Cases that make one wonder about the intent of enforcement

Those questions have come to light since the resolution of the Petrobras Foreign Corrupt Practices Act (FCPA) enforcement action, which resulted in the Brazilian national energy company receiving a non-prosecution agreement. Now, there are current investigations involving the Danish national bank, Danske Bank, over its role in engaging in more than $2 billion in suspicious transactions; the U.S. entity Goldman Sachs, which was the lead underwriter of over $3 billion in bond offerings for the Malaysian sovereign wealth fund 1MDB; and the conclusion of a multiyear investigation into FCPA violations at Walmart, all of which may raise similar questions.

Danske Bank ran all of its suspicious transactions through its Estonian branch and almost all of the suspicious transactions originated from Russia. There were numerous red flags, not simply missed, but allegedly actively ignored by senior management, including both warnings from the Russian central bank and internal company whistleblowers. At Goldman Sachs, the firm partner in charge of the 1MDB account has already pled guilty and has said in open court that Goldman Sachs had a culture that encouraged his illegal behavior and that such culture (and behavior) was pervasive throughout the Asia region at Goldman Sachs.

“It makes good economic sense and helps stamp out corruption when the Department adopts policies that foster greater corporate compliance.”

Matthew S. Miner, Deputy Assistant Attorney General

As for Danske Bank, while the numbers surrounding the suspicious transactions are eye-popping, what is the interest of the U.S. government in prosecuting the bank? Money laundering is recognized as a tool of both terrorists and criminal organizations. Should the U.S. government allow a financial institution that clearly put profits before the law to continue to exist? Should the U.S. government be in the business of putting a national entity such as Danske Bank out of business and potentially throwing the Danish banking system into chaos by making the Danish government (or worse, its citizens) pay for the crimes of its senior management?

With Petrobras, the amount of money paid as bribes and stolen through corruption was so large that the precise amount of the corruption is “unknown,” as only $2 billion can be accounted for by regulators. Yet, the company received a non-prosecution agreement from U.S. prosecutors. No doubt part of the reason is the robust prosecution by Brazilian authorities, yet the corrupt conduct at Petrobras went literally up to the board of directors. Would it have been in the interest of the United States to have a stronger enforcement around Petrobras, including putting a U.S. monitor in place to ensure the company makes good on its agreement to put ethical business practices and a best-practices compliance program in the organization? Consider that Petrobras paid out $2.95 billion in a civil shareholder action against the U.S. subsidiary around the company’s corruption. Is that enough of a penalty for a bribery and corruption regime whose total amounts are “unknown.”

Finally, consider Walmart. The amounts of reported bribes paid in Mexico have been as low as under $1 million, yet the company’s Mexican subsidiary generated up to 20 percent of the total company’s profits for several years. Further, Walmart has reported current investigative and remediation costs of more than $900 million, all still without a formal resolution. While not publicly admitting to paying bribes or engaging in corruption, Walmart has become a leader in creating a best-practices compliance program. Should the company’s time, money, and efforts to create a world-class compliance program be considered in the punishment phase of any enforcement action?

In a speech at the American Conference Institute’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets in July, Deputy Assistant Attorney General Matthew S. Miner said “it makes good economic sense and helps stamp out corruption when the Department adopts policies that foster greater corporate compliance.” If the goal of enforcement is primarily to encourage companies to do business ethically and foster compliance, Walmart may well lead the way.