Archive for the ‘Enforcement Agency Policy’ Category

Here’s What Would Get More Companies To Self-Disclose Bribery

Thursday, December 11th, 2014

This recent Wall Street Journal Risk & Compliance post asks “what would get more companies to self-disclose bribery?”  The article discusses several  answers (publicize declinations, start a leniency program, lower the amount of fines), but the best answer  is depicted in the below picture (with an FCPA compliance defense being the red arrow).

Compliance Defense As A Gap

There currently exists an informational gap between those with evidence of FCPA violations (i.e. companies and their counsel who conduct FCPA internal investigations) and the government agencies (DOJ and SEC) who enforce the FCPA.

Although – as highlighted in this recent post – approximately 60% of recent FCPA enforcement actions are the result of corporate voluntary disclosures, it should be an uncontroversial observation that many more FCPA violations (at least based on current enforcement theories) are happening in the global marketplace on a daily basis.

This observation is based on my nearly ten years of FCPA practice experience (and will be recognized as a self-evident truth by other FCPA practitioners) as well as my frequent conversations with FCPA practitioners.  While I am not suggesting the following is empirical evidence, the general thrust of comments I hear from FCPA practitioners is that approximately only 50% of FCPA issues in public companies are disclosed to the DOJ/SEC and that very, very few FCPA issues in private companies are disclosed to the DOJ.  The follow-up question I then ask is – in the situations in which the company has not voluntarily disclosed, has the DOJ/SEC ever found out about the problematic conduct at issue.  The universal response I have received is no.

Put this all together and the resulting landscape is that there are many FCPA violations occurring (at least based on current enforcement theories) that are not disclosed to the enforcement agencies.  Because the violations are not disclosed to the enforcement agencies, there is no enforcement action. Because there is no enforcement action, the individual engaging in the problematic conduct are not being held accountable.  Because the individual engaging in the problematic conduct is not being held accountable, FCPA enforcement is not as effective as it could be.

The DOJ (and SEC) clearly recognize the gap that exists and in recent months enforcement officials have tried to articulate policies that can help close this gap (see here, here, and here for summaries of recent speeches).

As highlighted in this prior post,  the policies articulated by DOJ officials are sensible (voluntarily disclose, cooperate, and identify culpable individuals).

Problem is, this is the same policy the enforcement agencies have been talking about for nearly a decade and its seems not to be closing the gap that exists between evidence of FCPA violations and prosecution of FCPA violations, including individuals.  Indeed, as highlighted by this prior post, 82% of corporate SEC FCPA enforcement actions since 2008 have not resulted in any related enforcement action against a company employee and 75% of corporate DOJ FCPA enforcement actions since 2008 have not resulted in any related enforcement action against a company employee.

An FCPA compliance defense will not close this gap completely, but it will help bridge the gap.

As stated in my 2012 article “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”

“An FCPA compliance defense will better facilitate the DOJ’s prosecution of culpable individuals and advance the objectives of its FCPA enforcement program. At present, business organizations that learn through internal reporting mechanisms of rogue employee conduct implicating the FCPA are often hesitant to report such conduct to the enforcement authorities. In such situations, business organizations are rightfully diffident to submit to the DOJ’s opaque, inconsistent, and unpredictable decision-making process and are rightfully concerned that its pre-existing FCPA compliance policies and procedures and its good faith compliance efforts will not be properly recognized. The end result is that the DOJ often does not become aware of individuals who make improper payments in violation of the FCPA and the individuals are thus not held legally accountable for their actions. An FCPA compliance defense surely will not cause every business organization that learns of rogue employee conduct to disclose such conduct to the enforcement agencies. However, it is reasonable to conclude that an FCPA compliance defense will cause more organizations with robust FCPA compliance policies and procedures to disclose rogue employee conduct to the enforcement agencies. Thus, an FCPA compliance defense can better facilitate DOJ prosecution of culpable individuals and increase the deterrent effect of FCPA enforcement actions.”

Are the enforcement agencies capable of viewing an FCPA compliance defense, not as a race to the bottom, but a race to the top? Are the enforcement agencies capable of viewing an FCPA compliance defense as helping them better achieve their FCPA policy objectives?

Let’s hope so, because the gap is problematic.

Might a compliance defense result in 1 or 2 fewer corporate enforcement actions per year?  Perhaps, but against this slight drop in “hard” enforcement would be an increase in “soft” enforcement of the FCPA (see here and here), and indeed because the gap would be narrowed there would be more “hard” enforcement of culpable individual actors.

See here and here for prior posts on the same topic.

