On May 9, 2018, Deputy Attorney General Rod J. Rosenstein introduced a new Department of Justice (DOJ) Policy on Coordination of Corporate Resolution Penalties (the Policy) while speaking at the New York City Bar White Collar Crime Institute. Rosenstein reiterated the DOJ’s commitment to “reinforcing its relationships with good corporate citizens” and explained that the Policy aimed to “discourage disproportionate enforcement of laws by multiple authorities”—what Rosenstein referred to as “piling on.”
As explained by Rosenstein, “[i]n highly regulated industries, a company may be accountable to multiple regulatory bodies. That creates a risk of repeated punishments that may exceed what is necessary to rectify the harm and deter future violations.” And this piling on can, in turn, “deprive a company of the benefits of certainty and finality ordinarily available through a full and final settlement.”
To address these concerns, the Policy, which is now included in the U.S. Attorneys’ Manual at § 1-12.100, sets out four basic principles:
- “Department attorneys should remain mindful of their ethical obligation not to use criminal enforcement authority unfairly to extract, or to attempt to extract, additional civil or administrative monetary payments.” Noting that this was not a change, Rosenstein explained that this was a reminder of, and a commitment to, the DOJ’s existing policy that it “should not employ the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case.”
- Where multiple DOJ components are investigating a company for the same conduct, “Department attorneys should coordinate with one another to avoid the unnecessary imposition of duplicative fines, penalties, and/or forfeiture against the company,” with the “goal of achieving an equitable result.”
- The DOJ “should also endeavor, as appropriate, to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct.”
- The Policy identifies factors the DOJ should consider in “determining whether coordination and apportionment between Department components and with other enforcement authorities allows the interests of justice to be fully vindicated.” These factors include, but are not limited to, “the egregiousness of a company’s misconduct; statutory mandates regarding penalties, fines, and/or forfeitures; the risk of unwarranted delay in achieving a final resolution; and the adequacy and timeliness of a company’s disclosures and its cooperation with the Department.”
Despite the emphasis on reducing duplicative penalties, Rosenstein noted that “[s]ometimes, penalties that may appear duplicative really are essential to achieve justice and protect the public,” in which case the DOJ “will not hesitate to pursue complete remedies, and to assist [their] law enforcement partners in doing the same.”1 Rosenstein also warned that “[c]ooperating with a different agency or a foreign government is not a substitute for cooperating with the [DOJ],” and the DOJ “will not look kindly on companies that come to the [DOJ] only after making inadequate disclosures to secure lenient penalties with other agencies or foreign governments.”2
In addition to announcing the new Policy, Rosenstein highlighted the establishment of a new DOJ Working Group on Corporate Enforcement and Accountability (the Working Group). The Working Group includes members of the DOJ, the FBI, and the US Attorney’s offices and “will make internal recommendations about white collar crime, corporate compliance, and related issues.”3 The Working Group aims to improve the deterrence impact of DOJ actions by “promot[ing] consistency in [their] white collar efforts.”4 Rosenstein concluded, “When we are serious about wanting people to follow the law, it does no good merely to post a sign. We need to make clear our intent to enforce the law, with sufficient vigor that people fear the consequences of violating it.”5
Significantly, the focus on deterrence dovetails with the DOJ’s pronouncements over recent years, and particularly in the current administration, of focusing on charging and punishing individual wrongdoers. Rosenstein specifically noted that the increased coordination with other enforcement bodies under the Policy “will help [the DOJ] to identify culpable individuals and hold them accountable,” adding that the Department “will seek appropriate corporate penalties when justified . . . . But the primary question should be, ‘Who made the decision to set the company on a course of criminal conduct?’”
The new Policy addresses a growing problem that we and others have identified particularly in the area of Foreign Corrupt Practices Act (FCPA) enforcement.6 Increasingly, anti-corruption enforcement involves cooperation and information-sharing among governments, as well as between US state, federal, and local enforcement agencies. As multiple global enforcement bodies coordinate and share information, companies also have faced multiple, and often duplicative, penalties in numerous jurisdictions.
