A Focus On DOJ FCPA Individual Prosecutions
This post highlights certain facts and figures concerning the DOJ’s prosecution of individuals for FCPA offenses in 2014 and historically.
As highlighted in recent posts here, here, and here, the DOJ frequently talks about the importance of individual FCPA prosecutions. Assistant Attorney General Leslie Caldwell has stated that “certainly…there has been an increased emphasis on, let’s get some individuals” and that it is “very important for [the DOJ] to hold accountable individuals who engage in criminal misconduct in white-collar (cases), as we do in every other kind of crime.” DOJ FCPA Unit Chief Patrick Stokes has said that the DOJ is “very focused” on prosecuting individuals as well as companies and that “going after one or the other is not sufficient for deterrence purposes.”
Against this backdrop, what do the facts actually show?
Since 2000, the DOJ has charged 133 individuals with FCPA criminal offenses. The breakdown is as follows.
- 2000 – 0 individuals
- 2001 – 8 individuals
- 2002 – 4 individuals
- 2003 – 4 individuals
- 2004 – 2 individuals
- 2005 – 3 individuals
- 2006 – 6 individuals
- 2007 – 7 individuals
- 2008 – 14 individuals
- 2009 – 18 individuals
- 2010 – 33 individuals (including 22 in the Africa Sting case)
- 2011 – 10 individuals
- 2012 – 2 individuals
- 2013 – 12 individuals
- 2014 – 10 individuals
An analysis of the numbers reveals some interesting points.
Most of the individuals – 99 (or 74%) were charged since 2008. Thus, on one level the DOJ is correct when it states that there has been an “increased emphasis” on individual prosecutions – at least as measured against the historical average given that between 1978 and 1999, the DOJ charged 38 individuals with FCPA criminal offenses.
Yet on another level, a more meaningful level given that there was much less overall enforcement of the FCPA between 1978 and 1999, the DOJ’s statements about its focus on individuals represents hollow rhetoric as demonstrated by the below figures.
Of the 99 individuals criminally charged with FCPA offenses by the DOJ since 2008:
- 22 individuals were in the Africa Sting case;
- 9 individuals (minus the “foreign officials” charged) were in the Haiti Teleco case;
- 8 individuals were in connection with the Control Components case;
- 8 individuals were in connection with the Siemens case;
- 5 individuals were associated with DF Group in the Indian mining licenses case;
- 5 individuals were associated with Direct Access Partners;
- 4 individuals were in connection with the Lindsey Manufacturing case;
- 4 individuals were in connection with the LatinNode / Hondutel case;
- 4 individuals were in connection with the Nexus Technologies case;
- 4 individuals were in connection with the BizJet case; and
- 4 individuals were in connection with the Alstom case.
In other words, 58% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just five cases and 78% of the individuals charged by the DOJ since 2008 have been in just eleven cases.
Considering that there has been 67 corporate DOJ FCPA enforcement actions since 2008, this is a rather remarkable statistic. Of the 67 corporate DOJ FCPA enforcement actions, 50 (or 75%) have not (at least yet) resulted in any DOJ charges against company employees. (See here for the chart with details – current when published in October 2014).
In short, and as demonstrated by the statistics, DOJ FCPA individual enforcement actions are significantly skewed by a small handful of enforcement actions and the reality is that 75% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees.
Another very interesting and significant picture emerges when analyzing DOJ individual prosecution data based on whether the corporate entity employing or otherwise involved with the individual charged was a public or private entity.
Of the 99 individuals charged by the DOJ with FCPA criminal offenses since 2008, 71 of the individuals (72%) were employees or otherwise affiliated with private business entities. This is a striking statistic given that 53 of the 67 corporate DOJ FCPA enforcement actions since 2008 (79%) were against publicly traded corporations.
In the 14 private entity DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 7 of those actions (50%). In contrast, in the 53 public entity DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 10 of those cases (19%). In short, and based on the data, a private entity DOJ FCPA enforcement is approximately three times more likely to have a related DOJ FCPA criminal prosecution of an individual than a public entity DOJ FCPA enforcement action.
