Parallel Universes: Antitrust Leniency and the FCPA Pilot Program
The world of science fiction can be exhilarating. If you ever read The Foundation Trilogy or Martian Chronicles, you know what I mean. The concept of parallel universes has always been an intriguing idea where believers can aspire to correct events in one universe by fantasizing about their own life in the parallel universe.
How I am going to twist this concept into a compliance or enforcement posting? – hold on. Within the Justice Department, the Antitrust Division and the Criminal Division maintain two significant different strategies for prosecuting companies in their respective areas of jurisdiction.
In the Antitrust Division, corporate actors can earn leniency for disclosing their participation in a cartel and cooperating in the investigation of the cartel. If you are the first company to report and cooperate, directors, officers and employees will receive immunity – that’s right immunity from prosecution. In a recent tweak to this program, the Antitrust Division modified the treatment of former directors, officers and employees to a discretionary standard based on the cooperation.
Along with the corporate immunity, the company earns a de-trebling of damages in any civil action instituted by customers or suppliers to the company that may have suffered financial harm. Instead of paying three times the damages, the company has to pay single damages.
After the first company enters the leniency program, additional companies may follow suit but the benefits of doing so diminish as the number of cooperating entities increases. So, in a five-company cartel, the fifth company may receive very little benefits from cooperating with the investigation.
With respect to credit for a compliance program, the Antitrust Division has been pushed within the Justice Department and outside commentators to award some credit to companies with robust compliance programs. For years, Antitrust Division attorneys resisted this credit with the claim that “if the compliance program had been effective, the company would not have engaged in a cartel.”
In the same building (not literally but figuratively), the Criminal Division’s FCPA Pilot Program takes a different tack. A company that discloses its involvement in foreign bribery can earn a 50 percent reduction from the bottom of applicable sentencing guideline range (and even a declination) so long as the company cooperates with the investigation and implements appropriate remediation. Even if the company earns a declination, the company has to disgorge any ill-gotten profits from the bribery scheme.
The focus of the remediation requirement is the company’s enhancements to its compliance program and the disciplining of offending officers and employees. A company that has instituted an effective program will receive credit for that portion of its remediation efforts.
The different treatment of corporate offenders in cartels and foreign bribery could be explained by one simple fact – cartels involve multiple actors and offering a complete pass to one company to learn about the cartel and prosecute the other corporate participants may be worth giving the first company to disclose or cooperate a pass. It is easy to imagine scenarios in which corporations and specific bad actors have received a pass for conduct that was fairly egregious in the cartel world. Interestingly, companies that qualify for the free pass are not required to disgorge any illegally obtained profits but the Antitrust Division’s response is that civil litigants are able to recover such ill-gotten profits by collecting damages in follow up class action suits.
The parallel universe appears to be incongruous when it comes to crediting companies for their compliance programs. The Antitrust Division claims that it awards such credit now in response to loud concerns but there has not been much transparency in this area like the FCPA Pilot Program.
FCPA practitioners point to the leniency program as a possible model for increasing voluntary disclosures and cooperation by companies for FCPA violations. The argument cites the importance of individual prosecutions as a deterrent and specifically claims that a leniency award to a company could be conditioned on full and complete cooperation in the prosecution of individuals in the company. Citing the Yates Memorandum for support, FCPA practitioners note the Justice Department’s renewed emphasis on individual prosecutions as an important benefit of awarding companies with a declination for meeting the Justice Department’s self-disclosure, cooperation and remediation requirements.
Whether the Justice Department will consider this issue is hard to tell in the current environment. The Antitrust Division and the Criminal Division are pleased with their respective programs and are unlikely to change much in the coming years