Assistant Attorney General Caldwell’s Unconvincing Defense Of DPAs / NPAs

Monday, December 8th, 2014

As noted in this Global Investigations Review article, at a recent event in Paris in connection with the release of the OECD’s Foreign Bribery Report, Assistant Attorney General Lisa Caldwell defended the DOJ’s frequent use of DPAs and NPAs to resolve Foreign Corrupt Practices Act enforcement actions.  As stated in the article:

“Caldwell defended the Department of Justice’s (DoJ) reliance on settlements in FCPA cases. “In the United States we are often able to achieve much more through a settlement – a negotiated settlement – than we could achieve following conviction at trial,” she said. “We are able to impose reforms, impose compliance controls, and impose all sorts of behavioural change that a court would never be able to impose following even a conviction at trial.” Since 2009 over 50 companies have settled with the DoJ for alleged FCPA violations. Caldwell told the audience in Paris: “Companies cannot be sent to jail, so all a court can do is say you will pay ‘x’. We can say: ‘you will also have a monitor and will do all sorts of other things for the next five years, and if you don’t do them for the next five years then you can still be prosecuted’.” “In the United States system at least it is a more powerful tool than actually going to trial,” she said.

Post-enforcement action compliance obligations typically last 2-3 years, not 5 as Caldwell suggested.  Regardless, Caldwell’s defense of DPAs and NPAs is just as unconvincing as former Assistant Attorney General Lanny Breuer’s defense of DPAs and DPAs in September 2012 (see here for the prior post).

For starters, the function of the DOJ’s criminal division, as stated on its website, is to “serve the public interest through the enforcement of criminal statutes.”  Whether the function of the DOJ is, in addition, to “impose reform, impose compliance controls, and all impose all sorts of behavioral changes” on a business organization is a point of much disagreement. (See, e.g., “Prosecutors in the Boardroom“).

Regardless of one’s thoughts on whether the DOJ’s criminal division ought to play the role of a quasi-regulator, the notion that the DOJ is powerless to effect corporate change through old-fashion law enforcement (that is enforcing the FCPA without use of NPAs and DPAs) is plainly false.

For instance, the Siemens enforcement action did not involve the use of an NPA or DPA.  Yet, it is clear from the plea agreement, sentencing memorandum, and judgment that the DOJ was able to obtain the reforms, compliance controls and behavioral changes it wanted.  More recently in 2014, the Alcoa enforcement action was resolved without an NPA or DPA.  The plea agreement and judgment in the case (see here and here) again demonstrate that the DOJ was again able to obtain the reform, compliance controls and behavioral changes it wanted.

To return to Caldwell’s words, perhaps NPAs and DPAs are indeed a more powerful tool in FCPA enforcement actions than actually going to trial, but then again the DOJ is 0-2 in FCPA history when put to its ultimate burden of proof by a business organization in an FCPA enforcement action.

Just because the DOJ may have difficulty proving FCPA violations against business organizations and just because the DOJ is troubled – with good reason – by traditional notions of corporate criminal liability, does not mean the DOJ needs to continue to champion the alternate universe of NPAs and DPAs it has created.

*****

To read a different perspective on Caldwell’s recent remarks, see here from Tom Fox at the FCPA Compliance and Ethics Blog.

Issues To Consider From The Recent OECD Report

Thursday, December 4th, 2014

Earlier this week the OECD released a report titled “OECD Foreign Bribery Report – An Analysis of the Crime of Bribery of Foreign Public Officials.”

The Report “endeavours to measure, and to describe, transnational corruption based on data from the 427 foreign bribery cases that have been concluded since the entry into force of the OECD Anti-Bribery Convention in 1999″ by the 41 signatory countries to the OECD Convention. From this universe of cases, the Report then attempts to calculate several statistics.

Calculating statistics across 41 countries with different legal regimes, different ways of prosecuting cases, etc. is a monumental task.

It is also a task that yields statistics that are not very reliable or meaningful, particularly given certain of the methodologies and assumptions made in the Report.

For starters, the report itself notes as follows.  ”This report is peppered with unknown data, ranging from 2% to 36% depending on the particular data set.  Many of the concluded cases did not contain all the information needed to make a full analysis and were also not publicly available.”

Second, the report ”does not examine foreign bribery related offenses such as accounting.”  It is a bit unclear what this means, but if it means that FCPA books and records and internal controls cases only are not included in the dataset, then this is a significant limitation because actual charges in an FCPA enforcement action are often based – not solely on the conduct at issue – but other factors such as voluntary disclosure, cooperation, collateral effects, etc.  In short, several FCPA enforcement which could implicate the FCPA’s anti-bribery provisions do not as a technical matter.

