Tag: CEP

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Innovation in Compliance

Innovation in Compliance – Insights on FCPA and Anti-Corruption Enforcement Trends with Anik Shah

Innovation touches every part of the modern enterprise, and compliance professionals must be prepared not only to respond to change but to lead through it. Join Tom Fox, the Voice of Compliance, as he visits with top innovative minds, thinkers, and creators on the award-winning Innovation in Compliance podcast. In this episode, host Tom Fox welcomes Anik Shah, Global Director of Anti-Bribery and Anti-Corruption Compliance at Sandisk, for an insightful discussion on the pivotal shifts in FCPA enforcement during 2025 and what they signal for 2026.

Shah outlines his extensive professional background, including his prior roles at the SEC and DOJ. The conversation explores key developments from 2025, including the Executive Order pausing certain FCPA investigations, the Blanche Memo’s four criteria for opening FCPA cases, and the implications of revisions to the Corporate Enforcement Policy. He also analyzes the Communications Cellular enforcement action to highlight practical compliance lessons, focusing on strengthening AML controls, managing third-party risk, and deploying proactive compliance measures amid renewed anti-corruption scrutiny.

The episode concludes with a forward-looking discussion of emerging anti-corruption risks associated with advanced AI technologies, large AI construction projects, and related permitting activities, both in the United States and globally. Shah offers strategic recommendations for compliance professionals seeking to anticipate and manage these evolving risks.

Key highlights:

• 2025 as a Pivotal Year in FCPA Enforcement

• The Blanche Memo and Corporate Enforcement Policy Revisions

• Anti-Money Laundering and Third-Party Risk Management

• Large AI Construction Projects and Permitting Risks

• Global Anti-Corruption Laws and Compliance

• Key Takeaways for 2026

Resources:

Anik Shah on LinkedIn 

Sandisk

Innovation in Compliance was recently honored as the Number 4 podcast in Risk Management by 1,000,000 Podcasts.

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FCPA Compliance Report

FCPA Compliance Report – Recent DOJ Policy Announcements

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. Today, Tom Fox welcomes back James Tillen and Ann Sultan, both partners at Miller & Chevalier, and takes a deep dive into four recent DOJ policy announcements: FCPA Enforcement, White-Collar Enforcement, Criminal Enforcement Policy, and the Whistleblower Pilot Program.

They take a deep dive into Deputy Attorney General Todd Blanche’s memo on Investigations and Enforcement of the FCPA, reviewing the stated main goals of the DOJ and how prosecutors are supposed to achieve these goals. They also consider three directives to prosecutors: focus on cases involving individual misconduct, proceed expeditiously, and consider the collateral consequences. They also examine the White Collar Plan and CEP and ask if we have shifted from a presumption of declination to a more tangible framework and conclude by reviewing what compliance professionals need to consider and investigate now.

Key highlights include:

  • How does the principle of “not attribute[ing] nonspecific malfeasance to corporate structures” impact potential prosecutions of companies and individuals?
  • And how do these priorities jive with other DOJ priorities, such as prosecuting cartels/transnational criminal organizations?
  • What does it mean for companies that the DOJ is prioritizing “serious misconduct”?
  • What are the implications of the DOJ’s stated intent to avoid penalizing “routine business practices in other nations”?
  • Do you see this as a shift in focus for the DOJ to non-US companies?
  • Other DOJ Priorities & Announcements
  • Policy Shifts and Clarifications
  • Looking Ahead: What’s on the Horizon

Resources:

FCPA Spring Review 2025 – Miller & Chevalier

DOJ Criminal Division White Collar Plan

Guidelines for Investigations and Enforcement of the FCPA

Tom Fox

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For more information on the use of AI in compliance programs, see Tom Fox’s new book, Upping Your Game. You can purchase a copy of the book on Amazon.com

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Blog

It’s a New Dawn – Compliance Monitors in 2025

In a move that should surprise no corporate compliance professional, the DOJ’s Criminal Division issued a new Memo on May 12, 2025, updating and clarifying its policies on the selection, imposition, and oversight of compliance monitors in corporate resolutions. (Herein the ‘Monitor Memo.’) This new guidance refreshes prior directives (including the foundational Morford Memo) and lays out how monitorships should be assessed, tailored, and executed in granular detail. I want to end my short series on the DOJ’s announcement of changes in white-collar enforcement by reviewing the changes to monitor selection and monitorships going forward and then considering what this means for compliance professionals. As Grace Slick said when Jefferson Airplane hit the stage at Woodstock on the morning of Day 2, “It’s a new dawn.”

