Archive for the ‘Enforcement Agency Speeches’ Category

Friday Roundup

Friday, September 25th, 2015

Roundup2More on the Yates Memo, scrutiny alerts, survey says, and FCPA reform.  It’s all here in the Friday roundup.

More on the Yates Memo

Once again a private company has marketed a public official to drive attendance to its paid event.

Earlier this week, Assistant Attorney General Leslie Caldwell delivered this speech reiterating various aspects of the “Yates Memo.” Caldwell stated:

“[O]ur focus on individuals stems from the reality that corporations act through human beings, and that justice usually requires identifying those responsible for criminal conduct and holding them personally accountable.  Prosecuting the corporate entity, and imposing a fine and other impersonal conditions, simply is not enough – in most instances – to fully punish and, more importantly, deter corporate misconduct.”

Regarding the cooperation credit aspects of the “Yates Memo,” Caldwell stated:

“We recognize, however, that a company cannot provide what it does not have.  And we understand that some investigations – despite their thoroughness – will not bear fruit.  Where a company truly is unable to identify the culpable individuals following an appropriately tailored and thorough investigation, but provides the government with the relevant facts and otherwise assists us in obtaining evidence, the company will be eligible for cooperation credit.  We will make efforts to credit, not penalize, diligent investigations.  On the flip side, we will carefully scrutinize and test a company’s claims that it could not identify or uncover evidence regarding the culpable individuals, particularly if we are able to do so ourselves.

As I have said before, it is not our intent to outsource our investigation of corporate wrongdoing to companies and their outside advisors.  As in the past, we will not sit idle, waiting for a company to conduct or complete its investigation.  Regardless of a company’s cooperation, federal agents and prosecutors will conduct thorough investigations.  If, through this process, we are able to identify the culpable individuals when the company itself did not do so, as well as evidence that would support the charging and prosecution of those individuals, we will assess whether that evidence truly was unavailable to the company.

We, of course, recognize that we sometimes can obtain evidence that a company cannot.  We often can obtain from third parties evidence that is not available to the company.  Also, we know that a company may not be able to interview former employees who refuse to cooperate in a company investigation.  Those same employees may provide information to us, whether voluntarily or through compulsory process.  Likewise, there are times when, for strategic reasons, we may ask that the company stand down from pursing a particular line of inquiry.  If so, the company will not be penalized for failing to identify facts subsequently discovered by government investigators.”

Caldwell also answered questions after the speech.  It appears that this Q&A was recorded and the same private company put the Q&A behind its paywall.

It’s just plain wrong that a private company is selling the words of public officials. It ought to stop.

Scrutiny Alerts


As highlighted here, in 2010 as part of the CustomsGate enforcement actions, Transocean resolved a $20.7 million FCPA enforcement action (involving a DOJ and SEC component) concerning alleged conduct in Nigeria.

Bloomberg reports:

“Transocean Ltd., the world’s largest offshore rig contractor, is being linked for the first time to the corruption probe of Petroleo Brasileiro SA, the state-owned energy giant at the center of Brazil’s biggest corporate scandal. A former executive at Brazil’s state-run oil company has testified to receiving what he says were payments made by someone claiming to be a Transocean agent in exchange for a rig-operation contract from Petrobras.”


This CBCNews report goes in-depth regarding new allegations in a civil suit concerning SNC-Lavalin. According to the article:

“Top executives for years endorsed bribes and lavish gifts — including a yacht and even prostitutes — to win contracts from Libya’s Gadhafi regime.”

To cement ties, [the complaint] alleges specific SNC executives signed off on or approved numerous favours to help Gadhafi, including:

  • providing SNC staff and hiring university professor as tutors;
  • helping to obtain a Canadian visa;
  • considering appointing Saadi Gadhafi an SNC vice-president;
  • officially sponsoring his Italian Serie A professional soccer team.

One of the largest expenses included the purchase of a Palmer Johnson yacht worth $38 million for Saadi Gadhafi ”organized and validated by CFO Laramée and approved by the then CEO Lamarre.” Saadi Gadhafi visited Canada in 2008, and SNC Lavalin picked up the bill — more than $2 million.”

Survey Says

KPMG recently conducted a worldwide online survey of corporate risk leaders to find out the strengths and weaknesses of their companies’ programs to combat bribery and corruption.  According to the survey responses:

“There is a sharp increase in the proportion of respondents who say they are highly challenged by the issue of Anti-Bribery Compliance (ABC) compared with a survey KPMG conducted four years earlier.

As companies continue to globalize, management of third parties poses the greatest challenge in executing ABC programs.

Despite the difficulty of monitoring their business dealings with third parties, more than one third of the respondents do not formally identify high-risk third parties. More than half of those respondents with right to-audit clauses over third parties have not exercised the right.

ABC considerations are accorded too low a priority by companies preparing to acquire, or merge with, other corporations across borders.

Respondents complain they lack the resources to manage ABC risk.

A top-down risk assessment would help companies set priorities, but executives admit that an ABC risk assessment is one of their companies’ top challenges.

Data analytics is an increasingly important and cost-effective tool to assess ABC controls. Yet only a quarter of respondents use data analysis to identify violations and, of those that do so, less than half continuously monitor data to spot potential violations.”

FCPA Reform

The U.S. Chamber of Commerce recently released this document outlining its policy priorities. Included in the lengthy document was the following:  ”work to reform the Foreign Corrupt Practices Act by supporting changes to enforcement practices.”


A good weekend to all.


The Yates Memo

Friday, September 11th, 2015

YatesSeptember has traditionally been an active month for Department of Justice policy statements and speeches.

Keeping this tradition alive, earlier this week DOJ Deputy Attorney General Sally Yates delivered this speech and released this memo titled “Individual Accountability for Corporate Wrongdoing” (hereafter the “Yates Memo”).  (See here for the video of the speech).

While many will likely view the Yates Memo as articulating new DOJ policy it really does not.

Rather, the Yates Memo continues the DOJ’s rhetoric as to the importance of individual prosecutions and is substantively similar to this September 2014 speech delivered by then Principal Deputy Attorney General Marshall Miller and this September 2014 speech delivered by then Attorney General Eric Holder.

In any event, the Yates Memo has already attracted substantial press (see herehere and here for instance) and will no doubt be the focus of numerous law firm client alerts in the near future.  The Yates Memo is the latest in a long-line of DOJ policy memos. (See here for the 1999 “Holder Memo,” here for 2003 “Thompson Memo,” here for the 2006 “McNulty Memo” and here for the 2008 “Filip Memo”).

The Yates Memo repeats the following DOJ rhetoric:

“One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”

This is rhetoric because the reality is that few DOJ corporate enforcement actions result in any related charges against company employees.  In the FCPA context, as noted in this prior post, between 2008-2014, 75% of DOJ corporate enforcement actions have not (at least yet) resulted in any DOJ charges against company employees.

The Yates Memo then states as follows.

“There are, however, many substantial challenges unique to pursuing individuals for corporate misdeeds. In large corporations, where responsibility can be diffuse and decisions are made at various levels, it can be difficult to determine if someone possessed the knowledge and criminal intent necessary to establish their guilt beyond a reasonable doubt. This is particularly true when determining the culpability of high-level executives, who may be insulated from the day-to-day activity in which the misconduct occurs. As a result, investigators often must reconstruct what happened based on a painstaking review of corporate documents, which can number in the millions, and which may be difficult to collect due to legal restrictions.

