Acting Assistant Attorney General Nicole M. Argentieri reviewed developments in the Criminal Division's revised enformement policies, citing examples in the department's caseload year to date.
Previously Principal Deputy Assistant Attorney General, Ms. Argentieri assumed her current role in August replacing Assistant Attorney General Kenneth Polite. Her remarks were delivered at the American Bar Association 10th Annual London White Collar Crime Institute October 10, 2023. (Heavily edited for brevity, click for [complete text])
With my time today, I’d like to discuss four areas with you:
The Criminal Division has a broad mandate to tackle all forms of crime, whether it is committed by violent gang members on the street or corrupt executives in the board room. While our mission is broad, prosecuting white collar and corporate crime is one of our top priorities.
In particular, our Fraud Section focuses on the integrity of our markets, rooting out a wide array of misconduct from cryptocurrency investment schemes to securities fraud that harms innocent investors.
Our commitment to protecting markets includes holding accountable financial institutions – along with their officers and employees – that undermine the security of the U.S. financial system. The Bank Integrity Unit (BIU) within the Criminal Division’s Money Laundering and Asset Recovery Section, or MLARS, has long focused on the threat posed by financial institutions that flout U.S. anti-money laundering laws and economic sanctions.
To strengthen these efforts, earlier this year, we announced a surge of resources to the BIU, which will add six prosecutors to target economic sanctions-related financial misconduct. This investment shows we are willing to put our money where our mouth is.
Working with foreign authorities allows us to be force multipliers. It makes evidence easier to obtain, leaves criminals fewer places to hide, and helps us recover criminal proceeds wherever they may be found..
As our recent cases show, we are regularly working with a large number of foreign law enforcement partners, not only in Foreign Corrupt Practices Act (FCPA) matters, but across the full range of our investigations. And our footprint of successful partnerships continues to grow.
This coordination among international law enforcement partners is one of the most important developments in white collar enforcement over the last decade. And it has produced real results.
Last December, we announced the Department’s first coordinated resolution with authorities in South Africa. ABB Ltd. agreed to pay $315 million for bribing a high-ranking official at South Africa’s state-owned energy company to corruptly obtain confidential information and win lucrative contracts. And in August of this year, we continued to break new ground by announcing the first-ever coordinated resolution with Colombian authorities in a foreign bribery case. Corficolombiana, a Colombian financial services institution, agreed to pay over $80 million for participating in a scheme to pay millions of dollars in bribes to high-ranking government officials in Colombia.
The Corficolombiana resolution also illustrates how we are implementing some of the recent changes to our corporate enforcement policy – the next area I wanted to discuss with you today.
As you all may know, in January 2023, my predecessor Assistant Attorney General Kenneth Polite announced the first substantive changes in five years to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, or CEP. The CEP sets forth specific benefits for companies that voluntarily self-disclose misconduct, fully cooperate with our investigations, and timely and appropriately remediate misconduct.
One of the goals of these policy changes was to allow prosecutors to make finer distinctions between companies that do the right thing and those that fall short, both in terms of the form of the resolution and the amount of the fine. Under our previous CEP, the maximum credit available to companies that did not voluntarily self-disclose misconduct but fully cooperated and timely and appropriately remediated was a 25% reduction from the low-end of the applicable fine range. The recent revisions increased that cap to a 50% reduction.
Keep in mind, every company still starts with zero cooperation credit. By increasing the maximum amount of credit a company can receive, we are not grading on a curve – the new policy is meant to more greatly reward good actors, not companies that do the bare minimum. Simply responding to legal process, standing alone, is not “cooperating.” To earn credit, we expect companies to truly cooperate in our investigations. We expect them to be both responsive and proactive.
And do not forget, these fine reductions account for both cooperation and remediation. With Corficolombiana, the first case announced under the new CEP, we awarded a 30% reduction to recognize its efforts on both fronts. The company not only took significant cooperative steps. It also took significant remedial steps. Among other things, it conducted a root cause analysis of the misconduct and promptly took actions to enhance its corporate governance and controls at joint venture entities; it also overhauled its compliance program and established a disciplinary process overseen by a cross-functional ethics committee.
