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Voluntary Disclosure Statistics

Recently, the Wall Street Journal published this [1] article titled “Why Companies Might Opt to Self-Report Potential Bribery Issues.” The article contained several observations from FCPA lawyers typically seen in voluntary disclosure articles.

“A lot of companies are self-reporting. And a lot of companies are not self-reporting,” said F. Joseph Warin, chairman of the Washington litigation department at Gibson Dunn & Crutcher LLP. Companies devote “an enormous effort” analyzing whether to self-report, he said.

“Voluntary disclosure is a business decision,” said Laurence Urgenson, a partner at law firm Mayer Brown LLP. “What are the costs and the benefits? Right now it’s a guessing game.”

For foreign corporations, the Justice Department’s nuanced message about the benefits of self-reporting “is lost in translation,” said Robert Luskin, a partner at Squire Patton Boggs who represents foreign companies in FCPA probes. “They see settlements in the hundreds of millions of dollars.…The view is that it’s better to just keep [the Justice Department] as far away as possible.”

What caught my eye though from the article is the following.

“About a third of the Securities and Exchange Commission’s FCPA cases in recent years have come from companies that self-report, an agency spokeswoman said. A Justice Department spokesman said the department doesn’t track the figure.”

I track voluntary disclosure statistics and the SEC’s claimed one-third statistic is not accurate.

Since 2011, there have been 34 corporate SEC FCPA enforcement actions.  20 of the enforcement actions (59%) have been based on voluntary disclosures per the SEC’s own resolution documents.  This 59% figure actually under-represents the impact of voluntary disclosures on the SEC’s FCPA enforcement program because several other FCPA enforcement actions (for instance against pharmaceutical companies Eli Lilly, Smith & Nephew, and Biomet) are generally viewed as “fruits” of a prior voluntary disclosure (Johnson & Johnson).

What about DOJ FCPA enforcement, given that the agency apparently doesn’t track voluntary disclosure figures?

Since 2011, there have been 31 core corporate DOJ FCPA enforcement actions.  17 of the enforcement actions (55%) have been based on voluntary disclosures per the DOJ’s own resolution documents.  Here again, this 55% figure actually under-represents the impact of voluntary disclosures on the DOJ’s FCPA enforcement program because several other FCPA enforcement actions (for instance against Smith & Nephew and Biomet) are generally viewed as “fruits” of a prior voluntary disclosure (Johnson & Johnson). Moreover, the Bilfinger enforcement action was the direct result of the prior Willbros enforcement action (an enforcement action based on a voluntary disclosure).