November 03, 2022
Since his election, President Joe Biden has loudly reaffirmed U.S. ambitions in the fight against global corruption, domestically and abroad.
Thus, in June 2021 the “Biden memorandum” declared the fight against corruption a “core U.S. national security interest.” Last December, the U.S. issued its first Strategy on Countering Corruption indicating one of its strategic objectives of the U.S. resolve is to “increase its focus on the transnational aspects of corruption.”
More recently, the United States indicated in its National Security Strategy that it “will elevate and expand the scale of diplomatic engagement and foreign assistance, including by enhancing partner governments’ capacities to fight corruption in cooperation with U.S. law enforcement authorities and bolstering the prevention and oversight capacities of willing governments.”[1]
This increased focus on the fight against corruption has also led to the issuance of more operational guidance designed to translate these policies into concrete actions:
These documents reaffirm the U.S. government’s commitment to fighting corporate crime by prosecuting companies, as well as executives and other individuals, involved in illegal activities.[5]
This client alert is specifically designed for the benefit of non-U.S. companies and complements a previous client alert.[6] Indeed, while the Department of Justice (“DOJ”) guidance is applicable to all companies (I), certain points are worth noting for non-U.S. companies (II).
In its latest guidance, the DOJ emphasized the importance of incentivizing companies to voluntarily self-disclose corporate misconduct to the DOJ on a timely basis. Under the new policy, all DOJ components are required to adopt policies setting forth the potential benefits that a company may receive for timely voluntary self-disclosures, including the following:
The DOJ’s efforts to increase transparency for voluntary self-disclosures is commendable, but the policies still raise many questions for non-U.S. companies, which may face investigations by both their home jurisdiction and the United States, as well as other jurisdictions. How should a company weigh whether to disclose if more than one jurisdiction may investigate? Should they disclose to all potential jurisdictions? If they disclose to their home authority first will this be held against them?
In her recent announcement, the DAG restated the DOJ’s longstanding policy to focus on the prosecution of individuals. To support such prosecutions, the DOJ’s new policies increased the burden on what companies are required to do to receive cooperation credit. Specifically, for a company to receive any cooperation credit, it must do the following:
The DOJ thus now will not only expect more cooperation from companies, but will also expect it to be provided on a faster basis. Non-U.S. companies should understand how these increased expectations may apply in making the decision whether to cooperate.
The latest Monaco Memorandum requires prosecutors to do all they can to conclude investigations into individual misconduct either before or simultaneously with resolving allegations of wrongdoing against the corporation. Prosecutors seeking to resolve corporate cases before concluding investigations of individuals will be required to submit a memorandum that identifies all potentially culpable individuals, details any remaining investigative steps, and describes a plan to resolve the matter within the applicable statute of limitations period.
The impact of this guidance on investigations targeting non-U.S. companies remains to be seen, but it appears that U.S. prosecutors will be under pressure to adopt a more aggressive stance with respect to individual targets, including non-U.S. ones. In addition, we can expect U.S. prosecutors to take other steps to prioritize individual prosecutions, including increasing their formal and informal cooperation with foreign authorities in order to conclude their investigations in a timely fashion. It should be noted that charges against non-U.S. individual defendants may not be announced at the same time as a corporate resolution, as U.S. prosecutors will often keep charges under seal to avoid tipping off the defendants.
The DOJ made clear in its two memoranda that the determination of whether the company’s compliance program is adequate and effective requires a detailed review. In that context, the involvement of personnel at different levels of the company in the misconduct may be an indication of a failure in the company’s compliance program.
The compliance program will be analyzed in particular with regard to the level of effectiveness of the activity and the specificities of the company, the prosecuting authority, and the resources granted to the compliance officer.
In this context, the DOJ will look at whether:[7]
Within this general context three points are worth noting for non-U.S. companies.
First, the last bullet point above is particularly impactful for non-U.S. companies. Indeed, employees at many non-U.S. companies use third-party applications like WhatsApp or Signal to conduct business communications. Because such data may not be preserved, the DOJ expects companies to adopt compliance policies to ensure that it will be able to preserve and collect business communications, and to later produce such materials in the event of a DOJ investigation. The failure to do so may result in not only a finding that the company’s compliance program is not fully effective, but also a reduction in cooperation credit.
However, the DOJ’s expectations may run counter to the fact that home countries of non-U.S. companies may have strict privacy rules that restrict access to personal devices even if used for professional purposes. For example, a French 2019 ruling of the highest court (Cour de Cassation), concerning MSN Messenger indicates that if the employee uses a professional account, then the employer can access the messages except those identified as personal. On the other hand, if the message comes from a personal e-mail account, it is covered by the secrecy of correspondence. The means of access to the server (professional computer or smartphone) has no impact on the reasoning. In that case the MSN Messenger application was installed via the personal mail and not the professional mail of the employee. As a number of companies have a Bring Your Own Device policy, in particular with respect to smartphones, it may be difficult to access materials on those devices.
