Every life sciences company with international operations should have a robust Foreign Corrupt Practices Act (FCPA) compliance program as part of its overall compliance strategy. On April 5, 2016, the Justice Department announced the launch of a one-year pilot program (Pilot Program) focused on the scope of credit that companies can expect to receive for self-disclosing FCPA violations. On the same day, the Justice Department also announced that it had increased the amount of resources devoted to the investigation and prosecution of FCPA cases. The announcement of the Pilot Program left many FCPA practitioners unclear as to the specific steps a company must take in order to receive ‘credit’ under the Pilot Program.
Last week, the Justice Department issued the first public declinations of criminal FCPA enforcement actions under the Pilot Program. The underlying cases involved allegations of bribery in China. The declination letters outlined the steps the Justice Department expects companies to take in order to receive full ‘credit’ under the Pilot Program. Specifically, in determining ‘credit,’ the Justice Department will consider: (i) whether the company’s internal audit function identified the misconduct; (ii) the promptness of the company’s voluntary self-disclosure; (iii) the thoroughness of the investigation undertaken by the company; (iv) the degree of cooperation from the company to the Justice Department in connection with the Department’s investigation, including the identification of all individuals involved in or responsible for the misconduct; (v)an agreement to continue to cooperate in any ongoing investigations of identified individuals; (v) listing the steps that the company has taken to enhance its compliance program and its internal accounting controls; (vi) the company’s full remediation (including terminating the employment of all individuals involved in the misconduct); (vii) termination of partners/agents involved in the misconduct; and (viii) any disgorgement or penalties imposed by another US government agency such as the Securities and Exchange Commission.
The best course of action for life sciences companies is to develop, implement, and keep current a robust FCPA compliance program, so they never have to enter the Pilot Program. If things do go wrong, the Pilot Program, and the steps outlined in the recent declination letters, provide life sciences companies with a mechanism to mitigate their exposure and resulting damages and penalties.