Friday Roundup
A sign-off, no surprise, scrutiny alert, for the reading stack, spot-on, and the $10 million man.
Judge Leon Signs-Off On IBM Action
As highlighted in this prior post, in March 2011 the SEC announced an FCPA enforcement action against IBM concerning alleged conduct in South Korea and China. The settlement terms contained a permanent injunction as to future FCPA violations and thus required judicial approval. Similar to the Tyco FCPA enforcement action, the case sat on Judge Leon’s docket. Last month, Judge Leon approved the Tyco settlement (see here) and yesterday Judge Leon approved the IBM settlement.
The common thread between the two enforcement actions would seem to be that both companies were repeat FCPA offenders.
Like Judge Leon’s final order in Tyco, the final order in IBM action states:
“[For a two year period IBM is required to submit annual reports] to the Commission and this Court describing its efforts to comply with the Foreign Corrupt Practices Act (“FCPA”), and to report to the Commission and this Court immediately upon learning it is reasonably likely that IBM has violated the FCPA in connection with either improper payments to foreign officials to obtain or retain business or any fraudulent books and records entries …””
For additional coverage of yesterday’s hearing, see here from Bloomberg. The article quotes Judge Leon as follows. IBM “has learned its lesson and is moving in the right direction to ensure this never happens again.” If there’s another violation over the next two years, “it won’t be a happy day.”
However, as noted in this previous post, IBM recently disclosed additional FCPA scrutiny.
No Surprise
This recent post highlighted the 9th Circuit’s restitution ruling in the Green FCPA enforcement action and was titled “Green Restitution Order Stands … For Now.” As noted in the prior post, the decision practically invited the Greens to petition for an en banc hearing.
No surprise, the Greens did just that earlier this week – see here for the petition.
Scrutiny Alert
This February 2012 post detailed how Wynn Resorts $135 million donation to the University of Macau became the subject of an SEC inquiry.
Earlier this month, Wynn disclosed in an SEC filing as follows:
“On February 13, 2012, Wynn Resorts, Limited (the “Company”) filed a Report on Form 8-K disclosing that it had received a letter from the Salt Lake Regional Office (the “Office”) of the Securities and Exchange Commission (the “SEC”) advising the Company that the Office had commenced an informal inquiry with respect to certain matters, including a donation by Wynn Macau, Limited, an affiliate of the Company, to the University of Macau Development Foundation. On July 2, 2013, the Company received a letter from the Office stating that the investigation had been completed with the Office not intending to recommend any enforcement action against the Company by the SEC.”
According to this report:
“Speaking to The Associated Press from his boat on the Spanish island of Ibiza … CEO Steve Wynn said he never had any doubt federal investigators would clear the company. ‘We were so sanguine that we never paid any attention to it; we had no exposure. It was a nonevent except for the damn newspapers.'”
For the Reading Stack
The always informative Gibson Dunn Mid-Year FCPA Update and Mid-Year DPA and NPA Update (through July 8th, approximately 30% of all DPAs/NPAs have been used to resolve FCPA enforcement actions).
Sound insight from Robertson Park and Timothy Peterson in this Inside Counsel column:
“Without putting too fine a spin on the matter, the discussion of the potential consequences faced by a company with potential anti-bribery exposure was fundamentally U.S.-centric. The dispositive question was often whether or not the potential misconduct was likely to fall under the umbrella of FCPA enforcement. Would U.S. authorities be interested in pursuing this matter? Would they find out about this matter? There were not many other concerns that mattered. Whether the site of the potential misconduct was in the European, Asian, South American or African sector, the substantial likelihood was that home authorities would have little interest in the matter, and even if they did it was likely an interest that would often frustrate and impede efforts by the Department of Justice or the Securities and Exchange Commission to investigate the matter. Cooperative enforcement was unlikely. This has changed. […] For companies that learn of a potential international corruption issue, the impact of this emerging global enforcement market means that the headache associated with scoping an internal investigation is now a migraine with diverse and complex symptoms. Companies investigating potential bribery have always faced the question of how, if at all, they plan to disclose any subsequent findings to government authorities. Now, initial assessments of investigative plans in anti-bribery matters must consider a broader array of potentially interested enforcement authorities. Companies must design their anti-bribery investigations at the outset to consider not only the FCPA enforcement regime in the U.S., but also a newly energized U.K. anti-bribery law, along with a growing list of ant-bribery measures in almost all of the important jurisdictions with business growth opportunities.”
