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Kokesh – Yet Another Reason Why Issuers Should Not Roll Over And Play Dead When Under FCPA Scrutiny

The Supreme Court’s recent unanimous decision in Kokesh [1] rejecting the SEC’s position and holding that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues” should impact SEC FCPA enforcement against issuers.

However, statute of limitations issues are meaningless when issuers (as often happens in the FCPA context) waive statute of limitations defenses or agree to toll the statute of limitations.

Thus, whether Kokesh will impact SEC FCPA enforcement against issuers depends on whether issuers will continue to roll over and play dead when under FCPA scrutiny or actually mount a defense.

There is much legal authority that should impact FCPA enforcement.

For starters, the FCPA’s actual elements and what Congress intended those elements to mean should impact FCPA enforcement. However, this legal authority seems to matter very little. (See the article “JPMorgan: A Trifecta of Off-The-Rails FCPA Enforcement [2]” for just one recent example).

The fact that the DOJ has an overall losing record in FCPA enforcement actions when put to its burden of proof should impact FCPA enforcement, but it  seems to matter very little.

The fact that in nearly 40 years the SEC has never prevailed in an FCPA enforcement action [3] when put to its ultimate burden of proof should impact FCPA enforcement, but it seems to matter very little.

The fact that the DOJ/SEC have an overall losing record when put to its burden of proof in non-procurement FCPA enforcement actions concerning licenses, permits, certifications and the like (see here [4] for an article highlighting these cases) should impact FCPA enforcement, but it seems to matter very little as numerous FCPA enforcement actions fall under the category of non-procurement actions.


As highlighted in this prior post [6], the fact that, in a case of first impression, a court held that the government has the burden of negating application of the FCPA’s facilitating payment exception should impact FCPA enforcement, but it seems to matter very little. As stated by Richard Grime (the SEC’s former Assistant Director of Enforcement):

“The drafters of the FCPA recognized that such demands for ‘grease payments’ are a reality in many countries, and accordingly made clear that certain payments made to expedite the approval of permits or licenses, or to prompt the expeditious performance of similar low-level ministerial duties, fell outside the ambit of the statute’s anti-bribery provisions. Yet that exception for ‘facilitating payments’ […] is becoming harder and harder to rely on. […]  The DOJ and SEC have pressed a narrow view of the exception in recent years … […] Of course, the fact that the FCPA’s twin enforcement agencies have treated certain payments as prohibited despite their possible categorization as facilitating payments does not mean a federal court would agree. But because the vast majority of enforcement actions are resolved through DPAs and NPAs, and other settlement devices, these cases never make it to trial. As a result, the DOJ and the SEC’s narrow interpretation of the facilitating payments exception is making that exception ever more illusory, regardless of whether the federal courts – or Congress – would agree.”

As highlighted in this prior post [7], the Supreme Court’s 2012 decision in Southern Union v. U.S. holding that any fact that substantially increases a criminal defendant’s fine amount must be provable to a jury beyond a reasonable doubt should impact FCPA enforcement, but it seems to matter very little.

As highlighted in this prior post [8], the Supreme Court’s unanimous 2013 decision in Gabelli v. SEC in which the court rejected the SEC’s expansive statute of limitations interpretation of 28 U.S.C. 2462 in cases involving civil penalties should impact FCPA enforcement, but it seems to matter very little.

As highlighted in this prior post [9], the Supreme Court’s unanimous 2014 decision in Daimler v. Bauman in which the court slammed an agency theory seemingly serving as the basis for several corporate FCPA enforcement actions should impact FCPA enforcement, but it seems to matter very little.

As highlighted in this prior post [10]:

all should impact FCPA enforcement, but seem to matter very little.

In short, the law and legal authority (including unanimous Supreme Court decisions) don’t matter when the FCPA is “enforced” around conference room tables in Washington, D.C. in the absence of any meaningful judicial scrutiny where corporate risk aversion is often the name of the game.

Does the DOJ and SEC bear some of the blame for off-the-rails FCPA enforcement?


But so too do risk averse business organizations in what amounts to a tragedy of the commons.

As Homer Moyer, a dean of the FCPA previously stated:

“One reality is the enforcement agencies’ [FCPA] views on issues and enforcement policies, positions on which they are rarely challenged in court. The other is what knowledgeable counsel believe the government could sustain in court, should their interpretations or positions be challenged. The two may not be the same. The operative rules of the game are the agencies’ views unless a company is prepared to go to court or to mount a serious challenge within the agencies.”

Indeed, in this recent FCPA Flash podcast [11], Joseph Covington (former head of the DOJ’s de facto FCPA unit in the early 1980’s) was asked what is different about FCPA enforcement today compared to the past and he stated: “the defense mindset in those days was prove it, a little bit different than it is today.”

What a novel thought – forcing the government to prove its case.

If business organizations faced with FCPA scrutiny would do just that, the enforcement landscape would likely look much different. Concerned that actually mounting a legal defense to a DOJ or SEC enforcement action will result in “corporate death?” This narrative is a complete fallacy. (See here [12]).

Corporate board members, audit committee members and others managing business organizations listen up.

If your company is under FCPA scrutiny don’t hire a lawyer raised in the “roll over and play dead” culture that many FCPA lawyers were raised in (see here [13] for an FCPA Flash podcast touching on this issue). Who cares if an FCPA lawyer is a former DOJ and SEC FCPA enforcement attorney.

Hire a litigator, hire someone who will fight back and force the government to prove its case.

We claim to have the rule of law in this country, but the sad reality is that the law often takes a backseat to leverage and risk aversion. (See this prior post [14] highlighting former DOJ Deputy Attorney General David Ogden’s criticism of the DOJ’s leverage-based enforcement approach and this related FCPA Flash podcast [15]).

In short, the Kokesh decision represents yet another reason why issuers should not roll over and play dead when under FCPA scrutiny.

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