FCPA Compliance and Ethics Blog

March 28, 2012

The FCPA Enforcement Process: Negotiating the Penalty

I recently explored the issue of ‘extraordinary cooperation’ in the context of a Foreign Corrupt Practices Act (FCPA) enforcement proceeding and some of the concrete steps that a company could take to reduce its overall penalty assessed by the Department of Justice (DOJ). However there is an additional step which a company should engage in before it receives its final penalty amount. This step is the negotiation with the DOJ over the amount of the penalty. Never having gone through such an exercise, I have often wondered what factors a company might put forward for DOJ consideration in this process. So I put that question to three persons with whom I shared a panel at the Dow Jones Global Compliance Symposium: Rich Plansky, Managing Director, Kroll; Eric Situarchuk, Partner, Morgan, Lewis and Bokius and Gary Giampetruzzi, Assistant General Counsel, Pfizer.


Plansky emphasized that it all begins with credibility. This credibility must begin in the initial self-disclosure, if such is made and it must continue throughout the investigation process. A company must engage in a credible investigation through the use of skilled and independent investigative counsel and it must use investigation techniques that the DOJ will recognize as sufficient such as in areas such as computer imaging and document retention. He said that a company must turn over all its findings, both good and bad to the government.

Collateral Consequences and Additional Costs

Sitarchuk said that he would emphasize two points in negotiation with the DOJ. The first is the collateral consequences if a proposed penalty is viewed as too high. The consequence of a penalty which is too high, after a company self-reports and cooperates throughout the pendency of an investigation, could be that it deters other companies from self-reporting FCPA violations to the DOJ. The second point would be to discuss the total impact in cost to the company of the incident. So if a public company is involved, this line of argument could include such things as the costs for defending, settling any shareholder lawsuits which might follow on an FCPA enforcement action and other documented and relevant costs. There may also be other non-monetary consequences he would bring up as well, such as potential debarment or other legal remedies that the company may be facing in the US or abroad.

Best Practices

Giampetruzzi said that he believes it is important to emphasize the company’s new compliance regime and commitment to compliance, which can be based in the remedial measures taken by the company to upgrade its compliance program. He noted that arguing the company’s ethical culture during a regime under which an incident arose is not the tack to take but to emphasize what the company did to remedy the problem that arose. In this context, a company can show the steps they have taken and how they meet or exceed a minimum best practices compliance program.

All three panelists made clear that the working relationship you establish during the entire process is critical to the end result. Recognizing the different interests that each party represents and speaking towards satisfying those interests is an important role for any lawyer in the process, whether DOJ lawyer, outside counsel representing the company or in-house counsel involved in the process. The final result is a negotiation but the negotiation does not begin simply when the DOJ proposes a number for the penalty. It begins and continues throughout the process.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

Blog at WordPress.com.