Let’s be perfectly clear about something right up front: Foreign Corrupt Practices Act enforcement activity is alive and well, and that’s not expected to abate under this administration.
FCPA enforcement numbers themselves fluctuate year-over-year. Enforcement personnel and priorities change administration to administration. But for any ethics and compliance officer to wrongly conclude that anti-corruption compliance and ethical decision making shouldn’t continue to be a priority would be a fool’s errand.
“It would be a mistake to conclude from all of this that somehow there is going to be a sea change in the enforcement environment,” says David Simon, a partner at law firm Foley & Lardner. “I don’t think that’s true.” If any changes occur, they more likely will take the form of amendments to the FCPA, such as the inclusion of an affirmative defense based on the existence of an effective compliance program, he says.
Speculation about the FCPA began to circulate in response to criticisms President Donald Trump made about the anti-corruption law in 2012, when he was still a corporate executive. At the time, during an interview with CNBC, President Trump referred to the FCPA as a “horrible law, and it should be changed.” He said the FCPA puts U.S. companies doing business abroad at a “huge” disadvantage, hampering their ability to compete on the international stage by losing business deals to corrupt foreign competitors.
Many legal and compliance professionals appear to disagree with that assertion. According to a survey, “International Business Attitudes to Corruption,” conducted by global risk consultancy firm Control Risks, “tough extra-territorial, anti-corruption laws are seen to be a force for good.”
Among 800 legal and compliance professionals surveyed, the majority of respondents (81 percent) agreed with the general proposition that international anti-corruption laws “improve the business environment for everyone” and deter corrupt competitors (64 percent). Another 55 percent agreed that tough anti-corruption laws make it easier to operate in high-risk markets.
These views similarly were held by the majority of respondents based in countries that pose a relatively high risk of corruption. Of the respondents based in Nigeria, 97 percent believe anti-corruption laws improve the business environment, as did 87 percent of Mexicans, 80 percent of Brazilians, 80 percent of Indians, and 79 percent of Indonesians. “The implication is that, at least to some degree, international legislation makes up for deficiencies of local law enforcement,” the survey stated.
Under President Trump’s “pro-business” administration, FCPA enforcement can actually benefit companies that operate ethically and with integrity by holding companies and individuals that engage in corrupt acts accountable. In that way, FCPA enforcement can level the global playing field.
“I don’t see any slowing down in FCPA enforcement and, in fact, I think it might pick up in some areas.”
John Carney, Partner, BakerHostetler
“I don’t see any slowing down in FCPA enforcement and, in fact, I think it might pick up in some areas,” says John Carney, a partner and co-leader of the national white-collar defense and corporate investigations team at law firm BakerHostetler. If the goal of the new administration is to level the playing field, that’s all the more reason for prosecutors to use the FCPA to pursue foreign companies engaging in corrupt acts that trade on U.S. exchanges, he says.
In fact, many of the largest FCPA penalties of all time historically have been levied against foreign companies. These include Siemens, Alstom, Teva, and most recently Odebrecht, for example.
“My own experience in conducting these types of investigations and advising companies on anti-corruption compliance is that culture plays a pretty significant role,” says Scott Moritz, a managing director and global leader of the investigations and fraud risk management practice at Protiviti. It stands to reason that FCPA enforcement will continue to skew toward high-risk countries where endemic corruption permeates a country and a culture, Moritz says.
Despite President Trump’s past criticism of the FCPA, Attorney General Jeff Sessions in his confirmation hearing and written responses explicitly stated his commitment to enforcing the law and to prosecuting corruption more generally. During his nomination hearing before the Senate Judiciary Committee in January, Attorney General Sessions stated that he “will enforce all federal laws, including the Foreign Corrupt Practices Act and the International Bribery Act.”
Individual accountability. The U.S. government’s recent trend toward focusing on individual accountability also will continue. In his first public remarks, at the Global Investigations Review Conference on Feb. 16, Deputy Assistant Attorney General Trevor McFadden said that the Criminal Division “will continue to prioritize prosecutions of individuals who have willfully and corruptly violated the FCPA.”
In 2016 alone, 17 individuals were charged or pleaded guilty to FCPA violations, and 13 corporate resolutions were reached, resulting in $1.36 billion in corporate U.S. criminal fines, penalties, and forfeiture. “If you combine that total to amounts payable to foreign authorities, the number is close to $7.3 billion,” McFadden said.
“Of course, we also recognize that individuals may be unwittingly involved in facilitating an illegal payment under circumstances that do not merit criminal prosecution of the individual,” McFadden said. “The need to understand and clearly analyze the facts of each case is of paramount importance to our work. This is one of the reasons why companies and individuals are encouraged to cooperate with the Department, even if they may have been involved in misconduct.”
TREVOR MCFADDEN REMARKS
Below is a partial text of remarks made by Deputy Assistant Attorney General Trevor McFadden at the Global Investigations Review Conference on Feb. 16.
