Vigorous enforcement of the Foreign Corrupt Practices Act and other anti-corruption laws around the world will remain a significant area of focus for U.S. prosecutors and foreign prosecutors alike in 2015.
At a global level, legal experts say, civil and criminal penalties for anti-corruption violations are on the rise; the Justice Department has plenty of prosecutors and resources; and this all comes at a time while several significant FCPA cases remain to be resolved. “We’re not really seeing a let-up in enforcement,” says Matteson Ellis, special counsel with law firm Miller Chevalier.
Companies should not be fooled by smaller number of enforcement actions taken in 2014 by the Department of Justice and the SEC, as compared to other years. Fewer sanctions don’t translate into a slowdown in enforcement efforts, warns William Michael, a partner with law firm Mayer Brown.
“While the numbers of enforcement actions may be down in any one particular year, there are a number of factors that influence the timing of bringing any enforcement action—and it’s certainly not reflective of the large influx of investigations that have been opened up by other countries,” Michael says.
Global Cooperation
Cooperation among prosecutors in foreign countries also continues to strengthen. “Non-U.S. authorities are exercising mutual legal assistance mechanisms to get information from U.S. authorities,” Ellis says. “That is a phenomenal development.”
In some cases, countries that historically haven’t cooperated with U.S. authorities now do. One example of that is Brazilian aircraft giant Embraer SA, currently under investigation by both Brazilian and U.S. authorities over alleged improper payments made in the Dominican Republic. “I would expect to see that continued trend of significant international cooperation,” says Charles Duross, a partner with law firm Morrison Foerster and former head of the FCPA Unit at the Justice Department.
As 2015 unfolds, “you’re going to start to see other countries not only cooperate with the Department of Justice and the SEC in bringing enforcement actions, but also begin to bring enforcement actions on their own,” Michael says. Take the record $489 million penalty that a Chinese court imposed against pharmaceutical giant GlaxoSmithKline for bribing non-government personnel to obtain improper commercial gain as one example. Another: Dutch authorities’ action against SAB Offshore in November that netted total fines of $240 million.
On a practical level, more global investigations will create new compliance obstacles for companies, because they don’t have the benefit of a history of regulatory action or case law in those countries, compared to the extensive historical record that now exists in the United States, Michael adds. “So they can’t really go back and look at several different cases over the last decade to see what is normally done, and what the normal process is,” he says.
“While the numbers of enforcement actions may be down, that’s inconsistent with the number of investigations that are being conducted—and it’s certainly not reflective of the large influx of investigations that have been opened up by other countries.”
William Michael, Partner, Mayer Brown
Aggressive Tactics
On top of the expanding global scope of cases, prosecutors’ investigative tactics also are becoming increasingly aggressive. “Techniques used to investigate organized crime are now being brought to bear with FCPA cases,” Ellis says. These investigative tactics now include wiretaps, body wires, border searches, physical surveillance, border searches, and more.
“Such proactive investigative tools—previously used primarily in organized crime and drug cases—have become a staple in our white-collar investigations,” one of the top prosecutors in the Criminal Division, Marshall Miller, said in a September speech. “I can promise you, we will continue to use them.”
More FCPA cases could also mean more anti-money laundering and anti-trust enforcement, multiplying a company’s legal risks in the event of non-compliance. “As global regulators become more sophisticated and diligent in their investigations, you’re going to see them branch out into other areas as well,” Michael says. What might have been brought as an anti-corruption case a few years ago, for example, may now also have elements of other offenses, including anti-money laundering or antitrust, he says.
Individual Prosecutions
Individual prosecutions will be another trend to keep a close eye on in 2015. “The Department of Justice has been pretty open about their intentions to pursue more individual prosecutions,” says Brian Whisler, a partner with law firm Baker & McKenzie.
“Look for a number of potential trials that will result in case law one way or another,” Duross says. “2015 could be the next big year for trials in the FCPA.”
Anti-Corruption Trends to Watch in 2015
Anti-corruption experts share some main themes to watch out for in the anti-bribery and anti-corruption space in 2015.
“You’re going to start to see other countries not only cooperate with the Department of Justice and the SEC in bringing enforcement actions, but also begin to bring enforcement actions on their own,” William Michael, a partner with law firm Mayer Brown, says.
“I would expect to see that continued trend of significant international cooperation,” Charles Duross, a partner with law firm Morrison Foerster.
“We’re thinking this is going to be the year of the whistleblower, because the pipeline is finally full,” Russ Berland, a partner with law firm Stinson Leonard Street.
“Look for a number of potential trials that will result in case law one way or another,” Duross says. “2015 could be the next big year for trials in the FCPA.”
Source: Compliance Week.
One significant FCPA case still pending, for example, is the PetroTiger case. At least one former co-chief executive officer of that oil and gas company, Knut Hammarskjold, pleaded guilty last February for his alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA. PetroTiger’s former general counsel, Gregory Weisman, also pleaded guilty to bribery and fraud charges in connection with the same scheme. FCPA charges are still pending, however, against PetroTiger’s other former co-CEO, Joseph Sigelman.
Prosecutors will have a keen eye on corporate gatekeepers in particular. “They’re going to be looking for opportunities to prosecute attorneys, accountants, and compliance professionals to show that people who are doing those jobs should be fully aware of the risks, and should never find themselves complicit,” says Russ Berland, a partner with law firm Stinson Leonard Street.
In another signal that the Justice Department is serious about prosecuting more individuals, Miller has also publicly warned companies to be prepared to rat out culpable employees or prepare to face the consequences. “If you want full cooperation credit, make your extensive efforts to secure evidence of individual culpability the first thing you talk about when you walk in the door to make your presentation. Make those efforts the last thing you talk about before you walk out,” Miller said in his September speech.
Whistleblower Cases
Legal experts also expect the number of cases stemming from whistleblower tips to the Securities and Exchange Commission to keep escalating in 2015. According to the SEC’s annual report on the Dodd-Frank Whistleblower Program, the Whistleblower Office received 3,620 whistleblower tips, complaints, and referrals during fiscal year 2014, coming from 60 different foreign countries. “Many of those complaints are focused on anti-corruption matters,” Michael says.
“We’re thinking this is going to be the year of the whistleblower, because the pipeline is finally full,” Berland says. “We will see payouts this year that have been in the works for a least a couple of years.”
If the amount of money paid to whistleblowers from False Claims Act cases is any indication, companies can anticipate payments awarded under the SEC whistleblower program to be similarly large. According to the Justice Department, the government awarded whistleblowers more than $2.47 billion from 2009 to the end of fiscal year 2014 from FCA cases.
As 2015 begins, no company should feel immune from the legal injection of anti-corruption enforcement, particularly as global cooperation advances, and whistleblower protections expand. So long as companies remain vigilant about promoting a drumbeat of anti-corruption compliance, and documenting the efforts they’ve made, they’ll be in a much better position when regulators do come knocking.
No comments yet