Are other factors at play when it comes to the fact that 75% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees? A future post will highlight a relevant datapoint.
[Notes – the above data was assembled using the “core” approach – see this prior post for an explanation. The term “public entity” is not limited to “issuers” under the FCPA, but rather a public entity regardless of which market it shares trade on. Thus, for instance, JGC Corp. of Japan and Bridgestone are both public entities even though its shares are not traded on a U.S. exchange.]
Corporate FCPA Enforcement In 2014 Compared To Prior Years
I am no different from the other Foreign Corrupt Practices Act aficionados.
I maintain and publish yearly FCPA statistics even though I fully acknowledge that year-to-year enforcement statistics, and the arbitrary cutoffs associated with such statistics, may be of marginal value given that many non-substantive factors can influence the timing of an actual FCPA enforcement action.
For instance, if the Alcoa enforcement action happened 10 days earlier (instead of January 9, 2014) or if the Alstom enforcement action happened 10 days later (instead of December 22, 2014), 2014 FCPA enforcement settlement amounts would be materially different.
Nevertheless and accepting year-to-year FCPA statistics for what they are, the issue remains: how does one best analyze and interpret these statistics over time?
Here is how I see it through reference to another example. In year 1, a city issues 100 speeding tickets and collects $20,000 in fines associated with those tickets. In year 2, a city issues 90 speeding tickets, but because certain drivers were going really fast, the city collects $25,000 in fines associated with those tickets. Was there less enforcement in year 2 compared to year 1? Depends on what you are measuring – the number of infractions or amount of fines.
The some logic applies to year-to-year FCPA statistical data and I believe that the best way to track yearly enforcement is through the number of “core” enforcement actions.
By this measure, although 2014 witnessed two very large settlement amounts, FCPA enforcement in 2014 was below historical averages.
Previous posts (here and here) provided various facts and figures from 2014 DOJ FCPA enforcement and SEC FCPA enforcement. Viewing FCPA enforcement statistics this way is useful and informative given that the DOJ and SEC are separate law enforcement agencies and different issues may arise in DOJ and SEC FCPA enforcement actions.
As indicated by the below charts and by using the “core” approach to FCPA enforcement statistics (an approach the DOJ endorses), both DOJ and SEC corporate enforcement in 2014 was down from recent historical averages
Corporate DOJ FCPA Enforcement Actions
|
Year
|
Core Actions
|
| 2014 | 7 |
|
2013
|
7
|
|
2012
|
9
|
|
2011
|
11
|
|
2010
|
17
|
Corporate SEC FCPA Enforcement Actions
|
Year
|
Core Actions
|
| 2014 | 7 |
|
2013
|
8
|
|
2012
|
8
|
|
2011
|
13
|
|
2010
|
19
|
However, if one analyzes corporate FCPA enforcement statistics based on settlement amounts, corporate FCPA enforcement was up in 2014 compared to recent historical averages.
Corporate DOJ FCPA Enforcement Action Settlement Amounts
|
Year
|
Settlement Amounts
|
| 2014 | $1.25 billion |
|
2013
|
$420 million
|
|
2012
|
$142 million
|
|
2011
|
$355 million
|
|
2010
|
$870 million
|
Corporate SEC FCPA Enforcement Action Settlement Amounts
|
Year
|
Settlement Amounts
|
| 2014 | $327 million |
|
2013
|
$300 million
|
|
2012
|
$118 million
|
|
2011
|
$148 million
|
|
2010
|
$530 million
|
Viewing FCPA enforcement in the aggregate (DOJ and SEC combined) is of course also useful and informative and in 2014 the DOJ and SEC combined collected approximately $1.6 billion in 10 corporate FCPA enforcement actions. The below chart provides a summary of corporate FCPA enforcement data (DOJ and SEC combined) for the years 2007-2014, as well as notable circumstances that significantly skewed enforcement data statistics for a particular year (an occurrence that happens in most years including 2014).
