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Andy Spalding: The Pilot Program as declination policy

We’ll spend a number of posts this month explaining what is good about the Pilot Program and what may be better. The last post explained the four (not three) requirements the Program establishes -- voluntary disclosure, cooperation, remediation, and disgorgement -- and how some of those terms have been carefully (re)defined. Here, let’s talk about what’s in it for the defendant.

The Pilot Program holds out two basic kinds of rewards. The first is probably the most widely commented upon, but perhaps the less important (which may explain why some seem to miss the Pilot Program’s true importance). This is the penalty reduction. The program provides that if a company has cooperated and remediated per the memo’s requirements, but has not voluntarily disclosed, it can receive up to a 25 percent reduction off the bottom of the Sentencing Guidelines fine range. But if a company does this plus voluntarily discloses, the DOJ “may” provide “up to” a 50 percent reduction off the bottom end of the Sentencing Guidelines range (and will generally not require a monitor). Though again, remember that this is all subject to a fourth requirement, stated earlier in the memo, that the defendant also disgorge.

Symbolically these provisions are critically important. For decades, even preceding the era of FCPA enforcement, lawyers working in white-collar enforcement (myself included) have wondered what the government’s proffered cooperation credit really is, or indeed, whether it actually existed at all. We couldn’t put a number on it, we couldn’t prove it. Academics tried and failed. We might advise clients to cooperate in exchange for cooperation credit, but behind closed doors we’d ask ourselves, “how much leniency does cooperation actually get us?  How can we be sure?”

The Pilot Program, to its credit, fills that gap. For the first time it provides specific, quantified cooperation credit.  On one level that’s huge, even historic. But this feature of the Program was seemingly met by the FCPA bar and commentariat with a shrug, or worse. Why? Because many felt that it only made explicit what the government, in practice, was already doing. Let’s affirm that making explicit that which was only implicit is itself an important step in enforcement policy -- it’s fundamental to the rule of law. Still, it’s certainly not the most impactful part of the Pilot Program.

That impact is to be found in the second principal reward the Program creates. If the defendant complies with all four requirements -- voluntary disclosure, cooperation, remediation, and disgorgement -- it may be eligible for a declination.

And that is indeed huge, both in theory and practice. The Pilot Program is FCPA declination policy, something we’ve needed for a good long while. Although the FCPA continues to award declinations outside the Pilot Program, these have occurred without formal DOJ announcements and without guidance from an explicit declination policy. The only declinations issued pursuant to a formal policy are the Pilot Program declinations. In the next posts we’ll talk about this new declination policy, and suggest a way the policy might be improved.

My long-winded answer can be found in this paper.


Andy Spalding is a lecturer at the International Anti-Corruption Academy, Professor at the University of Richmond School of Law, and Senior Editor of the FCPA Blog.