These challenges make it all the more important that the Department fully leverage its resources to identify culpable individuals al all levels in corporate cases. To address these challenges, the Department convened a working group of senior attorneys from Department components and the United States Attorney community with significant experience in this area. The working group examined how the Department approaches corporate investigations, and identified areas in which it can amend its policies and practices in order to most effectively pursue the individuals responsible for corporate wrongs. This memo is a product of the working group’s discussions.

The measures described in this memo arc steps that should be taken in any investigation of corporate misconduct. Some of these measures are new, while others reflect best practices that are already employed by many federal prosecutors. Fundamentally, this memo is designed to ensure that all attorneys across the Department are consistent in our best efforts to hold to account the individuals responsible for illegal corporate conduct.

The guidance in this memo will also apply to civil corporate matters. In addition to recovering assets, civil enforcement actions serve to redress misconduct and deter future wrongdoing. Thus, civil attorneys investigating corporate wrongdoing should maintain a focus on the responsible individuals, recognizing that holding them to account is an important part of protecting the public fisc in the long term.

The guidance in this memo reflects six key steps to strengthen our pursuit of individual corporate wrongdoing, some of which reflect policy shifts and each of which is described in greater detail below: (l) in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct; (2) criminal and civil corporate investigations should focus on individuals from the inception of the investigation; (3) criminal and civil attorneys handling corporate investigations should be in routine communication with one another; ( 4) absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (5) Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and (6) civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.”

The remainder of this post highlights specifics in the Yates Memo as to the above six topics and includes in italics portions of Yates’s speech relevant to the specific topic.

The Yates Memo states:

1. To be eligible for anv cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.

In order for a company to receive any consideration for cooperation under the Principles of Federal Prosecution of Business Organizations, the company must completely disclose to the Department all relevant facts about individual misconduct. Companies cannot pick and choose what facts to disclose. That is, to be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all facts relating to that misconduct. If a company seeking cooperation credit declines to learn of such facts or to provide the Department with complete factual information about individual wrongdoers, its cooperation will not be considered a mitigating factor pursuant to USAM 9-28.700 el seq. Once a company meets the threshold requirement of providing all relevant facts with respect to individuals, it will be eligible for consideration for cooperation credit. The extent of that cooperation credit will depend on all the various factors that have traditionally applied in making this assessment (e.g., the timeliness of the cooperation, the diligence, thoroughness, and speed of the internal investigation, the proactive nature of the cooperation, etc.).

This condition of cooperation applies equally to corporations seeking to cooperate in civil matters; a company under civil investigation must provide to the Dcpaiiment all relevant facts about individual misconduct in order to receive any consideration in the negotiation. For example, the Department’s position on “full cooperation” under the False Claims Act, 31 U.S.C. § 3729(a)(2), will be that, at a minimum, all relevant facts about responsible individuals must be provided.

The requirement that companies cooperate completely as to individuals, within the bounds of the law and legal privileges, see USAM 9-28.700 to 9-28.760, docs not mean that Department attorneys should wait for the company to deliver the information about individual wrongdoers and then merely accept what companies provide. To the contrary, Department attorneys should be proactivcly investigating individLtals at every step of the process – before, during, and after any corporate cooperation. Department attorneys should vigorously review any information provided by companies and compare it to the results of their own investigation, in order to best ensure that the information provided is indeed complete and docs not seek to minimize the behavior or role of any individual or group of individuals.

Department attorneys should strive to obtain from the company as much information as possible about responsible individuals before resolving the corporate case. But there may be instances where the company’s continued cooperation with respect to individuals will be necessary post-resolution. In these circumstances, the plea or settlement agreement should include a provision that requires the company to provide information about all culpable individuals and that is explicit enough so that a failure to provide the information results iu specific consequences, such as stipulated penalties and/or a material breach.”

In her speech, Yates stated:

“[T]o the average guy on the street, this might not sound like a big deal.  But those of you active in the white-collar area will recognize it as a substantial shift from our prior practice.  While we have long emphasized the importance of identifying culpable individuals, until now, companies could cooperate with the government by voluntarily disclosing improper corporate practices, but then stop short of identifying who engaged in the wrongdoing and what exactly they did.  While the companies weren’t entitled to full credit for cooperation, they could still get credit for what they did do and that credit could be enough to avoid indictment.

The rules have just changed.  Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company.  And we’re not going to let corporations plead ignorance.  If they don’t know who is responsible, they will need to find out.  If they want any cooperation credit, they will need to investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals.

While this is new for the corporate world, there’s nothing radical about the concept.  It’s the same rule we apply to cooperators in any other type of criminal investigation.  A drug trafficker can decide to flip against his co-conspirators.  He can proffer to the government the full scope of the criminal scheme.  He can take the stand for the government and testify against a dozen street-level dealers.  But if he has information about the cartel boss and declines to share it, we rip up his cooperation agreement and he serves his full sentence.  The same is true here.  A corporation should get no special treatment as a cooperator simply because the crimes took place behind a desk.

This new cooperation requirement does not mean that DOJ will sit back and wait for the company to deliver the information about individual wrongdoers and then merely accept what companies provide.  To the contrary, department attorneys will be actively investigating individuals at every step of the process – before, during and after any corporate cooperation.  Department attorneys will be vigorously testing information provided by companies and comparing it to the results of our own investigation to ensure that it is indeed complete and that it doesn’t seek to minimize the role of any one person or group of individuals.

Building on this point, a company should not assume that its cooperation ends as soon as it settles its case with the government.  Going forward, corporate plea agreements and settlement agreements will include a provision that requires the companies to continue providing relevant information to the government about any individuals implicated in the wrongdoing.  A company’s failure to continue cooperating against individuals will be considered a material breach of the agreement and grounds for revocation or stipulated penalties.

And one final note on this point.  The purpose of this policy is to better identify responsible individuals, not to burden corporations with longer or more expensive internal investigations than necessary.  We are not asking companies to “boil the ocean,” so to speak, and embark upon a multimillion-dollar investigation every time they learn about misconduct.  We expect thorough investigations tailored to the scope of the wrongdoing.  So for all the defense lawyers in the room – and I know there are plenty of you – keep this in mind.  If you are representing a corporation and there’s a question about the scope of what’s required, you can do what many defense attorneys do now – pick up the phone and discuss it with the prosecutor.”

The Yates Memo states:

2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.

Both criminal and civil attorneys should focus on individual wrongdoing from the very beginning of any investigation of corporate misconduct. By focusing on building cases against individual wrongdoers from the inception of an investigation, we accomplish multiple goals. First, we maximize our ability to ferret out the full extent of corporate misconduct. Because a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct. Second, by focusing our investigation on individuals, we can increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation and provide information against individuals higher up the corporate hierarchy. Third, by focusing on individuals from the very beginning of an investigation, we maximize the chances that the final resolution of an investigation uncovering the misconduct will include civil or criminal charges against not just the corporation but against culpable individuals as well.

In her speech, Yates stated:

“One of the things we have learned from experience is that it is extremely difficult to build a case against individuals, civil or criminal, unless we focus on individuals from the very beginning.  For example, if an investigation starts as a civil inquiry into the company and interviews are conducted and documents gathered with a focus on corporate liability, it is often challenging for our attorneys to then go back at the conclusion of the civil matter and build a criminal case against individuals.  This is particularly true not only because of the sheer passage of time, but also because individual criminal liability often hinges on proving a level of criminal intent much more demanding than what was required in the civil case.

