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Goldman – What Should Happen When Compliance Is Decent (And Often Good), But Not Great?

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The recent Foreign Corrupt Practices Act enforcement action against Goldman Sachs was the largest in FCPA history in terms of actual settlement amount ($1.66 billion).

Yes, the conduct at issue involved large bribe payments (according to the DOJ approximately $1.6 billion). Yes, the conduct at issue resulted in (according to the DOJ) Goldman obtaining “in excess of $600 million in fees and revenue across its divisions, and increased Goldman’s stature in SE Asia.” Yes, the conduct of the culpable Goldman employees criminally charged (Tim Leissner and Roger Ng) was egregious.

Viewed through the strict lens of respondeant superior, perhaps the record-setting FCPA enforcement action was justified. In this regard, the Goldman press release nicely stated in plain English: “We all share in the benefits when our colleagues perform well for our clients. The opposite must be true as well.  When a colleague knowingly violates a firm policy, or much worse, the law, we – as a firm – have to accept responsibility and recognize the broader failure that individual behavior represents for our firm.”

However, based on the DOJ’s (and SEC’s) allegations, the Goldman enforcement action was much different than certain other top ten FCPA enforcement actions.

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DOJ / SEC Announce Net $1.66 Billion (The Largest Of All-Time) FCPA Enforcement Action Against Goldman Sachs In Connection With 1MDB Fund

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As highlighted in this prior post, in November 2018 the DOJ announced criminal charges against former Goldman Sachs employees Roger Ng and Tim Leissner, and Low Taek Jho (Jho Low – an individual “known to be close to various high-ranking officials in Malaysia and Abu Dhabi” who “worked as an intermediary in related to 1MDB and other foreign government officials on numerous financial transactions and projects involving Goldman and others) for paying bribes to various Malaysian and Abu Dhabi officials in connection with 1Malaysia Development Berhad (1MDB), Malaysia’s state-owned and state-controlled investment development company.

This prior post asked: what does this mean for Goldman Sachs?

We now know the answer as the DOJ and SEC announced (here and here) a net $1.66 billion FCPA enforcement action against Goldman Sachs and a related entity. This represents the largest FCPA enforcement action of all-time (see here for the prior top ten list).

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In The Herbalife Enforcement Action, The Government Failed To Present The “Complete Picture” Regarding The Company’s Internal Audit Function

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When the government charges individuals with Foreign Corrupt Practices Act violations and then subsequently charges a business organization with FCPA violations based on the same core allegations one might expect the allegations to be consistent.

However, as highlighted below in connection with the DOJ/SEC’s individual enforcement action against former Herbalife China executives (see here for the prior post) and its subsequent enforcement against Herbalife (see here and here for prior posts), in the later enforcement action the government failed to present the “complete picture” regarding the company’s internal audit function (a key portion of the internal controls allegations against the company).

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Issues To Consider From The Herbalife Enforcement Action

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This prior post went in-depth into the recent $123 million Foreign Corrupt Practices Act enforcement action against Herbalife and this post highlights additional issues to consider.

Timeline

As highlighted in this post, Herbalife disclosed its FCPA scrutiny in early 2017.  Thus, from start to finish, its scrutiny lasted more than 3.5 years. I’ve said it many times, and will continue saying it until the cows come home, if the DOJ/SEC wants their FCPA enforcement programs to be viewed as credible and effective they must resolve instances of FCPA scrutiny much quicker.

This is particularly true in the Herbalife matter given that the conduct focused on a single country as well as the following language from the enforcement agencies.

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Further To The SEC’s Inconsistent Approach To Enforcing The FCPA’s Books And Records And Internal Controls Provisions

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Other than this website (see here, hereherehereherehere and here), there seems to be little focus on the SEC’s inconsistent approach to enforcing the FCPA’s books and records and internal controls provisions.

Which is too bad because consistency is a basic rule of law principle. In other words, the same legal violation ought to be sanctioned in the same way. When the same legal violation is sanctioned in materially different ways, trust and confidence in law enforcement is diminished.

As highlighted in the numerous prior posts as well as the latest example described below, there sure does seem to be a lack of consistency between how the SEC resolves Foreign Corrupt Practices Act books and records and internal controls violations.

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