As highlighted in this post, like prior years (see here and here) much of the largeness of 2018 FCPA enforcement resulted from corporate enforcement actions against foreign companies.
Specifically, of the 17 corporate enforcement actions in 2018, 9 (53%) were against foreign companies (based in many instances on mere listing of securities on U.S. markets and in a few instances on sparse allegations of a U.S. nexus in furtherance of a bribery scheme). Even more dramatic, of the net approximate $1 billion in FCPA settlement amounts from 2018 corporate enforcement actions, approximately 72% of this number was from enforcement actions against foreign companies.
- of the 13 corporate enforcement actions from 2017, 5 (38%) were against foreign companies and of the net $1.13 billion in FCPA settlement amounts from 2017 corporate enforcement actions, approximately 90% of this number was from enforcement actions against foreign companies.
- of the 27 corporate enforcement actions from 2016, 11 (41%) were against foreign companies and of the net $2.27 billion in FCPA settlement amounts from 2016 corporate enforcement actions, 63% of this number was from enforcement actions against foreign companies.
With one exception (the relatively minor DOJ enforcement action against Insurance Corporation of Barbados), all of the foreign companies which resolved 2018 FCPA enforcement actions were from peer OECD Convention countries. The question should thus be asked whether these FCPA enforcement actions represented a proper use of the FCPA – at least from a policy standpoint.
In other words, what legitimate U.S. law enforcement interests are implicated when for example:
- Brazilian companies such as Eletrobras and Petrobras interact with their own government officials;
- French companies like Sanofi and Societe General interact with alleged foreign officials in Jordan, Lebanon, Syria,Palestine, Bahrain, Kuwait, Qatar, Yemen, Oman, and the United Arab Emirates and Libya.
- A Swiss company like Credit Suisse interacts with alleged foreign officials in China
- A Canadian company like Kinross Gold interacts with alleged foreign officials in Mauritania and Ghana
- An Israeli company like Elbit Imaging interacts with alleged foreign officials in Romania; and
- A Japanese company like Panasonic interacts with alleged foreign officials in the Middle East
All of these 2018 FCPA enforcement actions were against companies headquartered in countries that, like the U.S., are parties to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention).
In other words, Brazil, France, Switzerland, Canada, Israel and Japan are all “peer” countries with mature FCPA-like laws governing the conduct of their companies coupled with reputable legal systems to prosecute such offenses.
Given this reality, as well as the specific provision in Article 4 of OECD Convention that “when more than one Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution,” can it truly be said that the U.S. was an appropriate jurisdiction to prosecute certain foreign companies for alleged interactions with non-U.S. officials?
As highlighted in this prior post, in 2017 DOJ officials stated that they “are working harder than ever to coordinate with global partners and avoid what some have termed “piling on” in attendant global resolutions.” As stated by Sandra Moser (Principal Deputy Chief, Fraud Section, DOJ):
“Coordination with foreign countries will continue, and that number of coordinated resolutions will grow, including with new countries. This is important for several reasons. First and foremost, it is fair to companies. It encourages companies to cooperate across the board, because we understand that, at the end of a case, money paid out is derived from one pie. A resolving company should not have piled upon it duplicative fines via separate resolutions that do not credit one another. Although the “piling on” problem is not entirely solved by doing this (other countries may certainly try to reach additional resolutions), our efforts do mitigate this problem, and we are trying to do better in this regard.”
As highlighted in this prior post, in May 2018 the DOJ announced a “non-piling” policy stating:
“The Department should … endeavor, as appropriate, to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct.”
Granted, in most of the enforcement actions highlighted above there were credits or offsets in terms of U.S. FCPA settlement amounts for related foreign law enforcement actions. Yet, as highlighted in prior posts here and here “piling on” is precisely what the DOJ is doing when it brings an FCPA enforcement action against a foreign company located in an OECD Country that is also subject to prosecution in its “home” jurisdiction.
The bigger question is whether the above examples should have been instances in which the U.S. simply backed away because of the related foreign law enforcement action?
For a prior post posing the same general question see here ” “non-U.S. efforts to prosecute overseas bribery are hampered by the absence of clear, credible statements from U.S. prosecutors that they will desist from prosecuting if a local prosecutor does so in good faith” as well as FCPA Flash podcasts here (Bruce Yannet – Debevoise & Plimpton), here Robert Luskin (Paul Hastings) and here David Bitkower (Jenner and Block and former DOJ Principal Deputy Assistant Attorney General for the Criminal Division).
In the minds of some, FCPA enforcement has become a convenient cash cow for the U.S. government. The above enforcement actions in 2018 against foreign companies, which resulted in approximately $715 million flowing into the U.S. treasury, only amplify these concerns.
From a historical perspective, it is worth noting that part of the FCPA reform discussion in the 1980’s were bills – introduced by Democrats – seeking to waive the FCPA’s provisions “in the case of any country which the Attorney General has certified to have (1) effective bribery or corruption statutes; and (2) an established record of aggressive enforcement of such statutes.” (See S. 1797, Competitive America Trade Reform Act of 1985, introduced on October 29, 1985 by Senator Gary Hart (D-CO) and H.R. 3813, Competitive America Trade Reform Act of 1985, introduced on November 21, 1985 by Representative Vic Fazio (D-CA)).
While waiving the FCPA’s provisions – as those bills sought to do – does not seem like a good idea, perhaps the time has come with the maturity of the OECD Convention – for U.S. enforcement agencies to adopt a policy of not bringing FCPA enforcement actions against foreign companies from peer OECD Convention countries.
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