For example, in 2008, Siemens AG (Siemens), along with three subsidiaries, settled bribery investigations by the DOJ and the Securities and Exchange Commission (SEC), paying a total of $800M ($450M in fines to the DOJ and $350M in disgorgement to the SEC). In the same year, Siemens paid an additional $569M to settle bribery charges by German regulators. And then, over the next five years, Siemens resolved additional actions by the World Bank ($100M), the Nigerian EFCC ($46.5M), Greek authorities (€270M), and the Swiss Federal Prosecutors Office ($75.6M).7 A similar example of multiple penalties across various jurisdictions was the prosecution of Alstom S.A. (Alstom), a French power and transportation company, and its Swiss subsidiary, Alstom Network Schweiz AG (Alstom Network).8 In 2011, the Swiss Office of the Attorney General punished Alstom Network for failing to prevent the payment of bribes to foreign public officials in Latvia, Malaysia, and Tunisia, fining Alstom 2.5M Swiss francs along with a compensatory penalty of 36.4M Swiss francs.9 Then, in 2012, Alstom Network and another Alstom subsidiary, Alstom Hydro France, entered a resolution agreement with the World Bank which included a restitution payment of $9.5M for bribing a Zambian government official.10 Finally, in 2015, Alstom and Alstom Network pleaded guilty to charges by US authorities, agreeing to pay a $772M criminal fine in connection with widespread bribery in Indonesia, Egypt, Saudi Arabia, the Bahamas, and Taiwan.11
More recently, it appears the DOJ has been moving in the direction of the Policy by crediting companies for penalties paid in other jurisdictions, while reserving the right to collect the full penalty in the United States if the amount was not collected by the foreign jurisdiction. For example, in September 2017, the DOJ announced a resolution with a Stockholm-based international telecommunications company, Telia Company AB (Telia), which constituted one of the largest settlements ever, totaling $965M.12 As part of its Deferred Prosecution Agreement (DPA) with the DOJ, Telia agreed to pay a total monetary penalty of over $548.6M.13 However, the DOJ agreed to offset up to $274M of that penalty for any penalties paid to Dutch authorities in connection with Telia’s potential criminal prosecution in the Netherlands.14 Similarly, in December 2017, the DOJ resolved an FCPA investigation with Keppel Offshore & Marine Ltd (Keppel), a Singapore-based company, in coordination with Singapore and Brazilian authorities.15 As part of its DPA with the DOJ, Keppel agreed to pay a total monetary penalty of over $422M.16 The DOJ agreed, however, that this amount would be offset by up to $211.1M for any amount paid to Brazilian authorities and up to $105.6M for any amount paid to Singaporean authorities in connection with parallel enforcement actions.17
Although increased cooperation and information sharing enables law enforcement to more effectively police anti-corruption laws, it also increases the risk of over-deterrence. Where a company is simultaneously investigated by multiple authorities for similar misconduct, each authority is likely empowered to impose sanctions at least sufficient to deter the behavior. Thus, if the authorities independently impose their full range of sanctions for any particular misconduct, the likely result is to overly punish the company from a deterrence perspective. In addition to being unfair, this overdeterrence is an inefficient use of law enforcement resources and may chill otherwise societally optimal business decisions. The Policy, following some recent coordinated resolutions, seems to be a step in the right direction.
Interestingly, the most frequent area of duplicative penalties in FCPA cases comes from the two US enforcement authorities that enforce the statute—the DOJ and the SEC. Both authorities have jurisdiction to enforce the statute, and it has been common over the years for both to impose penalties, often for identical conduct. Indeed, even in cases where the DOJ has coordinated with foreign authorities and essentially divided up the penalties, the SEC has also collected penalties in the very same cases. For example, in Telia, where the DOJ imposed $548.6M in penalties, agreeing to offset up to $274M of that for any criminal penalties paid to Dutch authorities, the SEC resolved a parallel investigation into the same conduct by Telia, requiring additional disgorgement of $457M, of which only $40M was offset by the DOJ penalty.18 Similarly, in 2016, the DOJ and SEC simultaneously resolved investigations into Braskem S.A. (Braskem), a Brazilian petrochemical company, for corrupt payments “in countries on three continents.”19 As part of its resolution with the DOJ, Braskem pleaded guilty and agreed to a total criminal penalty of $632M, which included penalties paid to Brazilian and Swiss authorities.20 At the same time, Braskem agreed to disgorge $325M as part of its resolution with the SEC, part of which was disgorged to Brazilian authorities.21
Granted, in both Telia and Braskem, as is typically the case, the monetary portion of the DOJ’s resolution was based on criminal fines while the SEC’s was labeled disgorgement, and the SEC did not assess an additional civil penalty where a criminal fine had been imposed.22 This arrangement, however, does not entirely resolve the concern of piling on. For example, both the DOJ’s calculations of criminal fines under the Sentencing Guidelines and the SEC’s calculation of disgorgement depend, in part, on the pecuniary gain defendants received from their misconduct;23 indeed, the Supreme Court recently announced that SEC disgorgement is essentially simply a penalty.24 As such, defendants simultaneously resolving parallel investigations with the SEC and the DOJ face duplicative financial penalties arising from the same conduct.
The Policy directs that the DOJ should coordinate with other US authorities in addition to foreign authorities. It will perhaps be most interesting to see if the DOJ is able to rein in the “piling on” that has been happening even in solely US cases for decades. Like the DOJ’s recent FCPA Corporate Enforcement Policy, these polices, while well intentioned, only control the DOJ. Whether other enforcement bodies in the United States and abroad follow the DOJ’s lead remains to be seen.