To address this problem, the department yesterday instructed its attorneys that, going forward, they are to focus on individuals from the start of an investigation, regardless of whether the investigation begins civilly or criminally. Moreover, once a case is underway, the inquiry into individual misconduct can and should proceed in tandem with the broader corporate investigation.  Delays in the corporate case will no longer suffice as a reason to delay pursuit of the individuals involved.”

The Yates Memo states:

3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.

Early and regular communication between civil attorneys and criminal prosecutors handling corporate investigations can be crucial to our ability to effectively pursue individuals in these matters. Consultation between the Department’s civil and criminal attorneys, together with agency attorneys, permits consideration of the full range of the government’s potential remedies (including incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and criminal forfeiture, and exclusion, suspension and debarment) and promotes the most thorough and appropriate resolution in every case. That is why the Department has long recognized the importance of parallel development of civil and criminal proceedings. See USAM 1-12.000.

Criminal attorneys handling corporate investigations should notify civil attorneys as early as permissible of conduct that might give rise to potential individual civil liability, even if criminal liability continues to be sought. Further, ifthcre is a decision not to pursue a criminal action against an individual – due to questions of intent or burcleu of prool~ for example ­ criminal attorneys should confer with their civil counterparts so that they may make an assessment under applicable civil statutes and consistent with this guidance. Likewise, if civil attorneys believe that an individual identified in the course of their corporate investigation should be subject to a criminal inquiry, that matter should promptly be referred to criminal prosecutors, regardless ofthe current status ofthe civil corporate investigation.

Department attorneys should be alert for circumstances where concurrent criminal and civil investigations of individual misconduct should be pursued. Coordination in this regard should happen early, even if it is not certain that a civil or criminal disposition will be the end result for the individuals or the company.

In her speech, Yates stated:

“The best way to ensure that criminal prosecutors don’t need to go back and build a new case after the civil attorneys finish their inquiry – or vice versa – is to make sure that everyone’s talking to each other from the very beginning.  And so we are directing our civil and criminal attorneys to collaborate to the full extent permitted by law at all stages of the investigation.  The Department of Justice has access to a wide range of enforcement remedies – from civil penalties to lengthy prison sentences – and the only way to leverage our full authority is by ensuring early and regular communication.  To make sure nothing slips through the cracks, we’re formalizing these lines of communication.  Going forward, regardless of whether a corporate case begins as a civil or criminal inquiry, the DOJ attorneys initially handling the matter will be responsible for notifying the “other side of the house” about the investigation.  As the case proceeds, civil and criminal attorneys will be in regular contact.  If prosecutors decide not to bring criminal charges against individuals, they will need to notify their civil counterparts, who can make an independent assessment of civil liability.  And if civil attorneys identify individuals during their investigation who should be subject to a criminal inquiry, they will be expected to promptly refer the matter to criminal prosecutors, regardless of the current status of the civil corporate investigation.”

The Yates Memo states:

4. Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.

There may be instances where the Department reaches a resolution with the company before resolving matters with responsible individuals. In these circumstances, Department attorneys should take care to preserve the ability to pursue these individuals. Because of the importance of holding responsible individuals to account, absent extraordinary circumstances or approved departmental policy such as the Antitrust Division’s Corporate Leniency Policy, Department lawyers should not agree to a corporate resolution that includes an agreement to dismiss charges against, or provide immunity for, individual officers or employees. The same principle holds true in civil corporate matters; absent extraordinary circumstances, the United States should not release claims related to the liability of individuals based on corporate settlement releases. Any such release of criminal or civil liability clue to extraordinary circumstances must be personally approved in writing by the relevant Assistant Attorney General or United States Attorney.

5. Corporate cases should uot be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.

If the investigation of individual misconduct has not concluded by the time authorization is sought to resolve the case against the corporation, the prosecution or corporate authorization memorandum should include a discussion of the potentially liable individuals, a description of the current status of the investigation regarding their conduct and the investigative work that remains to be done, and an investigative plan to bring the matter to resolution prior to the end of any statute of limitations period. If a decision is made at the conclusion of the investigation not to bring civil claims or criminal charges against the individuals who committed the misconduct, the reasons for that determination must be memorialized and approved by the United States Attorney or Assistant Attorney General whose office handled the investigation, or their designees.

Delays in the corporate investigation should not affect the Department’s ability to pursue potentially culpable individuals. While every effort should be made to resolve a corporate matter within the statutorily allotted time, and tolling agreements should be the rare exception, in situations where it is anticipated that a tolling agreement is nevertheless unavoidable and necessary, all efforts should be made either to resolve the matter against culpable individuals before the limitations period expires or to preserve the ability to charge individuals by tolling the limitations period by agreement or court order.

In her speech, Yates stated:

“The fourth and fifth policies relate to how we resolve cases.  As I mentioned earlier, delays in corporate investigations should not delay our ability or willingness to resolve related cases against individuals.  In most instances, this will mean that we resolve cases with individuals before or at the same time that we resolve the matter against the corporation.  If, however, DOJ attorneys decide it is necessary to resolve the corporate case first, they will only be permitted to do so once they have demonstrated a clear plan to their supervisors for resolving the related individual cases – promptly and before the statute of limitations expires.  If at the conclusion of the investigation the DOJ attorneys decide not to bring charges against individuals, they will be expected to memorialize their justification and then obtain approval from the U.S. Attorney or the Assistant Attorney General overseeing the investigation.  Likewise, we are instructing our attorneys that they should not release individuals from civil or criminal liability when resolving a matter with corporation, except under the rarest of circumstances.  When such circumstances do arise, the litigating attorneys will be required to obtain written approval from the relevant U.S. Attorney or Assistant Attorney General.  We will be monitoring these approval processes closely, in no small part so we can more readily identify whatever trends are limiting our ability to pursue individual cases.”

The Yates Memo states:

6. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

The Department’s civil enforcement efforts are designed not only to return government money to the public fisc, but also to hold the wrongdoers accountable and to deter future wrongdoing. These twin aims – of recovering as much money as possible, on the one hand, and of accountability for and deterrence of individual misconduct, on the other – are equally important. In certain circumstances, though, these dual goals can be in apparent tension with one another, for example, when it comes to the question of whether to pursue civil actions against individual corporate wrongdoers who may not have the necessary financial resources to pay a significant judgment.

Pursuit of civil actions against culpable individuals should not be governed solely by those individuals’ ability to pay. In other words, the fact that an individual may not have sufficient resources to satisfy a significant judgment should not control the decision on whether to bring suit. Rather, in deciding whether to file a civil action against an individual, Department attorneys should consider factors such as whether the person’s misconduct was serious, whether it is actionable, whether the admissible evidence will probably be sufficient to obtain and sustain a judgment, and whether pursuing the action reflects an important federal interest. Just as our prosecutors do when making charging decisions, civil attorneys should make individualized assessments in deciding whether to bring a case, taking into account numerous factors, such as the individual’s misconduct and past history and the circumstances relating to the commission of the misconduct, the needs of the communities we serve, and federal resources and priorities.

