Corporate Misconduct: Implications for Companies Understanding Key - - PowerPoint PPT Presentation

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DOJ Guidance on Individual Accountability for Corporate Misconduct: Implications for Companies

Understanding Key Provisions of the Yates Memo, Ensuring Compliance and Mitigating Legal Risks Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific THURSDAY, MARCH 23, 2017

Thaddeus R. McBride, Partner, Bass Berry & Sims, Washington, D.C. David Searle, Chief Compliance Officer and Associate General Counsel, Bristow Group, Houston

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DOJ Guidance on Individual Accountability for Corporate Misconduct: Implications for Companies

Strafford Publications Webinar March 2017

 Introduction  Sentencing Commission Guidelines  Yates Memo  Best Practices  Questions

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Agenda

 Independent agency of the Judicial Branch  Promulgates guidelines for appropriate sentences for federal crimes

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U.S. Sentencing Commission

 Aimed at ensuring consistency of sentences in criminal cases  Guidelines are advisory but must be considered

 Court must select a sentence from within the Guidelines range or specify reason for departure (e.g., atypical features of crime)

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The Guidelines

 Penalty imposed is based on “Culpability Score”

 Start with “base” offense level for type of crime  Consider specific offense characteristics (e.g., amount of money involved)  Apply adjustments

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Culpability Score

Adjustments

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Culpability Score (cont’d)

Aggravating Factors Mitigating Factors Involvement in / tolerance of criminal activity Effective compliance and ethics program Prior history Violation of an order Self-reporting, cooperation, and acceptance of responsibility Obstruction of justice

 Designed to prevent and detect criminal conduct; and  Promote culture of ethical conduct and compliance with the law.

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Effective Compliance and Ethics Program

 Issued on September 9, 2015 by Deputy US Attorney General Sally Yates

 Memo to all US Attorneys  Focus on individual accountability for corporate wrongdoing

www.justice.gov/dag/file/769036/download.

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The Yates Memorandum

 DOJ will

 continue to pursue companies for corporate wrongdoing

and

 simultaneously pursue charges against individual employees

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Yates: Key Message

 “Because a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct.”  Six Key Principles to strengthen the pursuit of individual corporate wrongdoing

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Yates: Why and How

 To be eligible for any cooperation credit in a criminal or civil matter, a corporation must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide the DOJ all facts relating to that misconduct.

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Yates Principle No. 1

 Criminal and civil corporate investigations should focus on individuals from the inception of the investigation.

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Yates Principle No. 2

 The DOJ’s criminal and civil attorneys handling corporate investigations should be in routine communication with one another.

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Yates Principle No. 3

 Absent extraordinary circumstances or approved DOJ policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.

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Yates Principle No. 4

 DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individuals cases, and should memorialize any declinations as to individuals in such cases.

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Yates Principle No. 5

 Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay (e.g., the seriousness of the conduct, past misconduct, whether it is actionable, the burden of proof, and federal resources and priorities).

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Yates Principle No. 6

 DOJ understands that lower-level employees facing individual civil or criminal liability may cooperate against their superiors  Facilitates DOJ’s ability to obtain information necessary to prosecute individuals further up the corporate ladder

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Yates: General Analysis

Yates In Practice - FCPA

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In 2015, 80% of DOJ’s FCPA enforcement actions were against individuals In 2015, DOJ did not bring an FCPA enforcement action against a corporation without also prosecuting an individual

FCPA Pilot Program

 Announced by DOJ on April 5, 2016  Initial one-year period – can be extended  Encourages voluntary self-disclose of potential FCPA violations  Significant mitigation available

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Pilot Program (cont’d)

 Mitigation credit based on three factors:

 Self-Disclosure  Full Cooperation  Remediation – including full disgorgement

 DOJ “will consider declination of prosecution” and avoidance of compliance monitor  Builds on the requirements set forth in the Yates Memorandum

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Pilot Program: Declination

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Individual Enforcement - Export

 Posobilov – February 2017

 Exported $50m in unauthorized electronics to Russia  Conduct between 2008 and 2012  Convicted in October 2015  Sentenced to 135 months in prison

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Posobilov (cont’d)

 Acting AG: Posobilov was “held accountable”  US Atty: “Those who compromise the national security … for their personal financial gain will face serious punishment.”  Posobilov’s company is defunct; Russian-based partner company failed to appear

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Sentencing Commission Guidelines:

An effective compliance program is designed to prevent and detect violations

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Best Practices

 Policies and procedures

 Communicate to management, high-level personnel, employees, and agents as appropriate (e.g., training)  Ensure management is knowledgeable about program and exercises “reasonable oversight”  Update as needed to reflect legal changes / best practice

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Effective Program: Characteristics

 Personnel need adequate resources, authority, and access to management  Effective mechanisms to respond to violations  Consistent enforcement (e.g., incentives and disciplinary measures)  Monitoring, auditing, and reporting mechanisms

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Characteristics (cont’d)

 Morgan Stanley executive (Peterson) improperly transferred a financial interest to a Chinese official  Morgan Stanley

 Maintained robust anti-bribery policies and accounting controls  Frequently trained employees – including Peterson seven (!) times  Monitored and audited transactions  Voluntarily disclosed and cooperated

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U.S. v. Peterson (2012)

 Peterson pled guilty to violating the FCPA

 Nine months in prison  $250,000 in disgorgement  Relinquishment of $3.4 million in real estate

 Morgan Stanley was not charged

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Peterson (cont’d)

 Effective compliance program can significantly reduce penalties in case

• f rogue employee

 Yates may encourage companies to identify individuals to government  Government may be more likely to pursue individuals instead of company

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Key Takeaways

Questions?

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THANK YOU!

David Searle Chief Compliance Officer Bristow Group dsearle@bristow.com Thad McBride Partner Bass Berry & Sims tmcbride@bassberry.com

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