Six ways to improve in-house compliance training from Ryan McConnell and Gérard Sonnier.
The reality of facilitation payments from Matt Kelly.
“… Facilitation payments are a fact of life in global business. Nobody likes them, and no compliance officer wants to pay a bribe disguised as a facilitation payment. But when the transaction truly fits the definition of a facilitation payment—money paid to a government official, to speed up some job duty he would normally perform anyway—there shouldn’t be any ethical or legal crisis in paying it. After all, we have facilitation payments domestically in the United States. If you want a passport from the State Department, you pay $165 in fees. If you want an expedited passport, you pay an extra $60 fee and get your passport in half the usual time. That’s a facilitation payment, pure and simple. Other countries have all sorts of facilitation payments as well, say, to get a visa processed quickly or to clear goods through customs rather than let them rot on the docks. Urgent needs happen in business, and facilitation payments get you through them. That’s life.”
The language of corruption from the BBC.
Spot-On
Regardless of what you think of former New York Attorney General Eliot Spitzer, he is spot-on with his observation that the so-called Arthur Anderson effect (i.e. if a business organization is criminally charged it will go out of business) is “overrated.” As noted in this Corporate Crime Reporter piece, in a new book titled “Protecting Capitalism Case by Case” Spitzer writes:
“Almost all entities have the capacity to regenerate — even if under a new name, with new ownership and new leadership — and forcing them to do so will have the deterrent effect we desire.”
“Most companies would have no trouble continuing in operation once charged. They might suffer reputational harm, perhaps lose contracts, have certain loans be declared to be in default, and lose some personnel and public support. But that would probably be the proper price to be paid in the context of the violations of the law they committed.”
As noted in previous posts, the Arthur Anderson effect was effectively debunked (see here) and even Denis McInerney (DOJ, Deputy Assistant Attorney General) recently acknowledged (see here) that there is a very small chance that a company would be put out of business as a result of actual DOJ criminal charges.
In his new book Spitzer also writes as follows concerning the SEC’s neither admit nor deny settlement policy.
“I hope that the new leadership at the Securities and Exchange Commission will mandate that an admission of guilt is a necessary part of future settlements in cases of this stature or magnitude. The law and justice require such an acknowledgement — or else nothing has been accomplished.”
Speaking of neither admit nor deny, part of the SEC’s talking points defense of this policy is that the SEC is not the only federal agency that makes use of such a settlement policy.
On this score, it is notable – as detailed in this Law360 article – that Bart Chilton, a top official at the U.S. Commodity Futures Trading Commission, “said the commission should rethink its policy of allowing defendants to settle claims without admitting or denying the allegations.” According to the article, Chilton stated:
“I understand there are certain circumstances where we might not want to require [admissions], but I think we at the CFTC should change our modus operandi. The default position should be that people who violate the law should admit wrongdoing.”
$10 Million Man
Continuing with neither admit nor deny, one of the defenders of this settlement policy was Robert Khuzami while he was at the SEC as the Director of Enforcement. As noted in this Kirkland & Ellis release, Khuzami joined the firm as a partner in the global Government, Regulatory and Internal Investigations Practice Group. According to this New York Times article, Khuzami’s new position “pays more than $5 million per year” and is guaranteed for two years. In joining Kirkland, the New York Times stated that Khuzami “is following quintessential Washington script: an influential government insider becoming a paid advocate for industries he once policed.”
