In this article, Daniel Patrick Wendt discussed how the Department of Justice (DOJ) measures disgorgement and if the DOJ should follow the lead of the Security and Exchange Commission (SEC) when making such calculations. "Although SEC disgorgement calculations are opaque, my understanding is that the SEC begins its analysis using a company's reported pre-tax profits," Wendt wrote. "The logic is that the SEC does not prohibit a company from seeking tax deductions for disgorged amounts and leaves open the possibility for an issuer or a subsidiary to seek refunds on taxes paid for historical profits that were ultimately disgorged. In contrast, under the Pilot Program's two declinations with disgorgement, the DOJ categorically prohibited the companies from seeking tax deductions for disgorged amounts." 

Following a review of the DOJ's two disgorgements under the Pilot Program, Wendt said the DOJ should provide further guidance, including how the DOJ calculates the profits as a basis for agreeing on a disgorgement remedy, the rationale for precluding a company from seeking tax deductions based on a nonpunitive remedy such as disgorgement, and whether the prohibition of tax deductions also precludes companies' subsidiaries from seeking tax refunds for profits that are ultimately disgorged via Pilot Program declinations. "Insight into the DOJ's thinking about these issues will help the Pilot Program meet expectations as a more transparent and predictable way to resolve FCPA offenses," he said.

This is a follow-up post to Mr. Wendt's November 28, 2016 FCPA Blog post, "Are Those DOJ Disgorgements Really Disgorgement?"