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Disclosed FCPA Investigations – A Mostly Meaningless Statistic

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There are all sorts of Foreign Corrupt Practices Act statistics one could tally.

Some are meaningful and some are mostly meaningless.

Tracking disclosed FCPA investigations is mostly meaningless for the reasons discussed below. Drafting articles around this statistic to draw judgments about FCPA enforcement and related issues (see here and here) is absurd.

Recently Stanford Law School’s Foreign Corrupt Practices Act Clearinghouse (a collaboration with Sullivan & Crowell) published this 2020 Q3 Report.

Like prior quarterly reports, it contains the following chart regarding “disclosed investigations.”

For starters, the DOJ and SEC (unlike certain other foreign law enforcement agencies such as the SFO which generally does) do not generally disclose their FCPA investigations.

Rather, FCPA investigations became publicly known generally (although not exclusively) through issuer disclosures. Yet, issuers (as demonstrated in the below representative graphic) constitute a relatively modest component of the entire range of companies subject to the FCPA.

There are many, many more “domestic concerns” (FCPA speak for generally any private U.S. company, U.S. based LLC or other form of business organization, U.S. sole proprietorships, etc.) subject to the FCPA’s anti-bribery provisions compared to issuers. However, “domestic concerns’ generally do not have any public disclosure obligations.

Likewise, there are many, many more “persons other than issuers or domestic concerns” (FCPA speak for foreign non-issuer companies) subject to the FCPA’s anti-bribery provisions (assuming the jurisdictional prong of dd-3 is met) compared to issuers. However, such “other” companies generally do not have public disclosure obligations.

In other words, measuring “disclosed FCPA investigations” generally only captures one category of actor subject to the FCPA’s anti-bribery provisions.

Moreover, while many issuers do disclose FCPA investigations prior to an actual FCPA enforcement action, not all issuers do and generally there is no legal obligation for an issuer to disclose an FCPA investigation. For instance, Cardinal Health did not appear to disclose its FCPA investigation even though the company resolved an FCPA enforcement action in March 2020.

Thus, measuring “disclosed FCPA investigations” (i) generally only captures one category of actor subject to the FCPA’s anti-bribery provisions; and (ii) is measuring something that issuers generally do not have a legal obligation to disclose and that some issuers do not disclose.

Finally, it logical that there would be fewer “disclosed FCPA investigations” in recent years for the simple reason that there are fewer issuers compared to prior years. (See here for a prior post discussing the downward trend in U.S. publicly listed companies).

Thus, measuring “disclosed FCPA investigations” (i) generally only captures one category of actor subject to the FCPA’s anti-bribery provisions; (ii) is measuring something that issuers generally do not have a legal obligation to disclose and that some issuers do not disclose; and (iii) is measuring against the backdrop of fewer issuers.

 

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