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On top of the fines or imprisonment that await violators of the Foreign Corrupt Practices Act, there has been an additional, less-visible penalty: Companies facing FCPA investigations have been expected to terminate the employment of executives tied to any alleged misconduct, or otherwise separate them from the company.
This hidden penalty saddles executives (even those with long, tenured careers) with sudden but officially unexplained departures from companies. It’s been driven in large part by the Department of Justice, which has often viewed an investigated company’s willingness to separate from wrongdoers as a demonstration of its commitment to compliance going forward and hence an important factor in deciding the terms of any resolution to the case.
Recently, however, the DOJ has signaled a shift in its expectations with respect to discipline against executives - at least, for those whose alleged misconduct does not constitute criminal activity. Rather, the department may be open to range of discipline that is less severe than terminations and separations.
The “Filip Factors” - set out in a 2008 memorandum by Mark Filip, then a U.S. Deputy Attorney General, and subsequently formalized in the U.S. Attorneys’ Manual on Principles of Federal Prosecution of Business Organizations - established as a general principle that the DOJ will determine whether to prosecute a company based in part on the company’s remedial actions. These include efforts “to replace responsible management” and “discipline or terminate wrongdoers.”
Until fairly recently the DOJ has emphasized that companies are expected to discipline senior executives and not just rely on terminating lower-level employees. For example, Assistant Attorney General Leslie Caldwell stated at a conference in November 2015 that “the department does not look favorably on situations in which low-level employees who may have engaged in...