International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Thursday, March 14, 2019

Assistant Attorney General Brian A. Benczkowski Delivers Remarks at the 33rd Annual ABA National Institute on White Collar Crime Conference

Thank you, Ray, for that kind introduction, and thank you to the organizers of this important program, which really is the premier white-collar conference in the country each year. It is a pleasure to be here in New Orleans, a place where I spent a lot of time in my previous life in private practice. 

Mark Twain once observed that “New Orleans food is as delicious as the less criminal forms of sin.”  I hope each of you is getting a chance to engage in some culinary sin a little bit this week, even if the Mardi Gras season ended on Tuesday.

Events like this provide an invaluable forum for practitioners, prosecutors, and law enforcement -- who often sit across the table from one another – to exchange ideas and perspectives, and to discuss areas of mutual interest.

I want to reflect today on those areas of mutual interest. 

Government enforcers and industry are so often painted as adversaries. 

But that simplistic view ignores how frequently our individual interests can intersect.

Financial fraud and corruption threaten private competition as well as the public fisc. 

Effective white-collar enforcement promotes market integrity and fairness, as well as fundamental values of democratic accountability. 

And prosecutors and companies alike each bear a critical responsibility, both in deterring corporate misconduct, and also in addressing such misconduct when it occurs. 

Mutual interests, however, don’t necessarily guarantee mutual trust.  At the Department of Justice, we recognize that transparency often can be key to advancing our mutual interests with the many responsible members of the corporate community. 

After all, when companies understand what conduct will be credited or penalized, the more likely they are, as generally rational actors, to implement effective compliance programs and, upon finding misconduct, to voluntarily disclose it, cooperate with the government, and remediate. 

And the more likely they are to work with the government, not against us, and to choose a course of action that ultimately advances the rule of law.

Since rejoining the Department last year, I have made it a priority to foster transparency in our corporate enforcement practices.  We have sought to promote transparency in both our general policies and our case-specific resolutions, many of which I will be discussing today.  And we have further promoted that transparency through a focus on both the clarity and detail of the policies themselves, as well as their effective dissemination within the Department and to the public.

There can be no doubt that today’s law enforcement challenges are many, and varied, and complex.  But the Department’s commitment to white-collar criminal enforcement and the promotion of ethical business practices remain as strong as ever.  You needn’t take my word for it.  The numbers themselves bear this out.  In fiscal year 2018, the Department charged more than 6,500 defendants in white-collar prosecutions, a modest three-percent increase over the prior year.  In the Criminal Division, which I oversee, those numbers were even higher.  In 2018, our Fraud Section prosecutors charged 406 individuals, won 268 convictions, and brought 10 corporate enforcement actions.  They recovered more than $1 billion in domestic corporate criminal fines, penalties, restitution, and forfeiture, as part of resolutions that returned $3 billion globally.

The Fraud Section also posted impressive numbers in a couple of other categories.  The number of individuals convicted at trial in 2018 marked a 40 percent increase from the previous year.  And the number of individuals charged in 2018 was 33 percent higher than in 2017.  The Fraud Section’s Securities and Financial Fraud Unit charged 66 individuals in 2018 – up from 57 individuals the year before.  And the FCPA Unit charged 31 individuals in 2018 – up from 24 individuals the year before.

Meanwhile, our Health Care Fraud Unit, which also oversees our Medicare Fraud Strike Forces, charged 309 individuals in 2018 – an increase of 40 percent over 2017.  And we dramatically expanded those Strike Forces in 2018, establishing new teams to concentrate on health care fraud and opioid cases in 12 federal districts, including in Philadelphia, Newark, NJ, and all across the Appalachian region.

As the numbers suggest, we remain steadfastly focused on holding culpable individuals accountable – which I think everyone understands is the most effective deterrent to corporate crime.  At the same time, however, we have also remained steadfast in our efforts to hold corporations accountable whenever the conduct warrants an entity-level resolution.

