Vimpelcom didn’t self report it’s massive bribery scheme. And yet, the company still got a deferred prosecution agreement and a 45 percent reduction off the penalty for cooperating with the Justice Department.

What signal does that send to major American corporations?

Chuck Duross is the former head of the Foreign Corrupt Practices Act (FCPA) unit at the Justice Department. He is now a partner at Morrison & Foerster in Washington, D.C.

“A case like Vimpelcom cuts both ways,” Duross told Corporate Crime Reporter in an interview last week. “On the one hand, the Department says — it was 45 percent off, but they would have gotten more if there was a voluntary disclosure and they would have gotten better treatment. You can also look at Vimpelcom and say — wait, if you are not going to voluntarily disclose and get a deferred prosecution agreement for the parent and a 45 percent reduction off the bottom of the range for just cooperating and not voluntarily disclosing, maybe I should just keep my head low and if they come talk to me I’ll aim for my 45 percent off and a deferred prosecution.”

And increasingly, corporate clients are more likely now to not self report.

“When I was leaving the Department, one of the things I thought to myself was — as a newly minted defense attorney, what would my advice be to a company and under what circumstances would a voluntary disclosure make sense to them?” Duross said. “I always thought that it was a legitimate criticism for people to say — the problem with voluntary disclosure is — it takes too long and it costs too much and on top of that the benefits are too uncertain.”

There is going to be a new head of the FCPA unit — Daniel Kahn. Was he there when you were there?

“Yes,” Duross said. “From the day that he started, Dan worked for me until I left the Department. While I’m sure that the FCPA unit will miss Patrick Stokes, who has now been promoted to senior deputy, the truth is that having Dan move into that position makes a lot of sense. He is a wealth of experience and ability. Dan is Cornell undergrad, Harvard Law School. His dad is a federal judge in Albany, New York. He went to Davis Polk for a number of years.”

“Dan has been a lion of the FCPA since he arrived. He has resolved more matters than anybody else in the unit. And some of the biggest matters – Alstom, Marubeni and BizJet in 2012.”

“BizJet was at the time looked upon as groundbreaking for giving the company substantial credit for voluntary disclosure. There was very high level of involvement at the company — in terms of executives involved in misconduct. But the company didn’t have a guilty plea. It was a deferred prosecution agreement with a substantial reduction in the penalty. And that was to reward the company for having come forward with a matter that the Department didn’t know anything about and wouldn’t have but for the company coming forward. There was an effort by Dan to reward the company there.”

“And then you can contrast that with the Marubeni matter in which Dan looked to hold the company accountable for not cooperating and voluntarily disclosing. He is firm, tough but fair. He has worked on some of the most significant cases that the FCPA unit has had. And he has also played a leading role in a number of other aspects of the work that the unit does — whether at the OECD or to standardize the provisions of the deferred prosecution agreements to make sure they are consistent across the unit and ultimately across the Criminal Division.”

“He has taken a leadership role not just in cases but in the work that he has done to manage the process to make it more consistent and fair across the board.”

What about staffing and resources at the FCPA unit?

“That has changed dramatically,” Duross said. “When I first got there in late 2006, there was Mark Mendelsohn and then there were maybe a couple of other full time FCPA prosecutors — maybe two or three at the most. I was maybe the third or fourth. You are talking Mark and two or three other people. It was a stark contrast to what you see today. Mark didn’t have the embarrassment of riches that exists today.”

“When I took over in 2010, there were maybe about a dozen or so prosecutors working almost exclusively or exclusively on FCPA cases. And by the time I left, we had moved from the fourth floor to the eleventh floor of the building. We had not quite 20 prosecutors. And we were able to add on a number of paralegals just because of the volume of documents that needed to be organized. We were able to hire bilingual paralegals, including not just Spanish, German and French. But we were able to use some contractors who were fluent in Japanese. We had moved to our own floor. It had expanded fairly substantially. But during this time frame, there was a hiring freeze for lawyers. There was a sequester and ultimately a government shutdown. It was difficult to build a unit to deal with the bandwidth of the cases that existed.”

“Fast forward to today. Leslie Caldwell announced last year that they were increasing by fifty percent the size of the unit. They are moving from about 20 FCPA prosecutors to about 30. And I would say that they have a dozen if not more paralegals. It’s much more substantial.”

“It went from Mark and a couple of prosecutors and maybe a couple of paralegals to January 2016 where they are working on getting 30 prosecutors plus a substantial number of paralegals.”

“When Mark first started, it was challenging to get the FBI engaged in these cases. They were complicated, they were international, they were different, they took a long time. He was able to get the FBI to create an FCPA squad in Manassas, Virginia. And now, fast forward to today — that squad is now housed in the international corruption unit in Washington, D.C. and they have three new FBI squads in New York, Houston and San Francisco.”

If you consider all the FCPA cases as the FCPA iceberg and the cases above sea level as the resolved cases, how big is the iceberg?

“There are a substantial number of cases ongoing at any point in time,” Duross says. “The Department won’t release that statistic. The last one that was released was years ago. That was in 2010 or so and the Department said they had 150 plus ongoing investigations.”

“I think that number is lower today. With greater resources the Department can more quickly resolve matters and determine whether to close and decline a matter and move forward with it. But there is certainly a steady pipeline of ongoing investigations, some of which are quite large and some of which are smaller.”

“I was just at a conference with both Kara Brockmeyer of the SEC and Patrick Stokes of the Department. They both indicated that they thought 2016 is going to be a substantial year. It already has been in some ways. But it will continue to be very busy. I think the SEC already this year has brought six actions.”

Did the Justice Department swing too far away from guilty pleas and toward deferred and non prosecution agreements?

“There is an ongoing debate in the defense bar and in the Department over — were the lessons of Arthur Andersen learned too well? Was there an over correction or over reaction to Arthur Andersen — embracing deferred prosecution agreements too often?”

“These cases are driven by the federal principles of prosecution of business organizations. They really do look at the collateral consequences and whether that might have an outsized and unjust impact on the company.”

“Even the people who are most aggressive on corporate guilty pleas probably see the value in having the flexibility of a deferred prosecution agreement as an option — maybe not one that should be used as frequently.”

[For the complete q/a transcript of the Interview with Chuck Duross, see 30 Corporate Crime Reporter 11(13), March 14, 2016, print edition only.]