2009 again saw record levels of Foreign Corrupt Practices Act enforcement actions brought by the Department of Justice and Securities and Exchange Commission according to a
recap of FCPA enforcement activity by Gibson, Dunn & Crutcher.
By the GDC's count, last year saw a combined 40 enforcement actions, with 26 brought by the DoJ, and 14 brought by the SEC, compared with 2008's 33 actions, of which 20 came out of the DoJ and 13 came from the SEC.
That trend is expected to continue, due to a large number of active cases in the pipeline, according to the
2009 Year-End FCPA Update.
"We believe that the SEC also has a robust stock of FCPA matters under investigation, many of which it is running in tandem with the DoJ," the alert's author, GDC partner Joseph Warin, writes.
DoJ officials have said the agency has least 130 open FCPA investigations.
The alert details six developments in 2009 FCPA enforcement that Warin says best highlight the myriad risks facing companies and their employees doing business internationally:
Aggressive New SEC Enforcement Theories: For example, last July,
Nature's Sunshine Products and two of its former officers, CEO Douglas Faggioli and CFO Craig Huff,
settled civil FCPA charges with the SEC arising from the alleged payment of bribes to customs officials in Brazil. The cases against Faggioli and Huff marked the SEC's first use of a "control person" theory of liability to hold U.S.-based executives responsible for alleged corrupt payments made at the foreign subsidiary-level when the U.S. officers didn't authorize or have knowledge of the payments. The alert also points to a December SEC enforcement action against former Pride International executive Bobby Benton, who is charged with violating the FCPA's anti-bribery, books-and-records and internal controls provisions, with aiding and abetting Pride's violations of the same, and with making false or misleading statements to the company's accountants in connection with their review of a report to be filed with the Commission. "Charging Benton for what appears to be editing a document by deleting references to suspected improper payments and failing to inform the company's managers and lawyers of those suspected payments is a new theory of FCPA liability, and it will be interesting to watch how this theory develops," the alert notes.
DoJ Prosecution of Third Parties and Foreign Government Officials: 2009 saw the DoJ's first attempt, using a novel legal theory, to prosecute the foreign government official recipients of bribes. In all, Warin says five intermediaries, or third parties or agents, were charged with FCPA violations in 2009.
One notable case concerns an investigation of several Florida-based telecommunications companies and their allegedly corrupt arrangements with officials of Haiti Teleco, Haiti's state-owned telecommunications company.
Among those charged in the case are the foreign government officials who allegedly received the improper payments. Although the FCPA doesn't criminalize the receipt of bribes by foreign officials, the GDC notes that a grand jury charged Robert Antoine and Jean Rene Duperval, successive holders of the office of Haiti Teleco's Director of International Relations, with participating in a money laundering conspiracy and, in Duperval's case, substantive money laundering charges, arising from the movement of the bribe payments through U.S. financial institutions.
"We believe this to be the DoJ's first attempt to prosecute foreign government officials as part of an FCPA conspiracy, which evidences the U.S. government's increasingly aggressive stance in foreign corruption prosecutions and promises an intriguing legal challenge," Warin wrote.
The DoJ Follows the Money: The alert also points to "a newly invigorated effort" by the DoJ to recover the proceeds of foreign bribery, noting that the charges in 10 of the DoJ's 26 FCPA prosecutions in 2009 included a forfeiture count.
The DoJ and the SEC Permit Corporate Self-Monitoring: While it's been common in recent years for the DoJ and the SEC to require settling defendants to retain an external corporate compliance consultant to monitor and report on the implementation of new compliance policies, in 2009 non-prosecution agreements with
Helmerich & Payne and
UTStarcom, the DoJ agreed to allow the companies to self-monitor and report on the implementation of their improved compliance policies without mandating the oversight of an external compliance monitor.
"The Year of the FCPA Trial": After nearly five years without a single FCPA trial, four individuals—Dooney & Bourke founder Frederic Bourke, former Congressman William Jefferson, and husband and wife film producers Gerald and Patricia Green—took their chances before a jury, leading Assistant Attorney General Lanny Breuer to declare this "the year of the FCPA trial." All four were convicted.
The recent uptick in FCPA litigation "has resulted in a number of judicial rulings...that are beginning to fill the relative void of judicial precedent defining the statute's contours," according to the GDC.
Organizational Changes at the DoJ and the SEC: The alert notes that the yet-to-be named successor to Mark Mendelsohn, Deputy Chief in the Criminal Division's Fraud Section and the DoJ's top FCPA enforcer, who will leave to enter private practice in 2010, "will find substantially greater resources at their disposal" than when he arrived, as the DoJ in recent years has added new prosecutors to work exclusively on FCPA investigations, aggressively cross-designated prosecutors from other working groups in the Fraud Section, created and expanded a squad of dedicated agents from the Federal Bureau of Investigation, and established partnerships with more than a dozen U.S. Attorney's Offices, the National Criminal Enforcement Section of the DoJ's Antitrust Division, and agencies like the Internal Revenue Service's Criminal Investigations Division.
Meanwhile, the SEC's Director of Enforcement, Robert Khuzami,
last August outlined a
plan to create a national specialized unit dedicated to FCPA enforcement, streamline investigative processes, and develop new tools designed to foster cooperation, such as a "Seaboard Memo" for individuals and use of DoJ-style deferred prosecution agreements. As a result, the GDC says companies should "look for increased enforcement statistics from the SEC in 2010 and beyond."