New DOJ Guidance on Corporate Compliance Programs: Key Issues and Recommendations Mattos Filho – São Paulo Office March 24, 2017 Boies Schiller F lexner L L P | www . b s f l lp . c o m
FOCUS ON CORPORATE COMPLIANCE A BRIEF HISTORY 1977 :: U.S. Congress enacts Foreign Corrupt Practices Act (FCPA) 1999 :: Deputy AG Eric Holder issues memorandum “Bringing Criminal Charges Against Corporations” 2002 :: DOJ indicts Enron auditor Arthur Andersen 2008 :: Deputy AG Mark Filip issues memorandum “Principles of Federal Prosecution of Business Organizations” 2012 :: SEC brings FCPA internal controls case against Oracle 2015 :: DOJ creates new Compliance Counsel position DOJ “pilot program” for self -reporting of FCPA violations 2016 :: DOJ issues “Evaluation of Corporate Compliance Programs” 2017 :: www.bsfllp.com 2
NEW DOJ GUIDANCE On February 8, 2017, the DOJ Fraud Section published “ Evaluation of Corporate Compliance Programs .” The new guidance “provides some important topics and sample questions that the Fraud Section has frequently found relevant in evaluating a corporate compliance program.” For each company, some topics and questions will be more relevant than others. DOJ “ does not use any rigid formula to assess the effectiveness of corporate compliance programs.” www.bsfllp.com 3
KEY ISSUES (1/4) EFFECTIVE POLICIES AND PROCEDURES Risk assessment :: Effective compliance is not “one size fits all.” • “What methodology has the company used to identify, analyze, and address the particular risks it faced? ” Operational integration :: Make sure the company can and will follow through. • “Who has been involved in the design of policies and procedures? Have business units/divisions been consulted prior to rolling them out?” Evolving approach and response to failures :: DOJ focuses on remedial measures. • “How often has the company updated its risk assessments and reviewed its compliance policies, procedures, and practices?” • “What specific changes has the company made to reduce the risk that the same or similar issues will not occur in the future?” www.bsfllp.com 4
KEY ISSUES (2/4) COMMUNICATING WITH EMPLOYEES Risk-based training :: Training should be tailored to the audience. • “Has the training been offered in the form and language appropriate for the intended audience? ” Effectiveness of the reporting mechanism :: Front-line employees need to be empowered to seek advice and report concerns, without fear of retaliation. • “How has the company assessed whether its employees know when to seek advice and whether they would be willing to do so?” • “ How has the company collected, analyzed, and used information from its reporting mechanisms?” Hitachi SEC settlement (2015) Anheuser-Busch InBev SEC settlement (2016) www.bsfllp.com 5
KEY ISSUES (3/4) MANAGING THIRD PARTY RELATIONSHIPS Selection and engagement of vendors :: Consultants are a high-risk area. • “What was the business rationale for the use of the third parties in question? What mechanisms have existed to ensure that the contract terms specifically described the services to be performed, that the payment terms are appropriate, that the described contractual work is performed, and that compensation is commensurate with the services rendered?” Third party due diligence :: Be alert to indicators of corruption risk. • “Were red flags identified from the due diligence of the third parties involved in the misconduct and how were they resolved?” LAN Airlines SEC settlements and DPA (2016) Las Vegas Sands SEC settlement (2016) and NPA (2017) www.bsfllp.com 6
KEY ISSUES (4/4) STRENGTH OF THE COMPLIANCE FUNCTION Conduct at the top :: Managers should demonstrate commitment to compliance. • “What concrete actions have [senior leaders] taken to demonstrate leadership in the company’s compliance and remediation efforts?” Autonomy and resources :: Corporate compliance officers are the first line of defense. • “How has the compliance function compared with other strategic functions in the company in terms of stature, compensation levels, rank/title, reporting line, resources, and access to key decision- makers?” • “Have there been specific transactions or deals that were stopped, modified, or more closely examined as a result of compliance concerns?” www.bsfllp.com 7
CORPORATE COMPLIANCE WHY INVEST RESOURCES? Integrity is good business: the compliance environment matters to investors and companies selecting business partners. The strength of a corporate compliance program is an important factor in the exercise of enforcement discretion by DOJ and SEC. Not investing resources in compliance upfront can prove exponentially more expensive when problems emerge, especially in light of the rise in DOJ’s use of corporate monitors . Odebrecht & Braskem guilty pleas (2016) Torneos y Competencias DPA (2016) www.bsfllp.com 8
FOR FURTHER REFERENCE DOJ, Evaluation of Corporate Compliance Programs (February 2017) https://www.justice.gov/criminal-fraud/page/file/937501/download DOJ, Guidance on FCPA Enforcement Pilot Program (April 2016) https://www.justice.gov/criminal-fraud/file/838416/download DOJ & SEC, A Resource Guide to the U.S. Foreign Corrupt Practices Act (last revised 2015) https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf DOJ, Principles of Federal Prosecution of Business Organizations https://www.justice.gov/usam/usam-9-28000-principles-federal-prosecution-business-organizations U.S. Federal Sentencing Guidelines, § 8B2.1 “Effective Compliance and Ethics Program” http://www.ussc.gov/sites/default/files/pdf/guidelines-manual/2016/CHAPTER_8.pdf www.bsfllp.com 9
ABOUT BSF CONTACT Scott R. Wilson Partner, New York +1 (212) 446-2370 swilson@bsfllp.com Boies Schiller Flexner LLP (“BSF”) , founded in 1997, has grown to more than 300 lawyers practicing in offices strategically located throughout the United States, with an additional office in London, England. BSF regularly serves as lead counsel on complex, high-profile global matters to some of the world’s most prominent institutions and individuals. By combining the skill and diversity of BSF attorneys with the partnership’s well -established network of global resources, we are able to deliver consistent success for our clients. Our Global Investigations and White Collar Defense group now includes 19 former DOJ prosecutors, as well as former officials from the SEC, the Federal Trade Commission, the Food and Drug Administration, the White House, Congress, and the Attorney General offices of New York and other states. Recent hires in Washington, London, and elsewhere have enhanced our ability to assist clients around the world. For more information, please visit us at www.bsfllp.com . www.bsfllp.com 1 0
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