This recent post highlighted the origins of corporate Foreign Corrupt Practices Act enforcement actions in 2024.
Continuing with the 2024 FCPA statistical feast, this post follows the chronology of scrutiny to enforcement and highlights one of the most troubling policy issues when it comes to FCPA enforcement.
That is – FCPA scrutiny simply lasts too long. Specifically, as highlighted below, 4.5 years was the approximate median length of time companies that resolved FCPA enforcement actions in 2024 were under scrutiny.
Before highlighting the statistics, some general background.
The DOJ/SEC have long recognized the problematic issues associated with long-protracted investigations. For instance, in this 2005 speech the DOJ’s then Assistant Attorney General of the Criminal Division stated:
“Simply put, speed matters in corporate fraud investigations. The days of five-year investigations, of agreement after agreement tolling the statute of limitations – while ill-gotten gains are frittered away and investor confidence sinks – are increasingly a thing of the past.”
As highlighted here, a notable development from 2017 was when Acting Principal Deputy Assistant Attorney General Trevor McFadden stated it was the DOJ’s “intent … for our FCPA investigations to be measured in months, not years.”
As highlighted here, in 2020 Stephanie Avakian (Director of the SEC’s Division of Enforcement) stated that the SEC was focused on maximizing resource allocation ” to shorten the amount of time it takes to complete investigations and bring cases.”
As highlighted here, in 2021 Gary Gensler (SEC Chair) talked about “timeliness” and stated: “I think we should focus on bringing matters to resolution swiftly. As the old legal saying goes, justice delayed is justice denied. […] We’ve got precious resources, we need to move the docket, and we will be bringing cases expeditiously.”
As highlighted here, in 2022 Gensler stated: “Process is about fairness: to the market, to the public, to those who are investigated, and to those who are wronged. Process is about timeliness. I think we should work thoughtfully and expeditiously to bring matters to resolution.”
As highlighted here, in 2022 Assistant Attorney General Kenneth Polite stated: “Where misconduct has occurred, everyone involved — from prosecutors to outside counsel to corporate leadership — should be ‘on the clock,’ operating with a true sense of urgency.”
Statute of limitations are ordinarily the remedy the law provides for legal gray clouds.
Yet, in corporate FCPA enforcement actions the fundamental black-letter legal principle of statute of limitations seems not to matter because cooperation is the name of the game and to raise bona fide legal arguments such as statute of limitations is not cooperating in an investigation.
Given the “carrots” and “sticks” relevant to resolving corporate FCPA enforcement actions, one of the first steps a company the subject of FCPA scrutiny often does to demonstrate its cooperation is agree to toll the statute of limitations or waive any statute of limitations defenses.
Given this dynamic, the enforcement agencies face little time pressure in resolving corporate FCPA inquiries. The end result is that the gray cloud of FCPA scrutiny often hangs over a company far too long.
This dynamic has long been discussed by FCPA commentators.
One FCPA commentator stated:
“[Companies under FCPA scrutiny are] routinely asked to waive the statute of limitations. They could refuse but none do; refusal might trigger an instant enforcement action against the company or its people. So the waiver gives the feds limitless time to investigate, deliberate, or procrastinate. And no one can force the DOJ or SEC to move on, either with an enforcement action or a declination. The result? Companies [under FCPA scrutiny] get stuck in FCPA limbo. […] But the DOJ and SEC should always keep one eye on the calendar. The threat of FCPA enforcement […] casts a long shadow. It darkens the future for management, shareholders, lenders, customers, and suppliers. Exactly the problem the statute of limitations was supposed to fix.”
Another FCPA commentator stated:
“The Justice Department and the SEC attorneys have a duty to manage caseloads and move cases responsibly. I called it “cut and run.” Either the government has the evidence or it does not – and they now fairly early on what direction a case is heading.”
As highlighted in this prior post, members of Congress have also questioned the long time periods associated with FCPA scrutiny.
Paul Pelletier (former Principal Deputy Chief of the DOJ’s Criminal Division) wrote a dandy 2015 Wall Street Journal editorial titled “The Foreign Bribery Sinkhole at Justice” in which he wrote:
“Absurdly long and costly investigations, however, may cause companies to reassess the value of reporting FCPA violations to the federal government.
When bribery investigations are publicly resolved in a timely fashion, other businesses can more readily identify ongoing bribery schemes operating within their industry or region and ensure that their anti-bribery compliance programs adequately address those current schemes. That opportunity is lost when criminal resolutions drag out for five or more years. Deterrence then is principally the size of the monetary penalty.
The Justice Department needs to do more than churn out resolutions to foreign bribery cases notable only for their record-breaking penalties. Rigorous and prompt FCPA enforcement can have a dramatic impact on the insidious and corrosive effect of corruption overseas and provide … restorative justice …”.
