improper payments both to obtain specific business and to acquire non-public personal data. The SEC noted that there were pre-acquisition concerns regarding the subsidiaries, but Dun & Bradstreet failed to take appropriate action to stop the payments or the false entries, which continued for several years after the acquisition.
This is the first instance we are aware of a company receiving a full declination from the DOJ under the new policy. The policy, which grew out of the FCPA Pilot Program, states that when a company voluntarily self-discloses, fully cooperates, and timely and appropriately remediates, there will be a presumption that the DOJ will issue a declination. The Dun & Bradstreet declination letter notes the company’s self-identification and disclosure, thorough investigation, and full cooperation, including identifying all individuals involved in the misconduct. The DOJ also cited the company’s “full remediation,” in part by terminating 11 employees, including senior employees, and reducing compensation and other forms of discipline.
On November 29, Deputy Attorney General Rod Rosenstein issued remarks announcing that the DOJ’s FCPA Pilot Program will be made permanent and expanded to provide greater incentives for more companies to voluntarily disclose potential FCPA violations. The new program will be formally incorporated into the US Attorney’s Manual. These changes will include greater potential benefits offered to companies that promptly disclose suspected FCPA violations.
Rosenstein identified three components of what will be called the “FCPA Corporate Enforcement Policy.” First, companies who voluntarily disclose, fully cooperate with the DOJ’s investigation, and undertake “timely and appropriate remediation” will be entitled to a presumption that the matter will be resolved through a declination, which “may be overcome only if there are aggravating circumstances related to the nature and seriousness of the offense, or if the offender is a criminal recidivist.” Second, if the company satisfies all other requirements but there are “aggravating circumstances,” the DOJ “will recommend a 50% reduction off the low end of the Sentencing Guidelines fine range,” although “criminal recidivists may not be eligible for such credit.” And third, the policy will provide details on how the DOJ “evaluates an appropriate compliance program, which will vary depending on the size and resources of a business.”
The Pilot Program began in April 2016. It was greeted with some skepticism that the benefits of disclosure would outweigh the potential benefits, as Rosenstein noted in his remarks. Click here to view previous FCPA Scorecard coverage of the Pilot Program.
Deputy Attorney General Rod Rosenstein Issues Remarks on Individual Accountability for Corporate Wrongdoing
Deputy Attorney General Rod Rosenstein recently issued remarks highlighting the importance of the DOJ’s consistency in enforcing policies “hold[ing] individuals accountable for corporate wrongdoing.” In particular, Deputy AG Rosenstein stated that the agency should focus on improving the recent track record of bringing criminal proceedings against company employees and commented that “consistency promotes fairness and enhances respect for the rule of law.” His remarks also touched on the Yates Memo and the FCPA Pilot Program, noting the appropriateness of focusing on individual officer or director liability.
The comments are yet another in the steady drumbeat of calls, both internal and external to the DOJ, for DOJ enforcement strategy to hold individual corporate employees accountable for FCPA violations, although how much that strategy is being implemented remains to be seen. A recent review of DOJ corporate FCPA enforcement actions notes that the last 20 such actions have lacked related criminal charges against company employees, and going back to 2008, approximately 80% of DOJ corporate FCPA enforcement actions have lacked related criminal charges against company employees. As Deputy AG Rosenstein’s comments concluded: “When we are serious about wanting people to follow rules, it does no good merely to post them. We need to make clear our intent to enforce the rules, with sufficient vigor that people fear the consequences of violating them.”
On June 21, the DOJ issued a declination letter to attorneys for CDM Smith, Inc., in which the DOJ declined prosecution and closed an investigation of CDM regarding potential FCPA violations that occurred in India between 2011 and 2015. CDM, a Boston-based privately held engineering and construction firm, agreed to pay DOJ approximately $4 million in disgorgement. The DOJ announced the declination on June 29 with a link posted on its website, making it the second FCPA declination that the DOJ announced in June 2017. Prior to June, the DOJ had last issued an FCPA declination letter in September 2016.
According to the DOJ Letter, CDM paid approximately $1.18 million in bribes to India government officials in exchange for contracts that resulted in approximately $4 million in net profits (the disgorgement amount). The payments were made by CDM’s division responsible for India operations and by CDM’s wholly-owned subsidiary in India through fraudulent subcontractors and generally equaled two to four percent of the contract price.
The DOJ’s letter stated that its decision to close its investigation is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that CDM had, among other things, made a “timely and voluntary self-disclosure” of potential FCPA violations, conducted and “thorough and comprehensive investigation,” fully cooperated with the DOJ, and performed full remediation, including the termination of all of the executives and employees involved in the conduct at issue. However, the letter provides little detail about these factors.
The DOJ letter makes clear that it does not foreclose future prosecution of any individuals connected to this matter, whether affiliated with CDM or otherwise.
Speaking at the American Bar Association’s National Institute on White Collar Crime yesterday, U.S. Department of Justice official Kenneth Blanco reportedly announced that the Justice Department’s FCPA pilot program encouraging corporate cooperation will not end on April 5 of this year as originally announced. Instead, until the Justice Department is able to render a final decision based on a complete evaluation, the program will remain in force. Notably, as previously reported, the new Deputy Assistant Attorney General with oversight over the Fraud Section, Trevor N. McFadden, co-authored an article during his time in the private sector praising the program as “a step forward in providing companies and their counsel with more transparent and predictable benefits for self-reporting, cooperating, and remediating FCPA misconduct.”
