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FCPA Flash Podcast – A Conversation With James Koukios Regarding FCPA Enforcement And Compliance

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The FCPA Flash podcast provides in an audio format the same fresh, candid, and informed commentary about the Foreign Corrupt Practices Act and related topics as readers have come to expect from written posts on FCPA Professor.

This FCPA Flash episode is a conversation with James Koukios (Morrison & Foerster and former Senior Deputy Chief of the DOJ’s Fraud Section). During the podcast, Koukios elaborates on various points he made in this recent article including: (i) how FCPA enforcement has made “significant and positive contributions to the development of compliance programs and standards; (ii) how regulators and prosecutors may take “unfair and impractical [FCPA] positions;” and (iii) how “FCPA enforcement should not be so puritanical as to stifle legitimate business opportunities or cause companies to overspend on ineffective compliance measures.”

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Panasonic Corp. And Related Entity Resolve $280 Million Avionics Industry FCPA Enforcement Action

panasonic

Yesterday, the DOJ and SEC announced (here and here) a parallel Foreign Corrupt Practices Act enforcement action against Japan-based Panasonic Corp.  and a U.S. subsidiary Panasonic Avionics Corp. (PAC).

As stated in the enforcement action, Panasonic was an issuer until April 2013 and again “for a brief period between 2015 and 2016 as a result of a share swap that retriggered Panasonic’s obligation to file its financial statements with the SEC.”

As highlighted in this post, the enforcement action consisted of:

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The Many Issues To Consider From The Dun & Bradstreet Enforcement Action

Issues

Some people simply read FCPA enforcement actions, accept the enforcement theories advanced, record the enforcement statistics, and go about their day.

Not here at FCPA Professor. Just because the FCPA is a fundamentally sound statute, does not mean that FCPA enforcement is necessarily fundamentally sound.

Prior posts here and here went in-depth into the SEC’s $9.2 million Foreign Corrupt Practices Act enforcement action against Dun & Bradstreet based on the conduct of two indirect Chinese subsidiaries from 6 – 12 years ago.

This post continues the analysis by highlighting the many troubling or notable issues to consider from the enforcement action.

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Size Matters, But To What Extent?

Big vs. small

Business organizations large and small are subject to the anti-bribery provisions of the Foreign Corrupt Practices Act.

Although the books and records and internal controls provisions only apply to issuers, issuers are not always large companies. These provisions make no explicit distinctions regarding the size of an issuer, but in the FCPA Guidance the DOJ and SEC sensibly acknowledge that a factor the enforcement agencies consider when evaluating an organization’s compliance program is the size of the organization. Specifically the Guidance states: ” small- and medium-size enterprises likely will have different compliance programs from large multi-national corporations, a fact DOJ and SEC take into account when evaluating companies’ compliance programs.”

Similarly, the DOJ’s November 2017 FCPA Corporate Enforcement Policy states: “implementation of an effective compliance and ethics program, the criteria for which will be periodically updated and which may vary based on the size and resources of the organization …”.

Despite this sensible FCPA enforcement agency guidance, does size actually matter?

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A Refreshing Judicial Reminder That Failure To Act Consistent With “Best Practices” Is NOT A Legal Violation

Judicial Decision

Several prior posts (see here, here, here, here, here, here and here) have highlighted the general issue that a troubling amount of Foreign Corrupt Practices Act enforcement (particularly by the SEC and its internal controls theories) amounts to little more than ipse dixit ((Latin for he himself said it – an unsupported statement that rests solely on the authority of the individual who makes it – in other words because the SEC says so).

The FCPA’s internal controls provisions require issuers to have “internal accounting controls sufficient to provide reasonable assurances” that certain limited financial objectives are met. The FCPA then provides the following definition of “reasonably assurances” and “reasonable detail” – “such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.”

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