Third, and as noted in footnote 11 of the report, “in the case of the United States, sanctions imposed by the Securities Exchange Commission (US SEC) and Department of Justice (US DOJ) are counted separately.”  Given that U.S. cases comprised approximately 1/4 of the total cases examined, this creative counting method is hugely significant.

Consider just 2013 FCPA enforcement in which there were 9 core corporate enforcement actions (ADM, Bilfinger, Weatheford, Diebold, Total, Ralph Lauren, Parker Drilling, Stryker and Phillips).  Yet if one counts DOJ and SEC actions separately, as did the OECD, notwithstanding the fact that most DOJ and SEC enforcement actions were based on the same core conduct, the number dramatically jumps to 15 corporate enforcement actions in 2013.  In other words and using just one year, one can clearly see how creative FCPA enforcement action counting methods dramatically changes the denominator for every statistic calculated.

One statistic that has generated much media attention from the OECD Report  (see here and here) is the finding that 53% of foreign bribery cases involved corporate management or CEOs.  However, the OECD Report - as noted in footnote 36 – defines “management” to mean senior level management, executives at the board level, directors and lower level management and states that “case data was insufficient to distinguish between these categories.”

To be sure in the FCPA context, certain enforcement actions have involved senior executive conduct and/or board conduct, but the vast majority of FCPA enforcement actions do not involve senior level management and a frequent allegation in such enforcement actions is that no one at the parent company resolving the enforcement action was aware of or participated in the alleged improper conduct.  To the extent there was a management level employee (and “title inflation” surely seems to be used in many FCPA enforcement actions) involved in the alleged improper conduct, the individual was employed by a legal entity (such as foreign subsidiary) separate from the entity actually resolving the enforcement action.

Because the OECD Report was “prepared with the aim of assisting the OECD Working Group on Bribery in International Business Transactions and the G20 Anti-Corruption Working Group in their efforts to combat transnational bribery,” it was imperative that the statistics in the Report be reliable and meaningful.

Based on the above information, you can decide for yourself whether this is the case.

Despite the statistical deficiencies of the OECD Report there are several “preliminary conclusions” in the report worthy of highlighting.

For instance, as to the long timeframes involved in foreign bribery cases, the report states “it is essential that law enforcement authorities undertake efficient and effective investigations to avoid unnecessary delays.”

As to settlements, the predominate vehicle by which foreign bribery cases are resolved, the report states that “settlement procedures should respect the principles of due process, transparency and consistency.”

As to compliance programs, the report states that there is “scope for greater incentivizing preventative anti-bribery compliance programs …”.

*****

DOJ Assistant Attorney General Leslie Caldwell delivered this speech in connection with the release of the OECD Report.

Reading Assignments

Tuesday, December 2nd, 2014

Read ThisEnd of the semester reading assignments for those interested in topics related to FCPA enforcement.

Thus far in 2014, every SEC FCPA enforcement action (both corporate and individual) has been resolved via the SEC’s administrative process.  Against this backdrop, Judge Jed Rakoff’s (S.D.N.Y.) recent speech “Is the SEC Becoming a Law Unto Itself” is a suggested read.

Prosecutorial common law most certainly impacts FCPA enforcement.  My amicus brief filed in connection with the recent Supreme Court “foreign official” cert petition highlighted, among other things, how judicial percolation of the “foreign official” issue is unlikely given how the FCPA is enforced. Against this backdrop, a recent statement by Supreme Court Justices Scalia and Thomas is a suggested read.

Both suggested reads are excerpted below.

Judge Rakoff’s Speech

In this recent speech Judge Jed Rakoff (S.D.N.Y.) asks “is the SEC becoming a law unto itself” and discusses “some dangers that seem to lurk … in the SEC’s apparent new policy of bringing a greater percentage of its significant enforcement actions as administrative proceedings.”  In pertinent part, Judge Rakoff stated:

“[I]n recent months the S.E.C. has signaled its intention to bring as administrative actions certain kinds of enforcement actions that historically it has more often brought in the federal courts. As early as October of 2013, Andrew Ceresney, Director of the Division of Enforcement, stated that “Our expectation is that we will be bringing more administrative proceedings given the recent statutory changes.” He followed that up last June when, with specific reference to insider trading cases, which previously had only very rarely been brought administratively, rather than in federal court, Mr. Ceresney stated: “I do think we will bring more insider-trading cases as administrative proceedings in appropriate cases.” Not to be outdone, Kara Brockmeyer, the head of the SEC’s antiforeign- corruption enforcement unit, stated just two weeks ago that “It’s fair to say it’s the new normal. Just like the rest of the enforcement division, we’re moving towards using administrative proceedings more frequently.”

