Auto parts manufacturer Proterial Cable – formerly Hitachi – will avoid a criminal prosecution after voluntarily disclosing to the US Justice Department that it concealed the failed safety tests of brake hose assemblies for motorcycles that were sold to customers.
Despite the fraud the DOJ found at the business, the law enforcement agency declined to prosecute because Proterial satisfied all three factors set out in DOJ’s Corporate Enforcement Policy.
The DOJ outlined the timely self-disclosure and extensive cooperation by the company this way:
- the voluntary and timely self-disclosure of the misconduct to the DOJ’s Fraud Section by Hitachi Cable (now Proterial Cable) and its corporate parent within weeks of an employee raising the issue during an internal audit;
- the company’s full and proactive cooperation in this matter (including divulging all relevant facts about the misconduct, including information about all of the individuals involved in the misconduct) and agreement to continue to cooperate with any ongoing Fraud Section investigations and any prosecution that has resulted or could in the future;
- the nature and seriousness of the offense;
- the company’s timely and appropriate remediation, including terminating contracts of employees involved in the misconduct and substantially improving the company’s compliance program and internal controls. This was achieved by, among other things, significant investment in designing, implementing, and testing a risk-based and sustainable compliance program; and
- the company’s agreement to pay a disgorgement amount of a little over $15m, which represents the total profit the company gained through the scheme.
DOJ said it also considered the findings by the business that the brake hose assemblies have not been the subject of a safety recall or been linked to any injury. “If the Fraud Section learns information that changes its assessment of any of the factors outlined above, it may reopen its inquiry,” the agency said.
GRIP Comment
Federal agencies continue offering businesses compliance guidance, specifically outlining how they can avoid more costly penalties – or even avoid any charges – if they abide by its corporate enforcement policies incentivizing voluntary self-disclosure, cooperation, and remediation.
Each compliance-focused guidance document from the DOJ has further outlined the government’s stated goal of offering increased incentives and transparency to companies that are seeking to bolster their compliance function.
To be sure, the DOJ’s guidance documents are applicable only in the context of corporate criminal resolutions, but their messaging merits consideration more generally. They outline the hallmarks of an effective compliance program – the very features that would actually enable the business to make a timely self-report, conduct its own effective investigation and remediate its program defects sufficiently.
It’s important to remember that the revised 2023 version contains two primary changes: first, a direct focus on the use of evolving technologies in an increasingly remote workplace, and second, increased efforts to prod companies to incentivize compliance through compensation systems.
The DOJ’s Evaluation of Corporate Compliance Programs helps prosecutors decide every component of the resolution they craft in a case – from the type of resolution, to the penalty imposed, to the compliance obligations the company must shoulder, such as a monitorship and extra reporting obligations. Any company seeking to get back to its main business instead of dealing with a protracted case with law enforcement should take the self-reporting and cooperation incentives seriously
