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First Corporate Enforcement Action Of 2018 Is Against Israel-Based Elbit Imaging Ltd.


Last Friday, the SEC released this administrative order finding that Israel-based Elbit Imaging Ltd. (a real estate company with shares traded on NASDAQ) violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act based on payments made to certain third parties “when some or all of the funds may have been used to make corrupt payments to Romanian government officials or were embezzled.”

The enforcement action concerned conduct between 2006 and 2012 (beyond any conceivable statute of limitations) and without admitting or denying the SEC’s findings Elbit agreed to pay $500,000 (an amount reflective of the fact that Elbit is currently winding down its operations).

The Elbit Imaging enforcement action is the first corporate FCPA enforcement action of 2018 and breaks a nearly six month dry spell in SEC corporate FCPA enforcement actions.

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In Times Like These, We Need To Ask: Is The FCPA Effective?

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In passing the Foreign Corrupt Practices Act, Congress anticipated that the “criminalization of foreign corporate bribery will to a significant extent act as a self-enforcing preventative mechanism.” Likewise since the FCPA’s earliest days, the DOJ has recognized that the “most efficient means of implementing the FCPA is voluntary compliance by the American business community.”

In short, the FCPA was never intended to be just a mechanism to achieve “hard enforcement” (actual enforcement actions), but more a mechanism to achieve “soft enforcement” (compliance) in furtherance of the statutory objective of  reducing bribery and corruption. Indeed, as stated by the Sixth Circuit in Lamb v. Phillip Morris Inc., 915 F.2d 1024 (1990) and repeated by several other courts, the FCPA’s statutory scheme “clearly evinces a preference for compliance in lieu of prosecution.”

Yet, as the FCPA nears its 40th anniversary those in this space need to start asking the question of whether the FCPA – as currently written and currently enforced – has been effective?

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