I. Monitors: Precision Tools

First, the DOJ clarifies that monitorship should not be used for punitive purposes. Instead, they aim to ensure that a company meaningfully implements compliance reforms and reduces the risk of future misconduct. However, the DOJ also recognizes that monitors can be costly and intrusive. Hence, their use must be carefully calibrated. The core principle of the Monitor Memo is that monitors should be imposed only when necessary, and their scope should be tailored to the misconduct and the company’s risk profile.

The Criminal Division lays out four key factors for when a monitor may be appropriate:

  1. Risk of Recurrence. If the underlying misconduct is serious—think sanctions violations, FCPA infractions, healthcare fraud, or cartel facilitation—and has national or international implications, the risk of recurrence will weigh heavily in favor of a monitorship.
  2. Other Oversight. If another regulator (domestic or foreign) is already effectively overseeing compliance, the DOJ might hold back on appointing a monitor. But if your company committed crimes despite existing oversight, that fact will support the need for one.
  3. Compliance Program & Culture. If your company has revamped its program, replaced bad actors, and created a credible culture of compliance, that cuts against the need for a monitor. But if your program is underdeveloped, window dressing won’t suffice.
  4. Control Maturity & Self-Monitoring Capacity. Have you tested your controls? Have they been in place long enough to prove they work? Can you test, update, and scale your compliance framework internally? If yes, you may avoid a monitor. If not, start preparing now.

The DOJ’s memo drives home one central theme: fit matters. The DOJ wants focused, cost-conscious, collaborative monitorships, from budget caps to biannual meetings.

Here’s what that looks like (at this point):

  • Budget Caps: Monitors must submit a detailed budget, subject to DOJ approval, at the outset of their work. Rate caps and cost estimates must be justified, updated before each review phase, and strictly adhered to.
  • Tri-Partite Meetings: At least twice a year, the monitor, the company, and the DOJ must meet to align goals, address concerns, and ensure transparency. These are not performative check-ins; they are designed to keep all parties rowing in the same direction.
  • Collaboration over Confrontation: The DOJ is encouraging a cultural shift. Monitorships should be approached as mutual partnerships, not hostile audits. Companies have a voice; explaining operational constraints or challenging unnecessary actions is not a red flag.

The selection of a monitor should not be a backroom deal. As a monitorship is a multilayered and often multiyear process, the selection process should be designed to ensure integrity, independence, and credibility. The Monitor Memo sets out a new and transparent process.

  1. Company Nominates: The company proposes 3–5 candidates with no recent ties to the organization and compliance and independence certifications.
  2. DOJ Interviews and Evaluations: Prosecutors and section supervisors interview each candidate, assessing their qualifications, objectivity, cost-efficiency, and experience.
  3. Standing Committee Review: A special committee, including ethics officials, reviews the DOJ’s recommended candidate and must approve before the pick moves to the Assistant Attorney General (AAG).
  4. Final Approval: The AAG reviews the recommendation and sends it to the Office of the Deputy Attorney General (ODAG), which gives the final stamp of approval.

In short, this is a deliberate, transparent process. If the DOJ rejects a candidate or the entire slate, the company must resubmit promptly.

The DOJ’s 2025 memorandum reflects an evolution in how federal prosecutors see compliance monitors: not just as watchdogs but as facilitators of lasting cultural change. For the corporate compliance community, this is a clarifying moment. The DOJ isn’t out to punish companies for punishment’s sake. It offers your compliance regime a chance to prove that your organization’s compliance house is in order and that your company can keep it that way without someone watching over your shoulder.

II. Lessons for the Compliance Professional

Taken in conjunction with the Galotti Memo, revised CEP, and Galeotti Speech, what should compliance leaders be doing today?

  • Bolster Your Program Now

The most effective way to avoid the imposition of a monitor and indeed receive a full Declination is to have a robust, tested, and risk-aligned compliance program already in place when misconduct is discovered, or better yet, before it occurs. If your program is reactive, overly general, or untested, it signals to the DOJ that you may need outside help. But suppose you can demonstrate that your program has been implemented thoughtfully, customized to your company’s risk profile, and embedded into business operations. In that case, you are far more likely to avoid a monitor. That means (1) documenting not only your policies and procedures; (2) showing how they are communicated, enforced, and regularly improved; (3) that your internal controls are more than words on paper; they are working in practice; and (4) continuous improvement through regular testing, third-party evaluations, and board-level oversight.

  • Document Everything

In compliance, if it is not documented, it did not happen. This mantra has never been more important than in the post-resolution environment. The DOJ’s refocused CEP and changes to monitorship decisions underscore the need for companies to contemporaneously and comprehensively document all remediation efforts, disciplinary actions, training rollouts, and policy changes. If your company responds to misconduct with serious reforms, but you do not have the paper trail to back it up, prosecutors may assume those reforms are temporary, superficial, or nonexistent. That is a recipe for a monitor.

