Earlier this week SEC Chair Mary Jo White delivered this speech.
Her speech focused on “a few priority areas that illustrate the dimensions of the SEC’s international role” and a substantial portion of the speech focused on the Foreign Corrupt Practices Act including how “vigorous enforcement of the FCPA is a high priority for both the SEC and DOJ.”
On individual actions, Chair 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.”
Keep in mind however the following facts. In 2016 thus far, 70% of corporate SEC FCPA enforcement actions have not involved any related individual charges and since 2008 approximately 80% of corporate SEC FCPA enforcement actions have not involved any related individual charges.
The remainder of this post excerpts the FCPA portion of Chair White’s speech.
Strong Enforcement against Foreign Corrupt Payments
Now let me say a few words about the FCPA, both about its importance and our current enforcement program. As a securities regulator, the SEC oversees and enforces a robust disclosure regime, one of the fundamental premises of which is that public companies must accurately disclose the drivers of their business successes (and failures) and the associated risks to the company’s future performance.
A company’s use of illicit payments—specifically, the payment of bribes and other things of value to obtain or retain business—masks the reality that a company is not competing on its merits. Instead, the company has relied on bribes to succeed. Making illicit payments also exposes a company to potential legal liability in multiple jurisdictions, hurts a company’s reputation, and jeopardizes the company’s future. Above all, corrupt payments undermine the integrity of our financial markets and have a corrosive impact on many institutions and businesses around the world. For these and other reasons, the U.S. enacted the FCPA in 1977, making it illegal, both civilly and criminally, for U.S. companies and individuals acting on their behalf to pay bribes to foreign officials. Vigorous enforcement of the FCPA is a high priority for both the SEC and the Department of Justice (DOJ).
The SEC’s record enforcing the FCPA is very strong and 2016 is no exception. This fiscal year, the SEC has already filed 17 actions against entities and individuals for FCPA violations, a nearly 30 percent increase from last year, and obtained more than $290 million in monetary remedies. As part of our proactive FCPA program, the SEC also makes occasional use of deferred prosecution and non-prosecution agreements in order to promote self-reporting, cooperation, and remediation.
To effectively combat bribes paid by global companies that benefit from access to our capital markets by listing their stock on U.S. exchanges, the SEC is often dependent on our international counterparts to provide vital cooperation and assistance. And I am very pleased that the SEC has received assistance from an expanding list of countries in FCPA cases filed this fiscal year. Let me illustrate with just one impressive example.
Earlier this year, the SEC, DOJ, and Dutch regulators entered into a global settlement with a telecommunications provider based in the Netherlands, where the company agreed to pay $795 million to resolve its violations of the FCPA in Uzbekistan. The SEC charged that the Dutch company offered and paid bribes to an Uzbek government official, who was related to the President of Uzbekistan, as the company sought licenses, frequencies, channels, and number blocks in the country’s regulated industry. We received significant cooperation from numerous countries during this complex investigation, including the civil and criminal authorities from Bermuda, the British Virgin Islands, the Cayman Islands, Estonia, Gibraltar, Ireland, Latvia, the Marshall Islands, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Arab Emirates – truly, an exceptional global effort in a very important case.
In addition to actions against companies, we prioritize charging individuals involved in bribery schemes where we have the necessary evidence and jurisdiction over the offender. Holding individuals accountable for their misconduct remains one of the most powerful deterrents in any enforcement area.
Not surprisingly, FCPA cases involving individuals requires significant and multi-faceted cooperation from our international partners. And we are getting it. This year alone, our FCPA cases against individuals included a CFO who helped falsify the company’s books and records, an engineer who bribed foreign officials and enriched himself, and a CEO who used sham consulting agreements to authorize improper payments to officials to settle a labor dispute. In these cases, the SEC received meaningful and substantial assistance from our international counterparts, including civil and criminal authorities from Austria, the British Virgin Islands, Canada, the Cayman Islands, Cyprus, Denmark, Estonia, Finland, Latvia, and Liechtenstein.
The fight against bribery and corruption is obviously a global effort and not limited to offending U.S. companies or their employees operating abroad. We all recognize its importance, as evidenced by the renewed commitment and focus on what more the entire international regulatory community can do to be more effective and better coordinated in dealing with corruption issues worldwide. As a first step, this requires countries to pass strong comprehensive laws targeting bribery and many jurisdictions have taken this crucial step. For example, according to a 2015 report by the Organisation for Economic Co-operation and Development (OECD), bribery is now a crime in all 41 countries that are parties to the OECD Convention. This is very significant because these countries—combined—cover 64 percent of global outbound foreign direct investments and more than 50 percent of the world’s exports. These countries are also home to 95 of the largest 100 non-financial—and all of the top 50 financial—multinational enterprises in the world
A quick look at the most recent statistics compiled by the Working Group on Bribery of the OECD are also encouraging. For example:
- Between 1999 and 2014, parties to the OECD Convention brought criminal prosecutions against 361 individuals and 126 entities for foreign bribery;
- At least 95 of the individuals were sent to prison for foreign bribery; and
- In addition, at least 110 individuals and 200 entities were sanctioned in civil, administrative, and criminal actions relating to foreign bribery, including accounting-related violations.
The same OECD report also indicates that Germany, Hungary, South Korea, and the United Kingdom, in particular, have had impressive results in holding both individuals and entities accountable in criminal foreign bribery cases.
These regulatory actions are important achievements, as foreign bribery must be a global regulatory priority. Cost alone mandates that. Another OECD report shows that the cost of corruption equals more than 5 percent of global gross domestic product, or $2.6 trillion, with over $1 trillion of bribes paid each year.
The SEC will continue to do its part with our own vigorous FCPA program and by assisting international efforts of countries committed to doing their part to combat this particular corrosive conduct that undermines the integrity of our markets. And we will continue to strongly support the important efforts of the OECD’s Working Group on Bribery to expand and strengthen anti-bribery laws and enforcement throughout the world.