In yet another foolish post with false data, the FCPA Blog asks “is there a compliance crisis coming?”
Why might a compliance crisis be coming?
Because the author of the FCPA Blog post received an e-mail “from a compliance head at a Fortune 500: “We are being asked to cut back this year.”
What is driving the apparent “cuts to compliance budgets?”
As stated by the FCPA Blog “well, enforcement is way, way down.”
The FCPA Blog states:
“In 2020, total FCPA settlements topped $6.4 billion. In 2021, that fell to a comparatively tiny $282 million.
Enforcement totals for 2022 bounced back a bit to $1.5 billion, and so far in 2023 we’ve seen settlements of just $300 million.
Enforcement actions this year have also been interestingly small. The largest (not counting Ericsson’s DPA breach) is $62 million paid by Koninklijke Philips. Three of the six settlements this year have been under $10 million. Gartner’s $2.5 million resolution last month was the smallest corporate FCPA settlement since 2018.”
For starters, the above contains widely false and misleading data.
In 2020, total FCPA settlement amounts were $2.78 billion (not $6.4 billion) and just one enforcement action – the $1.66 billion Goldman enforcement action (the largest FCPA settlement amount of all-time) comprised approximately 60% of this amount. In other words, 2020 FCPA settlement amount totals was significantly skewed by the largest FCPA settlement amount ever.
In 2021, total FCPA settlement amounts were $259 million (not $282 million). 2021 was the height of COVID and many “normal” statistics were down during this general time period.
In other words, comparing just one year of FCPA settlement amounts (a year in which the largest FCPA settlement amount occurred) to just one other year (a year in which there was a global health crisis that impacted many “normal” statistics) does not have much value.
Moreover, suggesting that a yearly FCPA settlement amount total in the range of $250 – $300 million is “tiny” and then trying to assert that this is a sign of a current crisis, ignores that in 2012 and 2015 yearly FCPA settlement amounts were in this general range as well.
FCPA settlement amounts in 2022 were $923 million (not $1.5 billion) and so far in 2023 FCPA settlement amounts equal approximately $93 million (not $300 million).
Have specific FCPA settlement amounts thus far in 2023 been on the lower side of the settlement amount spectrum?
Yes, but FCPA settlement amounts are generally a function of the specific conduct at issue and often the net financial benefit gained through the improper conduct.
Bigger picture, viewing FCPA enforcement through the lens of settlement amounts (rather than the number of enforcement actions) is odd.
If I wanted to assess enforcement of speeding laws on a local highway, would I look to the number of speeding tickets issued or the amount collected from speeding tickets (even if the amount may be skewed by just a few speeding ticket amounts in which a driver was going four times the legal limit)?
The below chart highlights corporate FCPA enforcement actions over the past 15 years.
Corporate FCPA Enforcement Actions (2007 – 2022)
| Year | Core Actions | Settlement Amounts* | Of Note |
| 2022 | 10 | $923 million | Two enforcement actions (Glencore – $443 million) and ABB ($147.5 million) comprised approximately 64% of the $923 million amount. |
| 2021 | 4 | $259 million | One enforcement action (Deutsche Bank – $123 million) comprised approximately 47% of the $259 million amount. |
| 2020 | 12 | $2.78 billion | One enforcement action (Goldman Sachs – $1.66 billion) comprised approximately 60% of the $2.78 billion amount and three enforcement actions (Goldman plus Novartis – $347 million and Airbus – $294 million) comprise approximately 83% of the $2.78 billion amount. |
| 2019 | 14 | $2.65 billion | Two enforcement actions (Ericsson and MTS) comprised approximately 70% of the $2.65 billion amount. |
| 2018 | 17 | $1 billion | Three enforcement actions (Panasonic, Societe General and Petrobras) comprised approximately 75% of the $1 billion amount. |
| 2017 | 13 | $1.1 billion | Two enforcement actions (Telia and SBM Offshore) comprised approximately 65% of the $1.13 billion amount and four enforcement actions (the two mentioned above plus Rolls-Royce and Keppel Offshore & Marine) comprised approximately 88% of the amount. |
| 2016 | 27 | $2.4 billion | Three enforcement actions (Teva, Odebrecht/Braskem and VimpelCom) comprised approximately 56% of the $2.41 billion amount and five enforcement actions (the three mentioned above plus JP Morgan and Embraer) comprised approximately 72% of the amount. |
| 2015 | 11 | $139 million | No enforcement actions significantly skewed the statistics. |
| 2014 | 10 | $1.6 billion | Two enforcement actions (Alstom – $772 million and Alcoa – $384 million) comprised approximately 72% of the $1.6 billion amount. |
| 2013 | 9 | $720 million | The $398 million Total enforcement action comprised approximately 55% of the $720 million amount. |
| 2012 | 12 | $260 million | No enforcement actions significantly skewed the statistics. |
| 2011 | 16 | $503 million | The $219 million JGC Corp. enforcement action comprised approximately 44% of the $503 million amount. |
| 2010 | 21 | $1.4 billion | Six enforcement actions, all resolved on the same day, involved various oil and gas companies’ use of Panalpina in Nigeria. Panalpina also resolved an enforcement action on the same day.Two enforcement actions (Technip and Eni / Snamprogetti) involved the same alleged conduct in Nigeria.
In other words, there were 14 unique corporate enforcement actions in 2010. Of further note, the two Nigeria enforcement actions, Technip($338 million) and Eni/Snamprogetti ($365 million) comprised approximately 50% of the $1.4 billion amount. |
| 2009 | 11 | $645 million | The $579 million KBR / Halliburton enforcement action comprised approximately 90% of the $645 million amount. |
| 2008 | 10 | $885 million | The $800 million Siemens enforcement action comprised approximately 90% of the $885 million amount. |
| 2007 | 15 | $149 million | Six enforcement actions involved Iraq Oil for Food conduct and these enforcement actions comprised 40% of all enforcement actions and approximately 50% of the $149 million amount. |
*After accounting for various credits or deductions in certain enforcement actions for related foreign law enforcement actions
Are there some outlier years in the number of core actions – yes – but then again when you measure something through an arbitrary 365 day period there is always going to be outliers.
Are there some outliers years in settlement amounts – yes – but then again just one action can significantly skew a yearly settlement amount and again when you measure through an arbitrary 365 day period there is always going to be outliers.
Aggregating the corporate FCPA enforcement data over a 15 year period looks results in this conclusion: in any given year, there tends to be approximately 13 corporate enforcement actions.
Thus far in 2023 (and keep in mind that FCPA enforcement action tends to be more vibrant in the second half of a year given the end of the SEC’s fiscal year in September and the end of the calendar year) there have been 6 corporate enforcement actions.
In other words, contrary to the FCPA Blog’s assertion, FCPA enforcement is not “way, way down.”