Khuzami and former Assistant Attorney General Lanny Breuer were the voice and face of the SEC and DOJ last November upon release of the FCPA Guidance. As detailed in this prior post, Breuer is currently at Covington & Burling making approximately $4 million per year.
*****
A good weekend to all.
DOJ’s Centralized FCPA Enforcement Policy
Yesterday’s post highlighted a 1979 speech by the DOJ’s Assistant Attorney General outlining the DOJ’s FCPA enforcement priorities. (See here). In the speech, the Assistant Attorney General talked about DOJ’s centralized FCPA enforcement policy and stated as follows.
“To maintain consistency in enforcement policy and to keep close liaison with the Department of State, SEC, and foreign law enforcement agencies, we have concluded that enforcement responsibility under the Act should be substantially centralized. Unlike other law enforcement areas where primary responsibility for prosecution rests with 94 different U.S. Attorneys around the country, most prosecutions under the Foreign Corrupt Practices Act for payment activities will be supervised by the Multinational Fraud Branch in the Criminal Division in Washington.”
The speech also referenced improper payments leading to the downfall of foreign governments and the foreign policy implications of such payments. Indeed, as told in my article “The Story of the Foreign Corrupt Practices Act,” what primarily motivated Congress to enact the Foreign Corrupt Practices Act was payments to foreign government officials such as the Prime Minister of Japan, the President of Korea, the President of Gabon, and Italian political parties. Congress really didn’t care (at least enough to legislate) about the many other questionable payments it learned of during its multi-year investigation and deliberation of the foreign corporate payments problem in the mid-1970’s. We know this because Congress excluded from the original definition of “foreign official” government employees whose duties were ministerial or clerical.
In 1982, Richard Shine (Chief of the DOJ’s Multinational Fraud Branch, the name then given to the DOJ’s FCPA Unit) likewise spoke of the DOJ’s centralized enforcement policy and stated as follows (see here for the prior post).
“Because of the obvious sensitivity both from a national security point of view and a foreign policy point of view, the Department has administered the enforcement of this statute quite differently than the enforcement of most of the provisions of Title 18 of the United States Code. Administration of the enforcement effort has been highly centralized. Generally, FCPA cases, by the terms of the United States Attorney’s Manual, are not investigated and prosecuted by the ninety-four United States Attorney’s Offices around the country. They are primarily investigated and prosecuted by the Multinational Fraud Branch in the Criminal Division at the Justice Department. Among other reasons, that is being done to make sure that there is a nationally uniform enforcement policy. Moreover, virtually any step that is taken in the investigative process, even more than in the post-indictment process, has potentially significant foreign policy and national security implications.”
The point is this.
As reflected in the above speeches, there was a time when the DOJ recognized Congressional intent in enacting the FCPA and based on this recognition the DOJ wisely implemented a centralized enforcement policy.
After all, did the country really want an Assistant U.S. Attorney in Seattle, Miami, you name it, bringing an enforcement action concerning payments to foreign government officials that could cause the downfall of a foreign government and raise a host of foreign policy and national security issues?
Centralized FCPA enforcement is still the DOJ’s policy and the U.S. Attorneys Manual states as follows.
“No investigation or prosecution of cases involving alleged violations of the [FCPA] shall be instituted without the express authorization of the Criminal Division. Any information relating to a possible violation of the FCPA should be brought immediately to the attention of the Fraud Section of the Criminal Division. Even when such information is developed during the course of an apparently unrelated investigation, the Fraud Section should be notified immediately. […] The investigation and prosecution of particular allegations of violations of the FCPA will raise complex enforcement problems abroad as well as difficult issues of jurisdiction and statutory construction. For example, part of the investigation may involve interviewing witnesses in foreign countries concerning their activities with high-level foreign government officials. In addition, relevant accounts maintained in United States banks and subject to subpoena may be directly or beneficially owned by senior foreign government officials. For these reasons, the need for centralized supervision of investigations and prosecutions under the FCPA is compelling.”
