DOJ Telegraphs Top FCPA Priorities Under Trump Administration
ALM Media
Updated
Trevor McFadden, the U.S. Justice Department s Acting Principal Deputy Assistant Attorney General for the criminal division, may have recently telegraphed the DOJ s top Foreign Corrupt Practices Act priorities under the new Trump Administration. In a pair of speeches in April, McFadden, in hinting at those priorities, expressed understanding that the vast majority of international businesses and business leaders want to get compliance right. McFadden has since been nominated to a federal judgeship, but much can be gleaned from his message.
McFadden, who worked with companies on FCPA issues in private practice before rejoining DOJ in January of this year, stressed that the Fraud Section and FCPA Unit s aims are not to prosecute every company we can, or break our own records for the largest fines or longest prison sentences. He recognized that companies that reach resolutions with DOJ are not bad companies and that companies with good intentions can make mistakes. As a result, according to McFadden, the Department s primary aim is to motivate companies and individuals voluntarily to comply with the law because they are in the best position to detect risk and to take preventative measures.
Building on this theme, McFadden highlighted several key areas where companies may see a shift in FCPA focus under the new administration:
Refer Evidence to Foreign Country When No Jurisdiction: McFadden might be signaling a less expansive jurisdictional approach to enforcing the FCPA. McFadden noted that as countries around the world have strengthened their domestic corruption laws and increased their own pursuit of bribery investigations, DOJ has expanded its partnerships with its foreign counterparts. Over the last several years, the Department has received criticism for its increasingly expansive view of territorial jurisdiction over foreign companies and individuals, with limited contacts with the United States, for conduct that occurred abroad. Perhaps in response to this criticism, McFadden noted that the Department will refer evidence of violations of foreign law to our international law enforcement partners where we do not have jurisdiction over the wrongdoers. Might the DOJ be telegraphing that it is pulling back on its expansive jurisdictional approach to the FCPA?
Apportion Penalties with Foreign Jurisdictions: As a result of DOJ s increased cooperation with foreign partners, some critics have observed that companies are essentially subject to being double-charged for the same conduct. Again, perhaps in response, McFadden observed that DOJ will seek to reach global resolutions that apportion penalties between the relevant jurisdictions so that companies seeking to accept responsibility for their prior misconduct are not unfairly penalized for the same conduct by multiple agencies. McFadden s experience representing companies and individuals in FCPA cases is apparent; he clearly understands the challenges faced by the subjects of these investigations, which is of course a good sign for our clients.
Quicken Pace of Investigations: If we credit McFadden, DOJ may quicken the pace of its FCPA cases under the new administration, a possible response to criticism about the inordinate expense and negative impact on a company s operations resulting from investigations that stretch on for years. McFadden emphasized that DOJ would make a concerted effort to move corporate investigations expeditiously and focus on wrapping up old investigations. In fact, McFadden said his intent is for our FCPA investigations to be measured in months, not years. He went on to say that no executive wants to deal with a lingering government investigation or the associated costs and distraction from the company s mission. McFadden stressed that additional trial attorneys were hired into the FCPA Unit over the last few years to help investigate cases more quickly.
Reduced Reliance on NPAs and DPAs: DOJ s reliance on non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) has increased dramatically over the years, with some critics expressing concern that they are being used in cases where there is not enough evidence to bring charges. If criminal charges are not warranted, the argument goes, the government should not threaten prosecution as a way to pressure companies to accept noncriminal alternatives. McFadden may be signaling that DOJ may decrease its pursuit of NPAs and DPAs when sufficient evidence does not exist, instead opting to refer such cases to the SEC. According to McFadden, When we do not have evidence of the requisite criminal intent, there is no justification for a Criminal Division resolution, and we will defer to our regulatory colleagues to handle the matter. He went on to say, As prosecutors, we have significant enforcement tools, but we also have heightened evidentiary and scienter standards, and we take those requirements seriously.
McFadden also signaled in his recent speeches that DOJ will continue the Obama-era focus on individual accountability, as well as voluntary self-disclosures and cooperation:
Prioritize Prosecution of Individuals: McFadden signaled that DOJ will continue to prioritize the prosecution of individuals under the FCPA, harkening to though not explicitly referencing the Obama Administration era Yates Memo. According to McFadden, DOJ will prioritize prosecutions of individuals who have willfully and corruptly violated the FCPA. McFadden noted that Attorney General Jeff Sessions has stressed the importance of individual accountability for corporate misconduct. McFadden also said that quickening the pace of corporate investigations will allow the Department to bring cases against responsible individuals before applicable statutes of limitations have run or evidence is lost. McFadden himself believes that individual prosecutions are more successful in deterring violations: In a 2015 article, McFadden wrote that, Individual prosecutions do have the potential to deter misconduct in a way that corporate settlements cannot, and it is increasingly difficult for the government to justify massive corporate settlements for which no one is held personally responsible.
Encourage Voluntary Self-Disclosures: According to McFadden, under the new administration, companies may see continued incentives from DOJ to voluntarily self-disclose as a means to avoid prosecution or minimize fines. In general, McFadden indicated that as part of DOJ s goal to work[] with companies transparently and in partnership, DOJ will continue to take[] into consideration voluntary self-disclosures, cooperation and remedial efforts when making charging decisions. McFadden highlighted five cases in which the Fraud Section would have brought criminal cases but for the companies voluntary self-disclosure, full cooperation, and comprehensive remediation as part of its FCPA Pilot Program which began in April of last year. The Pilot Program sets forth guidance about what DOJ requires from companies seeking mitigation credit for voluntarily self-disclosing misconduct, fully cooperating with an investigation, and remediating. According to McFadden, the Pilot Program will continue in full force as the Department evaluates its effectiveness.
Conclusion
Although McFadden describes FCPA enforcement as alive as ever, we may see a greater recognition going forward of the challenges faced by companies that find themselves addressing potential FCPA violations, investigations, and enforcement actions. McFadden s experience defending companies, and his first-hand understanding of the challenges, is evident in his speeches. Our clients should be heartened that McFadden recognizes the enormous strides companies have taken in the last 40 years, from a time when bribing foreign officials was considered a routine business expense, to now a time when most corporate leaders care about their corporate values and ethos, and they don t want anything to do with corrupt deals or shady transactions.
McFadden s nomination for a position on the U.S. District Court in Washington, D.C. is pending in the Senate. Because his replacement is unknown, we do not know to what extent the new Deputy Assistant Attorney General will hold the same views with respect to Department priorities. Only time will tell whether the priorities espoused by McFadden in his April speeches will be implemented in practice by DOJ prosecutors.
