Senior DOJ Official Comments on FCPA Enforcement Trends and Anti-Corruption Compliance Programs

On April 27, 2015, at ACI’s 9th Annual Advanced Forum on FCPA & the Life Sciences Industry, Daniel Kahn, Assistant Chief of the FCPA Unit at the U.S. Department of Justice’s (“DOJ”) Fraud Section, offered remarks on U.S. Foreign Corrupt Practices Act (“FCPA”) enforcement trends, the value of an anti-corruption compliance program and on various components of such compliance programs. The remarks were largely in response to specific questions from the audience during an hour-long Q&A-style panel.

FCPA Enforcement Trends

Kahn made specific mention of three often-discussed trends:

  1. DOJ will continue to prosecute individuals for FCPA violations;
  2. DOJ will continue to reward voluntary self-disclosure and cooperation; and
  3. DOJ will continue to look for opportunities to cooperate and coordinate with global enforcement authorities.

Speaking specifically to the last trend, Kahn stated: “We do have a relationship with China and are working that relationship just as we are with any other country.”

Kahn additionally touched on the distinction between cooperating and coordinating with a foreign enforcement agency. Regarding the latter, Kahn noted that DOJ often tries to coordinate foreign resolutions and give credit for resolutions a company enters into with another country. This is distinct from and in addition to cooperating with foreign enforcement agencies. Kahn offered the Siemens and ABM resolutions as examples of such coordination and noted that credit is more likely to happen when a company makes a voluntary disclosure.

Anti-Corruption Compliance Programs

As has become common refrain, Kahn emphasized that compliance programs are the best defense for preventing potential issues. He reiterated that such programs are one of the many factors DOJ considers when deciding whether to bring an FCPA enforcement action.

Kahn also touched on several specific components of an effective anti-corruption compliance program:

  1. Incentives: The need for employee “incentives” for compliant behavior was one of the first components Kahn discussed. He said that it was important for a company to link compliance to an individual’s performance by, for example, tying a bonus to compliance with company policies and training requirements.
  2. Gifts, Travel and Entertainment: When asked, Kahn stated that he believes companies should focus on gifts, travel and entertainment for several reasons, not just to prevent FCPA violations. On the FCPA-front, Kahn noted that a survey of DOJ enforcement actions would suggest a focus on “systemic” gifts and entertainment violations, which is distinct from the isolated, one-off meal or other entertainment activity.
  3. Third Parties: When speaking of third parties, Kahn noted there is no one type of third-party agent that a company should be cautious of; rather, the third parties considered “high risk” should be identified through a risk assessment process. Contractual and other third-party safeguards, while beneficial, lack teeth if not properly enforced. Kahn offered third-party audit rights and the need to actually exercise those rights as an example of the foregoing.
  4. Transactional Due Diligence: In the M&A context, Kahn reiterated that DOJ expects companies to “reasonably assess” a target company prior to an acquisition. Kahn also reminded the audience that if the target company was not subject to the FCPA’s jurisdiction prior to the acquisition and no post-acquisition violations occur, then there will be no successor liability for pre-acquisition conduct.

While not groundbreaking, Kahn reemphasized that anti-corruption enforcement by U.S. and global enforcement agencies continues. Likewise, Kahn’s statements demonstrate that DOJ gives corporate compliance programs a hard look when determining whether to exercise its discretion to bring a case and, if an action is brought, in the negotiation of the ultimate resolution. Keeping this in mind, every company should assess – and reassess – its anti-corruption compliance program and ensure that such programs are tailored to the needs of the organization and appropriately account for a company’s unique risk landscape.

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On April 27, 2015, at ACI’s 9th Annual Advanced Forum on FCPA & the Life Sciences Industry, Daniel Kahn, Assistant Chief of the FCPA Unit at the U.S. Department of Justice’s (“DOJ”) Fraud Section, offered remarks on U.S. Foreign Corrupt Practices Act (“FCPA”) enforcement trends, the value of an anti-corruption compliance program and on various components of such compliance programs. The remarks were largely in response to specific questions from the audience during an hour-long Q&A-style panel.

FCPA Enforcement Trends

Kahn made specific mention of three often-discussed trends:

  1. DOJ will continue to prosecute individuals for FCPA violations;
  2. DOJ will continue to reward voluntary self-disclosure and cooperation; and
  3. DOJ will continue to look for opportunities to cooperate and coordinate with global enforcement authorities.

Speaking specifically to the last trend, Kahn stated: “We do have a relationship with China and are working that relationship just as we are with any other country.”

Kahn additionally touched on the distinction between cooperating and coordinating with a foreign enforcement agency. Regarding the latter, Kahn noted that DOJ often tries to coordinate foreign resolutions and give credit for resolutions a company enters into with another country. This is distinct from and in addition to cooperating with foreign enforcement agencies. Kahn offered the Siemens and ABM resolutions as examples of such coordination and noted that credit is more likely to happen when a company makes a voluntary disclosure.

Anti-Corruption Compliance Programs

As has become common refrain, Kahn emphasized that compliance programs are the best defense for preventing potential issues. He reiterated that such programs are one of the many factors DOJ considers when deciding whether to bring an FCPA enforcement action.

Kahn also touched on several specific components of an effective anti-corruption compliance program:

  1. Incentives: The need for employee “incentives” for compliant behavior was one of the first components Kahn discussed. He said that it was important for a company to link compliance to an individual’s performance by, for example, tying a bonus to compliance with company policies and training requirements.
  2. Gifts, Travel and Entertainment: When asked, Kahn stated that he believes companies should focus on gifts, travel and entertainment for several reasons, not just to prevent FCPA violations. On the FCPA-front, Kahn noted that a survey of DOJ enforcement actions would suggest a focus on “systemic” gifts and entertainment violations, which is distinct from the isolated, one-off meal or other entertainment activity.
  3. Third Parties: When speaking of third parties, Kahn noted there is no one type of third-party agent that a company should be cautious of; rather, the third parties considered “high risk” should be identified through a risk assessment process. Contractual and other third-party safeguards, while beneficial, lack teeth if not properly enforced. Kahn offered third-party audit rights and the need to actually exercise those rights as an example of the foregoing.
  4. Transactional Due Diligence: In the M&A context, Kahn reiterated that DOJ expects companies to “reasonably assess” a target company prior to an acquisition. Kahn also reminded the audience that if the target company was not subject to the FCPA’s jurisdiction prior to the acquisition and no post-acquisition violations occur, then there will be no successor liability for pre-acquisition conduct.

While not groundbreaking, Kahn reemphasized that anti-corruption enforcement by U.S. and global enforcement agencies continues. Likewise, Kahn’s statements demonstrate that DOJ gives corporate compliance programs a hard look when determining whether to exercise its discretion to bring a case and, if an action is brought, in the negotiation of the ultimate resolution. Keeping this in mind, every company should assess – and reassess – its anti-corruption compliance program and ensure that such programs are tailored to the needs of the organization and appropriately account for a company’s unique risk landscape.

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