In the last decade prosecutors in the FCPA Unit have convicted or entered plea agreement with over 100 individuals who committed FCPA violations or relatec criminal offenses, and entered 101 corporate resolutions with well over $5 billion in corporate U.S. criminal fines, penalties and forfeiture.
This boost in FCPA enforcement has been driven by a number of factors. Among them, the FCPA Unit, which was formally created within the Fraud Section in 2005, has grown. In the past year and a half, 10 prosecutors were added to create the current team of 31 attorneys, including attorneys with significant litigation experience from other DOJ components and elite private firms. The FBI has also established three new squads of special agents devoted to FCPA investigations and prosecutions.
Additionally, there has been a notable increase in international cooperation between our international partners and the Fraud Section, the Office of International Affairs, and Department of Justice and FBI attachés around the world over the last two decades. Cooperation on such an international scale is of utmost importance because as cooperation increases, there is an inevitable reduction in the ability to hide or conceal assets and evidence, or to otherwise evade the jurisdiction of the United States. This cooperation in recent years is helping address concerns that U.S.-regulated companies and individuals are held to one standard while other businesses and individuals can thumb their noses at the rule of law.
This overview should make clear that the FCPA has been vigorously enforced over time, and that this enforcement has evolved over time. I think it is safe to say that this enforcement will continue to evolve long after the FCPA is “over the hill.”
Source: Trevor McFadden
Pilot Program up for review. In April 2016, Andrew Weissman, then-chief of the Criminal Division’s Fraud section, issued a nine-page memo setting forth the details of a one-year FCPA enforcement pilot program initiated by the Fraud Section’s FCPA Unit. Under the pilot program, if a criminal fine is still warranted in cases where a company self-discloses an FCPA violation, fully cooperates with the agency, and remediates compliance deficiencies, the company will be eligible to receive up to a 50 percent reduction off the bottom end of the U.S. Sentencing Guidelines fine range.
The pilot program will be up for review this spring. “At that time, we will carefully review the results of the program and consider what, if any, modifications should be made to encourage companies and individuals to comply voluntarily with the FCPA’s requirements,” McFadden said.
FCPA resolution techniques. Another question is whether (or to what extent) the Department of Justice will continue to use deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs) to resolve FCPA cases. During a 2011 Judiciary Committee hearing, Senator Sessions raised concerns about such resolution vehicles when he asked Acting Associate Attorney General Tony West whether DPAs and NPAs “undermine the rule of law by depriving the [Justice Department’s] legal arguments of meaningful testing in a judicial forum.”
Both the Justice Department and SEC have an incentive to pursue those types of resolutions, however, because they provide the agencies—with their large caseloads and limited resources—an expeditious way to bring investigations to a close. If DPAs and NPAs disappear, more companies may be less inclined to voluntarily self-disclose potential FCPA violations, which could affect enforcement numbers.
Furthermore, because companies effectively concede to the relevant facts, the agencies mostly get what they want, which is an admission or guilty plea of some sort, says John Davis, coordinator of the FCPA and international anti-corruption practice group at law firm Miller & Chevalier. DPAs and NPAs also give the Justice Department a more effective means to pursue culpable individuals, given that ongoing cooperation is often part of the agreement, he says.
Global FCPA enforcement. U.S. FCPA enforcement priorities aside, more countries are enacting anti-corruption laws of their own, increasingly giving enforcement authorities in these countries the leverage they need to initiate their own anti-corruption investigations and enforcement actions.
“In some ways that is its own driver,” Davis says. Even if FCPA investigations and enforcement activity were to slow down, it would only shift the focus toward those countries that are now actively undertaking anti-corruption investigations and enforcement actions of their own, he says.
On the U.S. enforcement front, international cooperation in FCPA investigations is “having a force multiplier effect,” Moritz of Protiviti says. U.S. prosecutors are “gathering momentum in terms of their capabilities,” he says.
In his remarks, McFadden echoed this point: “Cooperation on such an international scale is of utmost importance because as cooperation increases, there is an inevitable reduction in the ability to hide or conceal assets and evidence, or to otherwise evade the jurisdiction of the United States,” he said.
Another reason why FCPA enforcement will continue is because the agents and prosecutors tasked with leading FCPA investigations are committed to bringing them to their conclusion. “It’s not the attorney general making those calls,” Moritz says. “It’s the foot soldiers in the war against corruption.”
Lots of significant FCPA cases still remain in the pipeline. “In recent conversations I've had with prosecutors, their mindset is, ‘You haven’t seen anything yet,’ ” Moritz says.
All told, FCPA enforcement activity will not slow down under this administration. But as any good ethics and compliance officer already knows, establishing a robust anti-corruption compliance program and reinforcing ethical business practices should continue to be a top priority under any administration.