DOJ Issues Two Declination Letters Requiring Disgorgement
On September 29, 2016, the DOJ issued two declination letters concerning suspected FCPA violations, closing their investigations of two Texas-based corporations. The DOJ claims that its investigation of one of the corporations found that the company’s employees paid approximately $500,000 in bribes to Venezuela and China government officials in order to influence those officials’ purchasing decisions and thereby secure approximately $2.7 million in profits. With respect to its investigation of the second corporation, DOJ claims that the company’s China subsidiary provided approximately $45,000 worth of benefits to China government officials to obtain sales which generated profits of approximately $335,000. In connection with the issuance of the declination letters, the companies agreed to the disgorgement of their profits from the sales associated with their purportedly illegal conduct.
The declinations were made pursuant to the FCPA Pilot Program, a one-year program launched in April 2016 to encourage companies to voluntarily self-disclose FCPA-related misconduct, cooperate with DOJ, and make appropriate remediation efforts. The DOJ’s decision to close the investigations was based on a number of factors including the companies’ (i) voluntary disclosures; (ii) thorough internal investigations; (iii) full cooperation in providing DOJ with information about the individuals responsible for the purported misconduct; (iv) agreement to disgorge all profits made from the purported misconduct; (v) enhancement of compliance programs and internal accounting controls; and (vi) remediation in the form of terminating or sanctioning employees responsible for the purported misconduct. These are the fourth and fifth declination letters issued under the Pilot Program.
The disgorgement of profits in connection with the declination letters to the two corporations raises the question of whether such disgorgement may be a prerequisite to obtaining a declination letter under the Pilot Program. Companies that previously received declination letters under the Pilot Program were required to disgorge profits as part of settling related SEC enforcement actions. Past FCPA Scorecard coverage of the Pilot Program and associated declination letters may be found here.