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Issues To Consider From The Sargeant Marine Enforcement Action

Issues

This prior post went in-depth into the recent Foreign Corrupt Practices Act enforcement action against Sargeant Marine Inc. (SMI) and this post continues the analysis by highlighting additional issues to consider.

Why Disclose?

For approximately 15 years, the DOJ has been encouraging business organizations to voluntarily disclose FCPA violations. Yet, time and time again, the DOJ undermines its goal by how it resolves certain enforcement actions.

The SMI matter is the latest example that should cause a board member, audit committee member or others involved in the voluntary disclosure decision to pause.

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The Percentage Of Corporate DOJ And SEC FCPA Enforcement Actions That Result From A Voluntary Disclosure

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For at least 15 years the government has encouraged business organizations to voluntary disclosure conduct that violates the Foreign Corrupt Practices Act.

In more recent years, in 2012 the government sought in the FCPA Guidance to entice business organizations to voluntarily disclose by, among other things, highlighting six “anonymized examples of matters DOJ and SEC have declined to pursue” where a common thread was voluntary disclosure. In April 2016, it was the DOJ’s pilot program, an effort – in the words of the DOJ –  to “encourage voluntary corporate self-disclosure.” Thereafter, it was the November 2017 DOJ FCPA Corporate Enforcement policy which – in the words of the DOJ – was intended to provide “guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing…”

But what do the numbers show? What percentage of DOJ and SEC enforcement actions are the result of a voluntary disclosure? The below post provides the answers.

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The Origins Of 2019 Corporate Enforcement Actions

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This recent post compared corporate FCPA enforcement actions in 2019 to prior years. However, before a Foreign Corrupt Practices Act enforcement action is announced, scrutiny must first arise.

This post highlights the origins of the 14 core corporate enforcement actions in 2019. (See here for a similar post highlighting the origins of 2018 corporate enforcement actions; here for 2017 corporate enforcement actions and here for 2016 corporate enforcement actions).

As highlighted in the post, like prior years, 2019 corporate enforcement actions originated in a variety of ways from voluntary disclosures, to pro-active government investigations and industry sweeps, to foreign law enforcement investigations and foreign media reporting.

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The DOJ’s Latest Voluntary Disclosure Guidance Is Absurd

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Yet again, see here for a prior post, the Department of Justice recently revised its Foreign Corrupt Practices Act Corporate Enforcement Policy (CEP) – originally released in November 2017. (See here for the current version).

As highlighted below, while two of the three revisions make sense, the revision concerning voluntary disclosure is absurd.

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Checking In On Lennox International’s Absurd Voluntary Disclosure

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There is no legal obligation to voluntarily disclose actual violations of the Foreign Corrupt Practices Act, something even the DOJ has acknowledged various times. But then again, returning to an issue first highlighted in this 2009, voluntary disclosure is the fuel that feeds FCPA enforcement and is extremely lucrative for FCPA Inc. Indeed, who can forget the words of the former DOJ Fraud Section Chief in this Wall Street Journal article “if you get two of these [FCPA investigations] a year as a partner, you’re pretty much set.”

Lennox International is involved in the heating, air conditioning, and refrigeration markets.

This October 2016 post asked what made Lennox so hot that it disclosed to the DOJ and SEC an investigation into a $475 payment in Russia to release a shipment of goods being held by customs officials.

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