As dramatic as the increase in Foreign Corrupt Practices Act fines and penalties were in 2016, one of the more important themes for the year was the globalization of enforcement. By the end of 2016, international enforcement numbers had reached a staggering level with Odebrecht/Braskem, and then in the first month of 2017 with the Rolls-Royce resolution. I want to discuss what are some of the factors leading to this dramatic upswing in fines and penalties for anti-corruption and bribery enforcement. The Justice Department and Securities and Exchange Commission have worked quite diligently to increase professionalism around anti-corruption enforcement in jurisdictions outside the United States. At the ACI-2016 National FCPA conference last November, Kara Brockmeyer, chief of the FCPA unit, Division of Enforcement at the SEC, and Daniel Kahn, Chief of the FCPA unit fraud section, Criminal Division at the Justice Department, articulated an additional reason, which was the increase in international cooperation and enforcement.
Over the past few years, the DoJ and SEC have worked to create a network of international cooperation in the global war against bribery and corruption. In addition to forming liaisons, they have put on three conferences dedicated to training foreign prosecutors on investigations, best practices around anti-corruption compliance program, and cooperation between countries in the sharing of documents and other evidence. Both speakers remarked about the increased sophistication of foreign prosecutors in both investigations of bribery and corruption and in understanding compliance programs around anti-corruption laws.
While I had previously considered such training as a way for U.S. authorities to garner relationships to assist U.S.-based FCPA investigations, both speakers talked about more joint and coordinated international investigations. This points toward not only parallel investigations but also coordinated resolutions. While the OECD is a large part of how the United States makes such connections, it is these formal trainings that have allowed U.S. regulators to also make inroads into increasing prosecutions of such conduct.
In addition to this increased cooperation with U.S. authorities, many other countries’ anti-corruption regulators are now actively prosecuting bribery and corruption as well. Obviously, Operation Car Wash in Brazil is a prime example not simply to increased assistance with the United States, but also enforcement, which is clearly going global. Also, consider the Rolls-Royce enforcement action led the by the Serious Fraud Office in the United Kingdom. This single enforcement action probably cemented the SFO as the leading architect of the country’s anti-bribery efforts, in spite of now Prime Minister Theresa May having previously attempted to disband the SFO.
The trend that began in late 2016 and early 2017 of greater international cooperation in anti-corruption enforcement will only continue going forward. This will put much more pressure on companies around the issue of self-disclosure.
Regarding the VimpelCom enforcement action, the SEC said there was cooperation from the following regulatory and enforcement authorities outside the United States: “Public Prosecution Service of the Netherlands (Openbaar Ministrie), National Authority for Investigation and Prosecution of Economic and Environmental Crime in Norway (ØKOKRIM), Swedish Prosecution Authority, Office of the Attorney General in Switzerland, and Corruption Prevention and Combating Bureau in Latvia. Other valuable assistance was provided by the British Virgin Islands Financial Services Commission, Caymans Islands Monetary Authority, Bermuda Monetary Authority, and Central Bank of Ireland, Estonia Financial Supervisory Authority (Finantsinspektioon), Comisión Nacional del Mercado de Valores (Spain), Latvian Financial and Capital Market Commission, UAE Securities and Commodities Authority, Banking Commission of the Marshall Islands, and Gibraltar Financial Services Commission.” The final resolution required VimpelCom to pay $167.5 million to the SEC, $230.1 million to the Justice Department, and $397.5 million to Dutch regulators.
Regarding the Embraer enforcement action, according to the SEC, at least eight regulatory bodies and enforcement agencies were involved: the Brazilian Federal Prosecution Service, the Brazilian Federal Police, Brazil’s Comissão de Valores Mobiliários, the South African Financial Services Board, the Swiss Financial Market Supervisory Authority (FINMA), the Banco Central del Uruguay, the Spanish Comisión Nacional del Mercado de Valores, and the French Autorité des Marchés Financiers. Embraer ultimately paid a $107 million penalty to the Justice Department as part of a deferred prosecution agreement, and more than $98 million in disgorgement and interest to the SEC. Embraer received a $20 million credit on the amount of disgorgement based upon its payment to Brazilian authorities in a parallel civil proceeding in Brazil.
Finally, was the long list of enforcement and investigatory agencies involved in the Odebrecht/Braskem matter. In addition to the sharing of fines and penalties of between $2.6 to $4.5 billion between the United States, Switzerland, and Brazil, was the cooperation between the three countries. Both the DoJ and SEC acknowledged the assistance of the Ministerio Publico Federal (MPF) in Brazil the Departamento de Polícia Federal and the Office of the Attorney General in Switzerland in providing significant cooperation to the full investigation.
Another interesting approach in the global anti-corruption enforcement arena is the one pie concept. Increasingly, enforcement authorities are moving toward one total cost to anti-corruption violators that would be equitably split up by authorities where the corruption occurred or by the countries that hold jurisdiction. It appears that that companies that self-disclosed to multiple regulators and extensively remediated along the lines laid out in the FCPA Pilot Program, were more likely to garner credit with U.S. regulators for fines paid to overseas authorities. Odebrecht/Braskem are a prime example of this.
All of this means that the SEC and DoJ, together with the OECD, created an active and robust international anti-corruption enforcement regime, which is moving literally across the globe. To that end, here is the top ten international anti-corruption enforcement actions:
*The table above was developed through Tom Fox's independent research, by taking the known FCPA fines and then researching online sources to determine the fine from non-U.S. regulators. The exception was GSK which was all non-U.S. regulatory fines.
This table is dramatically different from the FCPA Top Ten enforcement table, which currently stands as follows. It shows the work of the Brazilian, Swiss, and U.K. prosecutors, particularly in enforcement actions in 2016 and into this year:
The trend that began in late 2016 and early 2017 of greater international cooperation in anti-corruption enforcement will only continue going forward. This will put much more pressure on companies around the issue of self-disclosure. As Brockmeyer made clear in her ACI 2016 National FCPA Conference remarks: for the SEC to give credit for fines and penalties in other countries, a party must self-disclose to the SEC (and presumably to the Justice Department) and cooperate fully throughout the investigation. This puts much more pressure on a company to take internal reports seriously and perform thorough investigations. One only need to consider GlaxoSmithKline plc (GSK) and its inept response to substantive whistleblower allegations of corruption in its Chinese business unit. GSK apparently put more time into trying to determine the identity of the whistleblower than in any detailed investigation of the claims brought forward.
Finally, for the compliance practitioner it is the sum of these messages. Global enforcement is here to stay, no matter who sits in the White House or how much it is believed corruption is simply a part of doing business in locales across the globe. If an allegation of corruption is made, either through an anonymous source or through monitoring or auditing, it must be aggressively investigated and remediated. If it turns out the conduct is not simply a one-off or is in any way systemic, you will need to seriously consider how many regulatory bodies to self-disclose to going forward. The only response should be to actually be doing compliance by not only putting a best practices compliance program in place, but also operationalizing it into the fabric of your company.