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DOJ “Piles On” Société Générale And Other Issues To Consider

piling

As highlighted in this prior post, in May the DOJ announced a non-binding policy discouraging “piling on” by instructing DOJ “components to appropriately coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company in relation to investigations of the same misconduct.”

This prior post discussed how discouraging “piling on” sounds great, but it all depends on what “piling on” means.

Specifically, one area in which the DOJ’s policy is FCPA relevant is due to the transnational nature of alleged FCPA violations against foreign companies which may be subject to U.S. law enforcement and foreign law enforcement as well.

As highlighted in prior posts here and here, much of the largeness of modern FCPA enforcement has resulted from corporate enforcement actions against foreign companies (based in many instances on mere listing of securities on U.S. markets and in a few instances on sparse allegations of a U.S. nexus in furtherance of an alleged bribery scheme).

A substantial majority of these enforcement actions have been against companies headquartered in countries that, like the U.S., are parties to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention). In other words, “peer” countries with mature FCPA-like laws governing the conduct of their companies coupled with reputable legal systems to prosecute such offenses.

Given this reality, as well as the specific provision in Article 4 of OECD Convention that “when more than one Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution,” is it “piling on” when the U.S. brings FCPA enforcement actions against such foreign companies for their interactions with non-U.S. officials?

After all, as highlighted in this prior post, in 2017 DOJ officials stated that they “are working harder than ever to coordinate with global partners and avoid what some have termed “piling on” in attendant global resolutions.” As stated by Sandra Moser (Principal Deputy Chief, Fraud Section, DOJ):

“Coordination with foreign countries will continue, and that number of coordinated resolutions will grow, including with new countries.  This is important for several reasons.  First and foremost, it is fair to companies.  It encourages companies to cooperate across the board, because we understand that, at the end of a case, money paid out is derived from one pie.  A resolving company should not have piled upon it duplicative fines via separate resolutions that do not credit one another.  Although the “piling on” problem is not entirely solved by doing this (other countries may certainly try to reach additional resolutions), our efforts do mitigate this problem, and we are trying to do better in this regard.”

Granted, in most of these type of enforcement actions there were credits or offsets in terms of U.S. FCPA settlement amounts for related foreign law enforcement actions. However, the bigger question is whether these examples should have been instances in which the U.S. simply backed away because of the related foreign law enforcement action?

Which brings us to the FCPA enforcement action earlier this week against French bank Société Générale for its bribery of alleged Libyan officials.

Both criminal informations invoked the dd-3 prong of the FCPA (added to the statute in 1998) that has the following jurisdictional element: “while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of an” improper payment scheme.

Both informations contain the following two relevant allegations:

“On or about April 28, 2008, Societe Generale sent a wire transfer of approximately $19.8 million through its New York branch to the Panamanian Company’s account at Societe Generale in Zurich, Switzerland.

On or about May 9, 2008, a Societe Generale employee and the Libyan Intermediary traveled to New York City through John F. Kennedy International Airport to meet with a Libyan official. While in New York, the Societe Generale employee discussed several potential transactions with the Libyan official. The Societe Generale employee also provided the Libyan official and the Libyan Intermediary with multiple days of entertainment in New York.”

In short, the jurisdictional basis for U.S. law enforcement bringing a net $293 million FCPA enforcement action against a French bank (a company obviously subject to jurisdiction by France “the most appropriate” “peer country”) for bribery of alleged Libyan foreign officials was a wire transfer approximately ten years prior to the enforcement action and alleged culpable actors setting foot in the U.S. in furtherance of the bribery scheme approximately ten years prior to the enforcement action.

Sure, there was an offset in the DOJ enforcement action for approximately $293 million paid to French law enforcement “in connection with the resolution of a parallel case concerning the allegations.”

But let’s call a spade a spade. The U.S. FCPA enforcement action was “piling on” (particularly since SoGen also paid approximately $1.1 billion to the Libyan Investment Authority to resolve a related civil dispute).

In the minds of some, FCPA enforcement has become a convenient cash cow for the U.S. government. The SoGen enforcement action only amplifies these concerns.

From a historical perspective, it is worth noting that part of the FCPA reform discussion in the 1980’s were bills –introduced by Democrats – seeking to waive the FCPA’s provisions “in the case of any country which the Attorney General has certified to have (1) effective bribery or corruption statutes; and (2) an established record of aggressive enforcement of such statutes.” (See S. 1797, Competitive America Trade Reform Act of 1985, introduced on October 29, 1985 by Senator Gary Hart (D-CO) and H.R. 3813, Competitive America Trade Reform Act of 1985, introduced on November 21, 1985 by Representative Vic Fazio (D-CA)).

While waiving the FCPA’s provisions – as those bills sought to do – does not seem like a good idea, perhaps the time has come with the maturity of the OECD Convention – for U.S. enforcement agencies to adopt a policy of not bringing FCPA enforcement actions against foreign companies from peer OECD Convention countries.

Just the Latest

Related to the above, Société Générale is just the latest in a long line of notable FCPA enforcement actions against French companies. Others include:

  • Alstom – $772 million (2014)
  • Total – $398 million (2013)
  • Technip – $240 million (2010)
  • Alcatel Lucent – $92 million (2010)

If you are scoring at home, this is approximately $1.8 billion in net FCPA settlements in recent years against French companies for bribery non-U.S. officials.

Timeline

SoGen received a subpoena from the DOJ in April 2014. Thus from start to finish, SoGen’s FCPA scrutiny lasted approximately four years.

Once again, if the DOJ wants the public to have confidence in its FCPA enforcement program, it must resolve instances of FCPA scrutiny much quicker. The validity and credibility of FCPA enforcement depends on this. Having FCPA scrutiny linger for over four years is inexcusable particularly since SoGen, in the words of the DOJ:

“conduct[ed] a thorough and robust internal investigation; collect[ed] and produc[ed] voluminous evidence located in other countries to the full extent permitted under applicable laws and regulations; and provid[ed] frequent and regular updates to the Offices as to the status of and facts learned during the Company’s internal investigation in a manner that both complied with applicable laws and regulations and satisfied the Office’s need to obtain this information in a timely manner.”

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