SEC Reaches Non-Prosecution Agreements for Bribes of Chinese Officials; DOJ Declines to Pursue FCPA Enforcement Actions
On June 7, the SEC announced it had entered into non-prosecution agreements with two unrelated companies in connection with bribes paid to Chinese officials by foreign subsidiaries. First, Akamai Technologies, a Massachusetts-based internet services provider, agreed to pay $652,000 in disgorgement and $19,433 in interest. According to its agreement, Akamai's foreign subsidiary had paid bribes to induce Chinese government-owned entities to purchase more services than they needed. Second, Nortek Inc., a Rhode Island-based residential and commercial building products manufacturer, agreed to pay $291,000 in disgorgement and $30,000 in interest. According to that agreement, Nortek's subsidiary made improper payments and gifts to Chinese officials in exchange for preferential treatment, relaxed regulatory oversight, and reduced customs duties, taxes, and fees. The agreements each stipulate that the companies are not charged with violations of the FCPA and will not pay any additional monetary penalties. In support of the agreements, the SEC noted that both companies promptly self-reported the conduct and cooperated extensively with the ensuing investigations. Kara Brockmeyer, Chief of the SEC Enforcement Division's FCPA Unit, praised the companies for "promptly tighten[ing] their internal controls after discovering the bribes and [taking] swift remedial measures to eliminate the problems." Also on June 7, Akamai and Nortek each released letters from the DOJ declining to pursue enforcement actions against the companies. The letters are the first public declinations issued by the DOJ under its FCPA Pilot Program announced in April 2016. The one-year Pilot Program is designed to encourage companies to voluntarily self-report potential FCPA-related misconduct and cooperate with federal investigations. DOJ declined to pursue enforcement actions based on several factors, including that the companies identified the misconduct themselves, promptly self-disclosed the misconduct, thoroughly investigated the misconduct, enhanced their compliance programs and internal accounting controls, terminated the employees responsible for the misconduct, disgorged any ill-gotten gains, fully cooperated with the federal investigations, and agreed to cooperate with any future investigations.
On May 10, Deputy U.S. Attorney General Sally Yates spoke at the New York City Bar Association's White Collar Crime Conference and expanded on the DOJ's Individual Accountability Policy, which informally bears Yates' name (the Yates Memo). The DOJ issued the Yates Memo in September 2015, and Yates' remarks were focused on why DOJ issued the policy and how it has been working in practice. Yates made clear that "holding individuals accountable for corporate wrongdoing has always been a priority for" DOJ, but that the policy memorandum was necessary to overcome "real world challenges" that DOJ encounters (e.g., convoluted corporate structures and lines of authority, data privacy laws, and inability to compel foreign witness testimony) so that it can hold individuals responsible for corporate wrongdoing. In practice, Yates said that the policy has not caused the parade of horrors that defense attorneys and client alerts have predicted. For example, she stated that she was not aware of any company refusing to cooperate with DOJ as a result of the policy. She further added that "no one has told us that they will be forced to waive privilege in order to comply with the policy." Instead, she said that the policy already has caused a shift toward higher compliance standards within companies. Yates also highlighted how DOJ attorneys are focused on individuals from the outset of an investigation: "The first thing the lawyers briefing me discuss is what we are doing to identify the individuals involved and what the company is doing during the course of its cooperation to meet its obligation to provide all the facts about individual conduct." In addition civil enforcement efforts have broadened to focusing on individuals. According to Yates, "[a]bility to pay is one of the factors considered, but it's no longer the determinative factor in deciding whether to bring an action in the first instance."
- Valerie L. Hletko to discuss "Forecasting litigation and settlement trends in the mortgage servicing and fair lending context" at the American Conference Institute National Forum on Residential Mortgage Regulatory Enforcement & Litigation
- Michelle L. Rogers and Jonice Gray Tucker to discuss “Building a govt affairs program; Government investigations” at the TechGC National Summit
- Tina Tchen to deliver keynote address at the American Bar Foundation Montgomery Summer Research Diversity Fellowship 30th Anniversary Celebration
- Douglas F. Gansler to discuss "Privacy, security and protection of your assets in contracts; Security exercises and tactical measures" at the TechGC National Summit
- H Joshua Kotin will discuss federal regulatory developments in mortgage lending and servicing at the Mortgage Bankers Association of Arkansas Fall Conference
- Kate Shrout to discuss "Conducting workplace investigations" at the TechGC National Summit
- Kathryn R. Goodman to discuss "HECM servicing policies and updates" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Fredrick S. Levin to discuss "Reverse mortgage litigation trends" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Melissa Klimkiewicz to speak at the "Digital marketing compliance roundtable" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Hank Asbill to discuss "The role of the media in white collar criminal investigations and the Mueller probe" at the American Bar Association White Collar Crime Town Hall
- John C. Redding to discuss "Regulatory compliance update" at PowerSports Finance
- Matthew P. Previn to discuss "Enforcement trends: Who is doing what and how?" at the Cambridge Forums Inc. Forum on Consumer Finance Litigation & Enforcement
- Jonice Gray Tucker to discuss "Protect yourself from a CFPB investigation" at the National Association of Settlement Purchasers Conference
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "New CDD Rule: Pitfalls in compliance" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference