Good morning, Professor Dervan, and thank you for that kind introduction. It is a pleasure to be here today with all of you for the ABA Criminal Justice Section’s Third Global White Collar Crime Institute.
I know that significant time and effort has gone into planning and organizing this program, and I sincerely appreciate the invitation to speak today. I also want to take a moment to recognize two distinguished program participants with whom I’ll be sharing a panel after these remarks: Pavel Zeman, Prosecutor General for the Czech Republic, and Matthew Wagstaff, head of the Bribery and Corruption Division of the UK’s Serious Fraud Office (SFO).
Mr. Prosecutor General—we at the U.S. Department of Justice fully support your country’s work on combatting white collar crime, including bribery and corruption. We commend Czech law enforcement on its investigation of foreign bribery cases and stand ready to assist in any capacity.
We also commend the Czech Republic for its active participation in the OECD’s Working Group on Bribery. In fact, Justice Department colleagues are in Paris this week, together with representatives of the Czech Republic, the UK and many other countries, attending the Working Group on Bribery. Such meetings are crucial to ensuring that countries work in tandem in the fight against foreign corruption.
Due in part to the efforts of the OECD Working Group on Bribery, we have transitioned from a world in which bribery of foreign officials was considered a business strategy, to one in which bribery is treated like the destructive crime that it is.
Mr. Wagstaff, we also very much appreciate our close working relationship with the SFO. This includes not only collaboration on matters of mutual importance, but also our successful secondment program. For those who are not aware, since 2016, the Department of Justice (DoJ) has maintained a program with the UK’s Financial Conduct Authority (FCA) and SFO that entails seconding a DoJ prosecutor to those agencies in an effort dedicated to enhancing international cooperation.
The Department of Justice is always looking for new ways to engage with our international colleagues. I mention these initiatives because they demonstrate the importance of, and our dedication to, collaborative engagement between foreign law enforcement agencies and officials – collaboration that is crucial to the successful investigation and prosecution of transnational crime.
In my work as the Department’s Deputy Assistant Attorney General overseeing the Criminal Division’s Fraud Section, which includes the Foreign Corrupt Practices Act (FCPA) and the Securities and Financial Fraud Units, I see firsthand the extent to which criminal schemes have grown increasingly transnational.
The attorneys I supervise regularly engage in cross-border investigations, seeking and obtaining evidence from across the globe. And this applies not just in the FCPA matters that I oversee, but in cases across the Fraud Section and, indeed, the Criminal Division and the Department.
This includes everything from bribery and investment schemes, to computer intrusion and darknet cases, as well as complex money laundering matters. And this is just the tip of the iceberg.
Working cooperatively and efficiently with our foreign counterparts is an absolute necessity for effective law enforcement. Two recent corporate resolutions illustrate the importance of our international law enforcement partners to DoJ investigations.
Earlier this week, the Department announced the resolution of a foreign bribery investigation against TechnipFMC plc (Technip) relating to two separate bribery schemes—one focused on corruptly influencing government officials in Brazil and the other focused on obtaining similar influence in Iraq. Like so many of our recent corporate resolutions under the Foreign Corrupt Practices Act, the Technip resolution was coordinated in parallel with actions by international law enforcement partners, in this case, authorities in Brazil. Pursuant to its agreement with the Department, Technip agreed to pay a total criminal penalty of over $296 million. Notably, DoJ agreed to credit Technip for the amounts it has agreed to pay to settle the parallel Brazilian investigations, which will result in approximately $214 million of the overall U.S. criminal penalty being credited to Brazil.
Large international investigations like the one against Technip require more than just the resources of the Department of Justice, acting alone. The governments of Brazil, the United Kingdom, Monaco, Italy, Australia, France and Switzerland provided significant assistance to further the investigation. The coordinated law enforcement effort in the Technip investigation is far from an outlier. In fact, it is just the most recent example. Earlier this year we announced a corporate resolution with Moscow-based Mobile TeleSystems PJSC (MTS), the largest mobile telecommunications company in Russia and an issuer of publicly traded securities in the United States that involved the assistance of law enforcement authorities in over a dozen countries.
Solid law enforcement relationships, while vital, are only part of what is needed to successfully confront international corporate misconduct. We recognize that effective cross-border coordination requires companies, their boards, and executives to trust that they will be treated fairly and not subject to needlessly duplicative penalties that are out of proportion to the misconduct at issue. To that end, in May of last year the Department implemented a coordinated resolution or “anti-piling on” policy to ensure that companies that run afoul of the law are not over-penalized for their misconduct as authorities work to resolve overlapping law enforcement interests.
The policy recognizes the need to protect against duplicative punishments, and importantly sends a signal to companies that we will work to avoid such punishments in parallel resolutions. The policy accomplishes this by directing Department attorneys, where possible, to endeavor to coordinate with other federal, state, local, and/or foreign enforcement authorities seeking to resolve a case with a company for the same misconduct. This means that not only are we coordinating resolutions and affording credit for penalties paid to other U.S. enforcement agencies, such as to the SEC in the MTS case, but we are also doing so with foreign authorities, where appropriate, just as we did this week with our Brazilian counterparts in the Technip matter.
We are also coordinating with our foreign partners on cases that do not result in a U.S. criminal resolution. Last year we declined prosecution of Guralp Systems Limited, not only because of the company’s voluntary disclosure, remediation and cooperation, but also because Guralp, a U.K. company with its principal place of business in the U.K., was the subject of an ongoing parallel investigation by the SFO for violations of law relating to the same conduct.
I mention the coordinated resolution policy not only to highlight our improved focus on crafting and revising Department policies to focus on transparency and fairness, but also to highlight a fact that I want to stress to all of you – our policies are not just for a domestic audience.
For example, in the Criminal Division we recently issued a new guidance document titled, “Evaluation of Corporate Compliance Programs.”
The guidance provides a framework for our prosecutors to use when evaluating whether a corporation’s compliance program was adequate and effective at the time of suspected misconduct, as well as at the time of a resolution or charging decision. Importantly, this guidance will be applied not just to U.S. domestic companies, but also to companies globally – and it recognizes the range of compliance challenges confronted by companies across industries, risk profiles, and the globe.
As our prosecutors understand, and the guidance recognizes, compliance is not and cannot be “one-size-fits-all.” We understand that, for instance, international banking compliance is specialized and influenced by different risks and regulatory requirements, just as compliance in the oil exploration and extraction industries is specialized and influenced by a completely different set of risks and regulatory requirements. We also recognize that those risks and regulatory requirements will differ across the countries in which a company operates.
Similarly, just as there is no “one-size-fits-all” approach to the evaluation of corporate compliance programs, there is also no one specific model or roadmap for building a compliance infrastructure at a company. After all, an effective compliance program is broader than the nuts and bolts of a company’s compliance department at one point in time. Indeed, the compliance department is not the same thing as a company’s compliance program—it is just one functional component of the whole.
In considering the guidance, it is important to keep in mind what it is and what it is not. The purpose of the compliance guidance is simply to guide our attorneys as they evaluate corporate compliance programs, no two of which will be exactly alike.
Companies and their advisors need to understand that the compliance guidance is just that, guidance. In developing and publicizing the guidance, the Criminal Division was not mandating a set of compliance program requirements. We are not regulators, and it would be impractical in any event to prescribe a universal formula for all companies to follow, regardless of industry, geography, or risk. Instead of trying to build a compliance program around the guidance, companies and their advisors should instead look to design and enhance compliance programs based around the company’s unique risk profile.
We are fully cognizant that a risk-based focus to compliance also includes geographically differentiated risk. This means that, for example, a company engaged in oil exploration in the Gulf of Mexico will likely face, and need to address, different compliance risks from a similar company or subsidiary operating in other parts of the world.
Even in our compliance training efforts, we have tried to be mindful of our law enforcement partners who are often evaluating the adequacy of the same compliance programs as they seek to resolve parallel corporate investigations. It is for this reason that, when we recently conducted corporate compliance training for our Criminal Division attorneys who engage in corporate enforcement, we invited attorneys from some of our regulatory enforcement partners in the United States and also from foreign enforcement authorities.
Just as the threat of transnational crime and evolving nature of international law impact how companies address risk and compliance, it is also impacting the way we in law enforcement collect evidence. Virtually every criminal scheme we investigate requires access to electronic evidence, such as the contents of emails and instant messages, and subscriber information. Our ability to investigate and prosecute international criminal schemes often depends on our ability to collect electronic evidence, wherever it may be located. However, global companies and their subsidiaries that hold key evidence are often subject to more than one country’s laws. Further complicating matters, data privacy and other restrictions are an evolving area, whether it relates to the European Union’s General Data Protection Regulation, or GDPR, or state secret laws in countries like China.
The number of jurisdictions that have data privacy laws continues to increase. One country may allow the disclosure of certain evidence by cooperating companies to U.S. law enforcement, but another country’s laws may restrict disclosure of that same data.
The FCPA Corporate Enforcement Policy, the principles of which are applied in corporate enforcement cases across the Criminal Division, addresses this issue by recognizing that there may be instances where a “company claims that disclosure of overseas documents is prohibited due to data privacy, blocking statutes, or other reasons related to foreign law.” We know this presents challenges, but companies must also understand that when we request data that the company claims it is precluded from providing to us, “the company bears the burden of establishing the prohibition.” Therefore, our expectation is that a cooperating company will work to identify all available legal means to provide such evidence and, if the company determines that it is unable to provide such information, we will expect a detailed explanation as to why.
Just as we expect companies and individuals to obey U.S. law, we also will not ask a company to break foreign law. With that said, we also will not simply accept a blanket assertion of non-disclosure. As in math class, we will want cooperating companies to show their work to explain the constraints they face and work with us to try to find solutions.
We recognize that this takes time and effort. That is one reason why we clarified the Department’s policy on Individual Accountability, also known as the Yates memo.
In November 2018, former Deputy Attorney General Rosenstein announced that under the amended policy, any company seeking cooperation credit in criminal cases must identify relevant facts as to every individual who was “substantially” involved in or responsible for the criminal conduct at issue. This change was made, in part, to reduce the burden on cooperating companies, which prior to the clarification were required to identify and provide evidence relating to “all” individuals engaged in wrongdoing in order to receive any cooperation credit. Through this change, the Department sought to recognize that resolutions should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted.
By focusing on only those “substantially” involved in or responsible for wrongdoing, the revised policy also avoids unnecessary expense for cooperating companies, particularly for those dealing with difficult issues relating to the collection and sharing of foreign evidence.
But make no mistake, we remain focused on identifying and holding culpable individuals to account.
Just last week, our prosecutors secured the trial convictions of two defendants for their participation in a scheme to bribe officials of the Republic of Haiti in exchange for business advantages. In the MTS case I mentioned earlier, we charged a former Uzbek official with conspiracy to commit money laundering, and a former Uzbek executive with various FCPA violations.
We want to encourage companies to develop strong compliance programs, to identify and remediate misconduct, and to come forward and cooperate when violations of the law are identified. We also want to ensure we are not sending mixed messages or discouraging cooperation because of questions about how cooperating companies will be treated. We are accomplishing this through an increased focus on transparency—by making clear to the public, companies, and their advisors how we will evaluate corporate enforcement matters across the Criminal Division and the Department.
Having represented companies as defense counsel, I know from personal experience the importance of clarity and transparency for companies and their management, boards, and advisors, particularly as it relates to difficult decisions regarding self-disclosure and cooperation. That is one reason why in cases warranting a declination under the FCPA Corporate Enforcement Policy, we have made our declination letters publicly available. Those letters lay out our reasoning for issuing the declination, providing increased transparency as to our evaluation process.
However, I also want to stress that there may be instances where a company self-discloses and we decide a public declination is neither necessary nor warranted. For instance, if a company self-discloses misconduct that was discovered in the context of a merger or acquisition, and we determine that the conduct and financial impact was de minimis, we may be open to a company’s request that we not disclose the declination. And I can assure you that we have done so. While this will not apply in all situations, and whether we decide to disclose will always be at the discretion of the Department, please know that we are open to discussion.
Of course, the issue where we most often exercise discretion is the decision as to whether to pursue a case in the first instance, particularly where it involves foreign companies and conduct.
While we will always protect American interests and American victims, our role is not to police the world. For that reason, we will generally pursue international cases that implicate a significant U.S. federal interest. Exercising this discretion entails consideration of a number of factors, starting with whether the company is based in the United States or is a U.S. issuer. Equally important is whether there are U.S. victims. Other factors will include where the misconduct took place, whether U.S. markets were impacted, and whether the U.S. financial system was utilized.
Should we determine that no significant federal interest is at stake, or that the matter is better handled by a foreign authority, as was the case in the Gurlap matter, we may decline prosecution in the United States.
At the end of the day, our interest is in reaching fair and reasonable resolutions, not making headlines or extracting financial penalties.
While the increasingly transnational aspects of criminal investigations pose new and evolving challenges for prosecutors and our law enforcement partners, our prosecutors and law enforcement agents are up to the challenge. We also recognize that these same issues also pose challenges for companies and those who represent them.
That is, in part, why we have been working diligently over the past few years to revise and clarify many of the Department’s and Criminal Division’s policies that impact corporate enforcement, and we will continue to do so for the foreseeable future.
I thank you for your time, and look forward to the remainder of the program.