  • Engage Experts

One of the clearest signals a company can send to the DOJ about its seriousness in addressing misconduct is proactively engaging third-party experts before the government forces its hand. The revised CEP and Monitor Memo recognizes that a company’s voluntary use of outside compliance consultants, forensic auditors, or legal advisors can reduce or even eliminate the need for a monitor. These experts provide an independent lens, help benchmark your program against industry standards, and identify gaps before they become systemic failures. The bottom line is not to wait for the government to tell you to bring in expertise. Be proactive. Be smart. Be credible.

  • Prove Your Culture Has Changed

Culture is the bedrock of compliance, and the DOJ knows it. The revised CEP and Monitor Memo encourage prosecutors to consider whether a company’s leadership and culture differ meaningfully from those that allowed the misconduct to occur. This creates a critical opportunity for compliance professionals to prove that their house has been cleaned and remodeled. It means demonstrable metrics, employee survey data, speak-up culture indicators, training completion rates, or reduction in hotline-related retaliation claims that show your culture is becoming one of integrity and accountability. Suppose you can show that employees now report misconduct earlier, that internal investigations are handled more fairly, and that ethical conduct is rewarded. In that case, your company is more likely to argue that external supervision is no longer necessary, even if a full Declination is not warranted. Cultural change takes time, but in the eyes of the DOJ, it is one of the most persuasive indicators of whether your organization has truly moved on from its past.

  • Prepare for Monitoring Anyway

If your company believes it will avoid a monitorship, prepare as if one is coming. Pressure tests your program and creates a remediation roadmap aligning with DOJ expectations. Be ready to show how your company has made significant progress. Preparing for a monitor also forces your team to adopt a monitor’s mindset: testing controls, tracking effectiveness, documenting improvements, and coordinating with business units. It’s a rigorous, forward-leaning exercise that will strengthen your compliance program, even if the monitor never arrives. Remember, the DOJ is not just interested in what you say your organization will do; it is watching what you have already done. Preparation shows maturity. And if the monitor is ultimately imposed, you can hit the ground running with a partner who views you as ready, willing, and able, not reluctant or reactive.

The bottom line from these new DOJ pronouncements is that compliance can be cleaned up, and then full walking papers for FCPA or other white-collar crime incidents that your organization may have sustained can be obtained. Now is the time to take advantage of the DOJ’s incredibly pro-business approach. If your senior management harks back to the Executive Order suspending FCPA investigation and enforcement, tell them that the DOJ has lifted the suspension.

Resources:

CRM White Collar Enforcement Plan

Revised CEP

CRM Monitor Memo

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Blog

The Updated CEP: Is Real Credit Finally Here?

Matthew R. Galeotti, Head of the Criminal Division at the U.S. Department of Justice (DOJ), recently delivered a speech at SIFMA’s Anti-Money Laundering and Financial Crimes Conference. Contemporaneously, the DOJ issued a Memo (the Galeotti Memo) entitled Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime. I have explored both in previous blog posts. Today, I want to review the Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) updates. It provides a roadmap for how companies can earn leniency when they self-report wrongdoing. And in an increasingly unforgiving regulatory landscape, that roadmap is worth its weight in gold.

Under the CEP, a company that voluntarily self-discloses, fully cooperates, and timely remediates can qualify for a declination of prosecution, provided there are no aggravating circumstances. This is the reaffirmation of a multi-year DOJ effort to garner more self-disclosures. It gives compliance professionals something real to bring to the C-suite: if we invest in robust compliance and proactively address issues, we can avoid criminal prosecution altogether.

What if aggravating factors exist, such as senior-level involvement or prior misconduct? If the company cooperates and remediates in good faith, the policy still provides for reduced penalties, non-prosecution agreements, and shorter resolution terms. In other words, the DOJ offers a “near miss” safety net for companies that fall short of full eligibility but act responsibly.

The takeaway is clear: Compliance is not just a cost center but a value driver. The CEP recognizes that companies should be rewarded for coming forward, cooperating, and fixing problems. That means compliance professionals must build systems that detect misconduct early, encourage internal reporting, and enable swift action. When a crisis hits, your response will not just shape your company’s future; it may be the difference between a decline and a prosecution.

