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Inside FCPA Enforcement Statistics

FCPA Inc., it often seems, is obsessed with enforcement statistics.  Increasing FCPA enforcement, and the ability to demonstrate it through numbers and graphs, is an effective marketing device for many in the industry.  But what happens when enforcement actually decreases?  How do you market decreasing FCPA enforcement?  As Michael Volkov recently stated (here [1]) on his Corruption, Crime and Compliance site  “law firms are wringing their hands wondering how they can ‘scare’ businesses with the latest FCPA enforcement action.”  It seems the answer is to speculate as to possible reasons for the decrease and remind your marketing targets of the many cases in the “pipeline.”

The decrease in FCPA enforcement has been a hot topic of late, for instance see here [2] from the FCPA Blog.

Let me share a not-so-secret, secret and that is this.  FCPA enforcement 2007-2011 was, to a great extent, the function of just three unique events:  (1) publication in 2005 of the so-called Volcker Report on the United Nations Iraq Oil for Food Program which served as a ready-made list of enforcement actions; (2) in 2003 Georges Krammer, a former top official at Technip, shared information with French investigators concerning a $6 billion dollar project at Bonny Island, Nigeria; and (3) several oil and gas companies utilized the services of Panalpina.

These three unique events have resulted in approximately 35% of the core corporate FCPA enforcement actions between 2007-2011.

There have been 14 core corporate enforcement actions focused on Iraq Oil for Food conduct (Chevron, Azko Nobel, El Paso, Novo Nordisk, AGCO, ABB, Innospec, Ingersall-Rand, Textron, York, AB Volvo, Flowserve, General Electric and Fiat).  Siemens and Daimler also included Iraq Oil for Food conduct, but such conduct was a minor focus of the overall allegations and thus not included in the above figure.  In short, the Iraqi Oil for Food enforcement actions have largely run their course (one of the few remaining inquiries would seem to be Weatherford International where the conduct under investigation includes Iraq Oil for Food conduct).  [Note:  most of the Iraq Oil for Food enforcement actions involved “only” FCPA books and records and internal control charges given that the kickback payments were to the Iraqi government, not a particular foreign official.  Nevertheless such actions are usually included in FCPA enforcement statistics].

There have been 7 core corporate enforcement actions concerning oil and gas companies utilizing the services of Panalpina in Nigeria (Panalpina, Noble, Pride, Shell, Tidewater, Transocean, and Global SantaFe).  These actions, all announced in November 2010, largely account for the spike in 2010 corporate FCPA enforcement.

There have been 4 core corporate enforcement actions concerning the so-called TSKJ joint venture in relation to Bonny Island, Nigeria conduct (KBR / Halliburton, Technip, ENI/Snamprogetti, and JGC Corp.) [Throw in the 2012 enforcement action against Marunbeni and the number is 5].  These enforcement actions of course have not been mere garden-variety types; rather Bonny Island enforcement actions have resulted in 4 of the top 6 FCPA enforcement actions of all time.

Add these numbers together and you find that 25 of the 73 core corporate enforcement actions between 2007-2011 were the direct result of just three unique events.

Viewing FCPA enforcement statistics in the abstract is not a very useful exercise.  Rather, the more thoughtful way to view such statistics is to understand the root causes leading to the enforcement actions in the first place.  When viewed in this way, the not-so-secret, secret is that approximately 35% of FCPA enforcement actions between 2007-2011 were the direct result of just three unique events.  These events have largely run their course and I submit this is the biggest reason why enforcement actions in 2012 are not on pace with the past few years.

[Note – as discussed in previous posts, unlike some others, I keep my corporate FCPA statistics using the “core” approach.  Thus, for instance, the Siemens  enforcement action was 1 ”core” enforcement action even if the DOJ entered into separate agreements with Siemens AG, Siemens Argentina, Siemens Bangladesh, and Siemens Venezuela and even if the SEC separately brought an enforcement action against Siemens AG.  I submit that counting Siemens as 5 corporate enforcement actions, as many do, results in misleading FCPA enforcement statistics.  Further distorting FCPA enforcement statistics is separately counting related individual enforcement actions.  For instance, if one took such an approach in connection with Siemens the end result would be 20 enforcement actions – even though all enforcement actions were based on the same core set of conduct].