Earlier this week SEC Chair Mary Jo White announced that she will soon be leaving the SEC.
As the head of the SEC since April 2013, White obviously had a lot on her plate and thus judging her tenure through the lens of the Foreign Corrupt Practices Act and related issues is a bit too narrow.
Nevertheless, as SEC Chair White did frequently speak about the FCPA and related issues and the SEC does maintain an FCPA Unit (one of only five specialized units at the SEC). Thus, judging her tenure with reference to the FCPA is warranted.
In this regard, this post highlights the many ironies of White’s tenure at the SEC. Some of the issues discussed below certainly pre-date White’s tenure at the SEC, yet as Chair the issues continued under White’s leadership.
When White joined the SEC in April 2013, this post highlighted her comments while in private practice about non-prosecution and deferred prosecution agreements. Her comments were an informed (she previously was the U.S. Attorney for the S.D. of N.Y.) and forceful critique of alternative resolution vehicles and she asked: “who made federal prosecutors into such super-regulators?” Among other criticisms, White stated “that the deferred prosecution trend may be sweeping too broadly” and she feared that “the deferred prosecution is becoming a vehicle to show results.”
Yet, use of NPAs and DPAs flourished at the SEC during White’s tenure including in the FCPA context.
This November 2013 post commended White on her speech titled “The Importance of Trials to the Law and Public Accountability.” Under the heading, “why trials are important,” White stated that “simply put, [trials] put our system of justice […] on display for all to see.” She stated as follows.
“The public airing of facts, literally in open court, creates accountability for both defendants and the government. How we resolve disputes and how we decide the guilt or innocence of an accused are the true measure of our democracy. Thomas Jefferson once said that he considered ‘trial by jury as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.’”
In the speech, White agreed that trials are the “‘crown jewel’ of our system of justice” and she focused on two “of the more important roles that trials play in our administration of justice: how they foster development of the law, and perhaps even more importantly how they create public accountability for both defendants and the government through the public airing of charges and evidence.”
As to the former, White stated that “trials allow for more thoughtful and nuanced interpretations of the law in a way that settlements and summary judgments cannot.” As to the later, White agreed with the following statement. “The death of trials would … remove a source of disciplined information about matters of public significance. … It would mean the end of an irreplaceable public forum and would mean that more of the legal order would proceed behind closed doors. And it would deprive us, as American citizens, of an important source of knowledge about ourselves and key issues of public concern.”
White talked about the “near-sacred nature of the courtroom,” how “litigants are required to meet their burden of proof, and where there is up-close-and-personal accountability for whatever the trial is about,” how trials are where “victims and witnesses have the chance to tell their stories and where the public can hear the facts set forth in open court,” and how trials provide a place for “public closure on hotly disputed facts and legal issues.” As White stated, “by the end of the trial, the full scope of the misconduct is laid before the fact-finder to decide guilt or innocence, liability or no liability.
Yet, the SEC enforcement division during White’s tenure largely avoided trials, including in the FCPA text, preferring instead to resolve enforcement actions in the absence of any judicial scrutiny. Indeed, during White’s tenure, the SEC never prevailed in an FCPA enforcement action when put to its ultimate burden of proof. Rather, when put to its ultimate burden of proof in the Jackson and Ruehlen matter, the SEC’s case fell apart after an adverse judicial ruling and the SEC approached the defendants on the eve of trial to settle.
Consistent with how other government officials often speak about enforcement activity, White frequently talked about FCPA enforcement by the numbers. (See here).
Yet White also stated that “quantitative metrics alone, however, are not the proper yardstick of the measure of Enforcement’s effectiveness.”
In this speech, White stated that “our first objective is to help companies avoid FCPA violations by educating them.”
Yet, many SEC FCPA enforcement actions during White’s tenure advanced enforcement theories seemingly in conflict with the FCPA’s actual statutory provisions and prior SEC guidance. As frequently highlighted on FCPA Professor (see here and here for instance), many SEC FCPA enforcement actions over the past few years seemingly advanced a hind-sight driven approach to enforcement that equated to shoulda, coulda, woulda. (See also this FCPA Flash podcast).
As highlighted in this post, White spoke about “the pressure of multiple regulators in the same or overlapping investigations” and she expressed concerns regarding “overcrowding,” “duplicative outcomes” and “double dipping.”
Yet, “double dipping” is what occurs in many FCPA enforcement actions involving issuers (see here for the prior post). The irony of course is that she mentioned the DOJ/SEC’s overlapping FCPA jurisdiction as a success when, in the minds of many, overlapping FCPA jurisdiction is Exhibit A for “overcrowding,” “duplicative outcomes” and “double dipping.”
For starters, as highlighted in “The Story of the Foreign Corrupt Practices Act,” the SEC never wanted any part in enforcing the FCPA’s anti-bribery provisions. Among the FCPA reform proposals advanced by Philip Urofosky (former DOJ Assistant Chief of the Fraud Section) in this article is to “eliminate overlapping enforcement jurisdiction” – in other words Urofosky writes, “the SEC should get out of the anti-bribery business.”
As highlighted in this post, in Congressional testimony White stated: “as in other areas, the Commission is focused on holding individuals accountable in FCPA cases.” This was a common theme during White’s tenure. As highlighted in this post, White stated:
“Any discussion of strong enforcement tools must include a discussion of our priority of pursuing individuals. Personal accountability, of course, is a basic tenet of law enforcement. And individual accountability, particularly at the most senior levels, is a core part of our enforcement program because firms can only act through their people and it is people to whom we are trying to send our strong message of deterrence. While some cases, because of the available evidence or charges, are appropriate to bring only against companies, we must always look to identify and charge those people who are responsible for their company’s wrongdoing.”
As highlighted in this post regarding a recent September 2016 speech White delivered that focused in substantial part on the FCPA, White stated that “vigorous enforcement of the FCPA is a high priority for both the SEC and DOJ.” On individual actions, White stated: “we prioritize charging individuals involved in bribery schemes where we have the necessary evidence and jurisdiction over the offender [and that] holding individuals accountable for their misconduct remains one of the most powerful deterrents in any enforcement area.”
In another speech (see here), White stated “the simple fact is that the SEC charges individuals in most of our cases, which is as it should be.”
Yet, it’s just not true. Since 2008 approximately 80% of corporate SEC FCPA enforcement actions have not involved any related individual charges.