Voluntary Self-Disclosure

The DOJ’s Criminal Division strongly encourages companies to voluntarily self-disclose potential misconduct as early as possible, even before completing an internal investigation. To qualify under the CEP, a disclosure must meet several key criteria: it must be made to the Criminal Division (or in good faith to another DOJ component involved in the resolution), concern previously unknown misconduct, not be required by any existing legal obligation, and occur before any imminent threat of disclosure or government investigation arises. Additionally, the disclosure must be made within a “reasonably prompt” timeframe, with the company bearing the burden of proving timeliness.

The DOJ proposes a limited exception for the new Corporate Whistleblower Awards Pilot Program. Suppose a whistleblower reports misconduct internally and to the DOJ. In that case, a company may still qualify for the presumption of declination, but only if it self-discloses to the DOJ within 120 days of the internal report and meets all other voluntary disclosure conditions.

This guidance underscores the urgency and importance of real-time reporting mechanisms, strong internal controls, and rapid compliance response protocols. Timely self-disclosure is not just encouraged; it is now a strategic imperative in mitigating enforcement risk.

What is Full Cooperation?

To earn full cooperation credit under the CEP, a company must go beyond the general requirements of the Principles of Federal Prosecution of Business Organizations (Justice Manual 9-28.000) and meet six key obligations:

  1. Disclosure of All Relevant Facts: A company must share all non-privileged, relevant facts it knows, including facts about individuals responsible for the misconduct, regardless of their rank, whether internal or external to the company.
  2. Timely and Specific Information Sharing: This includes facts obtained through any internal investigation, updates during that investigation, and specific attributions of facts to sources. The company must also clearly identify all involved parties.
  3. Proactive Cooperation: Companies must voluntarily disclose relevant facts, even if prosecutors do not specifically request them. They are also expected to alert the DOJ to any avenues of obtaining evidence not in the company’s possession but known to them.
  4. Preservation and Disclosure of Documents: Relevant documents, including overseas ones, must be preserved, collected, and produced. Companies must detail such documents’ origin, custodians, and locations; facilitate third-party productions; and provide necessary translations. The company must prove the restriction if foreign law prevents disclosure and suggest viable alternatives.
  5. De-confliction: Companies must avoid actions that might interfere with DOJ investigations. If requested, they must delay certain investigative steps, such as employee interviews, for a narrowly tailored period to protect DOJ priorities.
  6. Availability of Individuals for Interviews: Subject to constitutional protections, companies must make current and former employees (including those overseas) available for DOJ interviews and facilitate third-party interviews where possible.

These standards ensure that cooperation is meaningful, timely, and valuable to the DOJ’s efforts, rewarding companies that truly support investigations with favorable outcomes under the CEP.

Timely and Appropriate Remediation

Under the CEP, timely and appropriate remediation is a non-negotiable component of earning cooperation credit and potentially avoiding prosecution. And for compliance professionals, it is a clarion call to action. First, the company must conduct a root cause analysis, a genuine examination of what went wrong, why, and how to prevent it from happening again. It’s not about blaming a few bad apples but addressing systemic issues that allowed the misconduct to take root. Did a cultural blind spot develop in a high-risk market? Was there a breakdown in oversight or a failure to escalate red flags? The DOJ expects thoughtful answers and corrective action.

Second, the company must demonstrate an effective compliance and ethics program tailored to its risk profile, business model, and resources. That means more than having policies on the books. DOJ evaluators are looking at leadership’s commitment, compliance’s access to the board, compensation tied to ethical performance, and real-time testing of program effectiveness. Box-checking won’t cut it.

Third, accountability is key. Companies must appropriately discipline wrongdoers, including those who failed in their supervisory duties, and ensure they retain and safeguard business records, including communications on personal devices and ephemeral apps.

Finally, remediation includes showing that the company understands the seriousness of the misconduct and is proactively reducing future risk. This is about culture, not cosmetics.

In short, remediation is proof of your values in action. It is the difference between performative compliance and real commitment. Suppose you’re building a credible compliance program in today’s enforcement environment. In that case, remediation must be embedded in your DNA because the DOJ is watching, and your organization’s future may depend on how you respond.

Providing Cooperation Credit

Finally, there is the cooperation credit. Hopefully, we have finally moved past the Kenneth Polite formulation of super, double-secret, undefined “we know it when we see it” cooperation. Cooperation credit here will be earned through demonstrable, high-quality, timely actions. Cooperation is assessed on a sliding scale based on how extensively and effectively a company supports the government’s investigation. Once a company meets the minimum threshold for cooperation, prosecutors evaluate factors such as scope, quantity, quality, timing, and the overall impact of the cooperation provided.

Importantly, cooperation credit starts at zero and increases only with meaningful contributions, and there is no presumption of full credit. The DOJ now distinguishes between cooperation levels by varying the starting point within the U.S. Sentencing Guidelines fine range, and the percentage of fine reduction awarded. Companies that delay cooperation may significantly reduce their potential credit.