Judge Rakoff next provided an informative historical overview of the SEC’s evolving enforcement powers including recent Section 929 of Dodd-Frank which gave the SEC the power through internal administrative proceedings to impose monetary penalties.

In the words of Judge Rakoff:

“The net result of all this is that the S.E.C. can today obtain through internal administrative proceedings nearly everything it might obtain by going to court. This sea-change has come about almost entirely at the request of the S.E.C., usually by tacking the provisions authorizing such expansion onto one or another statute enacted in the wake of a financial scandal.

What has been the stated rationale for all these changes? Usually nothing more than a claim of greater efficiency. Thus, for example, when then-Director of Enforcement Robert Khuzami submitted a statement to the Senate Judiciary Committee in support of Dodd-Frank, he devoted all of one sentence to what became Section 929P(a), stating: “Additional legislative proposals that would serve to enhance the Division’s effectiveness and efficiency include the ability to seek civil penalties in [administrative] cease-and-desist proceedings.” Similarly, the sole legislative history of Section 929P(a) in the House Report on Dodd-Frank states that “This section streamlines the SEC’s existing enforcement authorities by permitting the SEC to seek civil money penalties in cease-and-desist proceedings under Federal securities laws.”

While a claim to greater efficiency by any federal bureaucracy suggests a certain chutzpah, it is hard to find a better example of what is sometimes disparagingly called “administrative creep” than this expansion of the S.E.C.’s internal enforcement power.

To be sure, an S.E.C. enforcement action brought internally is in some superficial respects more “effective and efficient” and more “streamlined” than a similar action brought in federal court, for the simple reason that S.E.C. administrative proceedings involve much more limited discovery than federal actions, with no provision whatsoever for either depositions or interrogatories. Similarly, at the hearing itself, the Federal Rules of Evidence do not apply and the S.E.C. is free to introduce hearsay. Further still, there is no jury, and the matter is decided by an administrative law judge appointed and paid by the S.E.C. It is hardly surprising in these circumstances that the S.E.C. won 100% of its internal administrative hearings in the fiscal year ending September 30, 2014, whereas it won only 61% of its trials in federal court during the same period.

But, although the informality and arguable unfairness of S.E.C. administrative proceedings might present serious problems for those defending such actions, you might suppose that federal judges would be delighted to have fewer complicated securities cases burdening their overcrowded dockets. The reason, though, that I suggest that the judiciary and the public should be concerned about any trend toward preferring the S.E.C.’s internal administrative forum to the federal courts is that it hinders the balanced development of the securities laws.”

[...]

[G]iven the expansion of its internal jurisdiction occasioned by Dodd-Frank, the S.E.C. might well be tempted in the future to bring such cases as administrative enforcement actions, and thereby likely avoid the sting of well-publicized defeats. But the result would be that the law in such cases would effectively be made, not by neutral federal courts, but by S.E.C. administrative judges.

This is because, at least in the case of administrative decisions that have been formally approved by the S.E.C., such decisions, though appealable to the federal courts of appeals, are presumed correct unless unreasonable. In other words, while the decisions of federal district courts on matters of law are subject to de novo review by the appellate courts, the law as determined by an administrative law judge in a formal administrative decision must be given deference by federal courts unless the decision is not within the range of reasonable interpretations.

To put it in terms that this audience is familiar with, an S.E.C. administrative judge’s formal ruling on an otherwise undecided issue of statutory interpretation of the securities law is, just like rules enacted by the Commission, entitled to “Chevron” deference.”

[...]

In short, what you have here are broad anti-fraud provisions, critical to the transparency of the securities markets, that have historically been construed and elaborated by the federal courts but that, under Dodd-Frank, could increasingly be construed and interpreted by the S.E.C.’s administrative law judges if the S.E.C. chose to bring its more significant cases in that forum. Whatever one might say about the S.E.C.’s quasijudicial functions, this is unlikely, I submit, to lead to as balanced, careful, and impartial interpretations as would result from having those cases brought in federal court.

In the short-run, this would be unfair to the litigants. In the longer-run, it might not be good for the S.E.C. itself, which has its own reputation for fairness to consider. But, most of all, in the both the short-run and the long-run, it would not be good for the impartial development of the law in an area of immense practical importance.

