For years, the DOJ has encouraged business organizations to voluntarily disclose Foreign Corrupt Practices Act issues.
For years, the DOJ has talked about transparency, consistency and predictability when it comes to FCPA enforcement. For instance, as highlighted in this prior post, in 2018 the DOJ’s Principal Deputy Assistant Attorney General gave a speech in which he stated that the DOJ recognizes “the need for better defined ‘rules of the road’ in corporate enforcement” and that the DOJ “has taken affirmative steps to make our prevailing ‘rules of the road’ as plain and predictable as possible.” Numerous other DOJ speeches or policy statements could also be cited.
This post highlighted the DOJ’s recent $19.6 million enforcement action against Beam Suntory – a highly unusual development given that the SEC previously brought a related enforcement action against the company approximately 2.5 years ago concerning the same core conduct. As highlighted in the prior post and below, several other aspects of the DOJ enforcement action were also unusual.
Sure, the DOJ secured an additional $19.6 million for the U.S. Treasury in bringing the Beam enforcement action and was able to issue a press release claiming that the enforcement action demonstrated how “it is critical that our global economy remain on a fair playing field.” Sure, the DOJ enforcement attorneys who worked for years on the matter no doubt gained some internal satisfaction and can put another notch into their belt for resolving yet another FCPA enforcement action.
However, for the reasons highlighted below the biggest loser in the Beam enforcement action was FCPA enforcement – specifically DOJ FCPA enforcement.
For starters, if the FCPA enforcement agencies want business organizations to voluntarily disclose (as they surely do), there simply can not be circumstances in which the enforcement agencies themselves disagree whether there was even a voluntary disclosure. This is the epitome of inconsistency and unpredictability.
Yet, this is what happened in the Beam matter.
In 2018, the SEC stated that “Beam voluntarily disclosed this misconduct to the Commission staff and timely shared the facts developed during the course of an internal investigation by a special committee of its board.” There were no “if, ands or buts” about it – the SEC concluded that Beam voluntarily disclosed.
However, last week the DOJ stated: “the Company did not receive voluntary disclosure credit … because it did not timely disclose to the DOJ.”
Result: FCPA Enforcement -1.
Likewise, if the FCPA enforcement agencies want business organizations to cooperate (as they surely do), there simply can not be circumstances in which the enforcement agencies themselves disagree whether there was cooperation.
Yet again, this is what happened in the Beam matter.
In 2018, the SEC stated under the heading “Beam’s Self-Disclosure, Cooperation, and Remedial Efforts” in pertinent part:
“Beam also cooperated by voluntarily producing documents, summarizing its factual findings, translating numerous key documents, providing timely reports on witness interviews, and making current or former employees available to the Commission staff, including those that needed to travel to the United States or elsewhere for interviews.”
The SEC did not drop any hint or suggestion that Beam was being uncooperative.
However, last week the DOJ stated:
“the Company did not receive full credit for its cooperation due to its inconsistent and, at times, inadequate cooperation, including positions taken by the Company that were not consistent with full cooperation, as well as significant delays caused by the Company in reaching a timely resolution and its refusal to accept responsibility for several years.”
Result: FCPA Enforcement -2.
And then things really got weird and concerning in the DOJ DPA as it stated that Beam would not get credit for the 2018 civil penalty it paid to the SEC because “the Company did not seek to coordinate a parallel resolution with the DOJ.”
Time out!
Is the DOJ actually suggesting that a company under scrutiny (regardless of the area of law) has a burden or obligation to coordinate parallel resolutions with other potentially relevant law enforcement agencies? If so, this is troubling beyond belief.
If the SEC was ready to resolve its Beam enforcement action in 2018 (as it clearly was) and if Beam officers and directors were comfortable with the terms and condition of the settlement (as they presumably were), it would arguably be a breach of fiduciary duty for Beam officers and directors to twiddle their thumbs and say “well, we are going to wait a couple more years until the DOJ is ready to settle or tell us what its plans are.”
In short, it is not up to business organizations under legal scrutiny to coordinate parallel resolutions with potentially relevant law enforcement agencies. Rather, it is up to potentially law enforcement agencies to coordinate parallel resolutions with their enforcement agency counterparts. After all, the DOJ’s so-called no-piling policy states: ““The Department should also endeavor, as appropriate, to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct.”
Result: FCPA Enforcement -3.
For years, the DOJ has long recognized the problematic issues associated with long-protracted investigations. Indeed, as highlighted in this prior post, in 2017 the DOJ Acting Principal Deputy Assistant Attorney General stated it was the DOJ’s “intent … for our FCPA investigations to be measured in months, not years.”
Regardless of whether Beam voluntarily disclosed (as the SEC stated) or not (as the DOJ stated), the fact remains Beam was under FCPA scrutiny since 2012 (see here for the prior post).
Thus, from start to finish its FCPA scrutiny lasted an unconscionable 8 years. If the DOJ wants its FCPA enforcement program to be viewed as credible and effective (as it surely does), FCPA scrutiny simply can not linger for approximately 8 years.
Result: FCPA Enforcement -4.
Given the resolution vehicles common in the FCPA’s modern era of enforcement, the FCPA enforcement agencies rarely have to prove anything connected to an FCPA matter.
Nevertheless, the fact remains that as a criminal law enforcement agency the DOJ has a higher burden of proof as to all FCPA elements (proof beyond a reasonable doubt) compared to the SEC as a civil law enforcement agency (preponderence of the evidence). Given this truism, when the DOJ and SEC jointly pursue an FCPA matter it is typical for the SEC enforcement action to go “above and beyond” the DOJ enforcement action.
However, in the Beam enforcement action the exact opposite happened. The DOJ went “above and beyond” the SEC’s 2018 enforcement action. In particular, the DOJ enforcement action contains more meaningful allegations regarding Beam Executive 1 (described as a senior executive in Beam’s legal department and based in corporate offices in Illinois) and Beam Employee 1 (described as a high-ranking employee in Beam’s legal department and based in corporate offices in Illinois).
In short, something is amiss when a criminal law enforcement agency with a higher burden of proof makes more substantive and meaningful allegations regarding individuals at corporate offices compared to a civil law enforcement agency with a burden of proof.
Result: FCPA enforcement – 5.
The Beam enforcement action is the third FCPA enforcement action against an alcoholic beverage industry participant based on the same general conduct in India. (See here for the 2011 enforcement action against Diageo and here for the 2016 enforcement action against ABInBev).
For reasons that are apparent when reviewing certain of the allegations in the Diageo and ABInBev enforcement actions, those enforcement actions were arguably more egregious than the conduct alleged in the Beam enforcement action.
However, the ABInBev enforcement action was an SEC only $6 million settlement and the Diageo enforcement action was an SEC only $16.3 million settlement.
In contrast, the Beam enforcement action (primarily focused on an alleged $18,000 bribe) was an overall $27.8 million enforcement action.
Result: FCPA enforcement – 6.
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