FCPA Pilot Program Sees Results

Earlier this spring, the Department of Justice announced a pilot program for enforcing the Foreign Corrupt Practices Act (FCPA). The program, which credits companies for self-reporting FCPA related misconduct, is set to run for one year, at which time the results and effectiveness will be reviewed for modification and/or extension. According to the memorandum, companies that report early, cooperate, and remediate are eligible for a 50% reduction off the bottom end of the Sentencing Guidelines fine range.

Enforcement of FCPA violations also falls under the purview of the SEC. Recent joint efforts by these two agencies have further enhanced the reporting guidelines and reflect a continued focus on FCPA related enforcement.

Earlier this month, the SEC announced the first two companies to reap the pilot program credits. In unrelated cases, Massachusetts based Akamai Technologies Inc. and Rhode Island’s Nortek Inc. entered non-prosecution agreements by which they avoided FCPA charges. The respective $671,885 and $322,058 settlements, each a result of self-reporting, cooperation, and remediation, are significantly less than the settlements of $25 million and $9 million collected by the SEC in other recent FCPA cases.

With both companies, the DOJ issued “declination letters“, stating that the department would not pursue the matter any further in consideration of their agreements with the SEC. The letters were later released by the companies themselves. A client memorandum by law firm Paul Weiss suggests that “although it is clear that these two matters were self-reported prior to the effective date of the Pilot Program, the letters nonetheless offer an early window into the DOJ’s view as to when declination to prosecute is appropriate and presumably consistent with the goals of the FCPA Pilot Program.”

Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “Akamai and Nortek each promptly tightened their internal controls after discovering the bribes and took swift remedial measures to eliminate the problems. They handled it the right way and got expeditious resolutions as a result.”

As reported by Sarah Lynch of Reuters, the DOJ’s Fraud Chief, Andrew Weissmann, noted that the program “draws a clear distinction between credit that you can be eligible for voluntary self-disclosure as opposed to companies that may decide to wait to see if they get caught, and then cooperate.”

That distinction was made clear last week week. Analogic Corp and its foreign subsidiary BK Medical ApS agreed to a $15 million settlement after their voluntary disclosure of involvement in hundreds of sham transactions for which they falsely reported effective internal controls and U.S. GAAP compliance. The settlement represents only partial cooperation credit because although the company self-reported, internal investigation later proved that they did not fully disclose all relevant facts.

In addition to providing credits, the FCPA unit will be adding an additional 10 prosecutors to further pursue enforcement actions.