According to the DOJ’s website, this Attorneys Manual excerpt is from 2000 and even then the DOJ still recognized that its FCPA enforcement efforts were targeted at high-level government officials and other senior foreign government officials.
Things have obviously changed with the DOJ’s FCPA enforcement program.
Most enforcement actions in this new era involve alleged payments to state-owned or state-controlled enterprises with many attributes of private commercial enterprises, employees of various foreign health care systems such as physicians, or actions based on payments to ministerial or clerical officials concerning mundane foreign licenses, permits or customs issues.
Can it truly be said that these enforcement actions concern payments that could lead to the downfall of foreign governments or payments that have “significant foreign policy and national security implications”?
Tracing the history of the DOJ’s centralized FCPA enforcement policy and its original policy justifications actually speaks volumes to how FCPA enforcement has changed in this new era.
There is another point to be made as well concerning DOJ’s centralized FCPA enforcement policy.
It is a special policy.
As noted in this recent post, before recently leaving the DOJ for FCPA Inc., then DOJ Deputy Chief of Staff for the Criminal Division Daniel Suleiman rightly noted as follows. “It is Justice Department policy that no FCPA prosecution can be brought without authorization from the Criminal Division, which distinguishes FCPA prosecutions from most other kinds of federal criminal cases.”
Likewise, former DOJ Assistant Chief for FCPA Enforcement Billy Jacobson also rightly observed (see here for the prior post) as follows.
“The FCPA has been recognized and treated as different by the U.S. government since its passage in 1977. […] [The FCPA] is one of just a few, select statutes to be prosecuted centrally from one DOJ office. The over-whelming majority of federal criminal statutes may be brought by each of the country’s U.S. Attorney’s Offices, but FCPA actions may be brought only by the Fraud Section of the Criminal Division within Main Justice.”
What this special DOJ FCPA policy means is that FCPA enforcement is highly centralized and, from a supervisory and discretionary standpoint, very few individuals control FCPA enforcement. Because of the DOJ resolution vehicles typically used to resolve FCPA enforcement actions, these few individuals largely “enforce” the FCPA behind closed doors in Washington D.C. often without any meaningful judicial scrutiny and in the general absence of case law of precedent setting the parameters of the FCPA.
The DOJ’s special policy warrants another special policy.
And that is, as I have long suggested, a prohibition on DOJ FCPA enforcement attorneys with supervisory and discretionary authority from providing FCPA defense or compliance services for five years upon leaving government service.
News Corp’s Possible Settlement Amount – Not The Media’s Finest Moment
Before Wal-Mart’s FCPA scrutiny dominated the news cycle in April 2012, there was News Corp.
In July 2011, the U.K. Guardian reported that “up to five U.K. police officers were paid between them a total of at least £100,000 in cash from the News of the World” and the next day the Guardian, based on my comments and those of others, made the link between these payments and the Foreign Corrupt Practices Act.
What followed over the next 10 days was the most intense worldwide media coverage of the FCPA in its history. (See here for the prior post detailing News Corp.’s FCPA scrutiny).
Like Wal-Mart’s FCPA scrutiny, News Corp.’s continued FCPA scrutiny continues to generate much media attention and some of it is completely off-base.
For instance, earlier this week on his media and modern life column in the Guardian (see here) Michael Wolff wrote that a possible settlement of FCPA charges by News Corp. “could be as high as $850 million” and “could go as high as billions.”
Anything of course is possible, but Wolff’s reporting (he is also the author of the book “The Man Who Owns the News: Inside the Secret World of Rupert Murdoch”) should have been met with skepticism by anyone knowledgeable about FCPA enforcement.
