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SEC Co-Director Of Enforcement Peikin Reflects On The Past, Present, And Future Of The SEC’s Enforcement Of The FCPA


Earlier today, Steven Peikin (Co-Director of the SEC’s Enforcement Division) delivered this speech at a Foreign Corrupt Practices Act / OECD Convention Anniversary Conference held at NYU School of Law. This post excerpts portions of Peikn’s remarks.

But first a few comments.

In talking about the past, I wonder if Peikin is even aware of the following historical fact. As highlighted in the article “The Story of the Foreign Corrupt Practices Act,” the SEC never wanted any role in enforcing the FCPA’s anti-bribery provisions. However, congressional leaders at the time of the FCPA’s enactment had a high level of distrust with the Justice Department and insisted, against the SEC’s objections both when the FCPA was enacted in 1977 and when it was first amended in 1988, that it play a role in enforcing the FCPA’s anti-bribery provisions.

Seems odd pointing this with the SEC now having its own FCPA Unit, but it is a historical fact.

In his speech, Peikin states that the FCPA Unit has a “uniform and predictable approach to FCPA enforcement.” Say whatever you want about SEC FCPA enforcement, but two words you will rarely hear are uniform and predictable. It is frequently the case that seemingly similar matters are resolved with dissimilar charges or findings (anti-bribery vs. books and records vs. internal controls). Then of course there is the form of resolution: civil charges, administrative action, non-prosecution agreement, and deferred prosecution agreement. And then of course there is a form of remedy: civil penalty vs. disgorgement. I’ve devoted my professional life to the study and analysis of FCPA enforcement and I can detect very little uniformity or predictability in SEC FCPA enforcement.

In his speech, Peikin states (as all prior SEC enforcement officials have stated) that “the Enforcement Division is broadly committed to holding individuals accountable when the facts and the law support doing so.” Keep in mind however the following fact. As highlighted in this prior post since 2006 approximately 80% of SEC corporate FCPA enforcement actions ahve lacked related SEC charges against company employees.

The remainder of this post excerpts Peikin’s speech.

“The SEC played a leading role in the investigations in the mid-1970s that prompted the enactment of the FCPA. Former SEC Chairman Roderick Hills and Judge Stanley Sporkin, then Director of the SEC’s Enforcement Division, were instrumental in helping to enact the statute. Their influence was particularly felt on the provision requiring public issuers to maintain accurate books and records, a provision which remains a key tool in the SEC’s FCPA enforcement arsenal today.

Over the last 40 years, enforcement of the FCPA has been a fundamental part of the SEC’s enforcement mission. Recognizing the increasingly specialized nature of FCPA practice, in 2010, the Enforcement Division formed a specialized Unit devoted to investigating potential violations of the FCPA. Today, the FCPA Unit has approximately three dozen attorneys and forensic accountants in various of the SEC’s offices around the country. The FCPA Unit has developed substantial expertise, built long-lasting relationships with our domestic and international law enforcement colleagues in the foreign bribery space, and developed a series of compelling cases exposing widespread corruption across many industries.

This dedicated focus on FCPA enforcement has yielded significant results. Since the creation of the FCPA Unit in 2010, the Commission has brought 106 FCPA-related actions against 101 entities and 38 individuals. Many of these cases involved well-known issuers both domestic and foreign in diverse industries such as natural resources, healthcare, and financial services. But our successes over the past seven years go beyond case-related ones. The unit approach has yielded a more uniform and predictable approach to FCPA enforcement, which is perhaps best manifested in the Resource Guide to the U.S. Foreign Corrupt Practice Act that we co-authored in 2012 along with the Department of Justice (DOJ). The unit approach also has, I believe, enhanced domestic and international partnerships in the fight against corruption.

Against that backdrop, what does the future hold for FCPA enforcement at the SEC? Will the SEC continue to be committed to robust FCPA enforcement? My answer to that question is simple: Yes.

As Chairman Clayton noted during his confirmation hearing, bribery and corruption have no place in society. They often go hand-in-hand with many other societal ills, including instability, inequality, and poverty, and have anti-competitive effects, including putting honest businesses at a disadvantage. Bribery and corruption undermine and distort the marketplace and ultimately harm investors. Combatting corruption therefore remains an important government mission, including at the SEC’s Enforcement Division.

As you undoubtedly know, Charles Cain was just last week appointed as Chief of the FCPA Unit. Charles has devoted much of his career to FCPA enforcement matters, has handled some of the Commission’s most significant cases and, prior to his appointment, served as Deputy Chief and Acting Chief of the Unit. And so, under Charles’ leadership, you can expect our efforts in this area to continue apace.