Almost from the very outset of the administrative state, the defense of the huge power we accord to administrative agencies – as classically stated by the second Chairman of the S.E.C., James Landis, in his book The Administrative Process – is that no practical alternative exists in our complex society. But when it comes to interpreting the securities laws, a practical alternative – and the very one provided by the Constitution – has functioned very effectively for decades, namely, adjudication in the federal courts. I see no good reason to displace that constitutional alternative with administrative fiat, and I would urge the S.E.C. to consider that it is neither in its own longterm interest, nor in the interest of the securities markets, nor in the interest of the public as a whole, for the S.E.C. to become, in effect, a law onto itself.”

Justice Scalia / Thomas Statement

Recently, the U.S. Supreme Court denied cert in an insider trading case, Whitman v. United States.  Much of the news surrounding the denial though focused on this statement by Justice Scalia and joined by Justice Thomas.  The statement reads in full (internal citations omitted) as follows.

“A court owes no deference to the prosecution’s interpretation of a criminal law. Criminal statutes “are for the
courts, not for the Government, to construe.” This case, a criminal prosecution under §10(b) of the Securities
Exchange Act of 1934 raises a related question: Does a court owe deference to an executive agency’s interpretation of a law that contemplates both criminal and administrative enforcement?

The Second Circuit thought it does. It deferred to the Securities and Exchange Commission’s interpretation of §10(b), and on that basis affirmed petitioner Douglas Whitman’s criminal conviction. Its decision tilled no new ground. Other Courts of Appeals have deferred to executive interpretations of a variety of laws that have both criminal and administrative applications.

I doubt the Government’s pretensions to deference. They collide with the norm that legislatures, not executive officers, define crimes. When King James I tried to create new crimes by royal command, the judges responded that “the King cannot create any offence by his prohibition or proclamation, which was not an offence before.” James I, however, did not have the benefit of Chevron deference. With deference to agency interpretations of statutory provisions to which criminal prohibitions are attached, federal administrators can in effect create (and uncreate) new crimes at will, so long as they do not roam beyond ambiguities that the laws contain. Undoubtedly Congress may make it a crime to violate a regulation, but it is quite a different matter for Congress to give agencies—let alone for us to presume that Congress gave agencies—power to resolve ambiguities in criminal legislation.

The Government’s theory that was accepted here would, in addition, upend ordinary principles of interpretation. The rule of lenity requires interpreters to resolve ambiguity in criminal laws in favor of defendants. Deferring to the prosecuting branch’s expansive views of these statutes “would turn [their] normal construction . . . upside-down, replacing the doctrine of lenity with a doctrine of severity.”

The best that one can say for the Government’s position is that in Babbitt v. Sweet Home Chapter, Communities for Great Ore., 515 U. S. 687 (1995), we deferred, with scarcely any explanation, to an agency’s interpretation of a law lenity aside in a footnote, stating that “[w]e have never suggested that the rule of lenity should provide the standard for reviewing facial challenges to administrative regulations.” That statement contradicts the many cases before and since holding that, if a law has both criminal and civil applications, the rule of lenity governs its interpretation in both settings. The footnote in Babbitt added that the regulation at issue was clear enough to fulfill the rule of lenity’s purpose of providing “fair warning” to would-be violators. But that is not the only function performed by the rule of lenity; equally important, it vindicates the principle that only the legislature may define crimes and fix punishments. Congress cannot, through ambiguity, effectively leave that function to the courts—much less to the administrative bureaucracy. Babbitt’s drive-by ruling, in short, deserves little weight.

Whitman does not seek review on the issue of deference, and the procedural history of the case in any event makes it a poor setting in which to reach the question. So I agree with the Court that we should deny the petition. But when a petition properly presenting the question comes before us, I will be receptive to granting it.”

DOJ And SEC Officials Talk FCPA

Thursday, November 20th, 2014

Speaking8In what has become a mid-November tradition, DOJ and SEC officials yesterday gave speeches at a Foreign Corrupt Practices Act conference.

Topics discussed included the following:  individual prosecutions, voluntary disclosure and cooperation, compliance programs, asset recovery, foreign law enforcement cooperation.  (For factual information concerning DOJ and SEC individuals prosecutions see this prior post and as relevant to the issue of “success” – a topic touched upon in both speeches – you might want to read the article ”What Percentage of DOJ FCPA Losses is Acceptable?“)

In many respects, yesterday’s DOJ and SEC speeches were very similar to previous speeches delivered by enforcement agency officials in September and October (see here, herehere and here for prior posts).

This post excerpts this speech by Assistant Attorney General Leslie Caldwell and this speech by Andrew Ceresney, Direct of the SEC’s Enforcement Division.

DOJ

Caldwell began her remarks as follows.

“I want to focus my remarks on one of our most important enforcement priorities – our efforts to combat corruption around the world.

