Recent High-Dollar Penalties and Expanded Guidance Highlight DOJ’s Continued Focus on Corporate Criminal Investigations

White-Collar Investigations and Litigation
February 20, 2020
 

The Department of Justice (DOJ) continues its focus on corporate criminal investigations. In recent months, DOJ announced penalties from two investigations that were each in the billion-dollar range. While perhaps out of the norm, these recent resolutions are a stark reminder of DOJ’s continued focus on corporate criminal investigations. Accordingly, companies of all sizes involved in DOJ investigations should be mindful of the updated cooperation credit guidance in Foreign Corrupt Practices Act (FCPA), False Claims Act (FCA) and Office of Foreign Asset Control (OFAC) investigations. And for those further along in discussions, DOJ’s recent guidance on evaluating corporate inability to pay claims is equally important.

Recent Billion-Dollar Penalties Resulting From FCPA Investigations

On January 31, 2020, DOJ announced the largest FCPA violation resolution to date. Airbus SE (Airbus), a France-based provider of civilian and military aircraft, agreed to pay over $3.9 billion in combined penalties to DOJ and authorities in France and the UK to resolve foreign corruption and bribery charges. According to DOJ’s press release, the “FCPA charge arose out of Airbus’s scheme to offer and pay bribes to foreign officials, including Chinese officials, in order to obtain and retain business, including contracts to sell aircraft.” January 31, 2020 DOJ Press Release. As part of the deferred prosecution agreement with DOJ, Airbus agreed to cooperate with DOJ “in any ongoing investigations and prosecutions relating to the conduct, including of individuals, and to enhance its compliance program.” Id.

Along these same lines, on December 6, 2019, DOJ announced that Telefonaktiebolaget LM Ericsson (Ericsson), a telecommunications company headquartered in Sweden, agreed to pay total penalties of more than $1 billion to resolve the U.S. government’s investigation into violations of the FCPA arising out of “[Ericsson’s] scheme to make and improperly record tens of millions of dollars in improper payments around the world.” December 6, 2019 DOJ Press Release. The penalties included “a criminal penalty of over $520 million and approximately $540 million to be paid to the U.S. Securities and Exchange Commission (SEC) in a related matter.” Id. According to DOJ, Ericsson admitted that “beginning in 2000 and continuing until 2016, Ericsson conspired with others to violate the FCPA by engaging in a longstanding scheme to pay bribes, to falsify books and records and to fail to implement reasonable internal accounting controls.” While the Airbus and Ericsson resolutions may be outliers as far as the amount of the respective penalties, both resolutions demonstrate that DOJ remains active, and accordingly, its guidance is important to companies of all sizes.

Key 2019 Guidance From DOJ

In May 2019, DOJ released formal guidance that explicitly expanded its expectations for corporate cooperation in the context of FCA investigations. To receive maximum cooperation credit, companies must voluntarily self-disclose misconduct and take “remedial steps through new or improved compliance programs.” May 7, 2019 DOJ Press Release.

Around that same time, DOJ received pushback for its heightened role in corporate internal investigations. Specifically, on May 2, 2019, the United States District Court for the Southern District of New York issued a decision regarding the boundaries by which the government must abide in the context of criminal investigations and internal corporate investigations. U.S. v. Connolly, (S.D.N.Y. May 2, 2019). The court found that DOJ and other agencies had “outsourced” their criminal LIBOR investigation to the corporation at issue and its outside counsel, thus violating the Fifth Amendment rights of the employee on trial when he was compelled, under threat of termination, to submit to an interview by the company’s outside counsel. This ruling has broad implications for the future of both internal and criminal investigations, as the court was clear that it was “deeply troubled by this issue” and that “there are profound implications if the [g]overnment … is routinely outsourcing its investigation into complex financial matters to the targets of those investigations who are in a uniquely coercive position vis-à-vis potential targets of criminal activity.” While DOJ has claimed that Connolly did not cause it to change, DOJ has separately acknowledged that the opinion prompted consideration as to the limits of its authority. And DOJ subsequently revised corporate cooperation credit guidance for FCPA cases. DOJ, Corporate Enforcement Policy (November 2019 Update). These revisions, while minimal, do soften the definition of “voluntary self-disclosure” and ease the burden on corporations during internal investigations.

Further, in October 2019, DOJ clarified its approach to evaluating corporate inability to pay claims with regard to meritorious fines or penalties. October 8, 2019 DOJ Remarks by B. Benczkowski. DOJ made clear that corporations bear the burden of establishing an inability to pay the otherwise agreed-upon fine and must fully cooperate with DOJ requests in assessing the merit of the claim, which could include disclosing assets, liens, liabilities or cash flow and producing financial statements or tax returns. Where a corporation raises a genuine financial concern, the guidance then permits DOJ to consider how the financial condition arose, whether the corporation will also be able to make restitution payments on top of the fine, and what future impact the fine might have on the corporation.

Lastly, in December 2019, DOJ again expanded its corporate cooperation guidance, this time to OFAC investigations. As with the FCA announcement in May 2019, DOJ confirmed that companies must voluntarily self-disclose all potentially willful violations of the statutes implementing the U.S. government’s primary export control and sanctions regimes, fully cooperate with government requests and timely and appropriately remediate suspected misconduct. DOJ focused on the existing and analogous guidance from the FCPA Corporate Enforcement Policy, in an effort to standardize, to the extent possible, DOJ voluntary disclosure policies. December 13, 2019 DOJ Press Release. And as with the FCPA tweaks in November, DOJ tightened its focus, for example, by only seeking identification of those individuals significantly involved in alleged “misconduct” rather than criminal violations.

Plan Cautiously and Take Developments Into Account

As DOJ will continue to focus on corporate criminal investigations, cautious planning with outside counsel, with appropriate deference to recent guidance, is the key to effectively and appropriately managing the interplay between internal investigation efforts and interactions with DOJ.


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