From antitrust to the Foreign Corrupt Practices Act (FCPA) to sanctions enforcement and beyond, 2020 promises to be another active year for the Department of Justice and, consequently, a busy one for compliance officers as well.
“Compliance expectations at large are being elevated by all the various agencies,” says Brian Whisler, a partner at law firm Baker McKenzie. It’s not just about managing corruption risk, but also antitrust, bid-rigging, and sanctions risk, not to mention cyber-related issues today’s chief compliance officers must now try to keep up with. “There is a wide menu of compliance risk,” Whisler says. That also means compliance departments are increasingly having to come up with creative ways to do more with fewer resources.
Antitrust enforcement is one area where there have been several notable developments in recent months that will spill into 2020. On Nov. 5, the Department of Justice announced the creation of the Procurement Collusion Strike Force, an interagency partnership comprised of federal and state investigators and prosecutors with a broad mandate of targeting collusion in government procurement and related misconduct, including violations of the False Claims Act (FCA), the FCPA, and other relevant statutes.
“Collaboration between antitrust and fraud prosecutors suggests increased risk that there will be the potential for intersection among antitrust, healthcare fraud, false claims cases, and corruption cases,” Whisler says. “It’s pretty clear that they’re really beefing up their resources in an effort to collaborate and develop more cases.”
A second big development in the antitrust enforcement space was the launch of an investigation into two technology giants, Google and Apple. This investigation is separate from the investigations launched by the Federal Trade Commission and numerous state attorneys general into Big Tech over antitrust concerns.
Coordination between the Department of Justice and other countries’ enforcement agencies is also expected to evolve, especially with the international antitrust community’s adoption last year of the Multilateral Framework on Procedures that specifically was designed to promote cross-border coordination. “These are just a few examples of why this will be a hot area to watch,” says Scott Hulsey, a lawyer with Kobre & Kim, who is a former federal prosecutor and former chief compliance officer at General Electric Energy Connections.
The good news for compliance officers is the Antitrust Division, under a new policy announced in July, now incentivizes corporate compliance at the charging stage in criminal antitrust investigations. “The Antitrust Division is committed to rewarding corporate efforts to invest in and instill a culture of compliance,” said Assistant Attorney General Makan Delrahim.
“Prosecutors will assess carefully the implementation and adequacy of corporate compliance programs” as they make their “charging, sentencing, and settlement decisions. In 2020, companies must move beyond simply citing world-class programs practices and focus on whether their compliance programs work in real life.”
Lillian Hardy, Partner, Hogan Lovells
As recommended in a client alert published by Baker McKenzie, companies should consider the following best-practice compliance measures: review government procurement policies and activities to assess antitrust risks; train employees and third parties on antitrust red flags and track who has received these trainings; create internal communication channels for employees and third parties to report suspicious anticompetitive behavior, procurement fraud, and bribery; and ensure that M&A due diligence checklists and questionnaires cover a target company’s potential involvement in anticompetitive conduct, particularly if the target participates in government procurement.
Relatedly, in the healthcare and pharmaceutical industries, “FCA enforcement continues to be a priority of the Department of Justice, particularly for actions that could impact patient safety or increase costs to federal healthcare programs,” says Jaime Jones, global co-leader of the healthcare practice at Sidley Austin. “Continuously refining compliance programs and proactively engaging with the U.S. Department of Health and Human Services on issues is critical for entities seeking to avoid civil and criminal enforcement actions in the year ahead.”
Chief compliance officers should further look to recent enforcement actions as examples of misconduct that increases the risk of FCA and antitrust liability in these sectors. In one recent action, for example, Heritage Pharmaceuticals reached a $7 million civil healthcare fraud settlement to resolve allegations that it violated the FCA by paying and receiving remuneration from other drug makers between 2012 and 2015 and engaged in a scheme to artificially inflate and fix prices on certain generic drugs. In this case, criminal antitrust penalties amounted to $225,000, while the remaining amount resulted from FCA charges under the Anti-Kickback Statute.
In the medical device industry, there have been several reports U.S. enforcement authorities—including the Department of Justice, Federal Bureau of Investigation, and the SEC—are assisting Brazilian federal prosecutors in an investigation involving allegations that more than 20 companies engaged in a kickback scheme related to medical equipment sales in Brazil over the past two decades. Johnson & Johnson, Siemens, General Electric, and Philips were said to be among those involved.
“Compliance officers must be aware of this increased cooperation between regulators, as it is a trend that will continue in 2020,” says Rafael Ribeiro, a partner at Hogan Lovells.
In the Foreign Corrupt Practices Act space, the emphasis continues to be on individual prosecutions, attributable in part to the PDVSA prosecutions. Venezuela’s state-owned and state-controlled energy company PDVSA is at the center of numerous schemes designed to embezzle billions of dollars from PDVSA for the personal gain of corrupt Venezuelan officials and businessmen.
“Given the Department of Justice’s continued commitment to individual accountability, we can expect more individual prosecutions, which means more challenges to the elements of the statute,” says Virginia Chavez Romano, a partner at White & Case. For example, in a rare case that tested the geographical reach of the FCPA, a three-judge panel for the Court of Appeals for the Second Circuit unanimously held, in the case U.S. v. Hoskins, that a foreign national who does not otherwise fall under the specific categories of defendants described in the statute cannot be held liable under the theory the foreign national acted as an accomplice or co-conspirator with a U.S. company or individual.
FCPA cases concerning companies are a different story. “The Department of Justice has been more aggressive about extraterritoriality and enjoys greater unchecked authority in this regard,” Romano says. “Unlike cases against individuals, cases against corporations are seldom challenged in court.”
Also important to note in the FCPA space are the latest revisions—albeit, minor—to the Corporate Enforcement Policy. “Self-disclosure and cooperation still come with risk but, thanks to DOJ’s public pronouncements, one that can be measured with a little more precision,” says David Weinstein, a partner at law firm Hinshaw & Culbertson.
The most important message here for compliance officers is this: “Prosecutors will assess carefully the implementation and adequacy of corporate compliance programs” as they make their “charging, sentencing, and settlement decisions,” says Lillian Hardy, a partner with Hogan Lovells. “In 2020, companies must move beyond simply citing world-class programs practices and focus on whether their compliance programs work in real life.”
Special report: Compliance 2020
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DOJ enforcement priorities for 2020 include antitrust