At the Criminal Division, we are stepping up our efforts in the battle against corruption, at home and abroad.  Through our Public Integrity Section, which prosecutes corruption cases involving U.S. federal, state, and local officials, we are attacking domestic corruption.

More relevant to this audience, we are also deeply committed to fighting corruption abroad.  Now, more than ever, we are bringing to justice individuals and corporations who use foreign bribery as a way to gain a business advantage.  In part, we are doing this using the tools and methods that have made our past enforcement efforts so successful – FCPA prosecutions and penalties.

But there have been some really big changes in the Justice Department’s FCPA work since I last worked there.  First, thanks to the expertise and knowledge we have acquired over the years, we are now able to investigate FCPA cases much more quickly.  We also are better equipped to prosecute individuals who are actually making corrupt payments, as well as intermediary entities hired to serve as conduits for bribes.

And now we also are prosecuting the bribe takers, using our money laundering and other laws.  And, importantly, we have begun stripping corrupt officials of the proceeds of their corruption involving both bribes and kleptocracy, using both criminal and civil authorities.

The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are really two sides of the same anti-corruption coin.  We bring those who pay bribes to justice, no matter how rich and powerful they are.  But by itself, that is not enough.  We also attack corruption at its source – by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.

Another big change – one that has been building for years but now has really developed momentum – is that we increasingly find ourselves shoulder-to-shoulder with law enforcement and regulatory authorities in other countries.  Every day, more countries join in the battle against transnational bribery. And this includes not just our long-time partners, but countries in all corners of the globe.

Together with our foreign law enforcement and regulatory partners we are taking a truly global approach to rooting out international corruption.  And make no mistake, this international approach has dramatically advanced our efforts to uncover, punish and deter foreign corruption.

Increasingly, we and our counterparts share information about bribery schemes.   We report schemes to one another.  And, where appropriate, we discuss strategy and coordinate our use of investigative techniques, so that we can obtain the best possible results, especially in very high-impact cases.

These efforts are incredibly important. The World Bank estimates that more than $1 trillion is paid every year in bribes, which amounts to about 3 percent of the world economy.  That amount is stunningly wasteful.  No one benefits from corruption other than the corrupt officials.

But corruption is far more insidious and harmful than can be measured numerically.  We all know that when corruption takes hold, the fundamental notion of playing-by-the-rules gets pushed to the side, and individuals, businesses and governments instead begin to operate under a fundamentally unfair – and destabilizing – set of norms.  This undermines confidence in the markets and governments, and destroys the sense of fair play that is absolutely critical for the rule of law to prevail.

In emerging economies, corruption stifles economic development that would lift people out of poverty, improve infrastructure, and better people’s lives.  And the fruits of corruption can prop up autocratic and oppressive rulers even in wealthier countries.

Make no mistake, the effects of foreign corruption are not just felt overseas.  In today’s global economy, the negative effects of foreign corruption inevitably flow back to the United States.  For one, American companies are harmed by global corruption.  They are denied the ability to compete in a fair and transparent marketplace.  Instead of being rewarded for their efficiency, innovation, and honest business practices, U.S. companies suffer at the hands of corrupt governments and lose out to corrupt competitors.

International corruption also presents broader public safety concerns.  Indeed, criminal networks of all kinds, including narcotics traffickers, cyber criminals, terrorists, and human traffickers, often take advantage of countries whose commitment to the rule of law is weakened by corruption of its officials.  And, as we’ve seen in the more extreme cases, thoroughly corrupted regimes have created safe havens for criminals by giving them a secure base from which they can orchestrate their criminal activities.

You have no doubt heard my predecessors speak of the evils of corruption.  It is because of these evils that the fight against international bribery has been, and continues to be, a core priority of the Department of Justice.

Our commitment to the fight against foreign bribery is reflected in our robust enforcement record in this area, which includes charges against corporations and individuals alike from all over the world.  Since 2009, we have convicted more than 50 individuals in FCPA and FCPA-related cases, and resolved criminal cases against more than 50 companies with penalties and forfeiture of approximately $3 billion.  Twenty-five of the cases involving individuals have come since 2013 alone.  And those are just the cases that are now public.  These individuals run the gamut of actors involved in bribery schemes: corporate executives, middlemen, and corrupt officials.”

Caldwell next focused on asset recovery and international cooperation:

“As our enforcement actions demonstrate, we are focusing our attention on bribes of consequence – ones that fundamentally undermine confidence in the markets and governments.  And our record of success in these prosecutions has allowed us to show – rather than just tell – corporate executives that if they participate in a scheme to improperly influence a foreign official, they will personally risk the very real prospect of going to prison.

[...]