Corporate FCPA Enforcement Actions (2007-2014)
|
Year
|
Core Actions
|
Settlement Amounts
|
Of Note
|
|
2007
|
15
|
$149 million
|
Six enforcement actions involved Iraq Oil for Food conduct and these enforcement actions comprised 40% of all enforcement actions and approximately 50% of the $149 million amount.
|
|
2008
|
10
|
$885 million
|
The $800 million Siemens enforcement action comprised approximately 90% of the $885 million amount.
|
|
2009
|
11
|
$645 million
|
The $579 million KBR / Halliburton Bonny Island, Nigeria enforcement action comprised approximately 90% of the $645 million amount.
|
|
2010
|
21
|
$1.4 billion
|
Six enforcement actions, all resolved on the same day, centered on various oil and gas companies use Panalpina in Nigeria. Panalpina also resolved an enforcement action on the same day.Two enforcement actions (Technip and Eni / Snamprogetti) involved Bonny Island conduct. In other words, there were 14 unique corporate enforcement actions in 2010. Of further note, the two Bonny Island enforcement actions, Technip($338 million) and Eni/Snamprogetti ($365 million) comprised approximately 50% of the $1.4 billion amount.
|
|
2011
|
16
|
$503 million
|
The $219 million JGC Corp. Bonny Island, Nigeria enforcement action comprised approximately 44% of the $503 million amount
|
|
2012
|
12
|
$260 million
|
None that significantly skewed the statistics
|
|
2013
|
9
|
$720 million
|
The $398 million Total enforcement action comprised approximately 55% of the $720 million amount
|
| 2014 | 10 | $1.6 billion | Two enforcement actions (Alstom – $772 million and Alcoa – $384 million) comprised approximately 72% of the $1.6 billion amount. |
| TOTALS |
104
|
$6.23 billion
|
In short, the number of core corporate FCPA enforcement actions in 2014 was tied for the second lowest in seven years.
In closing, have it your way.
However, the way I believe is the more accurate and reliable way to keep and analyze FCPA enforcement statistics is by focusing on unique instances of FCPA scrutiny (not settlement amounts) and tracking enforcement actions using the “core” approach.
DOJ Enforcement Of The FCPA – Year In Review
This previous post highlighted facts and figures from SEC enforcement of the FCPA in 2014.
This post highlights facts and figures from DOJ FCPA enforcement in 2014.
(See here for a similar post from 2013, here for a similar post from 2012, here for a similar post from 2011, and here from 2010).
Settlement Amounts and Specifics
In 2014, the DOJ brought 7 corporate FCPA enforcement actions. By comparision, in 2013 the DOJ brought 7 corporate enforcement action; in 2012 the DOJ brought 9 corporate FCPA enforcement actions; in 2011 the DOJ brought 11 corporate enforcement actions; and in 2010 the DOJ brought 17 corporate enforcement actions. (Note: these figures use the “core” approach to FCPA statistics – see here for the prior post – an approach also endorsed by the DOJ – see here).
In the 7 corporate FCPA enforcement actions from 2014, the DOJ collected approximately $1.25 billion in criminal fines, an all-time record in terms of yearly FCPA settlement amounts. By way of comparison, in the 7 corporate FCPA enforcement actions from 2013, the DOJ collected approximately $420 million in criminal fines; in 2012, the DOJ collected approximately $142 million in criminal fines; in 2011, the DOJ collected approximately $355 million in criminal fines ($504 million including the $149 million forfeiture in the Jeffrey Tesler individual enforcement action); and in 2010, the DOJ collected approximately $870 million in criminal fines.
DOJ FCPA enforcement in 2014 ranged from $772 million in criminal fines (Alstom) to $14 million in criminal fines (Dallas Airmotive). 3 FCPA enforcement actions in 2014 were DOJ only (Alstom, Dallas Airmotive and Marubeni).
Of the approximate $1.25 billion the DOJ collected in 2014 corporate FCPA enforcement actions, $772 million (62%) was in one enforcement action (Alstom) and $981 million (78%) was in two enforcement actions (Alstom and Alcoa).
