Remarks as Prepared for Delivery
Thank you for the kind introduction. It’s an honor to be with you all, and I am grateful for this opportunity to discuss the important work the Department of Justice’s Criminal Division is doing day in and day out to combat white-collar crime both at home and internationally.
There are many new and exciting developments in international white-collar enforcement. You will hear about many of those developments at this conference from some of the world’s foremost experts on cross-border cooperation among law enforcement, monitorships, extradition, and economic sanctions. And you will hear about these issues from different perspectives. You will hear from prosecutors and regulators, defense counsel who work at law firms all around the world, and in-house lawyers at major corporations.
With my time today, I’d like to discuss four areas with you:
- The Criminal Division’s commitment to combating white collar crime and protecting financial markets, which we can only do through our deep and ever-growing international partnerships;
- Recent changes to the Department’s corporate enforcement policies and how we are implementing them;
- The ongoing work of Task Force KleptoCapture to enforce the economic sanctions the United States imposed in response to Russia’s invasion of Ukraine; and
- A look to the future.
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. We do that by holding accountable both the individual wrongdoers who undermine the integrity of our financial markets and the corporations who often benefit from their crimes.
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. In April, prosecutors in the Fraud Section’s Market Integrity and Major Frauds Unit, or MIMF, secured a guilty plea from Sterling Bancorp Inc. for making materially false statements in its initial public offering and other public securities filings about its marquee lending program that, unbeknownst to the public, was rife with fraud. In keeping with our commitment to protecting financial markets – and investors who rely on the fair functioning of those markets – Sterling was required to pay more than $27 million to non-insider victim-shareholders. And in keeping with our number one priority in this area, three individuals who were responsible for the underlying fraud scheme have also been prosecuted and convicted.
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. With roughly a dozen prosecutors, over the past 10 years, the BIU has imposed more than $13 billion in financial penalties in criminal resolutions with global financial institutions that engaged in anti-money laundering and sanctions violations. 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.
But the Department will not succeed in combating white collar crime on our own. White collar crime knows no borders. Criminals involved in investment frauds, bribery, and sanctions violations move across international borders, as do the illicit proceeds of their crimes. To effectively fight these offenses, strong partnerships and cooperation with our international counterparts is mission critical. 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. International cooperation also amplifies the deterrent value of corporate prosecutions – companies and their employees should understand that now, more than ever before, law enforcement partners around the world are working together to tackle complex financial crime.
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. In recent years, we’ve worked with our enforcement colleagues all across the globe, including of course here in the United Kingdom, but also in Brazil, Malaysia, Switzerland, Ecuador, France, South Africa, Colombia, the Netherlands, Singapore, and more. We forge these relationships not only by cooperating on cases, but also by working together in critical international organizations. This week in Paris, two of our Fraud Section prosecutors are participating in the Organisation for Economic Co-operation and Development’s (OECD’s) Working Group on Bribery where they are meeting with foreign counterparts about existing and potential investigations.
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.
The first part of the pilot program underscores the Department’s view that corporations should have compensation and bonus systems that reward behavior consistent with compliance values. Under this part of the pilot program, 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.” We appreciate that relevant labor and employment laws and other laws across the world vary, and so the pilot program also takes that into account. As the language in our resolutions and policies make clear, it is subject to such laws.
The second part of the pilot program provides clear and predictable monetary incentives for companies to claw back, or withhold, compensation paid or otherwise due to individual wrongdoers. This applies to employees who engaged in suspected wrongdoing in connection with the conduct under investigation or had supervisory authority over those who engaged in the misconduct and knew of, or were willfully blind to, the misconduct. 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. This is a double savings – the company not only receives the benefit of not paying a wrongdoer, it is also rewarded with an additional fine reduction in its resolution with the Department.
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. In those circumstances, the resolving company will pay the applicable fine at the time of resolution, minus a reserved credit equaling the amount of compensation the company is actively attempting to claw back or withhold from culpable executives and employees. Once the company completes the clawback, the corresponding reserved credit will be released to the company. And even if the company is unable to achieve the clawback, prosecutors can credit the good faith effort by releasing to the company up to 25% of the amount the company sought.
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.
Among other successes, this team has seized a $300 million luxury yacht owned by a sanctioned Russian oligarch. MLARS has also obtained seizure warrants for two jets associated with oligarchs and their entities.
And in the last month, MLARS, along with the Department’s National Security Division and the U.S. Attorney’s Office for the Middle District of Florida, secured the guilty pleas of two individuals who engaged in a scheme to violate sanctions imposed against a Ukrainian oligarch for his misappropriation of state assets of Ukraine. The president of Florida steelmaking company Metalhouse, along with his co-conspirator, transferred over $150 million to the oligarch and his companies in exchange for steelmaking products for Metalhouse. These defendants prioritized their profits over compliance with U.S. sanctions and paid the price – pleading guilty to federal criminal charges.
The task force will continue to work with our international partners to build cases against Russian oligarchs who violate sanctions imposed in response to Russia’s unjustified act of war and to seize and forfeit their assets.
We have clearly already packed a lot into 2023. Significant policy changes, corporate resolutions, individual prosecutions, forfeiture actions, and more. All while dealing with the lingering effects of the pandemic. And I expect the remainder of the year will yield even more corporate resolutions as our strong pipeline continues to bear fruit. But I’m always looking to the future, when I expect you will see even more activity in our never-ending fight against corporate crime.
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.
I’m proud to note that our Criminal Division has been a thought leader in corporate criminal enforcement policies. 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. By encouraging companies to come forward and disclose, we will be able to hold wrongdoers accountable for crimes that were otherwise ongoing and undetected. We expect to receive information that will promote our Department-wide goal of holding individual wrongdoers accountable. This will increase both accountability and deterrence. 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.
The Criminal Division’s goals are also clear – to lead through both our enforcement and policy work in the areas of corporate and white-collar crime and to have an impact that reaches far beyond any individual case. To encourage good corporate citizenship, incentivize investments in compliance programs, and further our primary goal of individual accountability. To generate policies that are transparent and predictable, so that we can effectuate real change in corporate behavior domestically. And to work with our partners to amplify that change internationally.
Thank you for your time this morning.
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