Compliance officers got another glimpse into the future of FCPA enforcement this week, with the Justice Department’s top anti-corruption prosecutor giving his most extensive comments yet on the subject.
Those comments, delivered Tuesday by deputy assistant attorney general Trevor McFadden, was reassuring and frustrating at the same time. On one level, McFadden hit all the right notes about the moral imperative to keep fighting corruption. That’s good; in our rush to talk about effective compliance programs and acceptable enforcement theories, the compliance community sometimes forgets why we should want to fight bribery.
On another level, McFadden hit all the right notes for compliance and legal officers yearning for reasonable enforcement of the FCPA. He wants investigations “to be measured in months, not years,” and “When we do not have evidence of the requisite criminal intent, there is no justification for a Criminal Division resolution, and we will defer to our regulatory colleagues to handle the matter.”
Music to a weary compliance officer’s ears, right? But McFadden’s speech is only a speech, and a skillfully couched one at that. We haven’t seen the Justice Department start to put any substance behind his words: no resolution of outstanding FCPA cases, whether they are declinations to prosecute, deferred-prosecution agreements, or even signals to companies under investigation that they can announce the closing of an investigation.
We also haven’t seen other senior Justice Department officials talk about the FCPA, foremost because so few of them are even appointed yet. Attorney General Jeff Sessions did voice the usual support for FCPA enforcement when asked about it during his Senate confirmation hearings, and he’ll be speaking at the Ethics & Compliance Initiative’s conference next week—but mostly Sessions seems fixated on undocumented immigrants and some supposed crime wave that doesn’t actually exist.
So McFadden’s speech, as good as it is, leaves compliance professionals still waiting for specific actions we can see and study. We’re waiting for proof.
FCPA Pilot Program Goes On
McFadden did offer more clues about the FCPA Pilot Program, although they won’t surprise anyone who has been following the story so far.
As we should all know by now, the Pilot Program began one year ago to encourage more cooperation from companies facing FCPA investigations. If your company voluntarily reports a violation, turns over all evidence to implicate offending individuals, and fixes the weaknesses that allowed the bribery in the first place, the company can win steep discounts on monetary penalties.
The Pilot Program’s official term expired earlier this month. So what now? McFadden’s words are worth reading:
The Fraud Section’s Pilot Program is one example of an effort to provide more transparency and consistency for our corporate resolutions… [W]e are examining whether there is more that we can do to promote voluntary compliance with the law and what more we can be doing to provide appropriate transparency regarding our expectations and prosecutorial priorities. In the meantime, the Program will continue in full force.
If the Pilot Program is an effort to provide more transparency, and the Justice Department now wants to see what else it can do to provide more transparency, that means (wait for it) more Pilot Program. Perhaps McFadden & Co. will give the program another name, but the concept of fewer penalties and easier resolution in exchange for self-disclosure, cooperation, and remediation—that’s here to stay.
About Cooperation, However…
The one part of McFadden’s speech that left me most curious were his words about accelerating the pace of investigations. That’s a great idea; shorter investigations are crucial to cutting FCPA compliance costs. But as a practical matter, how can we bring it to fruition—especially if cooperating with prosecutors to pursue individual offenders will still be a priority?
Again, some of McFadden’s words:
We are also making a concerted effort to move corporate investigations expeditiously, and we expect cooperating companies to do so as well. This will maximize our ability to bring cases against responsible individuals, before applicable statutes of limitations have run or evidence is lost.
The implication there is that the Fraud Section will want to get to a decision about criminal liability for a company much more quickly, so it can get to the good stuff of prosecuting individuals. Fair enough. That fits with the view Sessions has voiced in the past, that prosecutors either do or do not prosecute crimes—but no funny business with deferred-prosecution agreements, which Sessions never seemed to like.
OK, so we move to an FCPA enforcement world where prosecutors want companies to provide relevant facts about offending individuals. But if we’re also in a world where these investigations take months rather than years, and where the Justice Department is sending more resources to prosecute terrorists, gangs, and undocumented immigrants rather than white-collar criminals—something has got to give. What is it?
That’s when I noticed what McFadden didn’t mention in the 1,955 words he delivered about FCPA enforcement this week. He didn’t mention the department’s guidance in February about how to evaluate the effectiveness of compliance programs.
I am not saying that that McFadden or anyone else wants to scrap reviews of a company’s FPCA compliance program entirely. In egregious cases of corporate-wide misconduct (looking at you, ZTE Corp.), I’m sure the Trump Administration will still drop the hammer with large penalties.
But if the Fraud Section’s priority is to determine where criminal intent resides (which is what McFadden said), and then pursue the wrongdoing party—well, you could kick over questions about the effectiveness of a compliance program to the Securities & Exchange Commission for civil enforcement. And perhaps in that world, compliance officers will encounter different expectations about supporting documentation, length of investigations, settlement talks, and so forth.
We won’t know for a while yet, until we hear more speeches and see more resolutions. But McFadden gives us plenty of food for thought.