The largest FCPA settlement in history is the $800 million enforcement action against Siemens in 2008. All of the top FCPA enforcement actions involve foreign procurement. No FCPA enforcement action outside the context of foreign procurement (such as payments to secure foreign licenses, permits, etc.) has topped $100 million.
News Corp.’s FCPA scrutiny is not based on payments in connection with foreign procurement. Given the nature of the allegations against it and the type of company News Corp. is, a record-setting – or even top – FCPA enforcement action is unlikely.
Moreover, even though every company has different disclosure practices, none of the common data-points suggesting an imminent FCPA settlement have been disclosed by News Corp.
Nevertheless, Wolff’s report spread like wild-fire around the internet and among various news organizations and was also carried forward by several websites devoted to the FCPA.
Similar to Las Vegas Sands FCPA reporting in March (see here for the prior post), news of News Corp.’s possible settlement amount was likewise not the media’s finest FCPA moment.
In an analyst call on June 11th, after publication of Wolff’s column, the following exchange occurred between an analyst and Murdoch.
Julie Tanner
Good morning. Julie Tanner with Christian Brothers Investment Services. […] And my question’s related to the settlement with the Department of Justice, if the board could comment on that? And if so, how much is that? […]
Rupert Murdoch
So let me start with your first question. Nice to see you again. I suspect your question is triggered by an article that was published in the Guardian, which is testimony to the fact, the old adage, that those who are talking don’t know, and those who know aren’t talking. The reality is that there is no settlement that’s been arranged with the Department of Justice. There have been no discussions of amounts. There have been no discussions of fines, period. We have an ongoing cooperative relations with the Department of Justice. That is where things stand. […]
Murdoch’s statements to the market are actionable under the securities laws for any material misrepresentation or omission. Thus, those interested in following News Corp.’s FCPA scrutiny should place a greater emphasis on his statements than a media and modern life column.
Friday Roundup
Boondoggle specifics, another DOJ enforcement official to FCPA Inc., scrutiny alert, across the pond, and for the reading stack. It’s all here in the Friday roundup.
Wal-Mart’s FCPA Expenses
Previous posts (here) and (here) have calculated Wal-Mart’s per working day FCPA related professional fees and expenses.
No wonder Wal-Mart’s first quarter professional fees and expenses equal approximately $1.16 million per working day. According to this recent article in India’s Economic Times, concerning just the India portion of Wal-Mart’s investigation:
“So far Greenberg Traurig and KPMG have spent 26,000 hours on consulting and shaping anti-corruption compliance programme for Bharti Walmart, which operates 20 Best Price Modern Wholesale stores in various cities in India. This work has included developing and implementing procedures and providing training to over 1,800 senior business and store level associates in India,” a Bharti Walmart spokesperson said in an e-mail response to ET. “For the past several months, the company has also been using Greenberg Traurig and KPMG to perform due diligence on third party service providers in India.” Currently there are about 20 Greenberg Traurig attorneys stationed in India working on Bharti Walmart’s compliance programme, the spokesperson said.”
Relevant to FCPA investigative expenses, this FCPA Inc. participant marketing pitch caught my eye. Is it really necessary to analyze millions of documents in an FCPA review? Also, since when did FCPA investigations focus on “proving a negative that [the company] did not bribe foreign officials?”
Suleiman to FCPA Inc.
As noted in this recent post, earlier this month Daniel Suleiman (DOJ Deputy Chief of Staff for the Criminal Division) stated in a speech that the DOJ’s FCPA enforcement efforts “are as active today … as we have ever been.”
Earlier this week, Covington & Burling announced (here) that Suleiman would be joining his former boss Lanny Breuer (see here for the prior post concerning Breuer’s jump to FCPA Inc.) at Covington. Suleiman thus becomes the latest in a long-line of former DOJ or SEC FCPA enforcement attorneys to depart for FCPA Inc. The firm stated, in pertinent part, as follows.