In fact, just this week, Mobile TeleSystems PJSC, or MTS, the largest mobile telecommunications company in Russia, entered into a deferred prosecution agreement with the Department in connection with FCPA violations in Uzbekistan.  The case involved an elaborate scheme with a staggering $865 million in bribe payments -- nearly 2 percent of Uzbekistan’s gross domestic product -- to a former Uzbek official.  The bribes were designed to secure the official’s assistance in the company’s entry into Uzbekistan’s telecommunications market.  As part of the agreement, the companies agreed to pay a combined penalty of $850 million.  MTS agreed to a three-year monitorship.  MTS’s wholly owned Uzbek subsidiary entered a guilty plea to conspiracy to violate the FCPA’s anti-bribery and books and records provisions.  And we announced charges against two individuals, the former Uzbek official and the former CEO of another MTS subsidiary.

The Department’s white-collar prosecutions and resolutions should send an unmistakable message to the private sector:  We are serious about fighting corporate fraud and corruption, and we are serious about doing so through resolutions that are fair and effective. 

That means, as an initial matter, that we aim to be as transparent and consistent as possible about the criteria we apply in exercising our prosecutorial discretion.  We strive to be open books about which factors we find aggravating, which we find mitigating, and how each is penalized, credited, and ultimately weighed.  It also means, more fundamentally, that we want to convey to companies the right incentives for responsible corporate behavior.  We want to avoid penalties imposed for penalties’ sake.  If a company faces other civil or foreign penalties for the same misconduct, we will apply our “anti-piling on” policy to reduce or apportion financial fines, forfeitures, and restitution between authorities to ensure that the overall outcome is equitable and just.  We also will avoid penalties that disproportionately punish innocent employees, shareholders, customers, and other stakeholders. 

Each of these guiding principles helps ensure that companies and their advisors, with better visibility into our decision-making process, can make their own well-informed decisions going forward.

Of course, the Department conveys its approach to white-collar and corporate enforcement not simply through the cases that we prosecute, but also the cases we agree not to prosecute.  The Department’s FCPA Corporate Enforcement Policy is at the forefront of this effort.  The Policy lays out in plain terms how we assess FCPA violations based on our evaluation of specific actions taken by a company in the face of misconduct. 

By formalizing and memorializing the Department’s declination criteria in the Justice Manual, the policy conveys to both prosecutors and the public that we will reward companies that act responsibly upon uncovering criminal misconduct.

As many of you well know, the Corporate Enforcement Policy details the standards for what constitutes voluntary self-disclosure, full cooperation, and timely remediation, providing for a presumption of a declination when a company meets these conditions.  It lays out various aggravating circumstances that could potentially overcome that presumption.  And it details reductions to fines that prosecutors should apply if aggravating circumstances call for a criminal resolution with a company that has voluntarily self-disclosed. 

At bottom, the policy fosters transparency about when credit is due, and how we will award that credit.  With that information, companies and their officers will be better equipped to engage in rational decision-making about the steps they should take to qualify for a declination. 

At the end of the day, companies that voluntarily self-disclose, take steps to prevent misconduct through robust compliance programs, and take appropriate remedial steps when misconduct is detected should know that they will get a fair shake from the Department.

To further promote transparency, we have made publicly available all of our case declinations to date under the FCPA Corporate Enforcement Policy.  There currently are 12 declination letters published on the Department’s website.  Each sheds additional light on how we apply the Corporate Enforcement Policy to different facts and circumstances and the determinative factors in our resolution. 

The most recent of those 12 letters involves our decision just last month to not prosecute Cognizant Technology Solutions Corporation, a publicly traded Fortune 200 company, for FCPA violations.  Certain high-level employees and agents of Cognizant allegedly participated in a scheme through which they authorized a third-party construction company to pay approximately $2 million in bribes to Indian officials for help in securing a planning permit relating to an office park project.  Notwithstanding the fact that the misconduct reached the highest levels of the company, we declined prosecution.  And we have made it clear why:  The company voluntarily self-disclosed the conduct within two weeks of when the company’s board learned of it.  As a result, the Department was able to identify the culpable individuals – and indeed, we have announced charges against the former president and the former chief legal officer of the company for their alleged involvement in the scheme. 

Our declination letter also noted, among other factors in the declination: the thoroughness of the company’s internal investigation; the proactive and ongoing nature of its cooperation with the government in investigations and prosecutions; the effectiveness of its preexisting compliance program; and the company’s willingness to fully remediate and disgorge its entire cost savings from the bribery. 