Waiver of attorney-client privilege or work product protections is not required to receive cooperation credit. If a company claims its financial condition limits its ability to cooperate, it must provide supporting documentation. The DOJ will carefully evaluate any such claims. Ultimately, the message is clear: to earn meaningful credit, cooperation must be real, proactive, and sustained. But at least it is now defined and not “We know it when we see it.”

Resources:

CRM White Collar Enforcement Plan

Revised CEP

CRM Monitor Memo

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Daily Compliance News

Daily Compliance News: May 19, 2025, The Definition of Corruption Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen in to the Daily Compliance News—all from the Compliance Podcast Network. Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

Top stories include:

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Blog

Ten Top Lessons from Recent FCPA Settlements – Lesson No. 10, Getting to Self-Disclosure: Speak Up, Triage and Internal Investigation

Over this series, I have reviewed the messages communicated by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) from three key Foreign Corrupt Practices Act (FCPA) enforcement actions regarding their priorities in investigations, what they want to see in remediations, and what they consider best practices compliance programs. These enforcement actions warrant a close study of the lessons learned. They should guide not simply your actions should you find yourself in an investigation but also how you should think about priorities. One thing is abundantly clear: It all begins with self-disclosure.

The three FCPA enforcement actions we have reviewed are ABB from December 2022, Albemarle from November 2023, and SAP from January 2024. I added a fourth, the Gunvor S.A. enforcement action, as a discussion point, as it was released while I was writing this series. I have also cited several speeches by DOJ officials, including those from Deputy Attorney General Lisa Monaco and Assistant Attorney General Kenneth Polite. They pointed out a clear path for the company, which finds itself in an investigation, using extensive remediation to avoid monitoring. They provided insight for the compliance professional into what the DOJ expects in a best practices compliance program on an ongoing basis.

Late last week, there were two speeches at the ABA White Collar Conference: one by DAG Lisa Monaco and a second by Acting Assistant Attorney General Nicole M. Argentieri, which re-emphasized the points I have articulated. Today, I want to use their speeches to add another factor to my Top Ten Lessons List: a Speak Up Culture, effective triage, and quick, efficient, and accurate internal investigation when information is brought forward.

DAG Monaco could not have been clearer when she said, “When a business discovers that its employees broke the law, the company is far better off reporting the violation than waiting for DOJ to discover it. Now, when the DOJ does discover the violation, the company can still reduce its exposure by proactively cooperating in our investigation. But I want to be clear: no matter how good a company’s cooperation, a resolution will always be more favourable with voluntary self-disclosure.” [emphasis supplied]

DAG Monaco noted that the DOJ has structured its “Voluntary Self Disclosure (VSD) programs to encourage companies to take responsibility for misconduct within their organizations. And we’ve conditioned benefits on the company’s willingness to step up and own up — requiring it to disgorge profits, upgrade compliance systems, and cooperate in investigations of culpable employees…We want to empower them to make the business case for investing in compliance. And when they do, they can point to our policies. Early reports on this work are promising. We directed all components and U.S. Attorneys to implement self-disclosure programs.”

The benefits of the VSD come from this self-disclosure. The DOJ’s announcement that it was launching a whistleblower program for payments to people who come forward with information about criminal activity emphasised this idea even more. While the SEC, CFTC, IRS, and other agencies have whistleblower reward programs, this is a powerful message from the DOJ that if your company has an issue, it is far better to self-disclose than investigate, remediate, and hope the DOJ (or any other agency) never finds out about the matter. Put another way, Argentieri spoke about “the benefits that await those that voluntarily disclose misconduct.”

All of this means you must be able to intake, evaluate, and investigate the information.

Culture of Speak Up

Your organization must have an effective and efficient means of allowing employees to raise their hands and speak up. That speak-up can be through an anonymous hotline, by going into their supervisor’s office to report something, or by coming to the compliance function. Or it could be another avenue of reporting. The point is that every company must be ready, willing, and able to hear and act on internal reports of wrongdoing.

Triage

Given the number of ways that information about violations or potential violations can be communicated to government regulators, having a robust triage system is a critical way to separate the wheat from the chaff and bring the correct number of resources to bear on a compliance problem. One important area is determining whether to bring in outside counsel to head up an investigation and the resources you may want or need to commit to a problem. You need to “kick the tyres” of any allegations or information so that you know the circumstances in front of you before you make decisions. You can achieve this through a robust triage process.