Stripping individuals of the proceeds of their conduct – and thus depriving them of the very profits that are driving the corrupt conduct in the first place – is one technique that we are using increasingly in our fight against foreign bribery.  And, we are not just pursuing these corrupt proceeds through criminal actions.

The FCPA Unit’s efforts to eradicate foreign corruption also are assisted by the work of our Kleptocracy Asset Recovery Initiative, through which prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section and Office of International Affairs are pursuing ill gotten riches from corrupt officials using our civil authority. [...] [W]e are ready, willing, and able to confiscate the riches of corrupt leaders who drain the resources of their countries for their own benefit.”

[O]ur efforts to hold bribe takers as well as bribe payors accountable for their criminal conduct are greatly aided by our foreign partners.  Transnational bribery is a global problem and an international solution truly is beginning to develop.  Every day, more countries reject the notion that bribery in international business is inevitable and acceptable.  Indeed, in just the last few years several countries have enacted new anti-corruption laws or enhanced existing laws.  Admittedly, the global trend against foreign corruption continues to face many challenges, but the tide has turned and I truly believe that it is now on our side.

This level of collaboration is the product of hard work and strategic coordination, which has allowed us to forge the international partnerships that are essential to fight global corruption.  For example, just a couple of weeks ago, about 200 judges, prosecutors, investigators, and regulators from more than 50 countries, multi-development banks, and international organizations around the world joined prosecutors, investigators, and regulators from the Criminal Division, SEC, and FBI in Washington, D.C., for a week long training course to exchange ideas and best practices on combating foreign corruption.

I had the opportunity to participate in this meeting and saw its value first-hand.  The meeting provided a critical opportunity for the people who fight global corruption in the trenches every day to meet face-to-face, discuss ongoing cases, identify new opportunities to collaborate, and improve intelligence sharing.

The results from this increased international collaboration speak for themselves.”

[...]

[T]hese coordinated global actions sent a powerful message – countries all over the world are now engaged in the fight against foreign bribery and together, we can and will hold to account individuals and companies who engage in corruption, regardless of where they operate or reside.

The increase in international collaboration is not only enhancing our own FCPA enforcement efforts but it is also resulting in anti-corruption enforcement actions by other countries.”

[...]

Continued international collaboration is absolutely critical if we are going to have a meaningful impact on corruption across the globe and we are committed to maintaining – and enhancing – our working relationships with our foreign partners.

By enhancing our coordination with our overseas counterparts, continually improving our already successful methods of investigating and prosecuting FCPA cases, and increasing our efforts to prosecute corrupt officials and recover their ill-gotten gains, we are now, more than ever, making a tangible difference in the fight against foreign bribery.”

Caldwell next shifted to voluntary disclosure and cooperation and stated:

“When I last worked at the department and even over the 10 years that I was in private practice, it seemed that many FCPA investigations were initiated by self-disclosures.  While we of course still welcome self-disclosure, today we are far from reliant on it.

[...]

And in a world of whistleblowers and international cooperation, I expect that will be the case more often than not going forward.  That said, we still encourage and reward self-disclosure and cooperation.

When you detect significant potential criminal conduct at your company, or a company that has retained you, I encourage you to disclose it to the Justice Department – and to do so in a timely manner.  As I am sure you all know, the department’s Principles of Federal Prosecution of Business Organizations provides that prosecutors should consider “the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents” in deciding how to proceed in a corporate investigation.

So, in addition to promptly disclosing the conduct to us, I also encourage you to conduct a thorough internal investigation and to share with us the facts you uncover in that investigation.  We do not expect you to boil the ocean in conducting your investigation but in order to receive full credit for cooperation, we do expect you to conduct a thorough, appropriately tailored investigation of the misconduct.

And we expect you to provide us useful facts in a timely manner.  And that includes, importantly, facts about the individuals responsible for the misconduct, no matter how high their rank may be.

[...]

The sooner you disclose the conduct to us, the more avenues we have to investigate culpable individuals.  And, the more open you are with us about the facts you learned about that conduct during your investigation, the more credit you will receive for cooperation.

But, if you delay notifying us about an executive’s conduct or attempt to whitewash the facts about an individual’s involvement, you risk receiving any credit for your “cooperation.”

This does not mean that we expect you to use law-enforcement style techniques to investigate your employees.  To the contrary, it simply means that when you do an internal investigation, and you choose to cooperate with us, you should understand that we will expect to hear not just what happened, but who did what, when, and where.

We also expect that a truly cooperating company will provide relevant documents in a timely fashion, even if those documents are located overseas.  We recognize that some countries’ laws pose real challenges to data access and transfer of information, but we also know that many do not.

