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Further Statistics Relevant To Individual Liability Under The FCPA

Statistical Analysis

FCPA Professor frequently publishes statistical information relevant to all matters of Foreign Corrupt Practices Act enforcement including individual enforcement actions. Thus, I took note of Arent Fox’s recent publication with a catchy title “C-Suite at Risk: A Study of Individual Liability Under the FCPA.”

While I find the study professional and well-presented, I do find the study lacking in terms of what I believe are the most important statistics relevant to individual FCPA accountability – statistics that paint a materially different picture from Arent Fox’s conclusion that “the C-Suite has been and will continue to be in the DOJ’s crosshairs.”

Generally speaking, the Arent Fox publication focuses on raw individual data without acknowledging that the chances of a company employee being prosecuted (criminally or civilly) for an FCPA violation are extremely low even when the business organization resolves an FCPA enforcement action . When I discussed this fact with one of the study’s lead authors, M. Scott Peeler, he compared it to his work studying the causes of wrongful convictions in New York: “[w]hile some argued that the number of individuals determined to be wrongfully convicted is infinitesimal when compared to the number of people who’ve gone through the criminal justice system, the impact on those people is extraordinary and the causes and trends must be studied.”

Fair point perhaps – but I still find Arent Fox’s publication lacking in certain key respects.

For starters, and as highlighted in previous posts here and here, there is a clear “clustering” dynamic when it comes to both DOJ and SEC individual FCPA enforcement actions.

Specifically, approximately 50% of the individuals charged by the DOJ with FCPA criminal offenses since 2006 have been in just eight core actions and approximately 65% of the individuals charged by the DOJ since 2006 have been in just fourteen core actions. In short, a relatively small number of actions (mostly against individuals associated with small privately held business organizations (see here for the prior post – as relevant to Arent Fox’s publication do these organizations even have “C-Suites”) make up an unusually large percentage of individual enforcement actions. Because these are core actions, these small number of actions impact several of Arent Fox’s qualitative statistics regarding location of alleged improper payments and industries involved.

Regarding SEC individual enforcement, approximately 45% of individuals charged by the SEC with FCPA civil offenses since 2006 have been in just seven core actions. Again because these are core actions, qualitative statistics are impacted.

The Arent Fox publication appears to paint a picture that individual FCPA enforcement is historically robust, but when measured against the backdrop of corporate enforcement actions, the opposite is true and individual FCPA enforcement is at historic lows.

For instance, as highlighted in the above-linked prior posts:

  • since 2006, approximately 80% of DOJ corporate enforcement actions have lacked any related DOJ FCPA charges against company employees.
  • since 2006, approximately 80% of SEC corporate enforcement actions have lacked any related SEC FCPA charges against company employees.

Compare the above numbers to the following:

  • between 1977 to 2004, approximately 90% of DOJ corporate FCPA enforcement actions RESULTED in related FCPA charges against company employees.
  • between 1977 and 2004, approximately 60% of SEC corporate FCPA enforcement actions RESULTED in related FCPA charges against company employees.

Why the change? Read the article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement.”

Indeed, as highlighted in this previous post SEC individual FCPA enforcement between 2012 – 2017 was generally below historical averages and further relevant are the following statistics: 10 out of the last 11 (91%) corporate FCPA enforcement actions brought by the SEC have lacked any related FCPA charges against company employees and the SEC has not brought an individual FCPA enforcement action in nearly one year (see here).

A final point to consider is that the Arent Fox publication appears to link – what it claims is more robust individual FCPA enforcement – to the Yates Memo released by the DOJ in September 2015 (see here) in which the DOJ supposedly renewed its commitment to individual accountability. Granted, the Yates Memo is not yet three years old and thus its full impact may still be forthcoming.  Nevertheless, at present actions speak louder than DOJ words and the following statistic – not mentioned in the Arent Fox publication – is very relevant.

Since the Yates Memo, the DOJ has brought 27 corporate enforcement actions. However, 22 of these actions (82%) have lacked any related DOJ FCPA charges against company employees. Even so, when I discussed this point with Peeler, he referenced the section of the publication finding that the number of individuals charged by the DOJ with FCPA violations last year was the second highest number since the passage of FCPA.

True that, but to suggest that the Yates Memo had a role in this assumes causation and demonstrates the logical fallacy post hoc ergo propter hoc (in other words, since event Y followed event X, event Y must have been caused by event X). Moreover, it ignores several facts and other things about many 2017 individual enforcement actions. For instance, a high percentage of 2017 individual DOJ enforcement actions (5) were against individuals associated with Rolls Royce, a company under scrutiny since 2012 – long before the September 2015 Yates Memo. Another individual enforcement action (Baptiste) was in connection with an undercover sting operation.  Yet another large clump of individual enforcement actions (7) were against individuals associated with small privately held companies and I bet the farm (well, if I actually had a farm) that those companies have never heard of the Yates Memo.

In short, the Arent Fox publication is worth a read, but so too are the many posts linked above which paint a materially different picture regarding individual FCPA enforcement.

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