As highlighted in prior posts here, here and here, it is always interesting when former DOJ or SEC FCPA enforcement officials travel the conference circuit and make statements that undermine or contradict things they said while at the DOJ or SEC.
From approximately 2010 to 2014, Charles Duross was the Chief of the DOJ’s FCPA Unit. Currently a partner at Morrison & Foerster, Duross recently appeared on a panel at this ABA event.
At approximately the 14:40 mark of the video, Duross mentioned the FCPA’s accounting provisions and called them “sneaky sh*t” and said that “everybody talks about the bribery piece, if your client is publicly traded what you care about is that thing [the accounting provisions] because it is the books and records and internal controls and the truth is – and I hope nobody from the SEC is in the room – the SEC has long left the moorings of what the statute actually means. […] The SEC has interpreted that today to mean that if there is anything that has ever gone wrong in your business period, like you have not devised and maintained an effective accounting control, its ridiculous, but that is the current status I am just telling you the practical sh*t.” (Duross used the “sh*t” word several times during his presentation).
At approximately the 17:40 mark of the video, Duross states:
“The truth is that people ask where is DOJ going next or where is SEC going next. It is entirely opportunistic. It’s like what they read in the Wall Street Journal, what companies come in and tell them something, if the FBI brings a case in, they are not necessarily targeting a particular industry. SEC sometimes does that, but for the most part DOJ does not.”
At approximately the 20:20 mark of the video, Duross states:
“Because [the FCPA] was a sleepy backwater for so many years and many of the cases are non-contested matters, they are guilty pleas, non-prosecution agreements, or deferred prosecution agreements, [the FCPA] is really what the U.S. government says it is.”
At approximately the 23:50 mark of the video, Duross states:
“DOJ is now declining matters without disgorgement and they are publicly announcing them, that has a huge impact …. of do you want to go voluntarily disclose and tell the DOJ something they don’t know and just hope they are going to do the right thing. The reward right now for doing the right thing and getting an A+ for your compliance program and coming in and voluntarily disclosing is that you get publicly tattooed on the DOJ’s website for the rest of the company’s life, so think about that.”
SEC Co-Directors of Enforcement Steven Peikin and Stephanie Avakian have stated several times in recent years (see prior posts here, and here), and rightly so, how success means more than just the number of enforcement actions brought and settlement amounts secured.
Peikin returned to this issue in this recent speech and stated:
“So, Labor Day is in now the rearview mirror and for those of us in the federal government, the end of the fiscal year is just a few weeks away. That makes this a good time to take stock, look back on the work of the Division of Enforcement over the past year, and discuss some of our priorities for the next year.
Over the next few weeks and months, we at the Commission are going to hear a lot of questions about FY 2019, and many of them will relate to the Division’s statistics. How many Enforcement actions did the Commission bring? What’s the total amount of penalties and disgorgement ordered by the Commission or federal district courts? How many individuals did the Commission charge? Are the numbers up or down over last year? Why didn’t we send anybody to jail? In all seriousness, we actually do get that question.
Joking aside, at some level I understand the desire to keep score. We work on behalf of the public, and they are entitled to know whether we are doing our jobs and how well we are doing. And quantitative metrics do have some value as a rough measure of our overall activity level. But I believe statistics are a poor proxy for the quality and effectiveness of our efforts. Indeed, in my view, judging our work primarily through the lens of statistics can not only be misleading, but also counterproductive – incentivizing the wrong sorts of behaviors.
To assess whether we in the SEC’s Division of Enforcement are effective in accomplishing the Commission’s mission, my co-Director Stephanie Avakian and I have emphasized the importance of a different, more qualitative, set of questions: Are our efforts protecting retail investors? To what extent is the Commission holding individuals accountable for violations of the law? Are we keeping pace with technological change? Do the remedies we recommend effectively further enforcement goals?And, are we efficiently allocating the Division’s resources?”
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