United States: Foreign Corrupt Practices Act Update: Considerations Around Voluntary Disclosures

In September 2022, Deputy Attorney General Lisa Monaco outlined the Department of Justice (DOJ) approach to enforcing corporate misconduct and directed agencies to review existing voluntary self-disclosure policies or, if none exist, draft new ones.

Two recently announced Foreign Corrupt Practices Act (FCPA) settlements involving reinsurance companies demonstrate what happens when the rubber hits the road.

Jardine Lloyd Thompson Group Holdings Ltd. Receives Declination

In March 2022, the DOJ issued a declination letter stating that it would be declining to prosecute Jardine Lloyd Thompson Group Holdings Ltd. (JLT) notwithstanding violations of the anti-bribery provisions of the FCPA. According to the DOJ, between 2014 and 2016, JLT employees and agents used a third-party intermediary to pay over $3 million in bribes to Ecuadorian officials to obtain business with Seguros Sucre, an Ecuadorian state-owned surety company.

In exchange for the DOJ's declining to prosecute, JLT agreed to disgorge approximately $29 million—the profit corruptly obtained as a result of its bribes. The DOJ agreed to credit the amount against fines paid by JLT to the UK Serious Fraud Office (SFO), which also prosecuted JLT in connection with the alleged bribes.

In issuing the declination, the DOJ emphasized JLT's "full and proactive cooperation" in the matter, agreement to continue to cooperate, the company's timely and full remediation, and the company's agreement to fully disgorge ill-gotten gains. Perhaps most importantly, the DOJ noted that JLT voluntarily self-disclosed the misconduct.

After the declination was made public, media reports suggested that the DOJ and SFO were also probing Seguros Sucre and its conduct involving other UK-based insurance firms, including Tysers Insurance Brokers Limited (Tysers).

Tysers Insurance Brokers Limited and H.W. Wood Limited Receive Deferred Prosecution Agreements

In November 2023, the DOJ unsealed Deferred Prosecution Agreements (DPAs) it entered into to settle allegations that Tysers and H.W. Wood had paid bribes through an intermediary company to officials of Seguros Sucre to obtain and retain reinsurance contracts. Tysers agreed to pay $36 million in criminal penalties and forfeit an additional $10.5 million. Similarly, H.W. Wood agreed to a criminal penalty of $22.5 million and a $2.3 million administrative forfeiture. (The DOJ determined that, because of its dire financial condition, H.W. Wood was unable to pay the full amount and thus agreed to a penalty of slightly more than $500,000.)

Each DPA is effective for three years and imposes substantial obligations on the companies. Among other things, the companies must cooperate fully with the DOJ in any related matter, use best efforts to make relevant employees and officers available for interviews, and implement specific compliance enhancements. Additionally, each DPA is contingent on the company continuing to abide by their significant obligations: if DOJ determines that there has been a breach of the agreement, it can pursue prosecution.

In announcing the DPAs, DOJ emphasized similar mitigating factors as in the case of JLT, such as the companies' cooperation and remediation. Most notably, however, neither company voluntarily disclosed their misconduct.

Voluntary Disclosure Seemingly Was Basis for JLT Declination

There are minor differences in the facts of the JLT and the Tysers and H.W. Wood matters. But it appears clear that the main difference is that JLT made a disclosure while Tysers and H.W. Wood did not.

That the lack of disclosure was apparently part of the basis for a DPA is not surprising in light of January 2023 revisions made to DOJ Criminal Division's Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). Specifically, the CEP identifies voluntary self-disclosure as a prerequisite for a declination. To be considered, a voluntary self-disclosure must be submitted to the DOJ before a matter or violation has been made public or otherwise known by the DOJ, and in a "timely fashion."

It is possible that JLT's disclosure triggered DOJ to look into similar conduct at other reinsurance companies. Such industry- or sector-wide investigations are not uncommon for DOJ, which has pursued such a strategy in the offshore oil drilling industry and with respect to medical device companies.

Careful Consideration Needed about Whether to Make Disclosure

The decision of whether or not to make a disclosure must be made carefully with a clear-eyed view of what disclosure will require. Once a disclosure is made, a proper investigation needs to be conducted with the results shared fully and honestly with the government. DOJ's guidance and the results in these reinsurance enforcement matters suggest that there are meaningful benefits to disclosure. These matters also suggest that an improper practice in an industry or a particular region or country may trigger a competitor to go to the government voluntarily in order to get disclosure credit. Companies must recognize this as another possible means by which the government can become aware of potential bribery and commence enforcement. Correspondingly, this is yet another important factor to consider in determining whether to make a disclosure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.