A declination letter from this past August provides another reference point.  We declined prosecution in the case of the Insurance Corporation of Barbados Limited, or ICBL, despite the involvement of high-level executives in a scheme to bribe a Barbadian government official in exchange for insurance contracts.  We reached that decision based, in part, on the company’s voluntary disclosure, its significant remediation efforts, including the termination of all employees involved, its cooperation with our investigation, and its implementation of an enhanced compliance program and more robust internal accounting controls.  And the Department pursued individual accountability, charging two of the company’s senior executives, as well as a former Barbadian official.

These two cases make clear that aggravating factors like high-level executive involvement in the misconduct will not necessarily preclude a declination when the company’s actions are otherwise exemplary. 

To be sure, publishing our declination policy and letters in the Justice Manual and on our website addresses just part of the broader challenge of transparency. 

It is also critical that we periodically take stock of our policies themselves.  We need to ensure that our policies are clear, comprehensive, and up to date.  And ensuring that our policies provide the right message and the right mix of incentives involves an ongoing process of refinement and reassessment.

To that end, last October, I updated a Criminal Division guidance memorandum from 2009 on the selection of corporate monitors.  We sought to update the preexisting monitorship policy to provide more guidance about the factors that will prompt the appointment of a monitor in the first place, including how to weigh the benefits and costs of a potential monitorship, and to clarify details about the selection process and scope of monitorships.  Similarly, we are currently in the process of updating the FCPA Corporate Enforcement Policy to bring it in line with current practice. 

As members of my leadership team announced over the past year, the Department now extends the principles of the Corporate Enforcement Policy to situations where misconduct is uncovered through due diligence in the context of a merger or acquisition, or, in appropriate instances, through post-acquisition audits or compliance integration efforts.  Applying the policy to the M&A context avoids chilling acquisition activity by law-abiding companies, who might otherwise walk away from worthwhile investments due to the risk of FCPA enforcement. 

After all, we want law-abiding companies with strong compliance cultures to be willing to make these kinds of acquisitions.  Put another way, we don’t want the good corporate actors to cede the field to higher-risk entities that may only perpetuate illegal conduct.

The new policy also makes clear that, in appropriate cases where the acquired entity presents aggravating circumstances – such as when the acquired entity’s past leadership was complicit in corruption, but has since been purged by the acquirer – a disclosing company may still receive a declination.  All this is consistent with our broader objectives of rewarding companies that voluntarily self-disclose and promptly remediate after learning of misconduct. 

And because the only written guidance relating to this issue was contained in the non-binding DOJ/SEC Resource Guide to the FCPA, which was released in 2012, we are working to ensure that our current practice is reflected in the Corporate Enforcement Policy itself.

Additionally, in the coming months, the Criminal Division will host the first of what I anticipate will be an annual training program for white-collar prosecutors, with a focus on how we, as prosecutors, will evaluate the effectiveness of corporate compliance programs.  Training is, of course, step one in any effort to promote consistency in the exercise of prosecutorial discretion. 

Before we can credibly speak of conveying predictable guiding principles to the private sector, we need prosecutors on the same page themselves.  Getting prosecutors across the country in one room to reflect on recent key resolutions and walk through emerging challenges in compliance will help educate our trial attorneys on the guiding principles by which we will pursue or not pursue corporate charges.

At the end of the day, we at the Department of Justice are deeply mindful of our role in ensuring greater transparency in corporate enforcement, and the impact that has in the corporate community.  Given my own past experience, I’d venture to guess that most, if not all of you, in the room today have had a client ask some version of the following question in the course of a DOJ-facing matter: “How do you think the Department will react if we do X?”  Believe it or not, we want to help enable you to better answer those questions with greater confidence and greater credibility.  It is in our own interest to do so.

Exercises of prosecutorial discretion are never formulaic.  But with more established markers by which both prosecutors and the private sector can conform their actions, we can expand the extent to which government and industry find themselves aligned and working toward the same ends, rather than against each other.

After all, companies are, in many ways, the first line of defense against corporate misconduct.  Working with many of you, companies are best equipped and best positioned to evaluate risk and implement measures to prevent corporate misconduct before it occurs. 

And when companies are incentivized to avert at the front end – through effective internal controls and compliance programs – the very violations that we would have to prosecute at the back end, that inures to the benefit of both government and industry. 

We have mutual interests in seeing corporate misconduct fairly and effectively deterred and redressed.  And at the Department of Justice, we will continue to do our part to advance those mutual interests.

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