In this piece Pelletier went into more-depth on the same topic. In pertinent part he wrote:
“[T]he pattern of costly delay in FCPA investigations continues unabated. While every government investigation and resolution poses unique facts and circumstances that may serve to delay the investigatory process, these recent long-developing FCPA resolutions …. are convincingly problematic. The staggering investigative costs, ultimately borne by employees and shareholders alike, however, also can reach unconscionable levels.
[…]
The Department of Justice has recently articulated that at least part of the rationale or justification for these interminable investigations is that “[c]ompared to other white collar crime, the challenges associated with FCPA investigations can be much greater.” The DOJ offered “overseas evidence” as one basis for this greater challenge.
But this statement fails to explain the more than twofold increase in investigatory durations from historical norms. A dispassionate, experience-based analysis of this overly broad assertion exposes a faulty premise. Simply put, the DOJ can and must do better.
[…]
With a cooperating corporation, FCPA investigators routinely find themselves in the unique position of having prompt access to overseas evidence and witnesses without a need to resort to cumbersome international treaty requests. Such cooperation is much like the prosecution having secured a cooperator with unfettered access to the critical evidence.
[…]
Regardless of the reason or reasons for these protracted investigations, both the continued vitality of the DOJ’s FCPA enforcement efforts and the prominence of the United States as the global leader of anti-corruption enforcement would seem to demand a renewed effort to dramatically reduce the time frame necessary to achieve resolution.
[…]
Legitimate enterprises benefit from those kinds of real-time revelations, and criminal political regimes can be immediately identified and deterred. Moreover, when a criminal resolution discloses and punishes criminal conduct that occurred five or more years earlier, any deterrent effect of the resolution is significantly diminished. This is particularly true in industries where the overseas corrupt conduct flourishes with abandon.
At that late stage, the principal deterrent effect is relegated to the size of the monetary penalty — something the DOJ continues to emphasize with all too much frequency and relish. As recent cases have demonstrated, lengthy FCPA investigations also place untenably wasteful financial burdens on corporations, their employees and their shareholders.
[…]
Given that the DOJ’s FCPA unit within the Fraud Section has more than doubled in size from 2009 to today and has been fortified by a dedicated squad of FBI agents, it is puzzling that many of these investigations seem to drag on interminably. The DOJ must strive to be more than just “FCPA Inc.,” churning out stale resolutions notable only for their record-breaking penalties.”
In conclusion Pelletier stated:
“The interests of justice are neither served nor advanced when FCPA investigations routinely drag on for five or more years. Rigorous and prompt FCPA enforcement with respect to current bribery schemes can have a dramatic impact on the insidious and corrosive effect of corruption overseas. Real-time enforcement is just one component of what must be a larger proactive strategy to root out overseas corruption, which includes punishing the bribe takers as well as the bribe payers and dispossessing the government officials of access to ill-gotten gains.
Curing the deficiencies that lead to costly and wasteful delays will require a systemic and sustained effort, primarily by the DOJ. It will also require a more focused approach by outside counsel. Although the ameliorative benefits resulting from such change will not be achieved overnight, the long-term vitality and efficacy of the DOJ’s anti-corruption enforcement efforts ultimately rests on the government’s ability to sustainably alter the status quo.”
As highlighted here, Pelletier suggested that the high attrition levels at the DOJ likely contribute to the length of FCPA inquiries. As he stated “most FCPA investigations will be passed from prosecutor to prosecutor, almost certainly leading to unnecessarily protracted investigations.”
For FCPA Flash podcast episodes discussing the long time periods associated with FCPA scrutiny see here (Paul Pelletier), here (Homer Moyer – a dean of the FCPA bar), here (Kevin Muhlendorf – former Assistant Chief in DOJ’s Fraud Section and former Senior Counsel in the SEC’s Enforcement Division), here (Richard Grime – former Assistant Director of SEC Enforcement), here (Ephraim Wernick – former DOJ FCPA Unit Assistant Chief), and here (Lucinda Low – a dean of the FCPA bar).
With this background, set forth below is how long companies that resolved FCPA enforcement actions in 2024 were under scrutiny. In certain enforcement actions, it is unclear when the company became the subject of FCPA scrutiny.
SAP
6.5 Years
Gunvor
3.5 Years
Trafigura
5 Years
Boston Consulting Group
Unclear, but at least 4 Years
Deere & Co.
Unclear
Moog
Unclear
RTX
4-5 Years
Telefonica Venzuela
4.5 Years
BIT Mining / 500.com
4.5 Years
McKinsey
6 Years
AAR
5.5 Years
When assessing the long time periods associated with FCPA scrutiny, it is important to keep in mind that both the DOJ/FBI and SEC have specific FCPA units that are uniquely tasked with investigating and prosecuting FCPA offenses.
