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Comparing Self-Discloure Under the FCPA and BCCA

Por: FCPAméricasImprimirVisualizar em PDF

Last year saw a dramatic increase in international cooperation in anticorruption enforcement. The trend is perhaps best demonstrated by the landmark global settlement signed by Odebrecht — a Brazilian conglomerate and the largest construction company in Latin America — with Brazilian, American and Swiss authorities whereby the group undertook to pay fines exceeding US$ 2 billion to resolve the largest foreign bribery case in history.

In the legal arena, a key component enabling a global settlement in the Odebrecht case was the enactment of frameworks incentivizing self-disclosure of wrongdoing. This post highlights some similarities and differences between the corporate voluntary disclosure incentives under the DOJ's FCPA Pilot Program and the Brazilian Clean Company Act. First, we will address the most notable similarities between these frameworks.

Leniency requirements. Both frameworks require that the companies applying for leniency (a) disclose the wrongdoing voluntarily; (b) cease its involvement therein; (c) identify other corporate or individual wrongdoers; and (d) cooperate with the investigation by providing any documentation and information requested by the enforcement agencies.

Fine reduction. According to the Pilot Program, the DOJ may accord full cooperation credit – i.e. 50 percent fine reduction beyond the bottom end of the Sentencing Guidelines –  to a company that voluntarily discloses (meaning prior to a government investigation) its FCPA misconduct and fully cooperates with the investigation, in addition to disgorging profits. Limited credit – i.e. 25 percent reduction off the bottom of the Sentencing Guidelines – may be awarded to a latecomer that fully cooperates. The Brazilian Clean Company Act similarly provides that a company voluntary disclosing wrongful acts will be entitled to a reduction of up to two thirds of the applicable fine. Latecomers are also allowed to apply for leniency provided that they add new elements to the investigation.

Compliance as a mitigator. The DOJ Pilot Program establishes that a company must implement a compliance program in order to receive credit for timely and appropriate remediation. The DOJ will evaluate whether the company (a) dedicates sufficient resources to the compliance function; (b) employs quality and experienced personnel; (c) adopts a compliance program tailored to its specific needs; and (d) undertakes to implement measures to reduce the risk of further misconduct. Under the Clean Company Act, the existence of an effective compliance program is likewise a mitigating factor. The Ministry of Transparency evaluates compliance programs pursuant to criteria similar to those set forth in the Pilot Program, e.g. top management involvement, independence of the compliance function, existence of hotlines, and taking of disciplinary action against personnel involved in the misconduct. Conversely, neither of these frameworks provides for an affirmative compliance defense to shield companies from liability – contrary to the UK Bribery Act and the recent framework enacted in Spain stimulating 'soft enforcement'.

Now we will address some relevant differences between the DOJ Pilot Program and the Brazilian Clean Company Act.

Enforcement regimes. The FCPA is notably subject to a dual federal enforcement regime where the DOJ controls criminal enforcement while the SEC handles civil enforcement against issuers. Such structure allows the SEC to hold companies liable for accounting failures even when authorities are unable to establish the scienter requirement. Moreover, in joint enforcement actions, the SEC is the sole agency responsible for determining the amount of profit disgorgement, whereas the DOJ sets the applicable fines. The existence of clear boundaries reduces the risk of interagency conflict – apparently uncommon in U.S. FCPA enforcement actions. By contrast, the Brazilian framework's biggest flaw is that it gives too much independence to multiple agencies, making it challenging for them to reach common ground on relevant issues such as determination of the fine, profit disgorgement and debarment. At the federal level, in addition to the Ministry of Transparency, the Federal Attorney's Office is often involved in the leniency discussion, along with the Government Accountability Office and the Federal Prosecutors Office, creating a breeding ground for interagency conflicts. Moreover, state and municipal agencies may also lead leniency discussions, despite the fact that they often lack resources and structure to handle such complex matters.

Criteria for fine assessment. The Brazilian framework sets forth objective criteria for assessment of the fine, ranging from 0.1% to 20%. For instance, the following conditions would increase the fine: (a) continuing offense (1-2%); (b) awareness of misconduct by high management (1-2.5%); (c) the company being in good financial standing (1%); and (d) repeating a violation in a five-year period (5%). By the same token, the Brazilian framework foresees mitigating factors, such as: (a) misconduct not materializing (1%); (b) wrongdoer redresses damages (1.5%); (c) wrongdoer cooperates with the investigation (1-1.5%); and (d) wrongdoer has a compliance program in place (1-4%). On the other hand, the Pilot Program's language is bare bones; it merely states that the DOJ may accord "up to a 50% reduction of the bottom end of the Sentencing Guidelines fine range" to a company that voluntarily self-discloses misconduct and fully cooperates while a company that fails to self-disclose but still cooperates may be accorded "at most a 25% reduction". It seems that the DOJ Pilot Program could be enhanced on this point as a means to reduce legal uncertainties surrounding the fine determination.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

 

© 2017 FCPAméricas, LLC

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