DOJ Attempts to Encourage Corporate Self-Disclosures With the Announcement of a One-Year FCPA Pilot Program

Alerts / April 13, 2016

Pursuing a classic “carrot and stick” approach to incentivizing corporate self-disclosure of FCPA violations and individual wrongdoing connected to FCPA violations, the Department of Justice (DOJ) Fraud Section announced a new FCPA pilot program aimed at providing transparency into the benefits of self-disclosing FCPA violations, and the consequences of not self-disclosing. The “carrot” portion of the pilot program provides that a company will qualify for the “full range of mitigation credit” if it: (i) voluntarily self-discloses FCPA violations; (ii) cooperates fully, consistent with the principles set forth in the U.S. Attorney’s Manual and the Yates Memo1; (iii) meets the stringent additional requirements of the pilot program; and (iv) completes timely and appropriate remediation. The full range of mitigation credits includes: (i) the potential to receive a declination of prosecution, or (ii) where a criminal resolution is warranted, notwithstanding self-disclosure and cooperation, a reduced fine that includes up to a fifty percent reduction off the bottom end of the Sentencing Guidelines fine range and (iii) generally a resolution that should not require the appointment of a monitor if a company has implemented an effective compliance program. The “stick” wielded by the program comes in the form of a cap on the amount of fine reduction to which DOJ Fraud Section will agree for a company that does not self-disclose an FCPA violation but fully cooperates with the DOJ investigation. Under the pilot program, a nondisclosing but cooperating company will be eligible for a resolution that accords at most a twenty-five percent reduction off the bottom of the Sentencing Guidelines fine range. This is a significant change from prior practice, in which some nondisclosing but cooperating companies received reductions of much higher than twenty-five percent off the bottom of the Sentencing Guidelines fine range.

The ultimate impact of the new policy, which is being previewed as a one-year “pilot,” is unknown. However, the DOJ is making good on prior promises to make clear the benefits of self-disclosure while at the same time trying to change the calculus of the self-disclosure decision. The proclaimed principal goal of the program is to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to self-report. Clearly, in the wake of the Yates memo, this new pronouncement is sure to further stoke the ongoing debate regarding whether the DOJ is too lenient on corporate crime, too harsh on corporate crime, or neither. And for corporations making what may be “bet the company” decisions in the FCPA context, the new policy places in stark relief the risks and benefits of the decision whether or not to report such misconduct.

Summary of the New Policy

On April 5, 2016, the Fraud Section of the DOJ announced that it is beginning a one-year pilot program to encourage companies to self-report violations of the FCPA. The specifics of the pilot program were issued by DOJ Fraud Section Chief Andrew Weissman in a memorandum called “The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance.” Under the pilot program, a company is eligible to receive various levels of “mitigation credit” and qualifies for the full range of mitigation credit, if it 1) self-reports FCPA misconduct, 2) cooperates fully with the DOJ’s investigation, and/or 3) remediates the misconduct. In contrast, companies that choose not to self-report will be subject to a cap on the amount of fine reduction available in a criminal resolution with the DOJ Fraud Section.

I. Requirements

A. Voluntary Self-Disclosure

The voluntary self-disclosure requirement has three components. First, the disclosure must be truly voluntary – a disclosure that the “company is required to make, by law, agreement, or contract, does not constitute voluntary self-disclosure for purposes” of the pilot program. Second, the disclosure must occur “prior to an imminent threat of disclosure or government investigation” and be “within a reasonably prompt time after [the company] becom[es] aware of the offense.” Finally, the disclosure must include “all relevant facts known to [the company], including relevant facts about the individuals involved in any FCPA violation.” This last requirement, which is a reference to the Yates memo, indicates that the Criminal Division policy cannot and will not be applied in a manner that is inconsistent with the previous policy issued by the Deputy Attorney General.

