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Friday Roundup

The SEC’s annual whistleblower report, a new FCPA map, taking FCPA reform too far, confessions of an FCPA “Mendelhead,” is too much FCPA training a bad thing, and Nigeria’s sovereign wealth fund … it’s all here in the Friday roundup.

SEC Whistleblower Report

The Dodd-Frank Act enacted in July 2010 contained whistleblower provisions applicable to all securities law violations including the Foreign Corrupt Practices Act.  In this prior post from July 2010, I predicted that the new whistleblower provisions would have a negligible impact on FCPA enforcement.  As noted in this prior post, my prediction was an outlier (so it seemed) compared to the flurry of law firm client alerts that predicted that the whistleblower provisions would have a significant impact on FCPA enforcement.

Whatever your view, I noted that the best part of the new whistleblower provisions were that its impact on FCPA enforcement can be monitored and analyzed because the SEC is required to submit annual reports to Congress.  Recently the SEC released (here) its annual report for FY2011.  However as noted by the SEC, “because the Final Rules [implementing the whistleblower program] became effective August 12, 2011, only 7 weeks of whistleblower tip data is available for fiscal year 2011.”

Appendix A to the report lists by subject matter “the 334 whistleblower tips received from August 12, 2011 through September 30, 2011.”   However, the SEC noted as follows.  “Of course, the Commission also receive [Tips, Complaints, and Referrals (“TCRs”] from individuals who do not wish or are not eligible to be considered for an award under the whistleblower program.  The data in this report is limited to those TCR’s that include the required whistleblower declaration and does not reflect all TCRs received by the Commission during the fiscal year.”

As the SEC notes “as a result of the relatively recent launch of the program and the small sample size, it is to early to identify any specific trends or conclusions from the data collected to data.”

In any event, a chart titled “Whistleblower Tips by Allegation Type” in the SEC report shows that 3.9% of the 334 tips involve the FCPA.  The SEC report is also an informative read as to the SEC’s implementation of the whistleblower award program and how it processes whistleblower tips.

The SEC whistleblower report from FY2010 is here.


The Mintz Group (an international investigative services firm that specializes in FCPA and integrity due-diligence that also assists corporate counsel and outside counsel with investigations related to potential or alleged FCPA violations) recently released here a dandy interactive map allowing users to scroll over countries and learn of FCPA violations in those countries, as well as industry specific FCPA data.

Taking FCPA Reform Too Far

Writing recently at the Cato Institute’s blog (see here), Walter Olson commented “the Foreign Corrupt Practices Act:  clarification is not enough.”  Olson stated as follows.  “The Foreign Corrupt Practices Act, enacted in 1977 and the subject of a high-profile federal enforcement campaign in recent years, is a feel-good piece of overcriminalization that oversteps the proper bounds of federal lawmaking in at least four distinct ways, any of which should have prevented its passage. It is extraterritorial, purporting to punish overseas misdeeds which deprive no Americans of liberty or property and whose punishment is better left in the hands of authorities elsewhere. It is vicarious, inflicting massive liability on businesses and unknowing higher-ups over the actions of rogue local subsidiaries, salespeople and facilitators. It is punitive, menacing its targets with twenty-year prison terms and inflicting huge penalties over less-than-huge misbehavior. And finally, it is vague, leaving companies to guess at the proper line between tolerated payments (e.g., gratuities to speed up visa and license issuance in developing countries) and improper “bribes,” and even such basic questions as who counts as “official.” In the face of a mounting outcry from the business community, the Obama administration has now finally conceded that there is some validity to this last point, and Criminal Division chief Lanny Breuer says the Department of Justice will develop guidelines to provide greater clarity as to what it believes the law does and does not forbid. Better than nothing, but why not consider the case for wider reform or even repeal?”