Second, in its October 2021 memorandum the DOJ indicated that for companies entering into resolutions with the DOJ, it would/could require compliance officers to certify that their compliance program was reasonably designed to prevent violations of anti-bribery laws. This has been applied once in a particular case.
This begs at least two questions for non-U.S. companies:
Third, the latest Monaco memorandum puts the accent on the need for compensation systems to be “crafted in a way that allows retroactive discipline, including through the use of claw back measures, partial escrowing of compensation, or equivalent arrangements.” However, national legislations may differ considerably on what the employer is allowed to do or not against employees or former employees even in the context of a disciplinary action.
The DAG in her September 2022 Memorandum indicated that further guidance is expected by the end of the year on this area, in particular on “how to shift the burden of corporate financial penalties away from shareholders—who in many cases do not have a role in misconduct—onto those more directly responsible.” It will be interesting to see if this further guidance will be adaptable to non-U.S. companies.
The September 2022 Memorandum has introduced helpful clarity on the imposition of monitors. The DAG made clear that prosecutors would not apply a presumption either in favor or against a monitor but would consider a non-exhaustive list of ten factors when evaluating the necessity and potential benefits of a monitor.
To be noted is factor 10, which provides that the U.S. prosecutors should consider “whether and to what extent the corporation is subject to oversight from industry regulators or a monitor imposed by another domestic or foreign enforcement authority or regulator.”
Indeed, designation of monitors for non-U.S. companies is always a delicate exercise and has led in one case in the past to a designation of two monitors (the Petrobras case) which is not what any company would wish for.
Among the various points outlined in the various guidance issued since 2020, some of them are of particular interest to non-U.S. companies as they are directly related to foreign jurisdiction or foreign laws.
The DOJ has announced that it will take into account the history of all misconduct previously committed by the company. The DOJ will not only take into account similar offenses that may have been committed previously by the company, but all of the offenses, whether criminal, civil, or regulatory, and whether the resolution is with U.S. or foreign authorities. In this context the DOJ will focus on those committed:
This includes any such actions against the target company’s parent, divisions, affiliates, subsidiaries, and other entities within the corporate family.
In subsequent public meetings DOJ officials have recognized that U.S. resolutions would, in principle, be given a greater weight than foreign ones, but also stressed that a non-U.S. company faced with a record of similar offences in countries outside the U.S. could still face heavier penalties and is unlikely to be able to benefit from receiving a non-guilty plea resolution, i.e., a DPA or NPA.
A practical difficulty, however, may arise from the fact that non U.S. countries may have different standards for liability. For example, in some countries a violation of antitrust provision may be a criminal an offense in others it may be civil/regulatory/administrative. The other difficulty relates to the robustness of the rule of law in the country that sanctioned the company. In a case where a company has been convicted in a country with a weak rule of law what weight should be given to such ruling?
The DOJ reserves its right to investigate and prosecute an individual who is also being investigated abroad.
The Memorandum of 15 September 2022 gives 3 criteria that prosecutors should consider to determine whether an individual is subject to effective prosecution in another jurisdiction, namely:
By relying on these criteria, the DAG made it clear that an individual simply facing the risk of prosecution abroad will not be enough to deter a DOJ prosecution. Instead, the memorandum expressly states that “prosecutors should not be deterred from pursuing charges just because an individual liable for corporate crime is located outside the United States”.
As a practical matter, in many cases, the DOJ will work with its international criminal enforcement partners to decide which agencies will take the lead on the prosecution of specific individuals. The DOJ does not, however, have such open lines of communication with all foreign law enforcement agencies. Thus, while these clarifications are welcome, in such cases, the question remains open on how the DOJ would make those determinations.
In addition to the various elements highlighted above, two points are worth noting:
In practice this means that:
Thus, despite the restriction imposed by the foreign national law, a company is expected to find a legal way to “navigate” such restrictions(s) in order to produce the requested documents. This can be particularly challenging for European-based companies (under GDPR and blocking statutes).
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In conclusion, the overall policy message sent by the U.S. authorities to the rest of the world can be distilled as follows:
In practical terms, non-U.S. companies are strongly invited to:
[1] United States Strategy on Countering Corruption—pursuant to the national security study memorandum on establishing the fight against corruption as a core united states national security interest—December 2021 (available here).
[4] Memorandum of 15 September 2022, Lisa Monaco (available here); press conference of 15 September 2022 (available here).
[5] Reaffirmed during Loretta Lynch’s speech at the University of Lausanne on October 3, 2022.