Commit bribery. Violate the Foreign Corrupt Practices Act (FCPA). Self-report to the Justice Department. Fully cooperate. Remediate. Absent aggravating circumstances, if you are a corporation, you get a presumption of declination.

Tarek Helou

Wilson Sonsini

Washington, D.C.

That’s current policy at the Justice Department under the FCPA’s Corporate Enforcement Policy.

Tarek Helou was with the FCPA unit at the Justice Department for the past twelve years, during the time when the FCPA Pilot Program and subsequent Corporate Enforcement Policy were being developed.

He is now a partner at Wilson Sonsini in Washington, D.C.

“The Pilot Program gave companies incentives,” Helou told Corporate Crime Reporter in an interview last week. “It reduced the penalties they would pay if they self-disclosed, cooperated and remediated. And it was somewhat different from what the unit had been doing. It crystallized the policy into writing so that companies would have a better idea of the result. And now we are going to be able to give the company some certainty.”

“The resulting Corporate Enforcement Policy went a little further. It created a presumption of a declination. It essentially said that a company that self-disclosed would not get a monitor. Which is a big deal.”

“Companies are looking for certainty. But you are never going to get complete certainty. Let’s say a company self discloses, but the CEO was involved and the company and made $200 million in profit. That may not be a case that is appropriate for declination. But what it did was it gave companies more data points to eliminate some of the uncertainty if they self-disclosed.”

During the Pilot Program, the FCPA unit posted FCPA declinations. That now has been incorporated into the Corporate Enforcement Program.

“In every resolution, there is an explanation as to why the Justice Department is entering into the resolution. The company didn’t self-disclose, the conduct is very serious, they took these measures when they shouldn’t have. That explanation is important. Companies can take those explanations and get guidance.”

“In a declination, the Justice Department needs a way to convey why they declined. Those declinations are all cases in which the Justice Department could have brought a criminal case and could have proved beyond a reasonable doubt that a crime was committed. In those cases, a crime was committed. But the company cooperated, they self-disclosed, they remediated. They were able to secure a declination.”

“But it’s not as if the Justice Department investigated the company and there was no misconduct. This is only used in a situation where a crime was committed and a crime could be proved. But it also gives the public guidance on what is important and how they can avoid criminal conduct by their employees. And if crimes do happen what they can do to ensure they get a declination.”

What’s the difference between those declinations that you just described and the declinations where the Justice Department says – no case here?

“You can call them a decision not to bring charges or a non public declination. In those cases, most of the time, we determined we could not prove a crime beyond a reasonable doubt. That is a high burden of proof. It’s higher than the SEC’s burden.”

Are those declinations more rare?

“No.”

Is there any public track record of those declinations?

“Those are not made public. As a prosecutor, you have to be wary of making a public accusation that a company or an individual cannot defend against.”

“A lot of times, the companies will announce the declination. If it’s a public company, they will often announce in their public filings that they are being investigated by the SEC and the Justice Department.”

And then once they get a letter saying that charges are not going to be sought, they will report in their next filing that the investigation was closed.”

There have been cases where there is no self-disclosure and the company still gets a declination.

“Yes. It depends on a number of factors. The aggravating factors are going to be important in every case. If the conduct is pervasive, that’s a problem. If you have the CEO involved and you didn’t self-disclose, you are probably not going to get a declination. One example of that is SBM. One CEO plead guilty. They did not self-disclose. So they paid some pretty large penalties. They paid $238 million to the US and $240 to the Dutch and several hundred million to Brazil. And the penalties would have been higher. But we conducted an inability to pay analysis and we came to $238 million. That’s an example of a case where you don’t self-disclose, you have aggravating factors and you don’t get a declination.”

That case resulted in a deferred prosecution agreement. Of the 200 or so cases the unit is looking at at any moment in time, what percentage of those are from self-disclosures?

“It’s hard to say. But I will say this. The number of self-disclosures increased quite a bit since we put in the Pilot Program and the Corporate Enforcement Policy. That’s been over three years now since the Pilot Program went into effect.”

“The change to a presumption of declination is a pretty big change even compared to what was in the Pilot Program. And there are other reasons why companies are now self disclosing more. When I started in the unit in 2012, it wasn’t that common that we talked with our foreign counterparts. By 2019, as an assistant chief, I was on the phone several times a week myself with foreign regulators and prosecutors. And the trial attorneys on our team were talking with foreign regulators and prosecutors every day. That increased the amount of information we would get. The Justice Department was learning about potential crimes. And they were getting better evidence on crimes they knew about already. And they are getting the information faster.”

“In addition, the FCPA unit grew from between 12 and 15 prosecutors in 2012 to over 30 prosecutors now. Also, the FBI has increased their involvement. They now have four squads and an international corruption unit focused exclusively on international corruption. And the FBI is developing an informant network. You add to that the SEC’s whistleblower program.”

“Combine all of that and it is now much less likely that the Justice Department and the SEC won’t find out about the activity.”

“For the company’s calculus, things have changed. The government is more likely to find out about it. And they are more likely to give you benefits if you self-disclose. It’s still always going to be a business decision whether to self-disclose. I understood that when I was at the Department of Justice. But the business decision calculus has changed. The carrots have increased and so have the sticks.”

Companies want to protect their reputation. A big issue is reputation and reputational damage from these settlements. That is the base of the criticism — the Justice Department is giving up a big stick when it moves toward a presumption of declination.

“But they are still public. And there is the corresponding SEC resolution.”

But you still have crimes being committed. And you still have a declination. It fuels the belief among many that there is a two-tier system of justice — one for the corporations and the powerful and the other for the rest of us.

“But the individuals don’t get a declination. You can’t look at companies and individuals the same way all the time. Now it is laid in clear policy – that you would decline on a company but not on the individuals.”

“It is not really a two-tier system. If somebody robs a bank and you can prove it beyond a reasonable doubt, they get charged. Someone pays bribes or engages in an accounting fraud scandal, if you can prove that beyond a reasonable doubt, they get charged also.”

Or if they are a company, they get a declination.

“But the individual doesn’t get a declination.”

But the corporation does. You can prove the case against the company and the company still gets a declination.

“But we are not going to decline on the individuals. In this context, you have to look at companies and people differently. If you are saying a poor person who robs a bank will be charged but the CEO won’t get charged – that’s not the case.”

“Companies employ people. They sell products. Take a pharmaceutical company for example. They literally save people’s lives. Putting them out of business or being unnecessarily harsh with them wouldn’t necessarily help. If there is an executive at those companies or an employee who committed a crime, that’s different.”

“Looking at it as a two-tiered justice system isn’t correct. In FCPA cases, a lot of times it is hard to convict people. The evidence is overseas. The evidence can be old by the time we find out about it. You have difficult issues of intent.”

“The question is – did they pay a bribe? But you are seeing a dramatic increase in the prosecution of individuals over the last few years. And those numbers are through the roof.”

“If you want to talk two-tier justice system, look at the number of individuals charged in 2017 and 2018 and already in 2019 versus ten years ago. These defendants are mostly very well off and sometimes downright rich.”

[For the complete q/a format Interview with Tarek Helou, see 33 Corporate Crime Reporter 33(10), September 2, 2019, print edition only.]