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Friday Roundup

Interesting, hardly a smoking gun, law enforcement ought not be a competition, quotable, and for the reading stack.  It’s all here in the Friday roundup.


An interesting study (here) from Michael Klausner (Nancy and Charles Munger Professor of Business and Professor of Law at Stanford Law School) and Jason Hegland (Project Manager for Stanford Securities Litigation Analytics).  Using a “universe of SEC enforcement actions involving nationally listed firms for violation of disclosure-related rules—fraud, books and records and internal control rules” from 2000 to the present, the authors found, among other things, that only 7 percent of corporate SEC enforcement actions involved no individual defendants.

Such a finding stands in stark contrast to corporate SEC Foreign Corrupt Practices Act enforcement actions.  As noted in this previous post,  since 2008 approximately 80% of corporate SEC FCPA enforcement actions have not (at least yet) resulted in any SEC charges against company employees.  This figure is likely to climb when I re-calculate the statistic to account for 2013 FCPA enforcement.  To date, the SEC has brought four corporate FCPA enforcement and none have resulted (at least yet) in any SEC charges against company employees.

Kudos to Klausner and Hegland for the quality of their data and using the “core” approach.  The authors state:

“We define a “case” in a specific way in order to organize the data. A case, as we use the term, is a set of one or more enforcement actions against a company and/or its executives and/or third parties such as accountants or underwriters for the same misstatement that led to a violation. Thus, if the SEC brings an action against ABC Co and one or more separate actions against ABC Co.’s executives and its outside auditor, all for a misstatement in ABC Co.’s 2012 financial statements, we consider all those separate actions as one “case.””

This is consistent with the “core” approach I use to keep my FCPA statistics.  (See here for the prior post).  The “core” approach is also what the DOJ uses (see here for the prior post).  However, many in FCPA Inc. use other creative counting methods to measure FCPA enforcement and related issues.  This is a huge quality of data issue and completely muddies the conversational waters on many FCPA issues.

Hardly a Smoking Gun

Reuters and other media outlets have carried forward Chinese state media reports as follows.  “A Chinese police investigation into drugmaker GlaxoSmithKline has discovered that alleged bribery of doctors in China was coordinated by the British company and was not the work of individual employees.”

The smoking gun?

Apparently GSK “had set goals for annual sales growth as high as 25 percent. That rate was 7 to 8 percentage points above the average growth rate for the industry” [according to one of GSK’s detained executives] and “GSK implemented salary policies based on sales volumes and such goals could not be achieved without “dubious corporate behavior.”

That is hardly a smoking gun.


At times it seems like there is a new “global arms race” to see which country can bring the most enforcement actions for the largest dollar value.  Competition is generally good, but law enforcement ought not be a competition where quantity of enforcement becomes more important than quality of enforcement.  Evidence of the former can be found in the following.

In this recent speech David Green (Director of the U.K. Serious Fraud Office) stated as follows.

“When it comes to prosecutions of corporates, the SFO’s performance is often compared unfavourably to that of US prosecutors. The key reason for this is the much higher bar that we in the SFO face in proving corporate criminal liability. Currently, in order to prove corporate liability, we have to prove that the controlling mind of the corporate was complicit in the relevant criminality.”

In other respects, Green’s speech reads like a political stump speech, not that of a high-profile law enforcement official.

This article in the South China Morning Post titled “Beijing Weighing Large Fines Against GlaxoSmithKline quotes from the China Ministry of Public Security website which states:  “We should learn from the practice of other countries in imposing astronomical fines.”


From Jonathan Weil’s Bloomberg View column:

“In the U.S., companies hire powerful people’s children all the time for reasons beyond their obvious skill set. (Chelsea Clinton working at a hedge fund?) And they don’t just bother with the kids — they hire the powerful people themselves. (Do you think Larry Summers got a high-paying job at the hedge fund D.E. Shaw because of his skills as a trader?)

If the feds are going to target wheel-greasing in China — where it can be difficult to get business done without bribing somebody — does this mean we need a Domestic Corrupt Practices Act, too? In Colorado, JPMorgan used to employ Chris Romer as a banker. His father, Roy Romer, was the state’s governor for 12 years. Did that help Chris Romer get hired? It couldn’t have hurt. Do we need a law against this? Of course not.

There are certain facts of life that aren’t worth bringing in the FBI to check out. When rich people with teenage children give millions of dollars to elite universities, there’s a good chance they want special attention from the admissions office for their kids, if not an outright guarantee they will get in. And when owners of companies hire senators’ kids for internships, they probably would like to meet the parents someday.

Perhaps what JPMorgan did in China was worse. We don’t know yet. But let’s not get ahead of ourselves. The decision of whether to hire someone often has less to do with that person’s qualifications than it does with who they are. Life isn’t fair — not in the U.S. and not in China.”

Reading Stack

From Thomas Gorman (Dorsey & Whitney), “The New FCPA Guide:  A Road Map to Crafting an Effective Compliance Defense.”

A client alert from Paul Hastings, “Preparing for Shareholder Lawsuits When Dealing with Foreign Corrupt Practices Act Investigations.”


A good weekend to all.

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