Global settlements, Part 5 of this series, require careful attention by counsel and parties in parallel proceedings. A global settlement may include just one settlement agreement, but is more likely to include multiple settlement agreements with different government agencies (including foreign ones) that are coordinated. The goal is to ensure that the overall impact of the settlement terms or penalties imposed is fair to each agency’s interests based on the specific circumstances of the enforcement action, but not ruinous to the company.

To ensure a good foundation for pursuing a global settlement, it is crucial to understand the topics covered in Parts 1-4 of this series:

  1. We identified the potentially relevant US government agencies (and the possibility of non-US government agency involvement) in Part 1;
  2. In Part 2, we discussed how the investigation may be impacted by the involvement of multiple agencies;
  3. We provided guidance on voluntary self-disclosures (VSDs) to those agencies in Part 3; and
  4. In Part 4, we covered the management of interagency communication.

As we previously noted, each agency has different authorities, powers, priorities, and timing; and all of these should be factored into the global settlement discussions. Continuous communication during the investigation can help identify each agency’s interests and priorities.

A global settlement process can be complex, involving the review, assessment, and analysis of settlement agreements from multiple agencies, and parallel negotiations. However, the benefits often far outweigh the costs, as companies faced with parallel investigations may have the opportunity, through a global settlement to obtain closure on issues relating to the relevant violations, and to potentially reduce the burden of the monetary and non-monetary penalties.

Before entering into the global settlement discussions, it is necessary to understand the implications and potential collateral consequences arising from settlement terms, including the potential monetary and non-monetary penalties (e.g., monitors, audits, or other restrictions on activities of the company) that each agency may assess or require as a condition to settle. For example, even though steep financial penalties are not an ideal outcome, they might be preferable to corporate or individual guilty convictions, debarment from government contracts, or revocation of export privileges.

With regard to calculating the penalties, the maximum statutory civil and criminal penalties are the starting place for analysis, but they are not typically determinative of the ultimate penalty imposed. Each agency has its own set of penalty mitigation criteria, such as the voluntary self-disclosure credit discussed in Part 3 of this series.

Additionally, agencies are open to consider a company’s ability to pay, and the potential impact on shareholders and employees. Agencies also avoid “disproportionate” fines to past cases, with a recent example of the Under Secretary of Commerce for Industry and Security, remanding a penalty imposed by an Administrative Law Judge because the penalty was disproportionate to similar cases charged by BIS. Similarly, OFAC, on several occasions, cited the operating capacity or the financial condition of a company as a reason to reduce settlement penalties (see British Arab Commercial Bank, United Medical Technology, and B Whale Corporation).

For criminal cases, the DOJ Justice Manual provides guidance to the department’s attorneys to coordinate parallel proceedings, “[s]pecifically, department attorneys from each component should consider the amount and apportionment of fines, penalties, and/or forfeiture paid to the other components that are or will be resolving with the company for the same misconduct, with the goal of achieving an equitable result.” Additionally, DOJ guidance on export control and sanctions enforcement policy specifically refers back to the DOJ Justice Manual, reaffirming its commitment “to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct.”

The overall monetary and non-monetary penalties should be considered across all agencies. In some cases, one agency may suspend a portion of the civil monetary penalty in recognition of the monetary penalties imposed by other agencies. For example, in the recently announced settlements between cigarette product maker Essentra FZE with DOJ and OFAC, the company agreed to pay a fine to DOJ of $666,544; at the same time, OFAC deemed its slightly lower fine “satisfied by its payment to DOJ.”

Similarly, if a monitorship or audit is to be imposed, the settlement terms should allow for one monitor whose reports and updates may be shared with the other agencies. The ZTE global settlement in March 2017 was an example of the same monitor acting as the DOJ corporate compliance monitor and the BIS independent compliance monitor for a specified period of time (see BIS Order).

If a global settlement is not undertaken, different US government agencies may take their own enforcements steps targeting a company for related violations, thereby delaying resolution and imposing separate penalties. This occurred in the BAE Systems case, where BAE Systems pled guilty to criminal charges of export control and other US law violations, however, DDTC was not a party to that agreement, even though it included charges of ITAR violations. After the plea was announced, DDTC issued an administrative hold on most of BAE’s export licenses and delayed issuance of licenses until the company BAE entered into a separate consent agreement with DDTC with additional fines over a year later.

The process to achieve a successful global settlement can be lengthy and complicated, as it requires expertise in the enforcement background, regulatory expertise, and perspective of each government agency involved, as well as an understanding of the key factors that motivate these agencies. However, all these efforts could be worthwhile because a successful global settlement can provide a company with an opportunity to move beyond the uncertainties caused by its past violations and, through strategic coordination and communication with agencies, allow the company to reach a preferable resolution.