Corporate Misconduct: Implications for Companies Understanding Key - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A DOJ Guidance on Individual Accountability for Corporate Misconduct: Implications for Companies Understanding Key Provisions of the Yates Memo, Ensuring Compliance and Mitigating Legal Risks THURSDAY, MARCH 23, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Thaddeus R. McBride, Partner, Bass Berry & Sims , Washington, D.C. David Searle, Chief Compliance Officer and Associate General Counsel, Bristow Group , Houston The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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DOJ Guidance on Individual Accountability for Corporate Misconduct: Implications for Companies Strafford Publications Webinar March 2017

Agenda  Introduction  Sentencing Commission Guidelines  Yates Memo  Best Practices  Questions 6

U.S. Sentencing Commission  Independent agency of the Judicial Branch  Promulgates guidelines for appropriate sentences for federal crimes 7

The Guidelines  Aimed at ensuring consistency of sentences in criminal cases  Guidelines are advisory but must be considered  Court must select a sentence from within the Guidelines range or specify reason for departure ( e.g. , atypical features of crime) 8

Culpability Score  Penalty imposed is based on “Culpability Score”  Start with “base” offense level for type of crime  Consider specific offense characteristics (e.g., amount of money involved)  Apply adjustments 9

Culpability Score (cont’d) Adjustments Aggravating Factors Mitigating Factors Involvement in / tolerance of criminal Effective compliance and ethics activity program Prior history Violation of an order Self-reporting, cooperation, and acceptance of responsibility Obstruction of justice 10

Effective Compliance and Ethics Program  Designed to prevent and detect criminal conduct; and  Promote culture of ethical conduct and compliance with the law. 11

The Yates Memorandum  Issued on September 9, 2015 by Deputy US Attorney General Sally Yates  Memo to all US Attorneys  Focus on individual accountability for corporate wrongdoing www.justice.gov/dag/file/769036/download. 12

Yates: Key Message  DOJ will  continue to pursue companies for corporate wrongdoing and  simultaneously pursue charges against individual employees 13

Yates: Why and How  “Because a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct .”  Six Key Principles to strengthen the pursuit of individual corporate wrongdoing 14

Yates Principle No. 1  To be eligible for any cooperation credit in a criminal or civil matter, a corporation must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide the DOJ all facts relating to that misconduct. 15

Yates Principle No. 2  Criminal and civil corporate investigations should focus on individuals from the inception of the investigation. 16

Yates Principle No. 3  The DOJ’s criminal and civil attorneys handling corporate investigations should be in routine communication with one another. 17

Yates Principle No. 4  Absent extraordinary circumstances or approved DOJ policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation. 18

Yates Principle No. 5  DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individuals cases , and should memorialize any declinations as to individuals in such cases. 19

Yates Principle No. 6  Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay (e.g., the seriousness of the conduct, past misconduct, whether it is actionable, the burden of proof, and federal resources and priorities). 20

Yates: General Analysis  DOJ understands that lower-level employees facing individual civil or criminal liability may cooperate against their superiors  Facilitates DOJ’s ability to obtain information necessary to prosecute individuals further up the corporate ladder 21

Yates In Practice - FCPA In 2015, DOJ did not bring an FCPA In 2015, 80% of enforcement DOJ’s FCPA action against a enforcement corporation actions were without also against individuals prosecuting an individual 22

FCPA Pilot Program  Announced by DOJ on April 5, 2016  Initial one-year period – can be extended  Encourages voluntary self-disclose of potential FCPA violations  Significant mitigation available 23

Pilot Program (cont’d)  Mitigation credit based on three factors:  Self-Disclosure  Full Cooperation  Remediation – including full disgorgement  DOJ “will consider declination of prosecution” and avoidance of compliance monitor  Builds on the requirements set forth in the Yates Memorandum 24

Pilot Program: Declination 25

Individual Enforcement - Export  Posobilov – February 2017  Exported $50m in unauthorized electronics to Russia  Conduct between 2008 and 2012  Convicted in October 2015  Sentenced to 135 months in prison 26

Posobilov (cont’d)  Acting AG: Posobilov was “held accountable”  US Atty: “Those who compromise the national security … for their personal financial gain will face serious punishment.”  Posobilov’s company is defunct; Russian -based partner company failed to appear 27

Best Practices Sentencing Commission Guidelines : An effective compliance program is designed to prevent and detect violations 28

Effective Program: Characteristics  Policies and procedures  Communicate to management, high-level personnel, employees, and agents as appropriate ( e.g. , training)  Ensure management is knowledgeable about program and exercises “ reasonable oversight ”  Update as needed to reflect legal changes / best practice 29

Characteristics (cont’d)  Personnel need adequate resources , authority, and access to management  Effective mechanisms to respond to violations  Consistent enforcement ( e.g. , incentives and disciplinary measures)  Monitoring, auditing, and reporting mechanisms 30

U.S. v. Peterson (2012)  Morgan Stanley executive (Peterson) improperly transferred a financial interest to a Chinese official  Morgan Stanley  Maintained robust anti-bribery policies and accounting controls  Frequently trained employees – including Peterson seven (!) times  Monitored and audited transactions  Voluntarily disclosed and cooperated 31

Peterson (cont’d)  Peterson pled guilty to violating the FCPA  Nine months in prison  $250,000 in disgorgement  Relinquishment of $3.4 million in real estate  Morgan Stanley was not charged 32

Key Takeaways  Effective compliance program can significantly reduce penalties in case of rogue employee  Yates may encourage companies to identify individuals to government  Government may be more likely to pursue individuals instead of company 33

Questions? 34

THANK YOU! David Searle Chief Compliance Officer Bristow Group dsearle@bristow.com Thad McBride Partner Bass Berry & Sims tmcbride@bassberry.com 35