“Mr. Suleiman joins the firm’s Washington office as special counsel where he is expected to focus on defending individuals and corporations facing white collar criminal charges, Foreign Corrupt Practices Act investigations and congressional inquiries. […] In his Justice Department role, Mr. Suleiman helped oversee about 600 lawyers and 1,000 employees, and managed an annual budget of approximately $600 million. He provided advice on a wide range of federal law enforcement priorities, with particular focus on Foreign Corrupt Practices Act and financial fraud enforcement.”
In his speech earlier this month, Suleiman rightly observed an issue I have long pointed out that, among other things, warrants a five-year bar on DOJ FCPA enforcement attorneys from providing private sector FCPA services. Suleiman stated as follows. “It is Justice Department policy that no FCPA prosecution can be brought without authorization from the Criminal Division, which distinguishes FCPA prosecutions from most other kinds of federal criminal cases.”
Scrutiny Alert
According to this report by the Organized Crime and Corruption Reporting project, the SEC “has opened an investigation into Swedish multinational Ericsson’s business practices in Romania. The investigation is related to allegations made by a former Ericsson employee that the company used an approved slush-fund to pay off Romanian officials and decision makers to win contracts.”
Ericsson has ADR shares listed on NASDAQ in the United States.
Across the Pond
From thebriberyact.com, a useful of summary (here) of recent remarks by U.K. Serious Fraud Office Director David Green.
Staying in the U.K., a useful summary (here) by Eversheds of the “third conviction for an individual under the Bribery Act 2010.” The case concerns a Chinese national studying in the U.K. who attempted to bribe his professor for a passing grade. As noted in the Eversheds summary, “the UK has yet to see prosecution of a corporate under the [Bribery] Act, so companies are still awaiting judicial interpretation the corporate offence under [section] 7 of the Bribery Act and the Ministry of Justice’s Guidance on ‘adequate procedures’”. [Note the U.K. Bribery Act has domestic bribery provisions as well as “FCPA-like” foreign bribery provisions. The three individual Bribery Act convictions have all been domestic bribery prosecutions].
Reading Stack
Trace International recently released (here) its third annual Global Enforcement Report. The report provides an updated summary of international anti-bribery enforcement trends based on the cases and investigations tracked in the TRACE Compendium, TRACE’s public, online database of transnational corruption cases.
Sound advice from Tim Peterson (a former SEC enforcement attorney) and Robertson Park (a former DOJ enforcement attorney) in this article in Inside Counsel regarding voluntary disclosures.
“Not all potential [FCPA] problems, however, are appropriate for disclosure. After investigation, allegations of misconduct may not result in a determination that illicit activity has occurred. Problematic payments may not be sufficiently material to amount to an FCPA violation (though companies should be aware of different standards for liability under other jurisdictions’ anti-corruption laws; for example, the U.K. Bribery Act of 2010). Prematurely attracting the government’s attention may, as a practical matter, shift the burden to the company to prove the absence of a corruption problem. Enforcement officials may feel the need as a matter of basic human nature to seek some type of resolution to a case where they have invested significant time and effort. Companies need to weigh the potential benefits of cooperation against the significant costs of initiating a potentially unwarranted government investigation.”
From Compliance Week, a useful summary (here) of recent remarks by Chuck Duross (DOJ FCPA Unit Chief) and Kara Brockmeyer (SEC FCPA Unit Chief).
*****
A good weekend to all.
Marketing The FCPA … The FCPA Risks Of … Well, Just About Everything
It is a common FCPA Inc. marketing device.
Pluck any FCPA-related item from the news and use that news as the hook to write about FCPA compliance services. Profile any recent instance of FCPA scrutiny and use that scrutiny as the hook to write about a supposed new trend and how that new trend of course indicates the need for FCPA compliance services.
It seems as if everything now-a-days is a “sobering reminder,” that there is constant speculation as to which industry “is going to be the next target,” and that every company is warned to ask itself will it be prepared when the “government knocks on the door.”
