DOJ and SEC Award Significant Credit for Remediation During Investigation
The Justice Department and the SEC have consistently preached the importance of remediation – that is, efforts by companies to address compliance deficiencies during the pendency of an investigation.
In 2013, DOJ and SEC delivered significant benefits to companies for companies that made significant changes during an investigation. The two most significant examples of such remediation were the Parker Drilling and Weatherford cases.
Both companies suffered significant systemic compliance breakdowns resulting in rampant and notorious bribery activities. Weatherford’s conduct was far more egregious than Parker Drilling, which was confined to its operations in Nigeria. Nonetheless, both companies devoted significant efforts to remove offenders from their companies and institute significant compliance program reforms. Each company hired a new compliance leader – Dan Chapman in the case of Parker Drilling, and Billy Jacobson in the case of Weatherford. Both have excellent reputations and are committed compliance professionals. For each company, the hiring of professionals of this caliber was a defining moment in their remediation efforts.
The message from DOJ and the SEC is very clear – do not wait until the resolution of a case to remediate a compliance breakdown; initiate remediation steps as soon as possible during an investigation. In other words, once the problem is discovered, do not delay and fix the problem.
DOJ and the SEC regularly cite remediation as an important factor in determining whether a corporate monitor should be appointed as part of a settlement. However, it is apparent that DOJ also will credit companies for their remediation efforts while the investigation is ongoing.
Weatherford received significant credit for its remediation program, resulting in a settlement that focused on internal controls violations rather than bribery, and avoided the appointment of a three-year monitor and had an eighteen-month monitor appointed.
Parker Drilling also earned significant benefits from its remediation program. First, Parker Drilling was carved out from the other defendants charged in the Panalpina case. By doing so, Parker Drilling was able to institute additional remediation steps and earn a greater reduction in its corporate fine. Most importantly, Parker Drilling avoided any corporate monitor.
When implementing a remediation program, the company has to conduct an assessment of deficiencies in its compliance program, taking into account the nature and scope of FCPA violations. The assessment should precede the conclusion of an internal investigation. It is important to improve a compliance program as quickly as possible and to keep the DOJ and SEC informed of the specific changes instituted.
Companies under investigation for potential FCPA violations have to be mindful of the benefits of remediation. If the company believes that it has not violated the FCPA, then it should not make a commitment to remediation. Only in those cases where a company is convinced it has violated the FCPA should a company consider a remediation strategy. It is an important strategy to avoid corporate fines and appointment of a monitor.