Although in the short term certain cases against individuals may not provide as robust a monetary return on the Department’s investment, pursuing individual actions in civil corporate matters will result in significant long-term deterrence. Only by seeking to hold individuals accountable in view of all of the factors above can the Department ensure that it is doing everything in its power to minimize corporate fraud, and, over the course of time, minimize losses to the public fisc through fraud.

In her speech Yates stated:

“Sixth and final, we’re broadening the focus of our civil enforcement strategy.  Generally speaking, when a criminal prosecutor is deciding whether to charge an individual, he or she consults with the department’s principles of federal prosecution, which lays out various considerations, including the nature and seriousness of the offense and the impact of the crime on its victims.  While some of our civil litigators have routinely pursued individuals, others have not – primarily because they have focused on the likelihood of financial recovery from their investigative targets.  This was an understandable practice, given that monetary sanctions are the most common form of relief in civil case, but it naturally prioritized large-scale corporate investigations over civil enforcement actions against the individuals who perpetrated the wrongdoing.

There is real value, however, in bringing civil cases against individuals who engage in corporate misconduct, even if that value cannot always be measured in dollars and cents.  Civil enforcement actions, like criminal prosecutions, hold wrongdoers accountable for their actions and deter future wrongdoing.  While we may not be able to satisfy the entire judgment with an individual’s resources, if that individual is liable, we can take what they have and ensure that they don’t benefit from their wrongdoing.  These individual civil judgments will also become part of corporate wrongdoers’ resumes that will follow them throughout their careers.  And by holding individuals accountable, we can change corporate culture to appropriately recognize the full costs of wrongdoing, rather than treating liability as a cost of doing business – a change that will protect public resources over the long term.

Beyond that, our civil attorneys recognize that they have an obligation to protect not only the public fisc, but also the public itself.  So, going forward we will be pursuing civil actions against corporate wrongdoers even if those wrongdoers don’t have the financial resources to satisfy a significant money judgment.  And our civil lawyers will be looking at factors similar to those considered by our criminal prosecutors, such as the individual’s misconduct, past history and the circumstances relating to the commission of the misconduct, in deciding whether to bring suit.  An individual’s financial resources will be only one consideration in that assessment, rather than a determinative factor.

We are going to continually reexamine our practices to ensure that we’re doing everything we can to hold corporate wrongdoers accountable.  Despite this, there will still be cases where we don’t have the evidence necessary to establish an individual’s criminal intent beyond a reasonable doubt.  And regardless of public demand, we will never bring charges against anyone unless we are satisfied that the individual is in fact guilty of a crime.  That is the core of our responsibility and promise to the American people.  And I should be clear: while these policy shifts are effective immediately, the public won’t see the impact of these steps over night.  Some of these policies will affect cases that are only beginning now and may take years to become public.  In the coming weeks and months, we’ll be providing additional training and guidance to our prosecutors to help them take full advantage of these policy shifts.  Next week, for example, I will be convening a national training conference in Washington for experienced white collar prosecutors and civil litigators from across the department to discuss these new policies and other practical ways to enhance our efforts to hold corporate wrongdoers accountable.”

In concluding her speech, Yates stated:

“We make these changes recognizing the challenges that they may present.  Some corporations may decide, for example, that the benefits of consideration for cooperation with DOJ are not worth the costs of coughing up the high-level executives who perpetrated the misconduct.  Less corporate cooperation could mean fewer settlements and potentially smaller overall recoveries by the government.  In addition, individuals facing long prison terms or large civil penalties may be more inclined to roll the dice before a jury and consequently, we could see fewer guilty pleas.

Only time will tell.  But if that’s what happens, so be it.  Our mission here is not to recover the largest amount of money from the greatest number of corporations; our job is to seek accountability from those who break our laws and victimize our citizens.  It’s the only way to truly deter corporate wrongdoing.

At the Department of Justice, our ability to fulfill our responsibilities – to advocate for victims, to vigorously pursue misconduct, to seek justice in all its forms – depends on public confidence in the institutions we represent.  But the public’s confidence is not something to be assumed or expected; it is something that we must earn and be vigilant in maintaining over time.  We do that by relentlessly pursuing wrongdoing, no matter who those wrongdoers may be.  The men and women of the Department of Justice have always embraced this challenge, as both an opportunity and a privilege and once again, we embrace the task presented here.  There is one system of justice, demanding that all be held accountable when laws are broken.  We look forward to the work that will be required as we seek greater accountability from those who use corporations to lie, cheat and steal.  It won’t always be easy, but we’re ready for it.  Our nation and its citizens deserve nothing less.”

Friday Roundup

Friday, June 19th, 2015

Roundup2Scrutiny alerts and updates, quotable, and for the reading stack.  It’s all here in the Friday Roundup.

Scrutiny Alerts and Updates


As highlighted here, in 2012 Net1 UEPS (a South African telecommunications company with shares traded on a U.S. exchange) disclosed that it had received information requests from the DOJ and SEC following South African media reports concerning civil litigation in that country by an unsuccessful bidder of a telecommunications contract.

As highlighted here, in 2013 Net1 announced: “[A] full bench of the South African Supreme Court of Appeal (“Appeal Court”) unanimously ruled that the tender process followed by the South African Social Security Agency (“SASSA”) in awarding a contract to Net1’s wholly owned subsidiary Cash Paymaster Services (Proprietary) Limited (“CPS”) was valid and legal.”

Recently, the company disclosed as follows.

“[We have] received a letter from the Foreign Corrupt Practices Act unit of the Division of Enforcement of the U.S. Securities and Exchange Commission (“SEC”), advising the Company as follows:

“We have concluded the investigation as to Net 1 UEPS Technologies, Inc. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Net 1 UEPS Technologies, Inc. We are providing this notice under the guidelines set out in the final paragraph of Securities Act Release No. 5310, which states in part that the notice “must in no way be construed that the party has been exonerated or that no action may ultimately result from the staff’s investigation” [...]

“The investigation commenced in December 2012 following the award of the SASSA national contract to us in January 2012,” said Dr. Serge Belamant, Chairman and CEO of Net1. “It commenced largely as a result of one of the losing bidders for the contract, Barclays Africa’s subsidiary AllPay, referring unsubstantiated South African press articles alleging irregularities in the tender process to the U.S. Department of Justice. We believe that AllPay was responsible for instigating those media allegations. This resulted in the DOJ and SEC initiating investigations into alleged FCPA and disclosures violations. This letter from the SEC is an important step in the Company clearing its name and is in line with the total absence of any findings of irregularities against Net1 by any South African Court or Regulator resulting from actions pursued by AllPay over the past three years,” he concluded.

The separate investigation into these matters initiated by Net1 itself with the South African Police’s Commercial Crimes unit is expected to be concluded shortly.

It is the Company’s understanding that the DOJ investigation remains open at this time.”


As noted here:

“Brazil’s state-run power company Centrais Eletricas Brasileiras SA has hired U.S. law firm Hogan Lovells to assess possible cases of corruption in some of the projects the company is involved in. Eletrobras, as the company is known, said in a filing to the Brazilian market regulator that the law firm will check whether there were practices which violated the U.S. Foreign Corrupt Practices Act. The projects to be scrutinized will be selected based on their financial relevance to the company and on their relationships with construction companies already being investigated by Brazilian authorities in the so-called Operation Car Wash, focused on state-run oil company Petrobras. Eletrobras also said that internal units assigned to investigate possible wrongdoings are progressing with evaluations and that it will inform investors of their findings as soon as they are available.”

