For years, the bellwether in the anti-corruption bar has been the annual FCPA enforcement statistics for the Department of Justice and the Securities and Exchange Commission. Every December, lawyers and commentators partake in the traditional dissecting of the numbers—not just the quantity of cases brought, but the fines levied and the kinds of penalties imposed. And so it came to be that 2015 was declared the year of the dearth. The Justice Department had only settled cases with two companies (two!), collecting a mere $24.2 million in penalties, which, as the New York Times was quick to point out, marked a sharp decline from 2014, when the agency brought 10 corporate enforcement actions and collected a more respectable $1.25 billion. That fact was repeated by many in the FCPA bar and was said to be “the most significant FCPA story” of 2015. How quickly that narrative changed, though, when just a few weeks later, on February 18th, U.S. and Dutch authorities settled with VimpelCom for $795 million, marking one of the biggest corporate settlements in FCPA history. Suddenly, commentators were quick to reverse course, stating that any downturn in FCPA enforcement if that’s what it could be called—had only been temporary.
The quick reversal caused by the VimpelCom case exposes a potential weakness in how we in the compliance world go about analyzing the anti-bribery enforcement landscape. Too often, the anti-bribery bar’s focus on U.S. enforcement numbers clouds our ability to see the forest through the trees. Put aside that 2015, when compared to the last 10 years, was very much middle-of-the-road in terms of the number of FCPA enforcement actions brought, the DoJ and SEC have cautioned for years against an over-reliance on yearly enforcement statistics. Just last month, Andrew Weissmann, chief of the Criminal Division’s Fraud Section at the Justice Dept., defended the number of FCPA cases brought in 2015 and explained that statistics surrounding enforcement numbers are often misleading and rely on an artificial 12-month calendar that doesn’t reflect how prosecutors actually bring cases. Mark Twain once put it more bluntly, “there are three kinds of lies: lies, damned lies, and statistics.”
Or, perhaps, anti-bribery experts are simply focusing on the wrong set of data. The truth is that U.S. enforcement statistics are only one component of the global regulatory puzzle. Yes, the United States is still leading the pack in cases involving bribery of foreign officials, but multinationals today are increasingly likely to face domestic anti-bribery suits in the country where they actually paid the bribe. That was the lesson learned by British company GlaxoSmithKline in 2014 when it was forced to pay nearly $500 million in penalties to authorities in China for bribes to state-employed doctors. Just last month, Brazilian prosecutors agreed to an out-of-court settlement with Dutch company SBM Offshore related to the company’s involvement in bribing directors at Petrobras, the state-run oil company. So far, 75 people have been convicted in connection to paying bribes for contracts with Petrobras, and multiple foreign companies, like Rolls-Royce and Samsung Heavy Industries, are also reportedly under investigation. TRACE International’s recent 2015 Global Enforcement Report shows at least 153 domestic bribery cases against multinational companies for bribing local government officials.
So why aren’t more people talking about these domestic corruption cases? Part of the difficulty is that domestic corruption numbers are hard to track and probably underrepresented in the compliance literature. Not all local enforcement agencies even publish statistics regarding the number of cases they bring. But from what information is available, many non-U.S. enforcement agencies appear to be increasingly active enforcers of their countries’ anti-bribery laws. Excellent reporting by the China Economic Review reveals that communist party officials disciplined under the banner of President Xi Jinping’s recent austerity and anti-graft initiative have doubled in the last four years. Similarly, statistics put out by Pakistan’s National Accountability Bureau showed a total of 584 completed bribery investigations in 2014, more than doubling the preceding years’ numbers.
Also lost in the conversation about U.S. enforcement statistics is the fact that U.S. enforcement agencies are working more closely with their foreign counterparts. In 2013, Canadian authorities fined Griffiths Energy International over CAD $10 million, after the company uncovered and disclosed a bribery scheme to obtain contracts in Chad. Although U.S. authorities had jurisdiction in the case, they declined to bring any foreign bribery action against Griffiths, presumably because Canadian authorities had already done so. After Canadian courts were unable to obtain the USD $34 million in proceeds held by the Chadian government official and his wife however, the DoJ did ultimately bring suit against Griffiths and, working with the Serious Fraud Office in the United Kingdom, were able to obtain a civil forfeiture in 2015. Which country should get the credit in this scenario? Canada, because it brought the original foreign corruption action against Griffiths? The U.S. because it provided support to Canadian authorities and brought the civil forfeiture case against the company? Or the United Kingdom, because it was able to ultimately freeze the stolen assets held in the Royal Bank of Scotland account? The reality is that all three countries—working together—were involved in the outcome; relying only on FCPA enforcement statistics would have belied this reality.
To be sure, enforcement data is an important tool for companies to understand their anti-bribery regulatory risks. But relying solely on U.S. enforcement statistics reveals only part of the increasingly complex and multi-layered regulatory landscape that multinationals are facing today. As compliance professionals, we can do a better job of parsing through the data to understand these risks.
Severin Wirz is the Director of Member and Advisory Services at TRACE International, a non-profit business association dedicated to anti-bribery compliance.