The Department of Justice and the Securities and Exchange Commission are separate law enforcement agencies.
However, in certain areas – including the Foreign Corrupt Practices Act – the law enforcement agencies often work together.
In this recent speech, Attorney General William Barr discussed the DOJ’s cooperation and coordination with the SEC.
Barr began:
As you well know, uncovering, investigating, and prosecuting financial fraud and corporate malfeasance in a globalized economy is already a difficult task – and fraudulent schemes are only growing more sophisticated by the day. The DOJ has considerable expertise in this area, and so do our partners here at the SEC.
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The cooperation between our two agencies is not new. The DOJ has long considered the SEC an indispensable partner in protecting markets and investors, promoting lawful commerce around the world, and deterring misconduct. Our two agencies have closely coordinated on a wide range of matters, and our cooperation has only grown as financial matters have become increasingly complex and globalized.”
During his speech, Barr highlighted the following three points about the “deepening and increasingly productive relationship” between the SEC and the DOJ: the (i) “impressive record of joint enforcement;” (ii) the “agencies’ joint efforts to ensure that we avoid creating arbitrary and unnecessary barriers to economic growth through our enforcement activities;” and (iii) the “importance of the DOJ and the SEC’s work in promoting ethical business practices and sound corporate governance and compliance policies.”
As to joint enforcement, Barr stated:
“Take, for example, our work together on FCPA cases. These matters often involve complicated financial transactions, significant sums of money, sophisticated parties, and voluminous evidence scattered throughout the world. But by working together in close coordination, the SEC and the DOJ are often able to focus our work, and succeed in vindicating the law.
Earlier this year, the DOJ and the SEC announced a joint resolution with Mobile TeleSystems – the largest telecommunications company in Russia – for bribing officials in Uzbekistan. The company agreed to pay over 850 million dollars to resolve the case, including a 100-million-dollar civil penalty to the SEC. The matter first came to the DOJ as a referral from the SEC, and our two agencies were able to work closely together to investigate and resolve the matter.”
Regarding the “agencies’ joint efforts to ensure that we avoid creating arbitrary and unnecessary barriers to economic growth through our enforcement activities,” Barr stated:
“While the DOJ and the SEC must be vigilant in investigating and prosecuting white-collar misconduct, we must also ensure that we are acting fairly and prudently. {…] During parallel investigations, our agencies should ensure that we remain mindful of – and properly account for – the collateral consequences that our matters can sometimes have.
These potential consequences include the cost to defend against an investigation, the cost associated with resolving the matter, and the intangible effects that a case can have on a company’s reputation and its ability to do business going forward. In many cases, these costs are borne not just by the wrongdoers, but also by others who were not involved in the misconduct, such as shareholders. And these costs are often amplified in our increasingly complex regulatory environment when multiple criminal and regulatory enforcement agencies seek to investigate the same or overlapping conduct.
The DOJ is mindful of these issues. That’s why, in May 2018, the Department issued the “Policy on Coordination of Corporate Resolution Penalties,” known colloquially as “the policy against piling-on.” It can be found both online and in our Justice Manual. This policy emphasizes that, to achieve an equitable outcome, the DOJ “should consider the totality of fines, penalties, and/or forfeiture imposed by all Department components as well as other law enforcement agencies and regulators.”
It’s been almost a year and a half since this common-sense policy was issued, and the DOJ’s prosecutors have continued to execute it with my full support. The Mobile TeleSystems case that I discussed earlier provides an excellent example. There, the Department credited the 100 million dollars that the company paid to resolve the parallel SEC matter against the 850 million dollars the company agreed to pay to the DOJ.
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I have been pleased to see that the SEC is also very mindful of the collateral impact that our work can have. In July of this year, for instance, Chairman Clayton issued a “Statement Regarding Offers of Settlement” that aligns the SEC’s waiver application process with the final approval and announcement of a resolution.The Commission’s new policy streamlines the resolution process and provides companies with much-needed transparency about the effects a settlement may have on their operations.
Speaking of streamlining, I believe that both of our agencies also must be mindful of the significant time that our investigations can take and the limited resources we have to pursue them. One way to address this is to ensure that we move efficiently in our investigations. But we also should ensure that we employ a discriminating eye on the front end when deciding which cases to pursue, making better choices about the use of our limited time and resources. By focusing on high-quality matters in the first instance, we can ensure that each case gets the attention it deserves and that our investigations move forward expeditiously. And by cutting down the time that proverbial clouds hang over companies and, as just mentioned, by encouraging companies to resolve matters at an earlier stage, we can get money back to harmed investors more quickly and more efficiently. I think we can all agree that this is a worthwhile goal.”
As to the “importance of the DOJ and the SEC’s work in promoting ethical business practices and sound corporate governance and compliance policies,” Barr stated:
“[P]rotecting investors isn’t just about punishment and restitution – it’s also about promoting ethical business practices. Hence, the third facet of the DOJ and the SEC’s relationship that I’d like to address today: incentivizing companies to adopt sound corporate practices and policies by providing them with appropriate credit for good behavior and cooperation.
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The Justice Department, of course, recently announced revisions to its FCPA Corporate Enforcement Policy. The new iteration of the Policy incentivizes good corporate behavior, expands transparency for companies seeking corporate resolutions, and increases the effectiveness of related individual prosecutions.
The Policy achieves these goals by encouraging companies to voluntarily bring misconduct to our attention at an earlier stage and to fully cooperate with investigations. This way, the Justice Department can take more investigative steps and gather more evidence without having to go through as many formal processes, including Mutual Legal Assistance Treaty requests.
Critically, this Policy also makes it clear that, if a company meets the benchmarks of good corporate behavior, the DOJ can use its discretion to act in deference to an SEC parallel resolution. For example, Cognizant, a technology-solutions company, authorized a third-party construction firm to pay approximately 2 million dollars in bribes to government officials in India. Yet in light of the company’s voluntary self-disclosure, internal reforms, full cooperation, active remediation, and a simultaneous SEC resolution – the DOJ declined prosecution. We disgorged approximately 19 million dollars in profits and credited the company for the amount already paid to the Commission.
In another instance, the Justice Department declined to prosecute the commercial and data analytics firm Dun & Bradstreet over bribery in China under an almost identical set of criteria.
I would also note that the cooperation between the SEC and the DOJ in this area extends beyond resolving cases and issuing complementary policies. For example, when the DOJ’s Criminal Division recently trained its prosecutors on its new Evaluation of Corporate Compliance Programs guidance, a sizable group from the SEC’s Enforcement Division also participated. This is exactly the type of cooperation and coordination we need to ensure we are pursuing financial fraud on behalf of the American people.”
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