SOCO International

The British oil and gas company with ADRs traded on a U.S. exchange was recently the subject of this New York Times article:

“[A]ccording to documents obtained by Global Witness, an advocacy group, SOCO appears to have paid tens of thousands of dollars to a Congolese Army officer who has been accused of leading a brutal campaign against those objecting to the company’s oil exploration in the nature reserve, Virunga National Park. Over the course of two weeks during the spring of 2014, according to the documents, the officer, Maj. Burimba Feruzi, received at least $42,250 in payments from a local bank account associated with SOCO. That is the equivalent of 30 years of salary for the army officer, according to Global Witness.”


Earlier this week Assistant Attorney General Leslie Caldwell spoke at the Annual Association of Certified Fraud Examiners Global Fraud Conference.  In pertinent part, she stated:

“The threats posed by international corruption cannot be overlooked.  Corruption renders countries less safe and less stable.  Corruption thwarts economic development, traps entire populations in poverty and undercuts credible justice systems.

International corruption also inhibits the ability of American companies—and others—to compete overseas on a level playing field.  Once bribery and corruption take hold, fair and competitive business practices are eliminated.

A timely example of how corruption can infect international business practices is the FIFA case recently charged by the U.S. Attorney’s Office of the Eastern District of New York.  In that case, nine FIFA officials and five corporate executives have been charged with various offenses, including racketeering conspiracy, in connection with a 24-year scheme to enrich themselves through the corruption of international soccer.  The Criminal Division’s Office of International Affairs has worked closely with the lead FIFA prosecutors to obtain evidence from numerous countries across the globe.  Swiss authorities have opened a separate, parallel probe into FIFA, relating to the selection of World Cup hosts.  We are sharing evidence and collaborating closely with governments around the world in connection with the ongoing investigation.  This worldwide effort is a profound illustration of the success that can be achieved through a truly global coalition.

In many ways, the FIFA case is very much like the Foreign Corrupt Practices Act (FCPA) cases the Criminal Division is regularly investigating and prosecuting to attack illegal conduct in the global marketplace.  These cases protect markets from corruption and the artificial influences of bribery, and ensure that American companies—indeed, all companies—can compete fairly and freely across international boundaries.

But make no mistake: fighting corruption is not some service we provide to the global community; this is a fight in which we have critical international allies.  Far from acting as the world’s corruption police, the United States is part of a formidable and growing coalition of international enforcement partners who together combat corruption around the world—at home as well as abroad—that threatens each of our nations.

It is not just the United States that is recognizing the importance of foreign bribery laws.  There is a growing chorus of countries voicing support for the fight against this type of corruption.  More and more countries are joining international bodies—like the Organisation for Economic Co-operation and Development—that provide uniform standards for the criminalization of bribery of foreign public officials in international business transactions.  This type of collaboration is critical if we are going to have a meaningful impact on international corruption.


At the same time that we work to combat corruption overseas, we are also increasing our efforts to ensure that American borders do not protect criminals or their assets.  In this regard, the Justice Department launched the Kleptocracy Asset Recovery Initiative in 2010.  The initiative relies on the use of U.S. civil forfeiture actions to recover the proceeds of foreign official corruption that pass through the United States.

More simply, it takes the monies and assets stolen by foreign despots and kleptocrats and returns them to the people harmed.  This initiative protects the integrity of the U.S. financial system from use by corrupt officials and denies those officials the ability to enjoy luxuries purchased in the United States at the expense of the populations they purport to serve.

In many ways, the Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are really two sides of the same anti-corruption coin.  We bring those who pay bribes to justice, no matter how rich and powerful they are.  But by itself, that is not enough.  We also attack corruption at its source, by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.”


The United States is not going to overcome the threat posed by global corruption and international organized crime by going it alone.  The Department of Justice is never going to serve as the world’s global police force.  But we can—and I believe we should—lead by example: by vigorously investigating and prosecuting international corruption and organized crime when it violates U.S. laws, and by sustaining and increasing our commitment to international collaboration in our nations’ shared struggle to safeguard our markets, our networks and our citizens.

Under my leadership, the Criminal Division will remain steadfastly committed to forging and growing our international partnerships as we fight the scourge of international corruption and organized crime.”


This recent Global Investigations Review article highlights comments made by Matthew Queler ( assistant chief of the DoJ’s FCPA unit) concerning the hiring of so-called princelings (a hiring practice that has resulted in FCPA scrutiny of a variety of companies in the financial services sector).  Queler’s comments reminded me of reading an article from the Onion in that he basically said its OK to hire princelings so long as it is legal and we at the DOJ determine what legal is.

For the Reading Stack

From Morrison & Foerster’s most recent Anti-Corruption Developments alert.

“DOJ Revokes Non-Prosecution Agreement (NPA). As we previously reported, Assistant Attorney General Leslie Caldwell publicly stated last month that DOJ would “not hesitate to tear up a DPA or NPA and file criminal charges” if a company breaches its agreement. AAG Caldwell’s statement was likely intended to foreshadow DOJ’s May 20, 2015 announcement that it had revoked an NPA with a corporate defendant, the first action of this kind since the revocation of a DPA with Aibel Group Limited in November 2008. In 2012, DOJ entered into an NPA with UBS AG in which DOJ declined to prosecute the bank for any crimes related to its submission of interest rates for LIBOR and other rate benchmarks. In return, the company was required to abide by several conditions during the pendency of the NPA, including the requirement that it “commit no United States crime whatsoever.” DOJ revoked the NPA after (according to the factual statement attached to the guilty plea) the company “engaged in deceptive FX trading and sales practices.” Although not an FCPA case, the revocation of the NPA in this case is relevant to FCPA enforcement because DOJ’s Fraud Section, which has exclusive authority to bring criminal FCPA cases, was involved in the decision. There are a number of reasons to find this action unfair to companies where, as here, the company implemented an enhanced compliance program, and once it found issues, it brought them forward voluntarily to the Antitrust Division (indeed, qualifying for immunity under the Leniency Program). In other words, the company undertook an enhanced compliance program as it promised to do and then it brought the matter forward, as DOJ has repeatedly encouraged companies to do, only to be punished for it. DOJ’s action, thus, presents a potential disincentive to well-meaning companies to report problems discovered as a product of the enhanced compliance program implemented in the wake of a DOJ resolution.”

Friday Roundup

Friday, May 29th, 2015

RoundupSurvey says, scrutiny alert, chuckle, and for the reading stack.  It’s all here in the Friday roundup.

Survey Says

Items that caught my eye from Kroll/Compliance Week’s recent 2015 Anti-Bribery and Corruption Benchmarking Report (a report based on approximately 250 survey responses from compliance professionals of large companies).

The average respondent to the survey was associated with a company that employs 22,000 employees and has more than 2,900 third party relationships.

In the minds of some, FCPA compliance is easy.  But as previously highlighted here, consider if the respondent companies were 99% compliant on a daily basis.  99% success in most all areas of life is rewarded, but 99% compliance for the respondent companies would mean 220 employee and 29 third party violations.

Against this backdrop, I am not at all surprised that approximately 50% of respondents in the survey were less than confident that company financial controls can catch potential books and records violations of the FCPA.

After all, the FCPA’s books and records (and internal control provisions) are among the broadest legal provisions one can find even if they are qualified in several respects.

