Coordination of Corporate Resolution Penalties Is Unlikely to Address the “Piling On” Problem in FCPA Prosecutions

Multinational companies that pay bribes may find themselves subject to prosecution by multiple jurisdictions. Some countries, including many in Europe, apply a double jeopardy bar (known there as ne bis in idem) that prevents one country from prosecuting an entity that has already been prosecuted elsewhere. Other countries, however—including the United States—have no such bar. US prosecutors may pursue those suspected of violating the Foreign Corrupt Practices Act (FCPA) even if the targets already have been, or are being, prosecuted in another country for the same bribe payments. Is this a problem? Some say no: the possibility of multiple prosecutions by different sovereigns might create a healthy “race to the top” and stronger deterrence. On the other hand, however, we might worry that multiple prosecutions risk over-punishing, thereby over-deterring risky but socially valuable conduct (like expanding into high-risk foreign markets). Companies also will not be sure when a matter is finally settled. In addition, there seems something arrogant about the US giving itself the power to evaluate whether a criminal prosecution in another country was adequate.

The US Department of Justice (DOJ), long a defender of its right to judge for itself whether to bring a parallel or follow-on prosecution in FCPA cases, recently signaled greater sympathy with those who take the latter side in this debate. Earlier this year, the DOJ unveiled a new policy meant to eliminate “unfair duplicative penalties” on corporate wrongdoers, including those participating in foreign bribery, and set out a number of factors that the DOJ can use to evaluate whether imposing multiple penalties serves “the interests of justice.” Describing the impetus for the policy update, Deputy Attorney General Rod Rosenstein echoed common complaints from the corporate community about how the “piling on” of multiple penalties for the same misconduct, from different regulatory and enforcement agencies, deprives the company and its stakeholders of the “the benefits of certainty and finality ordinarily available through a full and final settlement.”

It’s not clear, though, whether—at least with respect to FCPA cases—the new policy differs much from the approach that the DOJ’s FCPA Unit has been taking to joint and parallel investigations for many years. While formalizing the approach may seem to provide some relief to corporations, the new policy actually does little to address the “piling on” problem in the foreign bribery context: Continue reading

Guest Post: There’s Nothing (Legally) New About “Declinations” Under the DOJ’s Corporate Enforcement Policy

Today’s guest post is from Professor Karen Woody, at Indiana University’s Kelley School of Business:

Last year, the US Department of Justice (DOJ) announced a new “Corporate Enforcement Policy” (CEP) that would apply to Foreign Corrupt Practices Act (FCPA) cases, among others. A key feature of the CEP was the offer of leniency—in the form of a “declination”—so long as the company met certain conditions, including voluntary disclosure of the violation, full cooperation, and disgorgement of any ill-gotten gains from the unlawful conduct. While the basic contours of the DOJ’s new policy are reasonably clear, the use of the term “declination” has created some confusion and uncertainty. Is a “declination” merely a decision not to prosecute? Is it something more? Does it depend?

This confusion is illustrated by Maddie McMahon’s post last month, in which she argued that declinations granted pursuant to the CEP are indeed a “new” kind of enforcement action, distinct from a simple decision not to prosecute. And the DOJ has to some extent fostered that understanding: As Maggie points out, the CEP itself states (somewhat enigmatically), “if a case would have been declined in the absence of such circumstances [of compliance with the CEP], it is not a declination pursuant to the Policy,” which seems to imply that there still may be DOJ declinations, in addition to distinct declinations “pursuant to the CEP.” But in fact the CEP does not create a new mechanism for resolving FCPA cases (or other corporate enforcement actions). What it does do (confusingly and unhelpfully) is use the same term—“declination”—to describe two distinct, but familiar well-established, types of resolution.

To see this, it is critical to distinguish two types of cases for which the DOJ might issue a “declination” pursuant to the CEP: (1) unilateral declinations, where any required disgorgement is made in a separate settlement with the Securities and Exchange Commission (SEC); and (2) “declinations with disgorgement,” in which the SEC lacks jurisdiction and the disgorgement required to qualify for a “declination” under the CEP is made as part of an agreement between the company and the DOJ. Continue reading

Defining Declinations: A New Enforcement Action

In recent years, the US Department of Justice (DOJ) has, with increasing frequency, been resolving alleged violations of the Foreign Corrupt Practices Act (FCPA) with formal declinations (that is, a statement that the DOJ will not prosecute the corporation). Indeed, the possibility of resolution through declination is a centerpiece of the DOJ’s new Corporate Enforcement Policy (CEP). Under the new policy, the DOJ will presumptively grant a declination to a corporation implicated in potential FCPA violations, so long as the corporation voluntarily reports the possible FCPA violations to the government, agrees to implement internal remediation measures, and disgorges any ill-gotten gains. (When that last condition applies, the resolution is a “declination with disgorgement.”)

But what exactly is a “declination”? One would think that the answer would be straightforward, but it turns out to not to be so easy. Typically, declinations have been thought of in the negative, meaning what they are not: prosecutions. Generally, U.S. prosecutors have the discretion to decide whether to bring an enforcement action against a party that may have violated the law. If the DOJ decides that it is not in the interest of justice or otherwise worthwhile to pursue a given case, then the DOJ has “declined” to prosecute. However, in the FCPA context (and possibly other contexts as well), a formal “declination” should be thought of as something more than simply a decision not to prosecute. And that distinction turns out to have practical consequences for the types of penalties a formal “declination” can legally support.

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