FCPA Remediation Focus on Supervisory Personnel
The Justice Department’s FCPA enforcement and remediation focus on supervisory personnel is an interesting development.
On the one hand, DOJ has been slow to bring individual criminal enforcement actions for FCPA violations. At the same time, they are flirting with a potential new enforcement approach – a criminal prosecution for circumventing internal controls without proof of bribery. However, FCPA prosecutors appear to be gun-shy after some criminal trial defeats or difficulties, all of which are normal course when prosecuting white collar criminals.
Notwithstanding the lack of individual criminal enforcement actions, the Justice Department is pressuring companies to hold supervisors and other senior officials accountable as part of corporate remediation plans during the FCPA settlement process.
Starting in 2016, DOJ require companies to discipline supervisors who either knew or should have known about employee misconduct resulting in FCPA violations. In the Embraer enforcement action for example, DOJ withheld remediation credit to Embraer because the company failed to discipline a senior executive who likely knew or should have know about the ongoing bribery scheme. Embraer’s failure to discipline this one senior executive cost Embraer millions of dollars in a fine reduction under DOJ’s settlement standards.
Similarly, JP Morgan’s settlement with DOJ for its hiring practices FCPA violations included credit for robust disciplinary actions against employees who engaged in misconduct; a supervisor responsible for oversight of an employee who engaged in misconduct; and a range of supervisors and employees who were responsible for oversight and monitoring the employees.
From an enforcement perspective, no one disagrees that a criminal prosecution of responsible actors will have a significant deterrent effect. DOJ appears to be embracing a strategy that forces companies to aggressively discipline its managers and employees to ensure that those who are responsible for supervising and monitoring employee conduct are held accountable.
There is no question that a company’s disciplinary actions can have a significant impact on corporate behavior. If justice is meted out quickly and fairly across the company, employees will understand that organizational justice is important to the company. Trust in an internal justice system is critical to creating a culture of trust and integrity.
The Justice Department is appropriately advancing its interest in promoting effective disciplinary systems as an important element of an ethics and compliance program. The Justice Department has seen instances where whistleblowers are retaliated against for raising important issues, and they have observed unequal justice where senior officials are given a slap on the wrist while other employees who commit the same acts are fired.
The Justice Department’s emphasis on an effective disciplinary system will force companies to impose strict discipline. Companies that impose tough disciplinary standards recognize that such actions are an important means to communicate accountability. The credibility of a compliance program depends on its willingness to hold leaders, managers and employees accountable.
Supervisors who know or should have known about misconduct should be held accountable. If supervising means monitoring your staff’s conduct to ensure compliance, then, at a minimum, supervisors have to take steps to ensure that their employees are complying with the law. No one can argue with that proposition.