But, in my view, in an increasingly international enforcement environment, the U.S. authorities cannot – and should not – go it alone in fighting corruption. As global markets become more interconnected and complex, no one country or agency can effectively fight bribery and corruption by itself. Anti-corruption enforcement is a team effort. The Enforcement Division’s fight against corruption is much more effective when our international colleagues join us in a shared commitment to eradicating corruption and bribery and leveling the playing field for businesses everywhere.

Fortunately, I have observed that the level of cooperation and coordination among regulators and law enforcement worldwide is on a sharply upward trajectory, particularly in matters involving corruption. In fact, in the past fiscal year alone, the Commission has publicly acknowledged assistance from 19 different jurisdictions in FCPA matters.And, one need look no further than two recent, substantial cases that were resolved globally: (i) a settlement that we, the U.S. Department of Justice, and authorities in the Netherlands and Sweden reached with Teliasonera, and (ii) the coordinated Brazilian-Swiss-U.S. resolutions with Braskem.

I believe this sort of international coordination and cooperation in fighting corruption yields significant benefits. First, it sends strong messages of deterrence to companies and individuals who might otherwise see bribery and corruption as a way of maximizing their commercial advantage. Second, it allows for the more efficient investigation and resolution of cases. Internationally coordinated cases can often lead to coordinated global outcomes for companies that want to resolve issues they face. I fully expect the trend of the Enforcement Division working closely with foreign law enforcement and regulators in anti-bribery actions to continue its upward trajectory in the coming years.

Of course, companies cannot engage in bribery without the actions of culpable individuals. The Enforcement Division is broadly committed to holding individuals accountable when the facts and the law support doing so. As Chairman Clayton observed at his confirmation hearing, individual accountability drives behavior more than corporate accountability, a point which is supported by both logic and experience. The Division of Enforcement considers individual liability in every case it investigates; it is a core principle of our enforcement program.

Recent cases reflect that this approach applies with equal force in FCPA cases. One need look no further than the Commission’s recent charges against former Vice-President of Halliburton with causing Halliburton’s FCPA violations, circumventing internal accounting controls, and falsifying books and records while selecting and making payments to a local company in Angola in the course of winning lucrative oilfield services contracts. And, in April, the Commission reached strong settlements, after filing a contested action in 2011, with three former executives of Magyar Telekom that included penalties and officer-and-director bars.

FCPA cases can present particular challenges in our efforts to hold individuals accountable. In many cases, the individuals most directly involved in and responsible for the wrongdoing are foreign nationals who reside overseas. And even when we charge foreign nationals, they often have limited or no assets in the U.S., limiting our options for enforcing any monetary judgments we may obtain. Nevertheless, the effort to hold individuals accountable is critical to achieving the Enforcement Division’s goals of deterrence, incapacitation, and just punishment. I expect that we will continue to have intense focus on the question of individual responsibility in every FCPA investigation.

Finally, no discussion about the future of FCPA enforcement would be complete if I did not address one of the other principal challenges we face; namely, the interplay between the length of time it takes to conduct an FCPA investigation and the statute of limitations.

In many instances, by the time a foreign corruption matter hits our radar, the relevant conduct may already be aged. And because of their complexity and the need to collect evidence from abroad, FCPA investigations are often the cases that take the longest to develop. In contrast to the Department of Justice, the statute of limitations is not tolled for us while our foreign evidence requests are outstanding.

These limitations issues have only grown in the wake of the U.S. Supreme Court’s recent decision in Kokesh v. SEC, in which the Court held that Commission claims for disgorgement are subject to the general five-year statute of limitations. Kokesh is a very significant decision that has already had an impact across many parts of our enforcement program. I expect it will have particular significance for our FCPA matters, where disgorgement is among the remedies typically sought.

While the ultimate impact of Kokesh on SEC enforcement as a whole – and FCPA enforcement specifically – remains to be seen, we have no choice but to respond by redoubling our efforts to bring cases as quickly as possible. Even irrespective of Kokesh, this approach makes sense because our cases have the highest impact, and our litigation efforts are most effective, when we bring our cases close in time to the alleged wrongful conduct.

Let me conclude my remarks here. I appreciate the opportunity to speak to all of you about the Division’s anti-bribery and anti-corruption efforts. The FCPA has been and remains an increasingly important tool in the ongoing fight against corruption worldwide. The statute has provided us with a potent tool in the worldwide fight against corruption and, we have been very successful in bringing FCPA actions. And, the OECD and like-minded organizations have played a pivotal role in the worldwide battle against bribery. I am optimistic that the next 40 years of the FCPA, and the next 20 of the OECD, will be equally – if not more – successful.”

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