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Friday Roundup

Quotable, SEC Annual Report, it’s called the rule of law – deal with it, across the pond, more ISO 37001 puff pieces, monitor related, for your viewing pleasure, and for the reading stack. It’s all here in the Friday roundup.

Quotable

To those still hyperventilating about Foreign Corrupt Practices Act enforcement in the Trump administration (see here [1] and here [2]), perhaps this might calm you down. As reported here [3] by Wall Street Journal Risk & Compliance: “[FCPA Unit Chief Daniel Kahn dismissed the suggestion that President Donald Trump‘s previous criticism of the FCPA has had any effect on the department’s enforcement of the law. Mr. Kahn said he “spanned both administrations,” referring to Mr. Trump’s predecessor, President Barack Obama, adding, “I am continuing to do what I do.”

SEC Annual Report

Yesterday, the SEC released its annual report for FY2017 [4]. According to report, the SEC’s focus is guided by five principles including:

“Focus on Individual Accountability

The Commission has long pursued misconduct by both institutions and individuals. And it will continue to do so. But common sense and experience teach that individual accountability more effectively deters wrongdoing. The vigorous pursuit of individual wrongdoers must be the key feature of any effective enforcement program. That pursuit will send strong messages of both general and specific deterrence and strip wrongdoers of their ill-gotten gains. In many instances, we must also seek to protect investors by barring serious wrongdoers and recidivists from our markets.

Nice words, but the fact remains approximately 80% of corporate FCPA enforcement actions lack any related SEC charges or findings against company employees. (See here [4]).

Under the heading “Evaluation of Our Efforts,” kudos to the SEC for stating:

“Judging the effectiveness of our resource allocation is a complex task. Traditionally, many have judged the Commission on quantitative metrics. […] While such statistics provide some kind of measurement, they provide a limited picture of the quality, nature, and effectiveness of our efforts. For example, returning $100,000 to several dozen defrauded investors has little impact on our overall statistics, but can be life-changing for those investors. And, of course, violations that are prevented or deterred are never reflected in statistics. […] [W]e believe the Commission’s enforcement program should be judged both quantitatively and qualitatively and over various time periods. Have we focused on the most serious violations? Have we obtained meaningful punishments that deter unlawful conduct? Have we incapacitated wrongdoers? Are we recouping ill-gotten gains and returning money to investors? We believe the course we have set, and the principles we are following, answer all those questions in the affirmative.”

Again, nice words but in the FCPA enforcement context, quality of enforcement includes analyzing instances in which the SEC has been put to its ultimate burden of proof and in 40 years the SEC has never prevailed in an FCPA enforcement when put to its ultimate burden of proof.

Quality of enforcement also includes analyzing whether prevailing enforcement theories, resolution vehicles, and remedies sought are even consistent with legal authority and rule of law principles.  On this score, there is much to be disputed.

[5]

It’s Called the Rule of Law – Deal With It

Somewhat related to the above, as highlighted in this recent post [6], Co-Director of SEC Enforcement Steven Peikin recently delivered an FCPA speech in which he stated among other things that the Supreme Court’s June 2017 decision in Kokesh (see here [7] for the prior post) has had “an impact across many parts of our enforcement program.”

It has been interesting to see some of the reaction to this issue in the speech, which seem to imply that this is some sort of public policy crisis or that somehow we should have empathy for the SEC.

I say good. That is what happens when an unanimous Supreme Court rejects your position. It’s called the rule of law. Deal with it.

The majority of corporate SEC FCPA enforcement actions in most years result from corporate voluntary disclosures in which the SEC mostly just “processes” the voluntary disclosure against the backdrop of the company tolling or agreeing to waive statute of limitations defenses.  Even if that dynamic is not present, the SEC has a specific FCPA Unit (one of only five specialized units in the SEC). In short, get ‘er done.

Across the Pond

Yesterday, the U.K. Serious Fraud Office announced [8] that it “charged two individuals in relation to the Unaoil investigation.”