It is also worth noting the extensive cooperation that companies under FCPA scrutiny typically provide to the enforcement agencies which, it would seem, should make the DOJ and SEC’s job easier and should lead to shorter scrutiny periods.
For instance, in the SAP matter the DOJ stated:
“The Company’s cooperation included, among other things, (i) immediately beginning to cooperate after South African investigative reports made public allegations of the South Africa-related misconduct in 2017 and providing regular, prompt, and detailed updates to the Fraud Section and the Office regarding factual information obtained through its own internal investigation, which allowed the government to preserve and obtain evidence as part of its independent investigation; (ii) producing relevant documents and other information to the Fraud Section and the Office from multiple foreign countries expeditiously, while navigating foreign data privacy and related laws; (iii) at the request of the Fraud Section and the Office, voluntarily making Company officers and employees available for interviews; (iv) taking significant affirmative steps to. facilitate interviews while addressing witness security concerns; (v) raising and resolving potential deconfliction issues between the Company’s internal investigation and the investigation being conducted by the Fraud Section and the Office; (vi) promptly collecting, analyzing, and organizing voluminous information, including complex financial information, at the request of the Fraud Section and the Office; (vii) translating voluminous foreign language documents to facilitate and expedite review by the Fraud Section and the Office; and (viii) imaging the phones of relevant custodians at the beginning of the Company’s internal investigation, thus preserving relevant and highly probative business communications sent on mobile messaging applications.”
Likewise, the SEC stated:
“SAP cooperated in the Commission’s investigation by identifying and timely producing key documents identified in the course of its own internal investigation, providing the facts developed in its internal investigation, and making current or former employees available to the Commission staff.”
Likewise, in the Gunvor matter, the DOJ listed the following components of the company’s cooperation:
“(i) producing documents to the Offices from multiple foreign countries expeditiously while navigating foreign data privacy and criminal laws; (ii) providing information obtained through its own internal investigation to the government, which allowed the government to preserve and obtain evidence as part of the government’s investigation; (iii) making detailed, factual presentations to the Offices; (iv) arranging for the interview of an employee based outside the United States; (v) promptly collecting, analyzing, and organizing voluminous information, including complex financial information, at the request of the Offices, and producing an analysis of trading activity conducted by multiple outside forensic accounting firms retained by the Defendant; (vi) translating foreign language documents to facilitate and expedite review by the Offices; and (vii) imaging the phones of relevant custodians at the beginning of the Defendant’s internal investigation, thus preserving business communications sent on mobile messaging applications;”
In the Trafigura matter, the company – in the words of the DOJ:
“provid[ed] timely updates on facts learned during its internal investigation related to conduct … ; (ii) ma[de] factual presentations to the government; (iii) facilitat[ed] the interviews of employees and agents, including an employee located outside the United States, and arrang[ed] for counsel for employees where appropriate; and (iv) produc[ed] relevant nonprivileged documents and data to the government, including documents located outside the United States in ways that navigated foreign data privacy laws, accompanied by translations of certain documents;”
In the RTX matter, the DOJ stated:
“The Company’s cooperation included, among other things, (i) providing information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own independent investigation; (ii) facilitating interviews with current and former employees; (iii) making detailed factual presentations to the Offices; (iv) proactively disclosing certain evidence of which the Offices were previously unaware and identifying key documents in materials produced by the Company; and (v) engaging experts to conduct financial analyses.”
In the McKinsey matter the DOJ said that the company’s cooperation:
“[I]ncluded: (i) immediately and proactively cooperating from the inception of the DOJ’s investigation; (ii) making numerous factual presentations to the DOJ over the course of their investigation, derived from information obtained through the Company’s internal investigation; (iii) collecting, reviewing, and producing voluminous records, including those located abroad, in response to requests from the DOJ; (iv) promptly reporting the discovery of document-deletion efforts by the McKinsey partner involved in the conduct found during its internal investigation, taking additional investigative steps to uncover information and evidence regarding those efforts, and producing such information and evidence to the DOJ; (v) reporting, in real time, newly discovered information and documents which allowed the DOJ to preserve and obtain evidence as part of their independent investigation; (vi) tracing complex internal accounting money-flows and currency exchange-information in response to requests from the DOJ; (vii) preserving, collecting and producing to the DOJ documents located abroad, and engaging a third-party forensics consultant to analyze key electronic devices and providing to the DOJ the results of that analysis; (viii) collecting and producing to the DOJ personal email and bank account information of the McKinsey partner involved in the conduct relevant to the DOJ’s investigation; (ix) engaging with the DOJ in response to a deconflicting request to preserve the integrity of the DOJ’s investigation; and (x) making Company officers and employees available for interviews.”
