Self-Reporting FCPA Violations

In April 2016, the Fraud Section of the U.S. Department of Justice’s Criminal Division introduced a Foreign Corrupt Practice Act (FCPA) pilot program, which was intended to be a one-year experiment to incentivize self-disclosure of potential FCPA violations. It has recently been extended. A look back at how the program was implemented provides valuable lessons for companies confronted with possible violations and the opportunity to develop best practices for responding.

The DOJ wanted the pilot program to work and — during the first year, in particular — was highly motivated to reward self-disclosures by declining prosecution. Between April 2016 and July 2017, nine companies reached resolutions for self-disclosed conduct; seven of these received declinations. This represents a significant increase from the previous year when the DOJ issued only two declinations. The two companies that self-disclosed under the pilot program but did not receive declinations received significant discounts of 30 percent and 50 percent off the low end of the sentencing guidelines’ fine range.

Self-disclosure must be seriously considered. The benefits are real, but making such a disclosure is a frightening proposition. It means inviting a government investigation; and to make it even more complicated, these critical decisions must be made at the outset of the investigation. Even where there has been self-disclosure, full cooperation and remediation, every defense should be explored and raised, as there is still an opportunity to fight. When it comes to FCPA enforcement, there are many gray areas, leaving plenty of room to debate.