More on ‘Extraordinary’ Cooperation

Still wondering what the Justice Department means when it says it wants “immediate” self-disclosure of corporate misconduct and “extraordinary” cooperation and remediation for severe FCPA cases? Good news: we now have a bit more understanding of those terms, straight from the Justice Department official who coined them.

Assistant attorney general Kenneth Polite, who has been talking up self-disclosure and cooperation for months, gave a speech in Washington on Thursday articulating how those two concepts are likely to work in government investigations. While Polite stressed that every misconduct case will always depend on the facts at hand, his remarks still do give compliance officers something to chew on.

First let’s review the history. Since 2017 the Justice Department has pushed its Corporate Enforcement Policy. If a company self-discloses its misconduct, and cooperates in any ensuing investigation, and remediates whatever control weaknesses allowed the misconduct; then the Justice Department will “presumptively decline” to prosecute the case. (Although you can still expect disgorgement of ill-gotten profits.)  

The catch: that declination to prosecute would only apply if your misconduct had no aggravating circumstances. So in January, Polite announced updated policies that would offer a path to declination for companies in that predicament, too — if those companies offered “immediate” self-disclosure and “extraordinary” cooperation and remediation.

Which brings us to Polite’s speech this week, unpacking what those terms mean. 

“We recognize that under the revised [policy], one may ask what exactly constitutes “immediate,” or what precisely is “extraordinary,” Polite said. “Of course, we can never articulate, in advance, what exactly will or will not satisfy these provisions. Every case is different, and our prosecutors need flexibility and discretion to apply their judgment in the myriad scenarios that may be presented… But we understand that companies may wish for more to guide their decision-making now.”

An Example of Extraordinary

Rather than give that clear rule that we all want, Polite instead pointed to the recent FCPA enforcement action against ABB as an example of what constitutes “extraordinary.” Not the ideal answer, but still helpful. 

ABB, a Swiss-based industrial giant, settled its third FCPA case in December with $460 million in penalties and a three-year deferred prosecution agreement. Yes, Polite acknowledged, a DPA isn’t the same as a declination, but ABB still engaged in the extraordinary cooperation that prosecutors want to see. He listed several specific actions the company undertook: 

• Voluntarily made foreign-based employees available for interviews in the United States; 
• Produced relevant documents located outside the United States in ways that didn’t implicate foreign data privacy laws; 
• Collected, analyzed, and organized voluminous evidence (including by translating certain documents) so that prosecutors would have an easier time understanding it all. 

If we had to identify a theme among those three criteria, it would be that ABB put genuine effort into cooperating with the Justice Department. Flying overseas employees to the United States isn’t cheap. Nor is paying lawyers to collect and organize reams of electronic evidence, and to figure out ways around European privacy laws to boot. Such expense requires a commitment from senior management to support the goals of good compliance, even when that might result in a costly settlement. That’s exactly the sort of commitment that prosecutors want to see. 

Polite was less specific about extraordinary remediation, but his remarks still hewed closely to that concept of companies putting in the effort and, frankly, spending the money:

The most effective remediation… includes conducting root cause analyses and taking action to prevent the misconduct from occurring, even in the face of substantial cost or pressure from the business. This can require significant structural changes to a company to ensure compliance and legal personnel have adequate access to corporate decision-makers and receive necessary information from the business. 

Note that last sentence about “significant structural changes” and access to corporate decision-makers. It aligns with two of the Justice Department’s primary questions in its guidance about effective corporate compliance programs: (1) Is there a commitment from senior and middle management to compliance; and (2) does the compliance function have sufficient autonomy and resources? 

If your answer is “yes” to both, you’re probably in much better shape to achieve that extraordinary cooperation and remediation Justice Department officials keep talking about.

Absent Aggravating Circumstances

Polite also stressed that immediate self-disclosure and extraordinary cooperation only apply in cases with aggravating circumstances. In cases where such circumstances aren’t present, he said, they don’t.

To elaborate this point, Polite cited the department’s recent FCPA settlement with Corsa Coal. There were no aggravating factors, Polite said. The company fully cooperated with the department’s investigation, which eventually led to two employees getting indicted. Corsa also “fully remediated the misconduct” by firing a sales rep implicated in the bribery scheme and overhauling the company’s compliance program and internal controls. 

Therefore, Politie said, “In this example, the company received a declination without any need to demonstrate immediate or extraordinary action.”

I have to admit, I’m still confused by all the adjectives used in these settlements. Corsa, for example, won praise for its “full and proactive” cooperation. Is that different from the “full” cooperation cited in the Corporate Enforcement Policy? Is it the same as the extraordinary cooperation necessary for cases with aggravating circumstances, but travels under the “proactive” name because no aggravating circumstances were present here? Would full and proactive cooperation qualify as extraordinary if aggravating circumstances had been present? 

Beats me. So I look forward to the next speech.