Previously on his Corruption, Crime & Compliance site (here) Michael Volkov observed as follows.
“The FCPA Paparazzi has done a great disservice to the business community. Call it a complete lack of credibility. Legal marketing has become confused in this day and age – marketing has now been turned into the “Fear Factor,” meaning that lawyers need to scare potential clients into hiring them. That is flat-out wrong. Each week, new client alerts, client warnings and other cries of impending disaster are transmitted through the Internet to businesses. If I were a general counsel, I would have them on “auto delete.” Talk about a waste of time and effort.”
A bit harsh and I don’t know that I would go that far, but marketing of the FCPA is indeed a topic worthy of exploration and this post profiles recent FCPA marketing activity.
*****
There was a recent FCPA enforcement action against bond traders Tomas Clarke and Alejandro Hurtado (see here for the prior post).
Why of course that was an “unprecedented FCPA wake-up call for U.S. broker dealers” and caused one law firm to ask “has the perfect FCPA storm finally arrived for U.S. financial markets?” The law firm stated that “this case demonstrates that Wall Street is not immune to the concerns and risks of other industries and global companies, large and small” and that “this case may be the catalyst that jump-starts a government FCPA sweep of Wall Street that has been predicted since 2011, but not realized.”
The alert concluded as follows.
“In the event that there was previous uncertainty, U.S. financial markets are now on notice that the FCPA is an obligation and that the U.S. government has reason to ask more questions. It appears worthwhile for companies to be prepared and have their house in order to potentially avoid problems later. There is no excuse now for medium- to small-broker dealers, companies and funds to avoid looking into these matters, as it may end up being a worthwhile endeavor in the end.”
*****
Another law firm alert focused on the oil and gas industry and concluded as follows.
“Oil and gas companies operate in a dynamic anti-corruption risk landscape. Recent FCPA prosecutions and developments in related U.S. law have added to the burdens and potential traps facing the industry. Developments in foreign law signal additional evolutions in prosecution risk. Moreover, major changes in the oil and gas industry itself could expose businesses to local prosecution under anti-corruption laws in the states where they operate. Oil and gas firms are accordingly advised to develop comprehensive compliance programs specifically tailored to their unique business activities. History is a useful guide, but evolutions in law and the industry itself require careful assessment and regular updates.”
*****
Another law firm alert began as follows. “No industry is immune from corruption.” It then used two examples of clean-energy companies in the news to launch into the following. “These reports serve as a sobering reminder for companies of the risks and consequences of international corruption and of the importance of implementing compliance programs to reduce the risk that improper conduct will occur in the first instance.”
*****
A lawyer authored article stated “that the pharmaceutical and medical device industries remain subject to increased anticorruption scrutiny by regulators around the world, largely because of their business models.”
The article further stated as follows.
“The number of global enforcement actions and the size of fines and monetary settlements have increased exponentially in recent years. Coupled with the increasing potential for simultaneous liability under foreign anticorruption laws, companies are at greater risk for devastating financial and reputational consequences.”
“The pharmaceutical and medical device industries remain subject to elevated scrutiny. But as a result many industry players now have in place best-practices anticorruption compliance programs that are tailored to the now well-known and industry-specific risks. There’s no time like the present to make sure that your company’s compliance programs are among those rising to a higher standard.”
*****
Another law firm alert focused on Hollywood and the film industry. It stated as follows.
“Companies and individuals across the entire film industry could be at risk and should react accordingly. This risk is not limited to major movie studios, as the FCPA applies to a broad range of entities and individuals. Indeed, the recent uptick in FCPA enforcement actions against individuals, including the convictions of two film executives […], suggests that the Government may eventually seek FCPA charges against individuals involved in the alleged illegal activity as well as the companies. In addition to disgorgement, fines, and penalties faced by both individuals and companies, individuals can face lengthy prison sentences for violating the FCPA.”
