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Recent revisions to the Justice Department’s enforcement policy on the Foreign Corrupt Practices Act could be significant for companies deciding whether to voluntarily disclose wrongdoing under the anti-bribery statute.
Deputy Attorney General Rod Rosenstein announced the revisions at the 34th International Conference on the Foreign Corrupt Practices Act in Oxon Hill, Md., Nov. 29, including the presumption the DOJ will decline to prosecute if a company meets specific conditions for voluntary self-disclosure, full cooperation, and timely and appropriate remediation.
The revisions could wind up being significant for corporations deciding whether to make voluntary disclosures of wrongdoing under the FCPA, several health-care fraud attorneys told Bloomberg Law. Greater clarity is likely welcome for life sciences companies because the government has already been scrutinizing pharmaceutical and medical device companies for FCPA violations and other potential corruption in connection with the sales and marketing of their products abroad, particularly in emerging markets.
The FCPA, which covers companies that list their securities in the U.S., prohibits offering or paying bribes to foreign government officials at any level of government. The DOJ enforces the statute, along with the Securities and Exchange Commission.
In 2016, the DOJ began a pilot program to encourage companies, including health-care companies that sell products abroad, to self-report violations of the FCPA. The revision to the policy, plus the inclusion of the enforcement policy in the U.S. Attorney’s Manual, formalize the program. Since 2012, the life sciences industry has increasingly been the target of FCPA investigations. In 2016, medical equipment company Olympus paid almost $650 million to settle U.S. domestic as well as FCPA-related issues, and generic drug manufacturer Teva paid $519 million to settle FCPA charges.
In addition to the presumption against bringing enforcement action, another potentially significant change under the revised policy is for companies that voluntarily disclose wrongdoing and satisfy all other requirements but where aggravating circumstances nevertheless compel the government to bring an enforcement action. Under the revised policy, the DOJ will now recommend a 50 percent reduction off the low end of sentencing guidelines’ range of fines.
“I do view the changes as potentially significant but the devil will be in the details,” Warren Feldman of Skadden, Arps, Slate, Meagher & Flom LLP in New York told Bloomberg Law Dec. 4. “The fact that there is now a presumption of declination if a company meets the requisite conditions is a positive step towards encouraging voluntary disclosures,” he said.
The greater clarity about how the government will treat voluntary disclosure and cooperation in the revised policy could also mean certain companies have the incentive to come to the government more quickly, Bloomberg Law board member Jacqueline Wolff of Manatt, Phelps & Phillips LLP’s New York office, told Bloomberg Law Dec. 4.
“For public companies that have serious exposure due to the nature and extent of the conduct and that also have the ability and funding to remediate quickly and extensively, the 50% reduction or the presumption of the declination may bring them to the table quicker simply because they have to consider the benefit to their shareholders such reductions may provide,” she said. Wolff is a former DOJ official.
Meanwhile, Robert Weissman, president of Washington-based consumer group Public Citizen, was skeptical the revisions would lead to more early disclosure of corporate misdeeds.
“I think the practice is likely to be that disclosure comes only when companies see they are already in hot water,” he told Bloomberg Law Dec. 4.
But regardless of whether the policy revisions change the calculus of when and whether to disclose wrongdoing, the policy changes are nevertheless extremely significant, Weissman said.
“There has always been leniency for self-reporting, for FCPA and corporate crime in general,” he said. “But a formalized expectation of immunity is something new.”
“In the best case, they signify the start of light-touch FCPA enforcement. In the worst case, which I think is more likely, they provide a green light for companies to engage in overseas bribery.”
Most important, according to Weissman, “is the political signal sent, with consequences that may reach far beyond the FCPA—this is an administration that aims to be very gentle to corporate wrongdoers.”
Regardless of the policy revisions, DOJ prosecutors still retain wide discretion in cases, the fraud attorneys said.
“There is still significant discretionary latitude left to the DOJ which creates uncertainty,” Feldman said. The DOJ makes clear that the policy doesn’t create any enforceable rights, he said.
And because there are so many factors the DOJ will consider, each company will need to go through each of the factors before it makes the decision whether a disclosure is the best course for the company, Wolff said. “If the DOJ’s case is weak and the company’s compliance program is robust, the company may decide it will get a declination regardless of whether it discloses,” she said.
The revisions to the FCPA enforcement policy don’t change much in terms of how to evaluate whether to self-disclose, Bloomberg Law board member Kirk Ogrosky, with Arnold & Porter LLP in Washington, told Bloomberg Law Dec. 1.
“You’re still relying on the good faith of the prosecutors and their superiors,” Ogrosky, a former DOJ official said.
Rosenstein announced the revisions at the conference.
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