News

Declination with Disgorgement under DOJ Pilot Program

October 3, 2016
Categories: Anti-corruption, Bribery, Compliance, FCPA

A new category of Foreign Corrupt Practices Act (FCPA) enforcement  -declinations with disgorgement –  is at the center of discussion following the release of two letters by the U.S. Department of Justice (DOJ). In instances of declination with disgorgement, companies under investigation will not be prosecuted for FCPA violations, but will be required to disgorge their unlawful gains.

On September 29, the DOJ released letters to two privately-held, Texas-based companies, HMT LLC, a manufacturer for the oil and gas sector, and NCH Corporation, a cleaning products manufacturer, outlining the agency’s decision to close its inquiry into potential FCPA violations.” DOJ investigations found that both companies, through employees and agents, have illegally engaged in bribery in violation of the FCPA.

According to officials, HMT paid nearly $500,000 in bribes during the course of business in Venezuela and China and, in doing so, made an estimated $2.7 million in unlawful gains. The DOJ required HMT to disgorge $2.7 million.

A Chinese subsidiary of NCH bribed Chinese officials in amounts in excess of $40,000 in the form of cash, gifts, meals, and entertainment. NCH generated profits of $335,000 from the bribery. Per the declination letter, the DOJ required NCH to disgorge the entire $335,000.

The DOJ’s Pilot Program took effect in April of this year. See CREATe’s post here for more information. Since the commencement of the Pilot Program, which encourages self-reporting, the DOJ has issued declinations to Nortek, Akamai Technologies, and Johnson Controls. “Unlike HMT and NCH, all three are public companies and each had already agreed to disgorge profits to the SEC for their FCPA violations.”

Pursuant to  the declination letters, the DOJ indicated that the investigations into the two companies will be closed in spite of FCPA violations due to various mitigating factors, including:

  • Timely, voluntary self-disclosure of the violations
  • Full cooperation including providing all known relevant facts about the individuals involved in or responsible for the misconduct
  • Agreement to continue to cooperate in any ongoing investigations of individuals
  • The disgorgement of all profits made from the bribery
  • Enhancing compliance programs and internal accounting controls, and
  • Full remediation

 

For more information on anti-corruption and anti-bribery compliance, please see CREATe.org’s various resources.

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