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The FCPA Pipeline Is Bulging

Let’s take a trip way, way back in time. So far back you may hardly remember where you were or what you were doing.

The year was 2007, April to be precise, and the DOJ and SEC announced (here [1] and here [2]) the “largest combined sanction ever imposed in an FCPA case.”

The aggregate settlement amount? $44 million.

Obviously April 2007 was not that long ago, but FCPA settlement amounts have sure come a long way in a short amount of time and the FCPA pipeline is bulging as highlighted below.

Bloomberg reports [3] that J.P. Morgan may resolve today its long-standing internship and hiring practices FCPA scrutiny (the company has been under scrutiny since 2013) by agreeing to an aggregate $200 million FCPA enforcement action. According to the article:

“The bank will pay about $130 million to the Securities and Exchange Commission and about $70 million to the Justice Department.”

Earlier this week, Israel-based Teva Pharmaceuticals Limited, a company that has been under FCPA scrutiny since 2012, recently disclosed [4]:

“For several years, Teva has conducted a voluntary worldwide investigation into business practices that may have implications under the U.S. Foreign Corrupt Practices Act (“FCPA”), following the receipt, beginning in 2012, of subpoenas and informal document requests from the SEC and the DOJ with respect to compliance with the FCPA in certain countries. Management has established a provision of approximately $520 million based on advanced discussions with the DOJ and SEC to settle these FCPA matters. The provision relates to conduct in Russia, Mexico and Ukraine during the time period covering 2007-2013. Any final settlement would be subject to court, DOJ and SEC Commission approval.”

As highlighted in this [5] late October 2016 post, Sweden-based TeliaSonera (a company also entangled in the Uzbek telecommunications bribery scheme) recently disclosed.

“On September 14, Telia Company received a proposal from the US and the Dutch authorities for financial sanctions amounting to a total of approximately USD 1.45 billion or approximately SEK 12.5 billion. Telia Company has decided to continue its negotiations with the authorities. It is not at present possible to assess when the investigations will be finally resolved.

[…]

Resolution of the various investigations is complex and will require further discussion and negotiation with the various government agencies involved in the investigations. Without certainty as to the timing and amount that may be paid at the time of a final resolution, Telia Company has recorded a USD 1.45 billion (SEK 12.5 billion) provision at the balance sheet date.”

Similar to the prior VimpelCom enforcement action [6], the referenced $1.45 billion is expected to be split roughly even between a U.S. settlement amount and a foreign settlement amount. If so, let’s peg the Telia FCPA enforcement at approximately $700 million.

As highlighted in this [7] early October 2016 post, Reuters reported regarding Wal-Mart’s FCPA scrutiny (the company has been under FCPA scrutiny since 2011):

“Wal-Mart Stores Inc. is butting heads with the U.S. government over how to wrap up a long-running foreign corruption investigation. Officials have proposed that the world’s biggest retailer pay at least $600 million to resolve probes by the Justice Department and the Securities and Exchange Commission into whether it bribed government officials in markets from Mexico to India and China, according to three people familiar with the matter. The retailer has rebuffed the government’s request, two of them said.

With the impasse, prosecutors have gone back to elicit more evidence from witnesses about alleged bribe-paying in Mexico, the people said. That will put additional pressure on the company to settle. Some of the people familiar with the matter said the U.S. could propose a penalty well above $600 million. The government has some challenges as well. Some of the behavior it’s been investigating in Mexico, where the bulk of Wal-Mart’s non-U.S. stores are located, may be too old to prosecute, people familiar with the matter have said. Officials are working to wrap up an agreement with Wal-Mart before a new administration takes over in January, the people said.”

If you are counting the beans at your desk, the four FCPA enforcement actions bulging in the pipeline comprise over $2 billion in settlement amounts.

As highlighted in this recent post [8], 2016 FCPA enforcement is already record-breaking from the standpoint of the number of corporate enforcement actions.

As of this writing, 2016 corporate settlement amounts stand at approximately $1.2 billion, below the previous record years of 2014 (total corporate settlement amounts of approximately $1.6 billion) and 2010 (total corporate settlement amounts of approximately $1.4 billion).

If any combination of the above four referenced actions occur in the next 45 days at the settlement amounts disclosed/reported/speculated, 2016 will become record-breaking as well in terms of overall corporate settlement amounts as well. Indeed, the above four referenced actions themselves (at the settlement amounts disclosed/reported/speculated) would represent a record in isolation.

Eye-popping settlement amounts seem to be the defining hallmark of law enforcement under the Obama administration and the enforcement attorneys who announce these upcoming results will no doubt appreciate the additional notches in their belts. Indeed, if history is a guide, when these enforcement attorneys leave for private practice as they are likely to do in the near future, settlement amounts secured will likely be prominently mentioned in terms of their legacy. (See here [9] for the prior post regarding “For Profit, Public Enforcement”).

Not too long ago, the record-setting FCPA settlement amount of $44 million.

But that was so 2007.

FCPA settlement amounts have come a long way in a short amount of time as highlighted in this prior post [10]. See the related post “Have FCPA Settlement Amounts Increased … Just Because? [11]

If larger settlement amounts are warranted based on the conduct at issue … fine. (In this regard, the conduct at issue in the 2007 record-setting $44 million enforcement action was egregious).

However, if settlement amounts are increasing just because, well that is a problem and significant public policy concern.