“Companies can take various steps to ensure that they are prepared if and when the Government comes knocking on their door. While it is always advisable to have a robust and effective FCPA compliance program in place, it is even more important now for companies in the film industry to ensure that their compliance programs are up-to-date and being properly implemented so that they can gain credit if the Government launches an investigation. This is especially true for film companies with dealings in China, as these companies are on the SEC’s radar. To this end, film companies should consider a privileged review of their FCPA compliance programs by outside counsel to ensure that they include all the components that the Government deems necessary, including anti-corruption policies and procedures, training and communication, third-party due diligence, anti-corruption contract clauses, internal accounting controls, auditing of program effectiveness, and response to improper conduct and remedial action.”
“At-risk companies should also consider a privileged internal review by counsel to determine whether any FCPA issues exist and, if so, decide whether to disclose the issues to the Government. While companies can earn cooperation credit for self-disclosing potential violations, the question of whether and what to voluntarily disclose to the Government is a complex decision involving both risks and rewards for the company. Irrespective of whether a disclosure is made, however, launching a preemptive internal review will allow the company to stay ahead of the Government and be best prepared in the event that the Government initiates its own inquiry.”
******
Another law firm alert focused on “financial institutions” and stated as follows.
“It is clear from U.S. regulators’ pronouncements and the increase in investigations involving financial institutions that U.S. enforcement authorities will continue to carefully scrutinize financial institutions to evaluate their compliance with the FCPA. Financial institutions are well-advised to devote resources to creating compliance programs designed to address anti-corruption risks, and to providing training to personnel to assure that compliance expectations are understood throughout the organization.”
******
Another law firm alert was titled “Agribusiness: The Next Frontier for Enforcement of the Foreign Corrupt Practices Act?”
It began as follows.
“In recent years, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have aggressively enforced the anti-bribery and accounting provisions of the Foreign Corrupt Practices Act (FCPA), targeting industries as wide-ranging as energy, health care and Hollywood. The results of these efforts have been staggering. With senior government officials indicating that robust enforcement of the FCPA will continue for the foreseeable future, the natural question to ask is: which industry could be the next target for FCPA regulators? If recent events are any clue, it may be the agribusiness industry. In light of this recent development, companies in the agribusiness industry may wish to consider taking some of the steps described below to minimize risks of running afoul of the FCPA or, in the alternative, to maximize their bargaining power when negotiating a settlement with DOJ and the SEC. Given the risks discussed above and the possibility that the agribusiness industry could be a future target of the government’s continued commitment to aggressive enforcement of the FCPA, companies in this industry should consider taking proactive steps to minimize their potential liability, particularly if they have significant overseas business.
*****
The recent Griffiths Energy International Inc. enforcement action in Canada under Canada’s Corruption of Foreign Public Officials Act (see here for the prior post) was used to market FCPA compliance services as well. A law firm alert stated as follows.
“[The enforcement action] certainly has compliance with the CFPOA at the forefront for those Canadian companies engaged in international business. Importantly, compliance should not end there, as many Canadian companies must also comply with the Foreign Corrupt Practices Act”
The alert concluded as follows.
“Given the use by Canadian companies of U.S. agents and partners in business and the number of Canadian companies listed on US exchanges, the potential for FCPA applicability is quite high. As a result, it is important for any Canadian company that is required to comply with the FCPA to consult with a lawyer who is familiar with the U. S. anti-corruption laws.”
*****
As noted in this recent post, in-house counsel list the FCPA as the second most “specific regulatory area” seen as a threat.
But is the fear rational?
After all, in any given year there are 10-15 core corporate FCPA enforcement actions. Compare these numbers to the universe of business organizations subject to the FCPA.
Further, as noted in this post, just three unique historical events served as the foundation for 35% of all corporate FCPA enforcement actions between 2007-2011 and resulted in 55% of settlement amounts during that period.