Internal Investigations

You can decide whether or not to investigate by consulting with other groups, such as the Compliance Committee of the Board of Directors or the Legal Department. The head of the business unit in which the claim arose may also be notified that an allegation has been made and that the Compliance Department will be handling the matter on a go-forward basis. Using a detailed written procedure, you can ensure complete transparency on all parties’ rights and obligations once an allegation is made. This gives compliance the flexibility and responsibility to deal with such matters, from which it can best assess and decide how to manage them.

We concluded this series where we began with the need for or benefits of self-disclosure. The benefits laid out by the DOJ are clear, tangible, and direct. If you self-disclose, provide extraordinary cooperation, extensively remediate, and disgorge any ill-gotten gains through profit disgorgement, there will be a presumption of declination. Even if you do not meet the self-disclosure threshold, you can still garner significant discounts under the DOJ’s Corporate Enforcement Policy through extraordinary cooperation and extensive remediation.

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Blog

Phillips FCPA Enforcement Action: Lessons Learned – Part 3

We conclude our exploration of the Koninklijke Philips N.V. (Philips) Foreign Corrupt Practices Act (FCPA) enforcement action involving the Securities and Exchange Commission (SEC), for Phillips actions in China and its Chinese subsidiary, Phillips China. As set out in the SEC Order, Philips was order to “pay disgorgement of $41,126,170, prejudgment interest of $6,047,633, and a civil monetary penalty of $15,000,000” for a total fine and penalty of $62 million. Yesterday we considered the bribery schemes employed by Phillips China. After having reviewed the facts and Order we look at some lessons learned.

Distributors Under the FCPA

This is the third recent FCPA enforcement action involving distributors, following Oracle and Microsoft. Along with those cases, Phillips drives home the message that distributors are a risk under the FCPA. Oracle got into FCPA hot water regarding distributor discounts and marketing reimbursement. Microsoft came to OFAC grief as it did not know to whom its distributors were doing business as some distributors were selling to sanctioned entities. While distributors may not seem to be as high a risk commissioned sales agents, they do present a risk, which must be assessed and then managed with ongoing monitoring and improvements as appropriate. None of these steps were apparent from this FCPA enforcement action or found in the Order.

As noted yesterday, Philips in 2013 had agreed to “enhanced an anti-corruption training program that includes a certification process and a variety of training applications to ensure broad-based reach and effectiveness.” Whatever this training was, it does not seem to have reached China. Effective training is about communications, engagement and demonstrable implementation of the training messaging going forward. Once again Philips China did not seem as if that communications about not engaging in bribery and corruption was taken into its business operations.

Recidivist Behavior Under 2023 Corporate Enforcement Policy

As noted yesterday, in a May 10, 2023 Press Release,  Phillips announced that “The U.S. Department of Justice (DOJ) has closed its parallel inquiry into these matters” and the company intoned that it “fully cooperated with the SEC and DOJ.” Philips also reported that the FCPA matter had “previously been disclosed in Philips’ Annual Reports 2019 through 2022.”

There has been no statement by the Department of Justice (DOJ) regarding Philips. Further there has been no declination regarding Philips publicly announced by the DOJ. Given the strong statement about recidivists by Deputy Attorney General Lisa Monaco in announcing the Monaco Doctrine last September and the need for speed referenced by Kenneth Polite in announcing changes to the Corporate Enforcement Policy in January 2023; one might have expected some statement from the DOJ.

If the DOJ really wants companies to step forward and self-disclose, it would seem that Philips would be a good example to use. Apparently there was not self-disclosure, not extraordinary cooperation and no compliance with the 2013 SEC Order concluding the first Philips FCPA enforcement action. In other words, all the requirements for a company to obtain the significant credit under the 2023 Updated Corporate Enforcement Policy. If you add in Philip’s prior FCPA enforcement action into the mix, it would certainly appear that Phillips’ culture of compliance was lacking, at least along the lines of that aspect of the Monaco Doctrine.

Lessons Learned

With Phillips filing out the trio of recent distributor enforcement actions, it is clear that companies need to start paying more attention to the distributor sales model as a source of risk. Of course, robust due diligence screening is a must but it is only a starting point. Companies need to monitor the relationship after the contract is signed. The Philips FCPA enforcement action points toward the need for robust data analytics particularly around special price discounts with distributors creating excessive distributor margins which could be used to fund improper payments to employees of state-owned enterprises or governmental officials. A data analysis would quickly and efficiently show any special discount or discount beyond the standard range given to distributors. Moreover, regional discounts could be taken into account easily using the data analytics approach.

Additionally the maintenance of adequate books, records, and accounts concerning special price discounts to demonstrate that the discounts were supported by adequate documentation to ensure their business justification and management’s approval of them. This basic step also acts as a basic compliance internal control so that there can not only be oversight of the proposed distributors and any discounts but also creates a documented audit trail if a regulator ever comes knocking.

