The Current Time Gap In SEC Individual FCPA Enforcement Is The Longest In Eight Years
One reason to take FCPA enforcement agency rhetoric with a grain of salt is because it is warranted.
For instance, the FCPA enforcement agencies often talk about the importance of x and how they are committed to x, but in reality rarely do x.
Case in point is SEC individual FCPA enforcement actions.
For many years, SEC enforcement officials have talked about the importance of individual FCPA enforcement actions and set forth below are representative quotes from over the years.
SEC Commissioner Crenshaw Uncomfortable With Limiting Civil Penalties To Corporate Benefits
As highlighted in this prior post, earlier this year SEC Commissioner Caroline Crenshaw (appointed by President Trump and sworn into office in August 2020) stated that the SEC’s historical practice of placing emphasis on factors beyond the actual misconduct when imposing corporate penalties is “fundamentally flawed.”
In pertinent part, Crenshaw stated: “Over the years, Commissioners on both sides of the political aisle have agreed that a strong enforcement program incentivizes compliance with the securities laws, and that enforcement helps to promote a market that inspires investor confidence, creating a level playing field for market participants. But Commissioners have had different views about when corporate penalties further those goals. It is clear to me that the Commission has historically placed too much emphasis on factors beyond the actual misconduct when imposing corporate penalties – including whether the corporation’s shareholders benefited from the misconduct, or whether they will be harmed by the assessment of a penalty. This approach is fundamentally flawed. This approach, more concerningly, could allow companies to profit from fraud as it unnecessarily limits the Commission’s ability to craft appropriately tailored penalties that more effectively deter misconduct. If we are going to confront the novel issues today’s markets present and deter ever more complicated and hard to detect frauds, we must revisit our approach.”
In this recent public statement, Commissioner Crenshaw returned to the topic in connection with the recent Kraft Heinz Company enforcement action (see here for the prior post).
DOJ To Increase Its Focus On Investigations, Prosecutions, And Asset Recoveries Relating To Corruption In Northern Triangle Countries
Presumably in connection with the visit by Vice President Kamala Harris to Guatemala, earlier this week U.S. Attorney General Merrick Garland “announced a series of steps that the Department of Justice is taking to address the threats posed by both corruption and by transnational human smuggling and trafficking networks” in Central America.
The main focus of the establishment of so-called “Joint Task Force Alpha” will be “to enhance U.S. enforcement efforts against the most prolific and dangerous human smuggling and trafficking groups operating in Mexico and the Northern Triangle countries of Guatemala, El Salvador, and Honduras.”
In addition, the DOJ release states: “Joint Task Force Alpha will also complement the Justice Department’s efforts to fight corruption. The Justice Department will increase its focus on investigations, prosecutions, and asset recoveries relating to corruption in Northern Triangle countries through its Foreign Corrupt Practices Act enforcement program, counternarcotics prosecutions, and Kleptocracy Asset Recovery Initiative.”
Remember When …
Remember when Acting Principal Deputy Assistant Attorney General Trevor McFadden stated that it was the DOJ’s “intent … for our FCPA investigations to be measured in months, not years.”
This statement was made four years ago this week (see here for the prior post).
However, like much DOJ rhetoric surrounding the FCPA, it was just empty words. As highlighted below, since the DOJ’s statement of intention it has resolved approximately 30 corporate enforcement actions and the average length of time a company has been under FCPA scrutiny has been approximately 4.25 years.
SEC Commissioner Calls The SEC’s Approach To Corporate Penalties “Fundamentally Flawed”
In the FCPA’s modern era of enforcement, the bulk of SEC settlement amounts consist of disgorgement and prejudgment interest (See here). Stated differently (and although there have been a few notable exceptions), civil penalties are not a major feature of most corporate SEC Foreign Corrupt Practices Act enforcement actions.
Even so, SEC civil penalties can be FCPA relevant and it is thus interesting to note that SEC Commissioner Caroline Crenshaw (appointed by President Trump and sworn into office in August 2020) recently stated that the SEC’s historical practice of placing emphasis on factors beyond the actual misconduct when imposing corporate penalties is “fundamentally flawed.”
In this recent speech before the Council of Institutional Investors , Crenshaw began by stating how an SEC decision made 15 years (see here) “has taken us off course.”