Declinations During the FCPA Boom

Bloomberg and Corporate Counsel Law Report
August 2011
As enforcement of the Foreign Corrupt Practices Act (“FCPA”) has risen to new heights in recent years, there has been a less publicized trend that has paralleled this increase: decisions by the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) to conclude formal and informal investigations into potential violations of the FCPA without bringing enforcement actions.  In this article, James Tillen and Marc Bohn discuss how such decisions to conclude investigations without enforcement — popularly known as “declinations” — are the most desirable outcome of an FCPA investigation for a company, but since U.S. enforcement authorities do not publicize these decisions, it is difficult to know how frequently they occur.  Enforcement officials routinely suggest that declinations are commonplace, but provide few concrete details as to how often they occur or what circumstances would merit a decision to decline.

According to the authors, although decisions to close FCPA investigations by declining to take enforcement actions might reflect an insufficiency of evidence, the absence of jurisdiction, or a lack of actionable misconduct, they can also represent the clearest evidence of benefit from a voluntary self-disclosure or from extraordinary cooperation.  Therefore, any determination of whether to voluntarily self-disclose a potential violation or cooperate fully with enforcement authorities in an investigation is incomplete without including the recent spike in declinations in the analysis of what, strategically, is in the company’s best interest.  However, the recently published Dodd-Frank whistleblower regulations may end up significantly altering this voluntary self-disclosure analysis.
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