At this point there is perhaps some head-scratching about the final resolution, if any, regarding Philips given the state of the record as laid out by the Order. However it is clear there are significant lessons for the compliance professional from the Phillips enforcement action around distributors. I hope that at some point there is greater clarity under the 2023 Corporate Enforcement Policy update.

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FCPA Compliance Report

Jon May On Defending Individuals in FCPA Cases

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. In this episode, Tom Fox interview well-known curmudgeon and iconoclast Jon May. May, who is not a compliance officer, talks about his approach to the topic, which has caught Tom’s attention. The conversation traverses May’s professional background, discussing Miami’s wild west environment in the 1980s and corruption within the police department. The podcast takes a deep dive into corporate strategy, DOJ’s enforcement policies, and the changes in whistleblower laws. The author provides an exclusive hotline number for listeners to call him and wraps up by describing where to purchase his book! Take advantage of this engaging podcast with the brilliant Jon May, hosted by Tom Fox.

Key Highlights:

· Negotiating with Government in Corporate Criminal Conduct

· Navigating US Sentencing Guidelines for Defense Lawyers

· Pleading Guilty and Self-Disclosure for White-Collar Crimes

· Changing view of whistleblowers and self-disclosure regulations

· Balancing Crime Fighting and Civil Liberties

 Notable Quotes

“It is the company’s recommendation that they obtain counsel before they are interviewed by the company or the company’s outside counsel.”

“I have, as you know, always been very critical of the government’s care and stick approach to convincing companies to self-disclose.”

“But showing the prosecutor that there’s a very different side requires a great deal of work.”

“You might not get 3 points. You might only get 2 points. But the amount of time you can save by litigating various aspects of sentencing could be years and years.”

Resources

Jon May

On Creative Criminal Defense Consultants

Who Says You Can’t: Strategy and Tactics for Becoming a More Creative Criminal Defense Lawyer

Tom Fox

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FCPA Compliance Report

Ryan Patrick on the Role of a US Attorney Under the Monaco Memo, CEP & ECCP

Welcome to the award-winning FCPA Compliance Report, the longest running podcast in compliance. Looking for a podcast that will give you insights into the Department of Justice’s corporate enforcement policy and the implications for corporations facing investigations? Look no further than FCPA Compliance Report! In this episode, Tom Fox sits down with Ryan Patrick, a former US district attorney for the southern district of Texas. They discuss the importance of staying up-to-date with DOJ memos and speeches, the difficulty for corporations in deciding whether or not to self-disclose, and the implications of outside counsel being deputized. Ryan emphasizes the importance for companies to work with lawyers who know judges and have pre-existing relationships with local prosecutors, including US attorneys and line prosecutors. They discuss the Southern District of Texas and its role in border-related issues, as well as the Patrick’s time as a US Attorney for the Southern District of Texas. This podcast is a must-listen for anyone looking to gain a better understanding of corporate enforcement and compliance policies. Don’t miss out on the conversation between Tom Fox and Ryan Patrick!

 Key Highlights

·      Discussing U.S District Attorney’s work challenges

·      Evolution of Corporate Enforcement Policy by DOJ

·      Challenges in Communication with Corporations for Attorneys

·      Challenges of Self-Disclosure for Businesses

·      Navigating Legal Issues with Local Counsel

·      Challenges to Attorney-Client Privilege in Corporate Cases

·      Border Security and Cryptography Cases in Texas

·      US Attorney General Advisory Committee in Presidential Administration

·      Role of Southern District of Texas in law enforcement and corporate enforcement

·      Inside a Federal Prosecutor’s Role

 Notable Quotes

·      “It seems to me that this broaden beyond simply anti-corruption in FCPA and whether it be fraud, whether it be antitrust, whether it be environmental, whether it be a wide variety of other types of issues that an AUSA and a local district attorney US district attorney’s office would prosecute.”

·      “Asking the US attorney’s offices now to step into this space where really thinking from the idea of self-disclosure and from monitoring or audio auditing, so to speak, someone’s compliance program.”

·      “One of the not perhaps most difficult, but hardest conversations a corporation has is whether or not to self-disclose under the FCPA.”

·      “Bring it to me. I will consider it because it’s not 1 size fits all.