In addition to being the first FCPA case under the revised CEP, the Corficolombiana resolution also implemented new requirements in the Criminal Division’s Compensation Incentives and Clawbacks Pilot Program that we announced in March of this year.
Every corporate resolution involving the Criminal Division will require that the resolving company include compliance-promoting criteria in its compensation and bonus system. As part of its agreement with the Department, Corficolombiana pledged to do just that, “consistent with local labor laws.”
The pilot program provides clear and predictable monetary incentives for companies to claw back, or withhold, compensation paid or otherwise due to individual wrongdoers. Indeed, companies will be able to reduce criminal penalties when they attempt in good faith to claw back or withhold compensation – even if those efforts are unsuccessful.
The pilot program provides that for every dollar that a resolving company recoups from a wrongdoer – whether through money that’s withheld or paid and then clawed back – the otherwise applicable fine for the conduct will be reduced by a dollar.
The program also recognizes that clawing back compensation can be a timely and complicated process, and that clawbacks may not be complete at the time of the resolution, even if the company had effective clawback policies in place.
The recent resolution with Albemarle Corp. a few weeks ago is a good example of how we’re implementing many of our recent policy changes, including both parts of the pilot program as well as the CEP. In that case, Albemarle, a publicly traded chemicals manufacturing company headquartered in North Carolina, entered into a three-year non-prosecution agreement with the Fraud Section’s FCPA Unit and the U.S. Attorney’s Office in the Western District of North Carolina to resolve foreign bribery charges. The company admitted to agreeing to pay, through its third-party sales agents and subsidiary employees, bribes to government officials to obtain and retain business with state-owned oil refineries in Vietnam, Indonesia, and India. The company agreed to pay a penalty of approximately $98.2 million and forfeit approximately $98.5 million in ill-gotten gains. The company also simultaneously resolved with the U.S. Securities and Exchange Commission.
How were our policies put into action? Take the pilot program: Albemarle, like Corficolombiana, agreed to implement compliance-related criteria in its compensation structures subject to local labor laws. In addition, we awarded the first ever penalty reduction under the pilot program because the company withheld bonuses totaling over $763,000 during the course of its investigation from employees who fell within the policy’s scope.
Because Albemarle had proactively implemented procedures to freeze future bonuses for those suspected of misconduct, they were able to withhold compensation, rather than have to claw it back, and were rewarded with a reduction in their criminal monetary penalty equal to the amount of the bonuses that were withheld.
Now take the CEP: Albemarle was awarded a 45% reduction from the low-end of the applicable penalty range, the highest percentage reduction under the revised CEP to date. Albemarle substantially cooperated with our investigation and also undertook significant remediation. It created extensive enhancements to its corporate compliance program, particularly regarding its third-party due diligence and monitoring.
The company transformed its business model and risk management process to reduce corruption risk and to embed compliance in the business, including by eliminating the use of sales agents throughout the company. The company also terminated hundreds of other third-party sales representatives, such as distributors and resellers, and shifted to a direct sales business model. These improvements carry significant weight with us because we encourage companies to invest in effective risk analysis, mitigation and compliance programs that help prevent misconduct from occurring in the first place.
But I want to emphasize what set Albemarle apart from many other companies: it voluntarily disclosed the misconduct that formed the basis for this agreement before the conduct came to the Department’s attention. To be sure, the company was not “reasonably prompt” in doing so, as defined under the CEP and the Sentencing Guidelines. The company learned of allegations regarding possible misconduct in one country approximately 16 months before disclosing it to the Department. After an internal investigation, the company gathered evidence relating to the potential misconduct at least nine months prior to the disclosure. Taking too long to self-report meant the company was not eligible for the greatest benefit under the CEP – a declination.
But as they say, better late than never. The company’s decision to come forward – even if belatedly – resulted in significant and concrete benefits, including benefits that would not have been available under the older version of our policies. For one thing, the company resolved the case through a non-prosecution agreement, rather than a deferred prosecution agreement or a guilty plea. And within the new range of zero to a 50% reduction under the CEP, Albemarle’s decision to disclose factored heavily in our decision to award a 45% discount off the low end of the penalty range. The previous maximum discount under the prior policy would have been only 25%.
