In May, the Attorney General and a host of other Department of Justice (DOJ) officials announced the settlement of a massive Foreign Corrupt Practices Act (FCPA) and market manipulation case against Glencore plc (Glencore). Over this blog series, I have been reviewing the matter and mining it for lessons learned for the compliance community. Today, in this concluding Part V, I want to explore some open questions and provide some lessons learned.
Cooperation Pays
One thing made clear in the Information was that there was some serious misconduct going on here, for multiple years, in multiple countries with multiple schemes. Yet, as laid out in the Plea Agreement, Glencore received a reduction of 15% based upon the FCPA Corporate Enforcement Policy and a 2-point reduction in the overall penalty calculation under the US Sentencing Guidelines. Both of these discounts led to a not-insignificant reduction from the overall penalty assessed.
Glencore did not receive voluntary disclosure credit because it failed to self-disclose its legal violations to the DOJ. Although Glencore received partial cooperation credit, it did not receive full credit because it did not always “demonstrate a full commitment” to cooperation, was slow in providing documents and other evidence and was slow in its remediation. Additionally, it did not timely and appropriately remediate with respect to disciplining certain employees involved in the misconduct. Additionally, Glencore did not have adequate internal controls in place at the time the underlying incidents took place. Since that time, Glencore has taken remedial measures, certain of the compliance enhancements are new and have not been fully implemented or tested to demonstrate that they would prevent and detect similar misconduct in the future, mandating the imposition of an independent compliance monitor for a term of three years.
The key takeaway from the Glencore settlement is that as bad as a company’s conduct is, it can make a comeback and receive some credit under the FCPA Corporate Enforcement Policy. The discounted amount Glencore received drives that message home, but the settlement also specifies that if a company does not “demonstrate a full commitment” to cooperation it will not receive all possible cooperation credit. Additionally, although not specified in the Information or Plea Agreement, this lack of a full commitment may have also led to the robustness of the Monitor requirements which we will take up next.
Monitors
Glencore has been assigned two corporate monitors. One for its UK subsidiary where much of the conduct centered and a second for the corporate parent in Switzerland. Yet it is clear the DOJ does not fully trust Glencore yet. According to the Plea Agreement, Attachment D, “The Monitor’s primary responsibility is to assess and monitor the Company’s compliance with the terms of the agreement…to specifically address and reduce the risk of reoccurrence of the Company’s misconduct.” Additionally, the Monitor will evaluate “the effectiveness of internal accounting controls, record-keeping and financial reporting policies and procedures” as they “relate to ongoing compliance with the FCPA and other applicable anti-corruption laws.” The Monitor will also assess the “Board of Directors’ and senior management’s commitment to and effective implementation of the corporate compliance program described in Attachment C.”
While the Monitor can rely on company reporting and “Company-specific expertise”; it is only required to do so when “the Monitor has confidence in the quality of those resources.” Clearly the DOJ is leaving room for the Monitor to bring in its own resources, at the company’s expense, if the Monitor feels less than sanguine about how the company is moving forward. If the company is not moving forward in the right direction of providing sufficient information to the Monitor, the Monitor can respond accordingly, and the company has agreed to this. The Monitor will be looking at various operational issues of how Glencore implements the requirements of the settlement. These include where and with whom the company does business, its business partners, from third parties to joint venture partners and everything between and beyond; focusing on the business rationale for any such relationships. The Monitor will review and assess the company’s ongoing interactions with government officials and those of state-owned enterprises.
We have not seen this level of detail or robustness in a Monitor’s Mandate in quite some time. The Glencore Monitorship draws directly back to the remarks of Deputy Attorney General (DAG) Lisa Monaco in her October 2021 speech announcing a reorientation in FCPA investigations and enforcement. The monitorship mandate in the Glencore settlement is a direct outcome from this refocus and signals the formal end of the Benczkowski Memo and its clear distaste for monitorships. They are back, in a very big way and are clearly here to stay, at least during the Biden Administration.
CCO Certification
Although it was only announced formally on May 17, 2022, at Compliance Week 2022; the new requirement for Certification is formally incorporated into the Glencore settlement and is found at Attachment H of the Plea Agreement. The Glencore Chief Compliance Officer (CCO) will have to certify “the Company has implemented an anti-corruption compliance program that meets the requirements set forth in Attachment C.” Moreover, the certification attests that the Glencore compliance program “is reasonably designed to detect and prevent violations of the FCPA and other anti-corruption laws.” This certification is also required of the Chief Executive Officer (CEO).
This means the CCO is certifying the entire compliance program meets the standards of not simply best practices but also all the enhanced requirements set out in Attachment C. Of course, if there are either recidivist FCPA violations by Glencore or additional illegal actions uncovered during the pendency of the monitorship, it could well impact the certification. Also if the CCO does so attest, what happens if there is recidivist conduct during the time covered by the certification but only later discovered, even much later; similar to the conduct reported in the Tenaris FCPA enforcement action? Will there be criminal liability to a long-gone (or even current) CCO? At this point, it is an open question, but it does raise the stakes significantly for any CCO who does sign such a certification.
Culture, Culture, Culture
Glencore clearly had a business strategy based upon corruption. The corruption strategy was approved by, and payment of bribes were authorized at the highest levels of the company. While many of those executives have left the company, there was clearly an entire culture at play here. The question is whether the company will be able to turn things around enough to satisfy a Monitor, the DOJ and, at the end of the day, the Court who will oversee all of this.
The company made a start by publicly publishing its first Ethics and Compliance Report, for which it certainly should be commended. There is no better disinfectant than the light of day and if Glencore is committed to publicly reporting on its compliance, program it speaks directly to the change in culture that it is trying to undergo. It will no doubt take much time, effort and money but if Glencore is serious as it stated that “a strong Ethics and Compliance Programme grounded in our Values is critical to ensuring we are a responsible and ethical company, and a trusted business partner. We want to be transparent about the challenges we face, how we learn from them and how we use them as an opportunity to improve and push ourselves to do better”; it can become a global leader in ethics and compliance.
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