Record year of FCPA enforcement a sign of more to come in 2021

“It’s a record year as far as our resolutions,” said Christopher Cestaro, chief of the FCPA Unit in the Department of Justice’s Fraud Section, speaking at an Oct. 29 anti-bribery virtual forum sponsored by TRACE International. Cestaro specifically cited settlements with Goldman Sachs and Airbus as “notable because of the magnitude of the bribery schemes and the record penalties.”

Marking the largest fine in FCPA history, Goldman Sachs and its Malaysian subsidiary on Oct. 23 reached a $2.9 billion global settlement related to three bond offerings the firm had structured and arranged for Malaysia’s state development fund 1MDB. The amount included a record $1.26 billion criminal penalty to the DOJ and a $400 million civil penalty to the Securities and Exchange Commission, as well as $606 million in disgorgement.

Equally significant is the Airbus settlement, which marked the largest global resolution in a bribery case. In January, the European plane manufacturer agreed to pay €3.6 billion (U.S. $4 billion) in penalties for organizing large-scale bribes to foreign officials in 20 countries in exchange for contracts. The settlement included $583 million for FCPA offenses.

All told, authorities across the globe have imposed approximately $7.76 billion in anti-corruption penalties this year, acting Assistant Attorney General Brian Rabbitt of the Department of Justice’s Criminal Division said at an FCPA conference earlier this month (h/t Wall Street Journal). About $3.21 billion has been paid to the United States, according to Rabbitt.

Other significant U.S. resolutions reached in 2020 include a $347 million settlement against Novartis; a $256 million criminal penalty against Brazilian holding company J&F Investimentos; a $16.6 million criminal penalty against Sargeant Marine; and a $123 million settlement against Herbalife Nutrition.

In addition, the SEC on its own reached several administrative proceedings resulting from FCPA offenses, according to the agency’s 2020 annual enforcement report. These included resolutions with World Acceptance Corporation, Alexion Pharmaceuticals, Cardinal Health, and Eni.

“There are huge cases because there continue to be huge problems with bribes being paid,” said Charles Cain, chief of the SEC’s FCPA Unit, at the TRACE forum.

Taking it global

The last year also brought unprecedented coordination and cooperation among both domestic and foreign authorities. “It’s a trend we have seen in recent years, and it’s a trend that you’re going to continue to see as time goes on,” Cestaro said. “You’re going to see more robust enforcement in more and more countries over time.”

In the Goldman Sachs case, for example, no fewer than nine agencies were involved, including foreign authorities from the United Kingdom, Switzerland, Singapore, Luxembourg, and Malaysia. In the Airbus case, authorities from the United States, United Kingdom, and France coordinated with one another.

Global coordination among enforcement bodies is not a trend chief compliance officers and legal counsel should take lightly. It used to be collaboration meant foreign enforcement agencies helping with evidence-gathering, but that’s now morphed into, “‘Let’s work together,’” Cain said. “I think that trend is just going to continue in the future.”

No industry sweeps

No industry is ever immune from the watchful eye of the DOJ or the SEC. “We don’t pick a sector or an industry and say, ‘We’re hoping to focus here. We’re going to do a sweep in this industry,’” Cestaro said. “We get the leads we get, and we follow the evidence.”

What can have an impact on enforcement, however, is “when foreign authorities have a domestic corruption case that they crack wide open,” Cestaro added. The Lava Jato (Operation Car Wash) corruption probe that began in Brazil is a great example of that, he said.

The saga began upon the discovery that some of Brazil’s largest construction and engineering companies received inflated contracts from state-owned oil company Petrobras—excess markups that were then used to funnel kickbacks to Petrobras executives and high-ranking politicians. It has since spawned numerous investigations and enforcement actions around the world.

Heading into 2021, chief compliance officers and legal counsel will want to keep an eye on other emerging developments as more countries around the world advance in their anti-corruption enforcement efforts. As was the case in Brazil, any country’s domestic corruption case could signal a much broader corruption problem, indicating enhanced due diligence may be necessary in that country.

COVID-19 and compliance expectations

Despite the coronavirus pandemic continuing to pose challenges and limitations in the ability to conduct investigations—for example, performing in-person interviews and audits—both Cestaro (DOJ) and Cain (SEC) reminded companies their agencies will remain committed to FCPA enforcement. “The big takeaway is we’re open for business,” Cain said. “We continue to persevere and move forward.”

They expect the same level of commitment from corporate compliance programs. “There is no free pass,” Cestaro said. “Everyone should be doing their best to keep on keeping on in the compliance function and making sure they’re able to do all the monitoring and testing that they’re able to do at this time.”

Looking ahead to 2021, chief compliance officers should rest assured both the DOJ and the SEC will continue to emphasize the value of robust and effective corporate compliance programs—a key theme both agencies felt needed to be highlighted in the latest version of the “Evaluation of Corporate Compliance Programs” guidance. In particular, revised language in the guidance directs prosecutors to explicitly ask companies whether their compliance program is “adequately resourced and empowered to function” effectively.

“It seems like something that doesn’t need to be said,” Cain said. “I don’t know how you can have an effective compliance program if it is not adequately resourced and empowered to do its job.”