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“Total”ly Milking The FCPA Cash Cow?

There are many who believe that certain aspects of FCPA enforcement represent a cash cow for the government.

This previous post on the White Collar Crime Prof Blog stated as follows.  “FCPA is a cash cow. Big companies, most of whom are quite vulnerable, will do anything to avoid a civil or criminal trial. FCPA becomes a cost of doing business. The money flows into the government.”

In this article, a former Assistant Director in the SEC Division of Enforcement stated that one reason for the increase in FCPA enforcement is a “very simple reason–it’s lucrative.”

This post from the Chamber of Commerce titled “Justice’s FCPA Cash Cow” stated that “FCPA prosecutions have turned into a cash cow for the Justice Department” and the author noted as follows.  “I’m pretty sure using the justice system as an ATM wasn’t what the authors of the FCPA had in mind.”

This Business Insider article notes that “the profitability enforcement has garnered for the government” is one of the reasons for the increase in FCPA enforcement.  The article states “quite simply, [FCPA enforcement] is lucrative for the government” and it quotes David Krakoff, (BuckleySandler and a former federal prosecutor) as follows.  ” You have to think of the SEC and the DoJ as businesses.  They are looking for growth areas, too.”

As noted in this previous post, Adam Siegel (co-chair of the global white collar group at Freshfields Bruckhaus Deringer and a former federal prosecutor) stated as follows concerning increased enforcement.  “We’re in an economic climate today where I don’t think there’s a single government in the world that isn’t struggling to find resources.  This area has emerged … as a money making center, which is kind of bizarre.”

Matthew  Jacobs, a former DOJ prosecutor who now heads the San Francisco offices of  Vinson & Elkins LLP, stated as follows in a recent Law360 article (“FCPA  Enforcement Will Stay Robust Beyond Obama’s 2nd Term”): “The Department of  Justice has figured out that conducting investigations of corporations is a  lucrative business.  This is the one area of government activity that actually  brings money in rather than shoots money out. We’re talking about literally  billions of dollars that the government is able to collect … as long as there’s  a budget issue it’s not too cynical to say that … generating revenue is a factor  in bringing these cases.”

This Forbes contributor noted as follows. “FCPA enforcement has long been considered a cash cow for the Department of Justice.”

See also this prior post titled “Is the FCPA a Government Cash Cow” as well as my comments to the New York Times in this article.

And who can forget the comments of William Jacobson, a former DOJ Assistant Chief for FCPA enforcement.  Referencing a different member of the animal kingdom, he stated in a 2010 American Lawyer article that “[t]he government sees a profitable program, and it’s going to ride that horse until it can’t ride it anymore.”

Those who believe that certain aspects of FCPA enforcement represent a government grab for easy settlement money will find new support in the recent $398 million Total enforcement action (see here for the prior post).

The salient points as to the third largest settlement in FCPA history are as follows.

  • The enforcement action was against a French oil and gas company for making improper payments to an Iranian Official through use of an employee of a Swiss private bank and a British Virgin Islands company.
  • The vast majority of the alleged improper conduct took place between 1995 and 1997 (that is 16 to 18 years ago).
  • The sole U.S. jurisdictional nexus (a required legal element for an anti-bribery violation since Total is a foreign issuer) is a 1995 wire transfer of $500,000 (representing less than 1% of the alleged bribe payments at issue) from a New York based account.
  • The same exact conduct at issue is the focus of a French law enforcement investigation (i.e. Total’s “home” country).

So old is the conduct giving rise to the Total enforcement action, that the DOJ made the unusual statement in the DPA that “evidentiary challenges” were present for both parties given that “most of the underlying conduct occurred in the 1990s and early 2000s.”

A $398 million U.S. enforcement action against a French company for allegedly making improper payments to an Iranian Official with the sole U.S. jurisdictional nexus being an immaterial wire transfer through a U.S. account 18 years ago does not exactly dispel beliefs that certain aspects of FCPA enforcement represent a U.S. government cash cow.

Rather the Total enforcement action supports the legitimacy of this belief.

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