Matt Reeder: Do Pilot Program disclosures raise risks of carbon copy prosecutions?
Wednesday, October 12, 2016 at 8:28AM
Matt Reeder in Carbon Copy Prosecutions, Cooperation, Pilot Progam, Self Reporting, TSKJ

In April the DOJ launched its FCPA self-reporting Pilot Program for the purpose of increasing the number of companies voluntarily disclosing FCPA violations. The program was designed to achieve this goal with a carrot and stick approach.

The carrot comes in the form of greater certainty in the enforcement landscape -- quantifiable sentence reductions -- for companies choosing to fess up to wrongdoing and cooperate with enforcement officials.

The stick is a promise to increase enforcement efforts, and to distinguish between companies that disclose voluntarily and cooperate and companies who wait to be caught before cooperating.

But what of the international context?

An article I wrote, forthcoming in Volume 49.3 of The International Lawyer and previewed here, examines this question. The piece is titled 'Bad Math: State-Centric Anti-Corruption Enforcement + International Information Sharing Agreements = Conflicting Corporate Incentives.'"

While the article doesn’t focus specifically on the DOJ Pilot Program, it does offer another perspective in the ongoing discussion about the consequences of voluntary disclosure under the FCPA. I join this discussion by using a hypothetical fact pattern (loosely based on the TSKJ cases) to demonstrate that multinational corporations who -- seeking to reduce a sentence -- voluntarily disclose corrupt acts actually increase the risk of enforcement actions in other states.

I arrive at this conclusion by examining the anti-corruption laws in the U.S., the UK, and Nigeria, and considering the range of sentences -- and sentencing credit -- available in each jurisdiction. I then look at the terms of the information sharing agreements between each country to question how likely it is that disclosing in one jurisdiction would effectively serve as disclosure in another. Finally, I rely heavily on the work of two other scholars who conclude that the existence of a bilateral agreement between countries is correlated with higher aggregate sanctions.

From a practical perspective, this conclusion has serious implications for a multi-national corporation choosing whether or not to voluntarily disclose -- even in light of the new DOJ Pilot Program. In certain circumstances, it may be worth accepting the risk of receiving only partial sentencing credit for after-the-fact cooperation in exchange for the possible reward of avoiding enforcement actions altogether. This is especially where multi-jurisdictional enforcement is likely. Said another way, the reward the DOJ Pilot Program offers may be eclipsed by the potential for carbon copy prosecutions in other countries.

From a policy perspective, I suggest that states should consider taking a first step toward fixing this problem by agreeing on international anti-corruption sentencing principles. As I discuss in the article, the U.S. and UK already share similar guidelines. These new international principles could then guide states to include in bilateral and multilateral agreements specific provisions governing enforcement coordination.

Such provisions would provide greater international certainty to corporations considering whether to voluntarily disclose corrupt acts, and strengthen cooperative enforcement efforts.

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Matt Reeder, pictured above, is a lawyer on active duty in the U.S. Marine Corps and an LL.M. candidate at American University Washington College of Law, where his study is focused on white collar crime and anti-corruption. The views expressed here are offered in his personal capacity and are his alone. He can be contacted here.

Article originally appeared on The FCPA Blog (http://www.fcpablog.com/).
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