In 4 of 6 corporate FCPA enforcement actions where an analysis was possible, the DOJ agreed to a criminal fine below the minimum range suggested by the sentencing guidelines. In these 4 actions, the average was approximately 29% below the minimum guidelines range and the distribution range was 9% below the minimum guidelines range (Avon) to 53% below the minimum guidelines range (Alcoa). In 2 corporate FCPA enforcement actions in 2014 (Alstom and Marubeni), the company paid a criminal fine within the guidelines range.
[Note – why are only 6 of the 7 corporate enforcement actions included in the above analysis? 1 corporate enforcement action (Bio-Rad) was resolved via an NPA and the DOJ does not set forth a guidelines range in NPAs]
Corporate vs. Individual Prosecutions
How many corporate FCPA enforcement actions in 2014 involved related individual prosecutions of company employees by the DOJ (recognizing that such prosecutions may be forthcoming in the future)? Of the 7 corporate DOJ enforcement actions in 2014, 1 (14%) has thus far resulted in related DOJ prosecutions of company employees. This action was the Alstom action (in which the DOJ alleged conduct concerning Indonesia, Saudi Arabia, Egypt, the Bahamas, and Taiwan) and the related individual prosecutions related only to the Indonesia conduct alleged by the DOJ.
The DOJ brought or announced 10 individual FCPA enforcement actions in 2014 in 3 core actions (5 individuals associated with DF Group in connection with Indian mining licenses, 2 individuals associated with Direct Access Partners and 3 individuals associated with PetroTiger).
Stay tuned for future posts specifically about DOJ and SEC individual FCPA enforcement actions.
NPAs / DPAs
What about non-prosecution and deferred prosecution agreements vs. old fashioned law enforcement (i.e. if a company committed a crime the DOJ charged it and if the company did not commit a crime the DOJ did not charge it)? In 2014, 5 of the 7 (71%) corporate enforcement actions included an NPA or DPA. Marubeni and Alcoa were plea agreements only. [Note, the Alstom enforcement action involved two plea agreements and two DPAs; the Avon enforcement action involved a plea agreement and DPA; and the HP enforcement action involved a plea agreement, DPA and NPA].
By way of comparison, in 2013, 100% of corporate DOJ enforcement actions involved either an NPA or DPA; in 2012 100% of corporate DOJ enforcement actions involved either an NPA or a DPA; in 2011 82% of corporate DOJ enforcement actions involved either an NPA or DPA; and in 2010 94% of corporate DOJ enforcement actions involved either an NPA or DPA.
Since 2010, 86% of corporate DOJ enforcement actions have involved either an NPA or DPA.
Voluntary Disclosures
Of the 7 corporate DOJ FCPA enforcement actions in 2014, 2 enforcement actions (29%) were the result of corporate voluntary disclosures (Avon and Bio-Rad), 3 enforcement actions (43%) were the result of previous foreign law enforcement investigations or related thereto (Alstom, Marubeni, and HP), 1 enforcement action was related to a previous FCPA enforcement action (Dallas Airmotive) and 1 enforcement action was the result of civil litigation (Alcoa).
By way of comparison, in 2013 57% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures or the direct result of a related voluntary disclosure; in 2012, 78% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures or casually related to previous corporate voluntary disclosures; in 2011, 73% of corporate FCPA enforcement actions were the result of corporate voluntary disclosures.
Monitors
Of the 7 corporate DOJ FCPA enforcement actions in 2014, 1 (14%) enforcement action (Avon) resulted in a corporate monitor. By way of comparison, of the 7 corporate DOJ FCPA enforcement actions in 2013, 4 enforcement actions (57%) involved a monitor; of the 9 corporate DOJ FCPA enforcement actions in 2012, 3 enforcement actions (33%) involved a monitor; of the 11 corporate DOJ FCPA enforcement actions in 2011, 1 enforcement action (9%) involved a corporate monitor; of the 17 corporate DOJ enforcement actions in 2010, 7 enforcement actions (41%) involved a corporate monitor.