“Ziad Akle [Unaoil’s territory manager for Iraq] and Basil Al Jarah [Unaoil’s Iraq partner] have both been charged by requisition with conspiracy to make corrupt payments to secure the award of contracts in Iraq to Unaoil’s client SBM Offshore.

A third man, Saman Ahsani [Unaoil’s Commercial Director], is subject to an extradition request to Monaco on related charges.

The charges relate to alleged corrupt conduct within Unaoil, between June 2005 and August 2011.

  • Basil Al Jarah has been charged with two offences of conspiracy to make corrupt payments, contrary to section (1) of the Criminal Law Act 1977 and contrary to section 1 of the Prevention of Corruption Act 1906.
  • Ziad Akle has been charged with one offence of conspiracy to make corrupt payments, contrary to section (1) of the Criminal Law Act 1977 and contrary to section 1 of the Prevention of Corruption Act 1906

ISO 37001 Puff Pieces

Reading the constant stream of ISO 37001 related marketing pitches is rather funny.

For instance, this piece [9] titled “How Microsoft Is Busting the Bribery Bubble,” recently published on the ISO website as “news” gushes about ISO 37001 and states, without any factual support: “General consensus is that ISO 37001 has the potential to be a powerful tool for all organizations seeking to combat bribery risk in their own operations and throughout their global value chains.”

It is nothing short of amazing that the long article does not mention that Microsoft is currently under FCPA scrutiny. As stated in the company’s most recent 10-Q: “we have been cooperating with authorities in the U.S. in connection with reports concerning our compliance with the Foreign Corrupt Practices Act in various countries.”

And then there is this LinkedIn post [10] titled “ISO 37001: Industry Opinion Mixed on One Year Anniversary.”  I can’t claim to have read everything written about ISO 37001 over the past year, but my perspective is that the “mixed” part merely represents those with a vested business interest who are pushing ISO 37001 related services and certifications.

Monitor Related

This recent Wall Street Journal Risk & Compliance piece [11] states:

“Experts see room to improve the U.S. Justice Department’s corporate-monitorship program, now under review as part of  a broader look at how prosecutors deter corporate fraud. Potential changes, they say, include steps meant to build up expertise and eliminate perceptions of conflicts of interest among monitors, broadening access to lucrative monitorships and making it clearer why some companies, but not others, wind up with monitors in the first place.”

How about just eliminating monitors as a condition of settlement?

In many cases, monitors appear to be little more than a government required transfer of shareholder wealth to Monitor Inc (see here [12]).

As to the suggestion by Hui Chen (former DOJ compliance counsel) of a government monitor office (“I actually think monitorships should just become its own agency,” of perhaps 10 to 20 people, funded by penalties collected in enforcement actions), I do not think that a government monitor department is the answer.

As Ronald Reagan was fond of saying: the nine most terrifying words in the English language are: “I’m from the Government, and I’m here to help.”

For Your Viewing Pleasure

Recently, the Washington Legal Foundation hosted a live webcast titled “The FCPA Approaches Middle Age: Is the Anti-Corruption Law Slowing Down or as Spirited as Ever?”featuring Homer Moyer (Miller & Chevalier) and Lucinda Low (Steptoe & Johnson).

To view the webcast, click here [13].

For the Reading Stack

See here [14] from Dentons “Global Anti-Corruption and Anti-Bribery Laws.” As stated by the firm:

“To help you navigate what can be a complex web of statutes with differing elements, jurisdictional reach and consequences, Dentons created this first-of-its kind interactive tool synthesizing legislation across a common set of variables. Drawing on the knowledge and resources of our global, multidisciplinary team, our tool puts key information at your fingertips so that you can quickly and easily learn about and compare various aspects of international anti-bribery and anti-corruption laws …”.

See here [15] from Miller & Chevalier attorneys Gregory Bates and Leah Moushey, with co-author Filipe Magliarelli of KLA-Koury Lopes Advogados, “A Comparison of Brazil and the United States: Prosecutors’ Toolkits in the Anticorruption Context.”

Elevate Your FCPA Research

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Elevate Your Research [16]