Resources

Ryan Patrick on LinkedIn

Ryan Patrick on Haynes and Boone

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The Week That Was in Compliance – Clawbacks

We are in the midst of a multipart review of last week’s speeches from the Department of Justice (DOJ) at the recently concluded ABA’s 38th Annual National Institute on White Collar Crime, held in Miami. Compliance professionals, white collar defense lawyers and indeed corporate executives will be talking about the past week in Miami for many moons to come. The speeches were made by Deputy Attorney General Lisa Monaco (2023 Monaco Speech) and Assistant Attorney General Kenneth A. Polite (Polite Speech) and they previewed a number of initiatives by the DOJ which every compliance professional will need to study in some detail. These new initiatives included:

The Criminal Division’s Pilot Program Regarding Compensation Incentives and Clawbacks

Evaluation of Corporate Compliance Programs (ECCP)

Revised Memorandum on Selection of Monitors in Criminal Division Matters

Over this series, I will be taking a deep dive into these speeches and new Evaluation of Corporate Compliance Program, Monitor Selection and Pilot Program on Incentives and Clawbacks. Today we take a deep dive into those portions of the Monaco and Polite Speeches which dealt with clawbacks or in the terminology of the ECCP-consequence management.

Monaco Speech

DAG Monaco discussed the development of the clawback policy to promote “innovative approaches to compensation” which would “shift the burden of corporate malfeasance away from uninvolved shareholders onto those more directly responsible.” She believes “Companies should ensure that executives and employees are personally invested in promoting compliance” as “nothing grabs attention or demands personal investment like having skin in the game, through direct and tangible financial incentives.” This led the Criminal Division to “develop guidance, guidance on how to reward corporations with compliance-promoting compensation programs.”

The clawback initiative has two parts. Monaco said, “First, every corporate resolution involving the Criminal Division will now include a requirement that the resolving company develop compliance-promoting criteria within its compensation and bonus system. Second is the creation of a 3-year pilot program under which the “Criminal Division will provide fine reductions to companies who seek to claw back compensation from corporate wrongdoers.””

Finally, the DOJ has added some real benefits for companies which follow these prescripts. First is that any company which resolves a Foreign Corrupt Practices Act (FCPA) violation will “pay the applicable fine, minus a reserved credit equaling the amount of compensation the company is attempting to claw back from culpable executives and employees.” Additionally, “If the company succeeds and recoups compensation from a responsible employee, the company gets to keep that clawback money — and also doesn’t have to pay the amount it recovered.” Finally, if the company’s efforts at clawbacks are not successful or completed during the pendency of the investigation up to the settlement “the pilot program will also ensure that those who pursue clawbacks in good faith but are unsuccessful are still eligible to receive a fine reduction.” All of these efforts are designed to “shift the burden of corporate wrongdoing away from shareholders, who frequently play no role in the misconduct, onto those directly responsible.” Monaco concluded, “We intend this program to encourage companies who do not already factor compliance into compensation to retool their programs and get ahead of the curve.”

Polite Speech

 As expected, Polite provided more detail on the new clawback initiative. He said, “As to clawbacks: for companies that fully cooperate with our investigation and timely and appropriately remediate the misconduct, they may receive an additional fine reduction if the company has implemented a program to recoup compensation and uses that program. We expect companies that use these programs to address not only employees who engaged in wrongdoing in connection with the conduct under investigation, but also those who had supervisory authority over the employees or business area engaged in the misconduct, and knew of, or were willfully blind to, the misconduct.” (emphasis mine)

Expanding on the benefits for an organization, he stated, “If the company meets these factors and – in good faith – has initiated the process to recover such compensation at the time of resolution, our prosecutors will accord an additional fine reduction equal to the amount of any compensation that is recouped within the resolution term.” Finally, “if a company’s good faith effort is unsuccessful by the time the resolution term ends, our prosecutors will have discretion to accord a fine reduction of up to 25% of the amount of compensation that has been sought.”

Polite did leave room for companies to weigh a variety of factors in bringing a clawback claim. He noted, “We are not trying to incentivize waste. To the contrary, companies should make an assessment about the potential cost to shareholders and prospect of success of clawback litigation, given any applicable laws, and weigh it against the value of recoupment – and proceed in accordance with their stated corporate policies on executive compensation. This Pilot Program will be in effect for three years, allowing us to gather data and assess its effectiveness and also aid other components and offices in considering this important issue.”

As a recovering trial lawyer, I know that any litigation is always fraught with unknowns, both known and unknown. Given the imbroglio involving the DOJ and Cognizant Technologies Solutions over the DOJ prosecution of former executives, the road to any successful clawback will be fraught with peril. Additionally, it is not clear how far companies or the DOJ will push for clawbacks from “those who had supervisory authority over the employees or business area engaged in the misconduct.” If scope creep comes in it could be a wide group.

Join me tomorrow as I begin an exploration of the updated Evaluation of Corporate Compliance Programs.