We know the decision to self-report misconduct is a difficult one for Boards of Directors and their counsel. But remember the benefits that await you if you choose to do the right thing. The business case for compliance is clear. As Department leaders have repeatedly emphasized, we greatly value expediency and therefore can offer a presumption of a declination if the voluntary disclosure is reasonably prompt. This allows us to move quickly, to gather and preserve evidence, and enhances our ability to charge culpable individuals. But it’s not an all or nothing proposition. Don’t let the passage of time alone dissuade you from coming forward. As the Albermarle resolution shows, even a belated self-report will result in significant and meaningful benefits.
As I expect our future resolutions will show, the same is true of cooperation and remediation: earlier is always better, but even late-stage cooperation and remediation is better than none.
Let me now turn to another focus of the Criminal Division that involves significant coordination with international partners: Task Force KleptoCapture. Attorney General Garland announced the formation of Task Force KleptoCapture in March 2022 to ensure that oligarchs feel the full impact of the economic sanctions that the United States has levied in response to Russia’s invasion of Ukraine. Strong international cooperation has been essential to the Task Force’s work – from collecting key evidence to seizing assets funded in violation of sanctions.
Pursuing kleptocrats with the assistance of our international partners is not new to the Criminal Division. MLARS established its Kleptocracy Asset Recovery Initiative more than a decade ago to target and forfeit the proceeds of foreign official corruption. Task Force KleptoCapture builds on those efforts. In the past year and a half, the task force has aggressively pursued its mission, and, through MLARS, the Criminal Division has helped lead that charge. Task Force KleptoCapture has leveraged the Kleptocracy Initiative’s expertise in complex international financial investigations and asset forfeiture to use all available tools to target those who support Russia’s aggression in Ukraine.
On the policy front, we will be implementing the new Department-wide mergers and acquisitions (M&A) “safe harbor” announced by the Deputy Attorney General (DAG) last week. On the theme of earlier is better, this new “safe harbor” – which applies across the Department – creates an incentive for acquiring companies to come forward to report misconduct uncovered during pre- or post-acquisition M&A due diligence: a presumption of a declination for companies that disclose misconduct by an acquired business within six months of closing an acquisition. The acquiring company will also need to fully remediate within a year to qualify for a declination. These timeframes, as the DAG noted, are baselines. They are subject to a reasonableness analysis because we realize that not every company and every deal are the same.
Over the last two years, Criminal Division policies regarding voluntary self-disclosure, monitor selection, and compliance have been expanded into the Justice Manual and extended and adapted by other components. The Safe Harbor Policy likewise builds upon an existing provision in our Criminal Division CEP that we’ve used to great effect.
Let me explain for a minute how we envision the Safe Harbor Policy will interact with our CEP. The CEP states that companies that uncover misconduct at an acquired entity through pre- or post-acquisition due diligence or integration efforts, remediate the misconduct, appropriately implement a compliance program, disclose the misconduct, and disgorge all ill-gotten gains will receive the benefit of a presumption of a declination. The recent declination for French aerospace company Safran S.A., shows how this policy has been applied in practice.
Safran acquired two companies in 2015. Through its post-acquisition due diligence, Safran learned that both had paid bribes to a close-relative of a then-senior Chinese government official. Safran earned a declination by identifying the misconduct, voluntarily self-disclosing it to the FCPA Unit, fully cooperating and remediating, and disgorging ill-gotten gains.
Under the new policy announced by the DAG, to the extent that companies were not already motivated to rapidly come forward to report misconduct uncovered in the M&A context and remediate, the message is clear: companies will best position themselves for a declination if they move swiftly – within six months, if not sooner. And if they fall short, keep in mind the lesson of Albemarle – while early reporting is best, self-reporting late is always better than never, whether in the M&A context or otherwise. There are significant benefits available under our policies, in terms of both penalty reductions and the form of the resolution.
We also expect the new safe harbor policy working in conjunction with the Criminal Division’s CEP to increase our ability to both prosecute and prevent additional corporate crime. We see this policy as working hand-in-hand with the Criminal Division’s CEP as a way to incentivize companies to report bad acts that we would not otherwise know about.