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The FCPA Guidance Turns 6

Six years ago today, on November 14, 2012 [1], the DOJ and SEC released the FCPA Guidance [2]. The guidance generated a substantial amount of buzz, but the festive coverage soon subsidized as the guidance turned 1, 2, 3, 4, 5 and now 6 years old.

Yet, on this sixth anniversary of the FCPA Guidance, it is useful to take a look back.

As highlighted in this prior post [3], the 2012 FCPA guidance was a long-time coming to say the least.

For instance, in the 1988 FCPA amendments Congress encouraged the DOJ to issue FCPA guidance. The DOJ refused.

In 2002, the OECD encouraged the DOJ to issue FCPA guidance. The DOJ refused.

In 2010, the OECD again encouraged the DOJ to issue FCPA guidance. The DOJ again refused.

In the aftermath of the November 2010 Senate FCPA hearing the DOJ was again encouraged to issue FCPA guidance.  The DOJ again refused.

It was only after the FCPA reform movement gained steam in 2011 that the DOJ made the political move in announcing that FCPA guidance would be forthcoming. Tellingly as to the DOJ’s political motivations, actual issuance of the guidance took over one year and occurred a few days after the 2012 elections.  For more on the above chronology of events, see the article “Grading the FCPA Guidance [4].”

As discussed in this November 2012 post [5], there was little new information in the FCPA Guidance to those previously knowledgeable about the FCPA and its enforcement. Yet, to those persuaded by non-lawyer journalist coverage of FCPA topics and/or FCPA Inc. participants seeking convenient hooks to market FCPA compliance services, the guidance was indeed “new.”

Sure, the FCPA Guidance was a useful document to the extent it captured in one document the DOJ and SEC’s views on the FCPA and related topics. But that is all the guidance did.

[6]

Criticism of the FCPA Guidance was widespread, including by former high-ranking DOJ officials. (See this prior post [7] rounding up approximately 50 law firm client alerts, etc. regarding the guidance).  For instance, Steven Tyrrell, former chief of the DOJ fraud section stated that the guidance was “more of a scrapbook of past DOJ and SEC successes than a guide book for companies who care about playing by the rules.” (See also this [8] prior post highlighting former Deputy Attorney General Larry Thompson’s views on the guidance.)

Indeed, the FCPA Guidance did not represent the “law,” but rather DOJ and SEC interpretations of the law and as highlighted in this article [4] the guidance was not a well-balanced portrayal of the FCPA as it was replete with selective information, half-truths, and, worse information that was demonstratively false.

The passage of time has further demonstrated this point.

For instance, the Guidance states:

“The five-year limitations period applies to SEC actions seeking civil penalties, but it does not prevent SEC from seeking equitable remedies, such as an injunction or the disgorgement of ill-gotten gains, for conduct pre-dating the five-year period.”

As highlighted in this prior post [9], in 2017 the Supreme Court in Kokesh unanimously disagreed.

Likewise, the Guidance states:

“Individuals and companies, including foreign nationals and companies, may also be liable for conspiring to violate the FCPA—i.e., for agreeing to commit an FCPA violation—even if they are not, or could not be, independently charged with a substantive FCPA violation.”

As highlighted in this prior post [10], in 2018 the Second Circuit in Hoskins disagreed.

Even so, in the FCPA Guidance and in connection with its release, the enforcement agencies made some sensible statements (see here [11] for the prior post) such as:

As highlighted in this prior post [12], one of the more useful aspects of the guidance is that it could thus be used as a measuring stick for future enforcement activity. As the measuring sticks, were the following statements in the guidance.

“Like the ‘reasonable detail’ requirement in the books and records provision, the [FCPA’s internal control provisions] defines ‘reasonable assurances’ as ‘such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.’ The Act does not specify a particular set of controls that companies are required to implement. Rather, the internal controls provisions gives companies the flexibility to develop and maintain a system of controls that is appropriate to their particular needs and circumstances.” (Pg. 40)

“Companies may not be able to exercise the same level of control over a minority-owned subsidiary or affiliate as they do over a majority or wholly owned entity. Therefore, if a parent company owns less than 50% of a subsidiary or affiliate, the parent is only required to use its best efforts to cause the minority-owned subsidiary or affiliate to devise and maintain a system of internal accounting controls consistent with the issuer’s own obligations under the FCPA.” (Pg. 43)

Since the FCPA Guidance, there have been approximately 80 corporate FCPA enforcement actions.  Several of these enforcement actions such as Ralph Lauren [13]Phillips [14]Stryker [15]Allianz [16]Bruker [17]Layne Christensen [18]Smith & Wesson [19]BNY Mellon [20]Mead Johnson [21]BHP Billiton [22]FLIR Systems [23]Nordion [24]Novartis [25]Qualcomm [26]SAP [27]GSK [28]ABInBev [29]AstraZeneca [30]Mondelez [31], Beam [32]United Technologies [33], among others, raise the issue of whether the enforcement agencies are indeed acting consistent with their own guidance, let alone the FCPA statue itself.

In short, six years has passed since the FCPA Guidance and not much has changed.

It would seem that the only thing that has changed is that most of the principal spokespersons / authors of the FCPA Guidance are now part of FCPA Inc. making millions in the private sector advising companies against the FCPA enforcement climate they helped create.

And in an ironic twist, some of these same people are now calling for additional FCPA guidance. For instance, one of the signatories of the FCPA Guidance was Robert Khuzami in his role as Director of the SEC’s Enforcement Division. As highlighted in this prior post [34], Khuzami has since stated:

“I think that you may get a [new] look at the Foreign Corrupt Practices Act, the anti-corruption law that is somewhat controversial, mostly due to the potential breadth of the law. There is a view that perhaps the government can do more to assist companies in deciding how they can conduct business in jurisdictions where corruption exists. Companies overwhelmingly aren’t interested in handing out bribes or engaging in corrupt behavior, but typically they find themselves operating in countries where that is the norm or accepted behavior. There’s a way of giving additional guidance or changing the law in a way that might strike a balance.”

As far back as 1982 [35] it was recognized in the FCPA context that the United States should be a nation of laws, not a nation of men and women issuing non-binding guidance.

The 2012 FCPA guidance was just that – men and women issuing non-binding guidance.

The April 2016 DOJ Pilot Program was just that – men and women issuing non-binding guidance.

The November 2017 DOJ FCPA Corporate Enforcement Policy (CEP) was just that – men and women issuing non-binding guidance.

Indeed, just as the men and women who authored the 2012 guidance soon left the government, the men and women who drafted the FCPA Pilot Program and CEP soon left (or will be leaving) the government.

And so it goes.

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