B. Cooperation

To satisfy the cooperation requirement under the pilot program, the company must meet the requirements of the U.S. Attorney’s Manual, the Yates memo, and the more stringent requirements of the pilot program. For example, companies must “disclos[e] on a timely basis . . . all facts relevant to the wrongdoing at issue, including all facts related to involvement in the criminal activity by the corporation’s officers, employees, or agents.” Disclosure is required to be “proactive” rather than “reactive,” and facts relevant to the investigation should be voluntarily provided “even when [companies are] not specifically asked to do so.” Companies must provide timely updates on their internal investigation, including but not limited to rolling disclosures of information. Companies are also expected to preserve and disclose relevant documents, make individuals with relevant information available for DOJ interviews, provide translations of relevant foreign language documents, facilitate the production of third-party evidence, and conduct transparent internal investigations. In addition, to receive cooperation credit, companies must honor requests not to take certain actions in the internal investigation when investigators believe those actions might conflict with the objectives of the criminal investigation. Finally, where not inconsistent with the attorney-client privilege, companies must be willing to provide attribution of facts to specific sources.

C. Remediation

The final factor is “timely and appropriate remediation.” In determining whether a company has satisfied this requirement, the DOJ will generally consider whether the company has implemented an effective compliance program, disciplined culpable employees, timely remediated the violations, accepted responsibility, and implemented reforms to identify and reduce the risk of similar violations. The DOJ will rely upon the Fraud Section’s compliance counsel to thoroughly assess a company’s compliance program against certain benchmarks.

II. Credit

Where the above conditions are satisfied, and where a criminal resolution is warranted, the DOJ may discount the fine imposed at various levels. For a company that both self-discloses and cooperates, the DOJ may discount the fine by up to fifty percent off the “bottom end” of the Sentencing Guidelines fine range. However, where a company fully cooperates and remediates FCPA violations, but has not voluntarily disclosed, the DOJ may provide partial mitigation credit, but will agree to no more than a twenty-five percent reduction from the bottom of the Sentencing Guidelines fine range.

Thus, for the first time, the DOJ is quantifying the difference between self-reporting and cooperation, at least for the next year. It has set that number at twenty-five percent. Of course, the effectiveness of these demarcations for the disclosing and nondisclosing companies will depend upon whether companies and the public are persuaded that the underlying penalty numbers and guideline multipliers are fairly and appropriately calculated. After all, discounts and caps on discounts will mean little if they are not based on a fair and appropriate calculation of the underlying penalty number and guideline multiplier. A discount off a marked-up price is not truly a discount.

There is another benefit being offered to companies that self-report, cooperate and mitigate over the next year. In those circumstances, the DOJ generally will not require appointment of a monitor at the time of the settlement. This is the first time the DOJ has explicitly linked the concept of monitorship to a company’s cooperation, as opposed to other factors that tend to be predictive of the likelihood of future misconduct.


For the first time ever, at least for a year, corporations will have a better idea than before of the criminal fine reducing benefits of self-reporting FCPA conduct, rather than waiting until discovery of a violation to cooperate with a DOJ investigation. Conversely, they will know better what they risk on the criminal side if they elect not to “come in.” Paired with the Yates memo, the DOJ is offering a new menu – or at least some temporary specials – of carrots and sticks for corporations to consider in the FCPA context as they decide how to relate to the government. Of course, because the DOJ is only one of the potential enforcement agencies that administers the FCPA, absent similar action by the SEC, companies will still face uncertainty as to the benefits of self-disclosure when the SEC is also likely to investigate the violations.

If you have any questions about the alert, please contact John J. Carney at or 212.589.4255, Steven M. Dettelbach at or 216.861.7177, George A. Stamboulidis at or 212.589.4211, Jonathan R. Barr at or 202.861.1534, Lauren J. Resnick at or 212.589.4241, Jonathan B. New at or 212.589.4650, or any member of BakerHostetler's Foreign Corrupt Practices Act team.

Authorship credit: Jonathan R. Barr, John J. Carney, Steven M. Dettelbach, Jonathan B. New, Lauren J. Resnick, George A. Stamboulidis and Meheret M. Kassa

[1] The Yates Memo refers to the September 2015 memorandum authored by Deputy Attorney General Sally Quillian Yates announcing a DOJ initiative to hold individuals responsible for corporate misconduct, both criminal and civil. Memorandum from Sally Quillian Yates, Deputy Attorney General, U.S. Dep’t of Justice (Sept. 9, 2015) (“Yates Memo”), available at The Yates memo articulated several changes to DOJ policy, particularly regarding the level of cooperation expected of corporations seeking credit from the Department of Justice for such cooperation. The memo stated that to be eligible for any cooperation credit, corporations must identify, and provide all relevant facts about, all individuals involved in corporate misconduct.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.