Sooner Is Better for Companies Speaking Up to DOJ on Misconduct

In January, the Department of Justice announced new revisions to its corporate enforcement policy related to voluntary self-disclosure, cooperation, and remediation. The revisions were designed to incentivize companies that become aware of misconduct to engage early and proactively with law enforcement and strengthen their compliance programs.

Under the revised policy, prosecutors have greater discretion to seek reduced penalties or award declinations if a company acts promptly to disclose and redress criminal wrongdoing by its employees. To qualify for the benefits of voluntary self-disclosure, disclosures must be “reasonably prompt” after misconduct becomes apparent. The DOJ placed the burden of showing timeliness on those who seek the benefits of self-disclosure.

One company’s recent settlement of Foreign Corrupt Practices Act violations shows these revisions—and their limitations—in action.

On Sept. 29, the DOJ and the Securities and Exchange Commission announced that Albemarle Corporation, a North Carolina-based chemical manufacturer, had agreed to pay more than $218 million to resolve charges that it violated provisions of the FCPA.

In connection with the settlement, Albemarle admitted to conspiring to bribe government officials in three Asian countries to conduct business with state-owned oil refineries.

Between 2009 and 2017, employees of Albemarle’s subsidiaries, as well as its third-party sales agents, engaged in bribery schemes in Vietnam, Indonesia, and India. In Vietnam, the company obtained contracts with state refineries through a sales agent who requested increased commissions so they could bribe officials and rig bids in the company’s favor.

In Indonesia, Albemarle used a third-party intermediary to corruptly obtain business with a state oil company, even after the intermediary told Albemarle that bribing officials was a requirement of obtaining business. Finally, in India, the company retained its catalyst business with a state oil company by bribing officials to avoid being blacklisted. These schemes resulted in around $98.5 million in profits for the company.

Albemarle disclosed this misconduct before the DOJ and SEC investigations commenced. The company undertook remedial actions, including firing 11 employees involved in the misconduct and withholding $763,453 worth of bonuses from an additional 16 employees.

These actions were of the type contemplated by a 3-year pilot program announced by the DOJ in the spring, according to which corporate defendants who claw back compensation for employees responsible for misconduct can be eligible for penalty reductions.

In addition to the $218 million penalty, Albemarle entered a three-year non-prosecution agreement requiring ongoing cooperation and new compliance measures. Albemarle avoided the appointment of a compliance monitor by the DOJ.

Acting Assistant Attorney General Nicole Argentieri said Oct. 10 that the settlement demonstrates the “business case” for promptly disclosing misconduct. The case also demonstrates the long recognized risk posed by third-party intermediaries in FCPA cases, as well as the continued trend of FCPA cases involving both elements of bribery and anticompetitive conduct.

Key takeaways include:

Reasonable Promptness in Self-Disclosure

The $218 million penalty reflects a 45% reduction from the bottom of the applicable US Sentencing Guidelines range. According to the DOJ, this resolution “demonstrates the real benefits that companies can receive if they self-disclose misconduct, substantially cooperate, and extensively remediate.” At the same time, the DOJ noted that, although Albemarle voluntarily disclosed the conduct to DOJ, such disclosure was not “reasonably prompt” within the meaning of the guidelines.

As Assistant Attorney General Argentieri put it, “[t]aking too long to self-report meant the company was not eligible for the greatest benefit … a declination.” Albemarle had learned of possible misconduct in Vietnam approximately 16 months before disclosing it to US officials. After completing an internal investigation and obtaining evidence that demonstrated the misconduct, the company waited at least nine more months before disclosure. Still, the DOJ gave “significant weight” to the company’s “voluntary, even if untimely,” disclosure.

Third-Party Intermediaries

As in the majority of FCPA cases, the case in Vietnam and Indonesia centered on misconduct of third-party intermediaries, who used off-book fund sources—generated, in part, through commissions—to pay bribes. The matter highlights the continued risk posed by third-party misconduct.

Bid-Rigging

This isn’t the first FCPA case this year involving bid-rigging misconduct. Earlier in the year, the SEC reached a FCPA resolution relating to bid-rigging conduct involving Philips China. The resolutions emphasize the potential overlap between anti-competitive conduct and bribery, and the government’s continued awareness of the linkages between the two issues.

The decision to self-report remains a complex and difficult one that should only be undertaken on a case-by-case basis after serious consideration and consultation with counsel. Albemarle’s settlement illustrates the consequences of delayed disclosure and potential benefits, once a decision to self-report has been made, of doing so as promptly as feasible.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Geoffrey Atkins is a partner in Ropes & Gray’s litigation & enforcement practice group.

Rory Skowron is an associate in Ropes & Gray’s litigation & enforcement practice group.