What Can We Expect in Future FCPA Enforcement Actions?
In the FCPA and white collar defense community, we have seen buckets and buckets of ink spilled on the coming wave of aggressive enforcement. Justice Department officials have made so many statements about the “new” approach to prosecuting white collar crime. The government moves slowly and implementing far-reaching changes takes time. Anyone who has worked at DOJ knows that change is never immediate but takes time. Investigations and prosecutions do not just happen overnight.
We are at the early stage of change. The Stericycle FCPA settlement reflected the new approach surrounding a deferred prosecution agreement used to settle an FCPA case.
First, DOJ’s (and the SEC’s) assessment of Stericycle’s remediation efforts pointed to a more stringent standard for reviewing corporate compliance programs and corporate culture. DOJ and the SEC ultimately imposed a two year independent compliance monitorship as part of the DPA resolution. DOJ cited Stericycle’s enhancement of its compliance program but noted that the implementation had not been completed nor had the enhanced program been tested to confirm its effectiveness. As a result, DOJ and the SEC imposed the independent corporate monitor for a two-year term.
Second, in reaching this determination, DOJ and the SEC noted Stericycle’s culture deficiencies as recounted in the pervasive bribery schemes in Brazil, Mexico and Argentina. While not explicitly citing that fact, it is clear that DOJ and the SEC were struck by the involvement of senior executives in Stericycle’s Latin American division in directing, monitoring and executing regular bribery payments across the region as reflected in detailed financial spreadsheets and in accordance with formulas linked to specific contract values. The independent corporate compliance monitor is tasked with assessing and monitoring Stericycle’s commitment to the compliance program.
Third, the Stericycle DPA agreement includes a weighing of Stericycle’s entire criminal, civil and regulatory record. While Stericycle had been the subject of some regulatory actions, DOJ found no other significant events in its legal history. This inquiry, however, is new and creates a real possibility of significant weighting in future corporate enforcement actions. Prior to this new policy, DOJ would consider FCPA recidivism and possibly other significant criminal conduct but DOJ did not open up this inquiry to a broad consideration of civil and regulatory enforcement matters.
DOJ’s new approach reflects its emphasis on corporate culture. A company that is often the subject of criminal, civil and regulatory enforcement actions may be penalized in a DPA or NPA context, or even in a second criminal case. This underscores a message that DOJ has sent (and will continue to send) – corporate culture matters and companies better attend to their corporate cultures or else face real penalties.
In the end, Stericycle was still able to earn a 25 percent reduction from the bottom of the Sentencing Guidelines range because of its full cooperation and extensive remediation. Even with pervasive bribery conduct, companies, if committed, can earn significant reductions in penalties by making real and long-lasting changes.
Stericycle also stood in a unique position – with no significant enforcement or regulatory actions in its past, Stericycle had an opportunity to escape without disastrous results. Two years of a corporate compliance monitor may have real and tangible benefits for Stericycle’s business operations. It is likely to be a blessing in disguise.