This remainder of this post provides an overview of corporate DOJ FCPA enforcement in 2014.
Alstom and Related Entities (December 22nd).
See here and here for prior posts
Charges: As to Alstom S.A., violation of the FCPA’s books and records and internal controls provisions. As to Alstom Network Schweiz AG, conspiracy to violate the FCPA’s anti-bribery provisions. As to Alstom Power Inc., conspiracy to violate the FCPA’s anti-bribery provisions. As to Alstom Grid Inc., conspiracy to violate the FCPA’s anti-bribery provisions.
Resolution Vehicle: As to Alstom and Alstom Network Schweiz, plea agreements. As to Alstom Power and Alstom Grid, DPAs.
Guidelines Range: As to Alstom $532.8 million to $1.065 billion
Penalty: As to Alstom, $772 million (the other entities were not required to pay separate penalties).
Disclosure: The enforcement action presumably originated from a prior 2011 Swiss enforcement action (see here and here).
Monitor: No
Individuals Charged: Yes (as to the Indonesia conduct – see here).
Avon Entities (December 17th)
See here and here for prior posts
Charges: As to Avon China, conspiracy to violate the FCPA’s books and records provisions. As to Avon Products, conspiracy to violate the FCPA’s books and records provisions and violation of the FCPA’s internal controls provisions.
Resolution Vehicle: As to Avon China, a plea agreement; as to Avon Products a DPA.
Guidelines Range: As to Avon China, $73.9 million to $147.9 million; as to Avon Products, $84.6 million to $169.1 million.
Penalty: As to Avon China, $67.6 million; as to Avon Products $67.6 million but the Avon China penalty was deducted from this amount.
Disclosure: Voluntary Disclosure.
Monitor: Yes
Individuals Charged: No
Dallas Airmotive (December 10th)
See here for the prior post
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and violation of the FCPA’s anti-bribery provisions.
Resolution Vehicle: DPA
Guidelines Range: $17.5 million to $35 million
Penalty: $14 million
Disclosure: The enforcement action appears to be casually related to a prior enforcement action against BizJet International and certain of its executives
Monitor: No
Individuals Charged: No
Bio-Rad (November 3rd)
See here and here for prior posts
Charges: Not applicable
Resolution Vehicle: NPA
Guidelines Range: Not set forth in the NPA
Penalty: $14.4 million
Disclosure: Voluntary Disclosure
Monitor: No
Individuals Charged: No
HP Related Entities (April 9th)
See here for the prior post
Charges: As to HP Russia – (i) conspiracy to violate the FCPA’s anti-bribery provisions and books and records and internal controls provisions; (ii) one count of violating the FCPA’s anti-bribery provisions; (iii) one count of violating the FCPA’s internal controls provisions; and (iv) one count of violating the FCPA’s books and records provisions; As to HP Poland – violation of the FCPA’s books and records and internal controls provisions; As to HP Mexico – not applicable.
Resolution Vehicle: As to HP Russia, a plea agreement; as to HP Poland a DPA; as to HP Mexico an NPA.
Guidelines Range: As to HP Russia $87 million to $174 million; as to HP Poland $19.3 million to $38.6 million; as to HP Mexico not specified in the NPA.
Penalty: As to HP Russia $58.8 million; as to HP Poland $15.5 million; as to HP Mexico $2.5 million.
Disclosure: The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).
Monitor: No
Individuals Charged: No
Marubeni (March 19th)
See here for the prior post
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and 7 substantive FCPA anti-bribery violations
Resolution Vehicle: Criminal information resolved via a plea agreement
Guidelines Range: $63.7 million to $127.4 million
Penalty: $88 million
Disclosure: Related to the April 2013 FCPA enforcement action against various current and former employees of Alstom
Monitor: No
Individuals Charged: No
Alcoa (January 9th)
See here for the prior post
Charges: One count of violating the FCPA’s anti-bribery provisions.
Resolution Vehicle: Criminal information against Alcoa World Alumina LLC resolved via a plea agreement.
Guidelines Range: $446 million – $892 million.
