A pressing quality of FCPA information issue is the meaning of “declination.”
The purpose of this post is similar to this recent post titled “What is a Foreign Corrupt Practices Act Enforcement Action?” That is, to improve the quality and reliability of FCPA “declination” statistics given that such a statistic has become a new datapoint of interest.
As discussed in my article “Grading the Foreign Corrupt Practices Act Guidance” (here), to my knowledge, the DOJ has never offered a declination definition, but perhaps in an effort to portray a fair and balanced FCPA enforcement program, the DOJ appears to be advocating an expansive definition.
Using two recent examples of FCPA scrutiny, I discuss below how certain FCPA commentators are also liberally applying the declination label to instances of FCPA scrutiny that do not result in any FCPA enforcement action. I then suggest a declination definition.
As highlighted in this prior post, in August 2011 various media outlets reported that Deere received an inquiry from regulators in July regarding alleged payments made in Russia and nearby countries. In a subsequent statement, Deere stated as follows. “On July 25, 2011, Deere received a request from the SEC that it voluntarily produce documents relating to Deere’s activities, and those of third parties, in certain foreign countries. Deere is cooperating with the SEC’s requests.”
In a press release (here) last week, Deere stated as follows.
“Deere & Company has been notified in a letter from the U.S. Securities and Exchange Commission Enforcement Division staff that it has completed an investigation of Deere and does not plan to pursue any enforcement action. In August 2011, news media reported that Deere & Company was subject to an inquiry concerning alleged payments to foreign officials in Russia and surrounding countries. At that time, Deere stated that it had received a request from the SEC that Deere produce documents related to the company’s activities, and those of third parties, in certain foreign countries. Deere said it fully cooperated with the SEC during the investigation and is pleased to report this conclusion. The company also stated that Deere remains committed to its core value of doing business with the highest integrity around the globe.
Soon thereafter (see here), the FCPA Blog termed the resolution of Deere’s FCPA scrutiny as a “declination.”
Another liberal use of the term “declination” occurred in the context of W.W. Grainger’s recent FCPA scrutiny. (See here for the prior post discussing the company’s disclosure). In November 2012, Grainger updated its prior disclosure in a quarterly filing and stated as follows.
“As previously reported, the Company has been conducting an inquiry into alleged falsification of expense reimbursement forms submitted by employees in certain sales offices of Grainger China LLC, a subsidiary of the Company. In the course of the investigation the Company learned that sales employees may have provided prepaid gift cards to certain customers. The company’s investigation included determining whether there were any violations of laws, including the U.S. Foreign Corrupt Practices Act. The Company retained outside counsel to assist in its investigation of this matter. On January 24, 2012, the Company contacted the DOJ and the Securities and Exchange Commission to voluntarily disclose that the Company was conducting an internal investigation, and agreed to fully cooperate and update the DOJ and SEC periodically on further developments. The results of the investigation, which have been submitted to the DOJ and the SEC, did not substantiate initial information suggesting significant use of gift cards for improper purposes. On August 14, 2012, the DOJ closed its inquiry into this matter.” (emphasis added).
Soon thereafter (see here), the FCPA blog stated in a headline that “after China investigation, Grainger wins DOJ declination.”
The company specifically disclosed that it did not “substantiate initial information” suggesting potential FCPA issues.
How is this a declination?
In this prior post, I offered my definition of a declination as being – an instance in which an enforcement agency has concluded that it could bring a case, consistent with its burden of proof as to all necessary elements, yet decides not to pursue the action. Others have offered the same definition (see here for a Wilmer Hale Client Alert -”the concept of a declination is supposed to be reserved for instances in which the offense is chargeable but the government declines in its own discretion to bring a case”).
Anything less ought not be termed a ”declination.” It is really no different that saying a police officer “declined” to issue a speeding ticket in an instance in which the driver was not speeding. This is not a declination, it is what the law commands, and such reasoning applies in the FCPA context as well.