As noted in the report accompanying the survey findings:

“There is a little bit of anti-bribery and anti-corruption fatigue at the board level across large organizations.  In 2009 and 2010 lawyers and regulators predicted doomsday scenarios, bolstered by an explosion in the growth of formal investigation and fines imposed.  That uptick leveled off in recent years, leading some companies to believe they have more time to get their houses in order.”

Perhaps the lesson is that boards should take with a grain of salt the doomsday scenarios of FCPA Inc. because they are often self-serving.

Scrutiny Update

As previously highlighted here, in September 2013 Hyperdynamics disclosed:

“[On] September 2013 [the company] received a subpoena from the United States Department of Justice (DOJ) requesting that the Company produce documents relating to its business in Guinea.  In 2006, a Production Sharing Contract was signed by the Company and the government of Guinea granting rights to an oil and gas concession offshore Guinea.  The Company understands that the DOJ is investigating whether Hyperdynamics’ activities in obtaining and retaining the concession rights and its relationships with charitable organizations potentially violate the U.S. Foreign Corrupt Practices Act or U.S. anti-money laundering statutes.  The Company has retained legal counsel to represent it in this matter and is cooperating fully with the government.  The Company is unable to predict when the investigation will be completed, what outcome may result and what costs the Company will incur in the course of the investigation.”

Last week the company disclosed:

“As set forth in the attached letter, the United States Department of Justice (DOJ) has closed its investigation into possible violations by Hyperdynamics of the Foreign Corrupt Practices Act (FCPA) without bringing any charges against the Company.  Hyperdynamics had cooperated with the government’s investigation, and DOJ noted the value of the Company’s cooperation in its letter.  Ray Leonard, President and CEO, commented, “This is an important development for Hyperdynamics. We are extremely pleased to be informed that the DOJ has closed its inquiry into this matter.” As previously disclosed, both the DOJ and SEC issued subpoenas to Hyperdynamics concerning possible violations of the FCPA and other laws. The SEC investigation has not yet been resolved.”

To those who frequently overuse the “d” word (as in declination), this was a DOJ declination.  However, when a company merely receives a subpoena and the DOJ closes its investigation, I prefer to call that the law enforcement investigative process.

Nevertheless, it what seems to be a new trend for FCPA Inc., the law firm representing Hyperdynamics issued this press release stating:

“Covington represented Hyperdynamics in an investigation conducted by the U.S. Department of Justice into potential violations of the Foreign Corrupt Practices Act related to its business activities in the Republic of Guinea. The Justice Department has completed its investigation without bringing any charges against the company. Hyperdynamics received a subpoena from the Justice Department in September 2013 concerning possible violations of the FCPA and other laws relating to its business in Guinea. The Houston-based oil and gas company fully cooperated with the government’s investigation and the Justice Department noted the value of the company’s cooperation in its declination letter. [...] The SEC also issued a subpoena to Hyperdynamics concerning possible violations of the FCPA and other laws. The SEC investigation has not yet been resolved. The Covington team handling the matter included Lanny BreuerNancy Kestenbaum and Barbara Hoffman.”

Lanny Breuer is the former head of the DOJ’s criminal division.

According to disclosures by Hyperdynamics, the company spent approximately $11.2 million on its FCPA scrutiny.


There has been much recent discussion and war of words concerning the length of FCPA scrutiny (see here and here).

Against this backdrop, I had a good chuckle when I recently stumbled upon this 2005 speech by the DOJ’s then Assistant Attorney General of the Criminal Division.

“Simply put, speed matters in corporate fraud investigations.  The days of five-year investigations, of agreement after agreement tolling the statute of limitations – while ill-gotten gains are frittered away and investor confidence sinks – are increasingly a thing of the past.”

For the Reading Stack

As highlighted in this prior post, last month  Paul Pelletier (former principal deputy chief of the DOJ Criminal Division’s Fraud Section) penned a dandy Wall Street Journal editorial titled “The Foreign Bribery Sinkhole at Justice.”

In this recent piece Pelletier goes into more-depth on the same topic.  In pertinent part he writes:

“[T]he pattern of costly delay in FCPA investigations continues unabated.  While every government investigation and resolution poses unique facts and circumstances that may serve to delay the investigatory process, these recent long-developing FCPA resolutions, together with the findings of the OECD report, are convincingly problematic.  The staggering investigative costs, ultimately borne by employees and shareholders alike, however, also can reach unconscionable levels.


The Department of Justice has recently articulated that at least part of the rationale or justification for these interminable investigations is that “[c]ompared to other white collar crime, the challenges associated with FCPA investigations can be much greater.”  The DOJ offered “overseas evidence” as one basis for this greater challenge.2

But this statement fails to explain the  more than twofold increase in investigatory durations from historical norms.  A dispassionate, experience-based analysis of this overly broad assertion exposes a faulty premise.  Simply put, the DOJ can and must do better.


With a cooperating corporation, FCPA investigators routinely find themselves in the unique position of having prompt access to overseas evidence and witnesses without a need to resort to cumbersome international treaty requests.  Such cooperation is much like the prosecution having secured a cooperator with unfettered access to the critical evidence.


Regardless of the reason or reasons for these protracted investigations, both the continued vitality of the DOJ’s FCPA enforcement efforts and the prominence of the United States as the global leader of anti-corruption enforcement would seem to demand a renewed effort to dramatically reduce the time frame necessary to achieve resolution.


Legitimate enterprises benefit from those kinds of real-time revelations, and criminal political regimes can be immediately identified and deterred.  Moreover, when a criminal resolution discloses and punishes criminal conduct that occurred five or more years earlier, any deterrent effect of the resolution is significantly diminished.  This is particularly true in industries where the overseas corrupt conduct flourishes with abandon.

At that late stage, the principal deterrent effect is relegated to the size of the monetary penalty — something the DOJ continues to emphasize with all too much frequency and relish.  As recent cases have demonstrated, lengthy FCPA investigations also place untenably wasteful financial burdens on corporations, their employees and their shareholders.


Given that the DOJ’s FCPA unit within the Fraud Section has more than doubled in size from 2009 to today and has been fortified by a dedicated squad of FBI agents, it is puzzling that many of these investigations seem to drag on interminably.  The DOJ must strive to be more than just “FCPA Inc.,” churning out stale resolutions notable only for their record-breaking penalties.”

In conclusion Pelletier writes:

“The interests of justice are neither served nor advanced when FCPA investigations routinely drag on for five or more years.  Rigorous and prompt FCPA enforcement with respect to current bribery schemes can have a dramatic impact on the insidious and corrosive effect of corruption overseas.  Real-time enforcement is just one component of what must be a larger proactive strategy to root out overseas corruption, which includes punishing the bribe takers as well as the bribe payers and dispossessing the government officials of access to ill-gotten gains.

Curing the deficiencies that lead to costly and wasteful delays will require a systemic and sustained effort, primarily by the DOJ.  It will also require a more focused approach by outside counsel.  Although the ameliorative benefits resulting from such change will not be achieved overnight, the long-term vitality and efficacy of the DOJ’s anti-corruption enforcement efforts ultimately rests on the government’s ability to sustainably alter the status quo.”


A good weekend to all.

Assistant AG Caldwell Regarding Exorbitant Pre-Enforcement Action Professional Fees and Expenses – “That’s Not Us, That’s The Companies” Who Are Responsible, Plus Other DOJ Musings

Thursday, May 28th, 2015

SoapboxThe war of words regarding who is to blame for exorbitant pre-enforcement action professional fees and expenses continued in recent weeks.

