Among those who follow Foreign Corrupt Practices Act (FCPA) enforcement practices, there’s been a spate of commentary on a few recent cases in which the Department of Justice (DOJ) has resolved FCPA cases with a formal decision not to prosecute (a “declination”) that includes, as one of the reasons for (and conditions of) the declination, the target company’s agreement to disgorge to the U.S. Treasury the profits associated with the (allegedly) unlawful conduct. Disgorgement is a civil remedy rather than a criminal penalty (as the U.S. Supreme Court recently emphasized); it is often employed by the Securities and Exchange Commission (SEC), which has civil FCPA enforcement authority over issuers on U.S. exchanges. Until recently, however, the DOJ – which has civil FCPA enforcement authority with respect to non-issuers, and criminal enforcement authority in all FCPA matters – had not sought disgorgement very often, and the recent “declination-with-disgorgement” resolutions appear to be something new, at least in the FCPA context.
Not everyone is happy with this development. Last week, for example, Professor Karen Woody posted an interesting commentary over at the FCPA Blog (based on a longer academic paper) on why the emergence of declinations-with-disgorgement in FCPA cases is an “alarming” development that makes her “queasy.” Professor Woody is an astute and knowledgeable FCPA commentator, and I’m hesitant to disagree with her—especially since I’m not really an FCPA specialist in the way that she is—but I’m having trouble working up a comparable level of alarm. Indeed, my knee-jerk reaction is to view the declination-with-disgorgement as a useful mechanism, one that would often be the most appropriate one to employ to resolve FCPA violations by a company that is not subject to SEC jurisdiction, and eliminating this mechanism might force the DOJ to employ a worse alternative.
Let me start by laying out the affirmative case for declinations-with-disgorgement, and then I’ll turn to Professor Woody’s concerns. Continue reading