Penalty: $209 million (plus administrative forfeiture of $14 million)
Disclosure: A 2008 civil lawsuit between Alba and Alcoa.
Monitor: No
Individuals Charged: No
SEC Enforcement Of The FCPA – Year In Review
Foreign Corrupt Practices Act enforcement, it is not just about the DOJ. Granted, as a civil enforcement agency its sticks are less sharp than the DOJ’s, but the SEC also claims a significant piece of the FCPA enforcement pie (query whether it should – but that is a subject for another day – for instance as discussed in “The Story of the Foreign Corrupt Practices Act” the SEC wanted no part in enforcing the FCPA’s anti-bribery provisions).
Today’s post is a year in review of SEC FCPA Enforcement. (See here for a similar post for 2013; here for a similar post for 2012; here for a similar post for 2011; and here for a similar post for 2010).
Stay tuned for a similar post on DOJ FCPA enforcement in 2014.
Settlement Amounts and Specifics
In 2014, the SEC collected approximately $327 million in 7 corporate FCPA enforcement actions.
By comparison, in 2013 the SEC collected approximately $300 million in 8 corporate enforcement actions; in 2012 the SEC collected approximately $118 million in 8 corporate FCPA enforcement actions; in 2011 the SEC collected approximately $148 million in 13 corporate FCPA enforcement actions; and in 2010, the SEC collected approximately $530 million in 19 corporate FCPA enforcement actions.
The range of SEC FCPA enforcement actions in 2014 was, on the high end, $175 million (Alcoa), and on the low end, $2 million (Smith & Wesson). Of the $327 million the SEC collected in 2014 corporate FCPA enforcement actions, approximately 54% was in just one enforcement action (Alcoa) and two enforcement actions (Alcoa and Avon) comprised approximately 75% of the amount.
Three corporate FCPA enforcement actions from 2014 were SEC only (Bruker, Layne Christensen and Smith & Wesson).
Of the 7 corporate enforcement actions from 2014, 6 enforcement actions (all but the Avon action) were administrative actions. In other words, there was no judicial scrutiny of 86% of SEC FCPA enforcement actions from 2014. The settlement amounts in these actions comprised approximately 80% of the SEC’s $326 million collected in 2014 corporate FCPA enforcement actions. By comparison, in 2013 there was no judicial scrutiny of 50% of SEC FCPA enforcement actions and settlement amounts in these actions comprised approximately 57% of the SEC’s $300 million collected.
In 2014, the SEC collected approximately $104 million in disgorgement and prejudgment interest in enforcement actions that did not charge anti-bribery violations. This is noteworthy because many question, and rightfully so, whether disgorgement is an appropriate remedy in cases that do not charge FCPA anti-bribery violations. See here for a prior post on so-called “no-charged bribery disgorgement” cases. In 2013, the SEC collected approximately $208 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; in 2012, the SEC collected approximately $57.4 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; and in 2011 the SEC collected approximately $51 million in disgorgement and prejudgment interest in n0-charged bribery disgorgement cases.
The $327 million the SEC collected in 2014 FCPA enforcement actions breaks down as follows:
$2.7 million in a civil penalties (Bruker, Layne Christensen and Smith & Wesson); and
$324.3 million in disgorgement and prejudgment interest.
Thus, 99% of SEC FCPA settlement amounts in 2014 consisted of disgorgement and prejudgment interest. By way of comparison, in 2013 98% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2012 86% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; in 2011, disgorgement and prejudgment interest comprised 94% of SEC FCPA enforcement settlement amounts; and in 2010, disgorgement and prejudgment interest comprised 96% of SEC FCPA enforcement settlement amounts.
If one tries to analyze why some SEC FCPA enforcement actions in 2014 included a civil penalty, disgorgement and prejudgment interest (Bruker, Layne Christensen, and Smith & Wesson), whereas other enforcement actions included only disgorgement and prejudgment interest (Avon, Bio-Rad and HP), whereas other enforcement actions included only disgorgement (Alcoa), good luck and please enlighten us all with your insight.