By way of background and as highlighted in this prior post, in April Assistant Attorney General Leslie Caldwell stated – “we do not expect companies to aimlessly boil the ocean.”

Certain FCPA lawyers disputed Caldwell’s assertion – see here and here.

Recently, Assistant AG Caldwell again shot-back stating – as noted in this Wall Street Journal Risk & Compliance post - “That’s not us. That’s the companies” who are responsible for the pre-enforcement action professional fees and expenses.


Staying with the same topic, as noted in this recent Morgan Lewis “Lawflash,” here is what DOJ Fraud Section Chief Andrew Weissmann had to say at a recent event:

“When asked about the rising costs of Foreign Corrupt Practices Act (FCPA) investigations, Mr. Weissmann dismissed the suggestion that high investigative and defense expenses—which have cost some companies nearly half a billion dollars—are a predicate to receiving full cooperation credit. Noting some of the staggering legal fees in the hundreds of millions of dollars, Mr. Weissmann advised the audience that companies do not need to “boil the ocean” when investigating corporate misconduct. Although there may be “historical evidence” of DOJ asking companies to engage in “widespread investigations,” he assured the audience that this “is not the current Department of Justice view.”

Mr. Weissmann described a “real life example” of a multinational company that voluntarily disclosed FCPA misconduct in an unnamed foreign country by a team of individuals who also had responsibilities in three other countries. Because “there was very good reason to think that they would have engaged in the same conduct in those other countries,” Mr. Weissmann said, DOJ expected the company to investigate those countries in order to receive full cooperation credit, and the company complied. Mr. Weissmann noted that the company was neither asked nor expected to expand its investigation to the “Antarctic,” for instance, or high-risk countries (as determined by Transparency International’s Corruption Perceptions Index) where the company operated. As explained by Mr. Weissmann, “If there is an issue in one country and just speculation that the same issues could be happening elsewhere, then we should deal with the issue that is before us and come to a very quick resolution.” Investigations should be “appropriately tailored to the facts at issue,” he said, because both DOJ and the companies it investigates share the same interest in “prompt resolutions.”

As noted in this prior post, prior to becoming DOJ Fraud Section Chief, Weissmann was a vocal critic of various aspects of DOJ FCPA enforcement.  Set forth below is what Weissmann wrote in Restoring Balance: Proposed Amendments to the FCPA.

“The current FCPA enforcement environment has been costly to business. Businesses enmeshed in a fullblown FCPA investigation conducted by the U.S. government have and will continue to spend enormous sums on legal fees, forensic accounting, and other investigative costs before they are even confronted with a fine or penalty, which, as noted, can range into the tens or hundreds of millions. In fact, one noteworthy innovation in FCPA enforcement policy has been the effective outsourcing of investigations by the government to the private sector, by having companies suspected of FCPA violations shoulder the cost of uncovering such violations themselves through extensive internal investigations.

From the government’s standpoint, it is the best of both worlds. The costs of investigating FCPA violations are borne by the company and any resulting fines or penalties accrue entirely to the government. For businesses, this arrangement means having to expend significant sums on an investigation based solely on allegations of wrongdoing and, if violations are found, without any guarantee that the business will receive cooperation credit for conducting an investigation.”


Back to Morgan Lewis’s “Lawflash” – here is what it says about other aspects of Weissmann’s recent remarks.

“Mr. Weissmann confirmed DOJ’s commitment to providing more transparency regarding cooperation credit and declinations by including greater factual details in non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) and providing “general statistics” about declinations in a series of “anonymized examples.” Currently, because declinations are rarely, if ever, publicly announced, companies and their counsel have limited insight into how and why such determinations are made. That will change, Mr. Weissmann said, with DOJ providing the public with greater transparency about the declinations process and what companies can do to increase their chances of receiving declinations. Likewise, although DOJ’s website already contains some information about DPAs and NPAs, Mr. Weissmann assured the audience that they can expect to see more detail in the future about what exactly happened that resulted in specific dispositions to help companies assess the benefits of full cooperation.”


Finally on the DOJ speech “beat,” Assistant AG Cadlwell recently delivered this speech to a paying audience at Compliance Week.

The topic?

“[C]orporate accountability.  How corporations should be holding themselves accountable by designing compliance programs that don’t just look good on paper but actually work.  Compliance programs that are designed to protect the company’s reputation, customers, counterparties and the public, as well as ensuring compliance with the law.”

In pertinent part, Caldwell stated:

“A corporation’s internal compliance policies and practices, and its compliance professionals, are the first lines of defense against fraud, abuse and corruption. As all of you know, there is no “one size fits all” compliance program.  Rather, effective compliance programs are those that are tailored to the unique needs, risks and structure of each business or industry. While a corporate compliance program must, by definition, address regulatory risk and the risk of potential violations of law, a strong compliance program will not stop there. A strong program also will aim to deter employee misconduct, whether or not that misconduct poses obvious regulatory risk.

While companies have for years appropriately adopted a “risk-based” approach to compliance, we have seen that corporations all too often misdirect their focus to the wrong type of risk.  We have repeatedly seen corporations target the risk of regulatory or law enforcement exposure of institutional and employee misconduct, rather than the risk of the misconduct itself. The result: compliance programs are too often behind the curve, effectively guarding against yesterday’s corporate problem but failing to identify and prevent tomorrow’s scandals.

In designing compliance programs, companies would be wise to examine all of their lines of business – including those not subject to regulation – and determine where specific risks are and how best to control or mitigate them. It is also critical that compliance programs take into account the operational realities and risks attendant to the particular company’s business, and are designed to prevent and detect particular types of misconduct likely to occur in a particular line of business.

For example, to comply with the Foreign Corrupt Practices Act (FCPA), businesses that tend to be exposed to corruption must employ different internal controls than businesses that have less exposure to corruption.


Too often we have heard companies say that a particular course of criminal conduct took them by surprise, when a hard look at the business practices would have identified the risk.  And, far too often, we have heard companies exclaim in defense that everyone else is doing it – that others in the industry are engaged in the same misconduct.  But as you all know, an industry-wide compliance failure is not a defense to knowing and willful criminal activity.

With this principle that compliance programs should be proactive, and not merely reactive in mind, there are some general hallmarks of effective compliance programs that I’d like to share with you today.

  • A company must ensure that its senior leaders provide strong, explicit and visible support for its corporate compliance policies.Corporate management must enforce compliance policies, not tacitly encourage or pressure employees to engage in misconduct to achieve business objectives.
  • We look not just at the written policies, but to other messages otherwise conveyed to employees, including through in-person meetings, emails, telephone calls, incentives/bonuses, etc.; and will make a determination regarding whether the company meaningfully stressed compliance or, when faced with a conflict between compliance and profits, encouraged employees to choose profits.
  • Senior executives should be responsible for the implementation and oversight of compliance.Those executives should have authority to report directly to independent monitoring bodies – for example, internal auditors or the board of directors.
  • A company’s policies should be clear and in writing and should easily be understood by employees.But having written policies – even those that appear specific and comprehensive “on paper” – is not enough.
  • Compliance teams need adequate funding and access to necessary resources.And they must have an appropriate stature within the company.
  • A company should have an effective process – with sufficient resources – for investigating and documenting allegations of violations.
  • A company periodically should review its compliance policies and practices to keep it up to date with evolving risks and circumstances, including when the company merges with or acquires another company.In particular, if a U.S.-based entity merges with, acquires or is acquired by a foreign entity, all compliance policies should be reviewed and revised accordingly.
  • A company should have an effective system for confidential, internal reporting of compliance violations.
  • A company should implement mechanisms designed to enforce its policies, including incentivizing compliance and disciplining violations.
  • A company should sensitize third parties with which it interacts (for example, vendors, agents or consultants) to the company’s expectation that its partners are compliant.This means more than including boilerplate language in a contract.It means taking action – including termination of a business relationship – if a partner demonstrates a lack of respect for laws and policies.