Similarly, Scott Greenfield who runs the blog Simple Justice (see here) stated as follows.  “At its core, the FCPA is our government’s way of pretending to be the mean old school marm, telling all the nasty children of the world how to behave.  If it doesn’t appeal to the school marm’s sensibilities, then it’s a crime, and demands a hard smack across the knuckles.  A very expensive hard smack. […]   We may hate corporations, but we need them, and we need them to be productive around the globe.  To tie them down because of vague, child-like notions of fairness that conflict with cultural norms everywhere else is just foolish and counterproductive. Surviving and competing in foreign cultures isn’t wrong, and it shouldn’t be a crime. The FCPA has got to go.”

I respectfully disagree.  While I agree that the FCPA ought to be reformed in certain respects and while FCPA enforcement has become unhinged, I do believe, as I have stated on several occasions including in my November 2010 Senate testimony (here), that the FCPA is a fundamentally sound statute that was passed by Congress for a specific valid and legitimate reason.

Confessions Of An FCPA “Mendelhead”

In response to my recent “luncheon law” post (see here), Howard Sklar (who previously ran anti-corruption compliance for Hewlett-Packard Co.) wrote on his Open Air Blog (here) as follows.  “I used to go to these conferences with the expressed purpose of ‘reading the DOJ tea leaves for this season.’  The ‘used to’ in that sentence is important, but we’ll get to that in a minute. Because ‘reading the tea leaves’ was a crucial part of my risk assessment process. That’s a pitiful state of affairs, but there you are. During that period, several years ago, there really wasn’t anywhere else to go. I would reach out to fellow in-house practitioners and benchmark all the time, and I’d follow Mark Mendelsohn around like a puppy looking for scraps. It was a little sad, really. I know I’m a bit of a geek, and I know Mark Mendelsohn ain’t the Grateful Dead. But there I was, an FCPA Mendelhead.”


Greg Esslinger (Senior Managing Director at FTI Consulting) recently posted (here) an interesting article on the ABA’s Global Anti-Corruption Task Force website.  Titled “Anti-Corruption Compliance:  Are Employees Becoming ‘Over-Trained’?”  Esslinger writes as follows.  “In response [to this new era of enforcement], companies have begun to provide more and more accessible (read: web-based) anti-corruption and related regulatory training programs.  Predictably, a panoply of vendors have surfaced offering state-of-the-art customizable online training modules, complete with scenarios, live actors, knowledge checks and certifications.  Online compliance training has now become a cottage industry serving a wide array of organizations faced with the daunting task of communicating a Western regulatory concept to tens of thousands of employees across multiple languages, cultures and jurisdictions – again, under the watchful eye of various enforcement bodies.”  In the piece, Esslinger asks “whether repeated online and other mass training will over time actually have the unintended effect of desensitizing employees to, rather than making them more aware and cautious of, bribery and other corrupt activity.”

Training occurs in a variety of legal and non-legal contexts and if anyone is aware of social-science / behavioral research relevant to an “over-training” phenomena please share.

Nigeria Sovereign Wealth Fund

With certain companies reportedly under the FCPA microscope for dealings with sovereign wealth funds (see here for a prior post), its hard not to have the FCPA radars go off when reading this recent article by Azam Ahmed in the New York Times concerning Nigeria’s new sovereign wealth fund.  The article states as follows.  “In an effort to preserve and increase its oil revenue, the country recently established a so-called sovereign wealth fund, following the path of many resource-rich countries. Now, Wall Street titans like Goldman Sachs, Morgan Stanley and JPMorgan Chase are courting top government officials, aiming to grab a piece of a portfolio that could eventually be worth tens of billions of dollars.”  The article further states as follows.  “To grab a piece of the lucrative business, big banks and asset managers have tirelessly cultivated relationships with governments worldwide and added teams dedicated to sovereign wealth funds. In recent months, bankers, lawyers and consultants flew to the Nigerian capital of Abuja to pitch officials on their services. The government chose JPMorgan Chase as one of its advisers on the structuring of the fund.”


A good weekend to all.

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