Corporate vs. Individual Actions
Of the 7 corporate SEC FCPA enforcement actions from 2014, 0 (0%) have involved, at present, related SEC charges against company employees. By way of comparison, of the 8 SEC corporate FCPA enforcement actions from 2013, 0 (0%) have involved, at present, related SEC charges against company employees; in 2012, 0 of the 8 corporate (0%) FCPA actions involved related SEC charges against company employees; in 2011, 2 of the 13 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees; in 2010, 3 of the 19 (15%) corporate SEC FCPA enforcement actions involved related SEC charges against company employees.
Voluntary Disclosures
Of the 7 corporate SEC FCPA enforcement actions from 2014, 4 enforcement actions (57%) (Avon, Bruker, Bio-Rad and Layne Christensen) were the result of corporate voluntary disclosures. 1 enforcement action (Smith & Wesson) originated from the manufactured Africa Sting enforcement action, 1 enforcement action (HP) was the result of a previous foreign law enforcement action and 1 enforcement action (Alcoa) was the result of a previous civil lawsuit. By way of comparison, of the 8 corporate SEC FCPA enforcement actions in 2013, 3 enforcement actions (38%) were the result of corporate voluntary disclosures; in 2012 of the 8 corporate SEC FCPA enforcement actions 4 (50%) were the result of corporate voluntary disclosures; and in 2011 of the 13 corporate SEC FCPA enforcement actions 11 (85%) were the result of corporate voluntary disclosures.
This remainder of this post provides an overview of SEC FCPA enforcement in 2014.
Avon (December 17th)
See here and here for prior posts
Charges: Violation of the FCPA’s books and records and internal controls provisions
Settlement: Approximately $67.4 million ($52,850,000 in disgorgement plus prejudgment interest of $14,515,013.13)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Bruker Corp. (December 15th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.
Settlement: Approximately $2.4 million ($1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
Bio-Rad (November 3rd)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: Approximately $40.7 million in disgorgement
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Layne Christensen (November 3rd)
See here and here for prior posts
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: Approximately $5.1 million ($3,893,472.42 in disgorgement plus $858,720 in prejudgment interest as well as a $375,000 penalty amount)
Disclosure: Voluntary Disclosure
Individuals Charged: No
Related DOJ Enforcement Action: No
Smith & Wesson (July 28th)
See here and here for prior posts.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery, books and records and internal control provisions.
Settlement: Approximately $2 million ($107,852 in disgorgement, $21,040 in prejudgment interest, and a civil monetary penalty of $1,906,000
Disclosure: The enforcement action originated after a Smith & Wesson employee was criminally charged in the DOJ’s manufactured Africa Sting enforcement action.
Individuals Charged: No (as to the conduct alleged in the corporate enforcement action).
Related DOJ Enforcement Action: No.
HP (April 9th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.
Settlement: $34 million in disgorgement and prejudgment interest (approximately $2.5 million of the disgorgement amount was satisfied by payment of $2.5 million in connection with the HP Mexico DOJ action).
Disclosure: The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).
Individuals Charged: No
Related DOJ Enforcement Action: Yes
Alcoa (January 9th)
See here for the prior post.
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.
Settlement: $175 million in disgorgement (of which $14 million will be satisfied by the payment of the forfeiture in the criminal action).
Disclosure: A 2008 civil lawsuit between Alba and Alcoa.
Individuals Charged: No
Related DOJ Enforcement Action: Yes
SEC Enforcement (Individual)
For the first time since April 2012, the SEC brought an FCPA enforcement action against an individual. This enforcement action is summarized below.
Stephen Timms and Yasser Ramahi (November 17th)
See here for the prior post
Charges: None. Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions, causing violations of the FCPA’s books and records provisions
Settlement: Timms and Ramahi consented to the entry of the order and agreed to pay financial penalties of $50,000 and $20,000 respectively.
Employer Charged: The individuals were associated with FLIR System, Inc. but at present the company has not been charged
Related DOJ Enforcement Action: No
Voluntary Disclosure Statistics
Recently, the Wall Street Journal published this 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).