Corporations also must ensure compliance with the laws of all the countries in which they operate.  We appreciate that this may present a major compliance challenge, as international corporations often must bridge cultural, as well as geographic, divides.  But such challenges do not justify non-compliance.


Overall, our message is simple: we expect corporate entities to take compliance risk as seriously as they take other business-related risks.


When a compliance program works and a company suspects or discovers potential criminal wrongdoing, a company would be wise to conduct a thorough internal investigation. While we in the Criminal Division will not tell a company how it should conduct an investigation, we evaluate the quality of a company’s internal investigation, both through our own investigation and in considering what if any charges to bring against a company.  In that regard, we have seen some “best practices” with regard to internal investigations.

Good internal investigations uncover the facts.  They don’t promote corporate talking points or whitewash the truth.  The investigation should be focused on rooting out the relevant facts, identifying and interviewing the knowledgeable actors and capturing and preserving relevant documents and other evidence.  The investigation should seek to identify responsible individuals, even if those individuals hold senior positions at the company.

It is reasonable to take resources – time and money – into account.  If an internal investigation unearths criminal conduct, the inquiry should be thorough enough to identify the relevant facts, players, documents and other evidence, and to get a sense of the pervasiveness of the misconduct. But, we do not believe that it is necessary or productive for a company to employ its internal investigators to look under every rock and pebble – particularly when a company has offices or personnel around the globe that do not appear to be involved in the misconduct at issue. In fact, doing so will cost companies much more in the end, both in fees but also because it ultimately will delay our investigation and delay resolution and closure for the company.

For example, if a multi-national corporation discovers an FCPA violation in one country, and has no basis to suspect that the misconduct is occurring elsewhere, the Criminal Division would not expect that the internal investigation would extend beyond the country in which the violation was discovered.  By contrast, if the known offenders operated in multiple countries, we would expect that the internal investigation would extend into those locations as well.

Once your company learns of potential criminal conduct and confirms it through a reasonable internal investigation, the company then must choose whether to disclose the conduct to the government, and whether to cooperate in the government’s investigation. These are the company’s choices, and very few companies have a legal obligation to disclose criminal misconduct to the department.  Likewise, there is no obligation to cooperate beyond compliance with lawful process. But if a company chooses to cooperate with the government in its investigation – particularly at an early stage – the company likely will receive significant credit for such efforts when the government is contemplating what prosecutorial action to take.

In conducting an investigation, determining whether to bring charges and negotiating plea or other agreements, federal prosecutors take into account, among other factors, the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents.  Prosecutors also consider the availability of alternative or supplemental remedies such as civil or regulatory enforcement action.

To receive cooperation credit, a company must do more than comply with subpoenas or other compulsory process.  Companies must provide a full accounting of the known facts about the conduct or events under review, and affirmatively must identify responsible individuals (and provide evidence supporting their culpability), including corporate executives and officers – and they must do so in a timely way. A company’s cooperation may be particularly helpful where the criminal conduct continued over an extended period of time, and the knowledgeable or culpable individuals and/or the relevant documents are dispersed or located abroad. Under these circumstances, cooperation includes helping to circumvent barriers to the investigation by making knowledgeable personnel available for interviews or testimony, and by producing documents and other evidence that otherwise may not be readily accessible to the government.

We recognize that some foreign data privacy laws may limit or prohibit the disclosure of certain types of data or information.  Over the years, the Criminal Division has developed an understanding of certain oft-cited data privacy laws, and we will challenge what we perceive to be unfounded reliance on these laws to justify withholding requested information.  Companies should avoid this by giving careful consideration to the government’s requests for information, refraining from making broad “knee jerk” claims that large categories of information are protected from disclosure and producing what can be disclosed.


Corporate accountability through a strong, tailored compliance program and thorough internal investigations should be the standard for your companies.


Corporate accountability through compliance, investigations and protections against breaches is a good practice for all of your companies.  And in the Criminal Division, I am emphasizing accountability on our side as well, particularly through our work with regulators and other law enforcement agencies, and through increased transparency about our decision-making where possible.

Many of the cases handled by the Criminal Division also involve parallel investigations or civil or enforcement actions by civil or regulatory authorities.  Even if certain misconduct could be pursued civilly or through regulatory action, criminal investigation and prosecution often is appropriate.

It is department policy that criminal prosecutors and civil attorneys coordinate with one another and with agency attorneys, to the extent permissible, to protect and advance the government’s overall interests.  Early and effective coordination is critical to ensuring the efficient use of resources and the best ultimate outcome.

We have heard concerns expressed about regulatory “piling on.”  We agree that there is the potential for unfairness when a company is asked to pay penalties and fines to different regulators and enforcement authorities based on the same set of facts.

Different law enforcement authorities have distinct and important functions.  Companies know who their regulators are, and they know that they are subjecting themselves to those regulatory schemes and the laws of the countries in which they operate.  But we are trying to address this concern and are mindful of making sure that companies are not punished unfairly.

Since becoming Assistant Attorney General, one of my priorities has been to ensure that the Criminal Division is as transparent as possible about its decision making.  While we are limited in the information we can disclose to the public about matters in which we decline to prosecute, when we file charges, secure a guilty plea or enter into a deferred prosecution or non-prosecution agreement, the Criminal Division will place in the public record detailed information explaining the rationale for the particular resolution whenever possible.

Whether we secure a guilty plea or enter into an NPA or DPA, these resolutions generally have the same key components: admissions, a detailed statement of facts, remediation and/or enhanced compliance requirements and penalties.  Depending on the facts and circumstances of a particular case, the Criminal Division also may require the imposition of a compliance monitor. Companies would be wise to study these publicly-available documents to measure their compliance or to assess their exposure.

In our view, increased transparency benefits everyone.  From the Criminal Division’s perspective, if companies know the benefits that likely will flow from self-reporting or cooperating with the government’s investigation, we are confident that more companies will be willing to voluntarily disclose identified misconduct and cooperate, including against culpable individuals. In addition, transparency takes a significant amount of the guess work out of assessing the likely benefits of cooperation, as well as the costs of refusing to cooperate or offering limited or partial assistance.

Regardless of the form of resolution, the Criminal Division is committed to enforcing compliance with its terms.  In particular, when a company that is subject to the terms of an NPA or a DPA violates the terms of the agreement, if proportional to the breach, the Criminal Division will not hesitate to tear up the agreement and prosecute the offending entity based on the admitted statement of facts. If we do so, as with the other resolutions, the Criminal Division will be transparent and include its rationale in publicly-filed documents. In addition to statements contained in public filings in cases investigated or prosecuted by the Criminal Division, our commitment to transparency also is effectuated by the participation of Criminal Division personnel in conferences such as this one.”