The Criminal Division investigates and prosecutes a large volume of international cases and through these cases, we have developed an understanding of these laws.  We will not give full cooperation credit to companies that hide behind foreign data privacy laws instead of providing overseas documents when they can.  Foreign data privacy laws exist to protect individual privacy, not to shield companies that purport to be cooperating in criminal investigations.

Put simply, cooperation – and the quality and timeliness of that cooperation – matter.  This is a well-established principle that we have applied in criminal cases across the spectrum – from violent and organized crime cases to corporate fraud cases – for decades.

If a company works with us, it not only helps the Department, but it helps itself.

[...]

Fighting corruption is not a choice we have made. It is, increasingly, a global imperative.  Given the critical nature of this mission, we are bringing more resources to bear than ever before – and we will continue doing so.  We have achieved significant successes using our traditional FCPA enforcement tools.  We are building on those successes and continuing to evolve our enforcement efforts.  Especially with the power of so many countries now standing by our side, we are determined to use every lawful means available to hold the perpetrators of corruption to account.”

SEC

Ceresney began his remarks as follows.

“Pursuing such [FCPA] violations remains a critical part of our enforcement efforts, as international bribery has many nefarious impacts, including sapping investor confidence in the legitimacy of a company’s performance and undermining the accuracy of a company’s books and records. Our specialized FCPA unit as well as other parts of the Enforcement Division continue to do remarkable work in this space, bringing significant and impactful cases often in partnership with the DOJ and FBI. [...] Looking ahead, I anticipate another productive year of FCPA enforcement, as we have a robust pipeline of investigations across the globe. I thought I would spend my time this morning discussing some areas we will be focusing on in the coming year and beyond, and then, if we have time, I can take some questions.”

Under the heading “Focus on Individuals,” Ceresney stated:

“Let me start with cases against individuals. It is a hot topic of the day, in the face of some significant enforcement actions against entities alone, to ask the question of whether enforcement actions against entities are as impactful as actions against individuals, and whether actions against entities actually deter misconduct.

I always have said that actions against individuals have the largest deterrent impact. Individual accountability is a powerful deterrent because people pay attention and alter their conduct when they personally face potential punishment. And so in the FCPA arena as well as all other areas of our enforcement efforts, we are very focused on attempting to bring cases against individuals.

That is not to say that cases against companies are unimportant — in fact, I think FCPA enforcement is perhaps one of the best examples of how actions against entities can have a tremendous deterrent effect. Our actions against entities have had a tremendous impact in the last 10 years on FCPA compliance. Companies have increased their compliance spending and focus exponentially — the attendance at this conference is but one example of that. And these actions continue to provide significant deterrence and send important messages about areas that companies should be focused on. Every action we bring is scrutinized closely and dissected for information on areas of risk. That is a great dynamic and one we should continue to foster. But individual accountability is critical to FCPA enforcement — and imposing personal consequences on bad actors, including through bars and monetary sanctions, will continue to be a high priority for us.

Now it is important to recognize that FCPA cases against individuals can present some unique challenges for us and we simply are unable to bring cases against individuals in connection with a number of our cases. For example, in many cases we face significant investigative hurdles, including difficulties in gathering specific testimony and documents from overseas that will be admissible at trial. This is one area where we have been working closely with our counterparts in other jurisdictions, to access foreign witnesses, bank statements, and company records. These efforts have been more and more successful as we form strong partnerships with other countries to combat corruption.

When the conduct involves foreign nationals — as it often does — another challenge can be establishing personal jurisdiction over the bad actor. We have had some favorable decisions in this area, but it still remains a challenge in certain cases. Statute of limitations issues also complicate these cases.

Despite these various challenges, we continue to vigorously pursue cases against individuals.”

Under the heading “Importance of FCPA Compliance Programs,” Ceresney stated:

“This is a message that I think has started to get through in the past 5 years. Nothing situates a company better to avoid FCPA issues than a robust FCPA compliance program.

The best companies have adopted strong programs that include compliance personnel, extensive policies and procedures, training, vendor reviews, due diligence on third-party agents, expense controls, escalation of red flags, and internal audits to review compliance. You can look to our Resource Guide on the FCPA that we jointly published with the DOJ, to see what some of the hallmarks of an effective compliance program are. I won’t mention them all because you should be familiar with many that relate to policies, procedures and training. But, I’ll highlight just a few others. Companies should perform risk assessments that take into account a host of factors listed in the guide and then place controls in these risk areas. Companies should have disciplinary measures in place to deter violations and compliance programs should be periodically tested and reviewed to ensure they are keeping pace with the business. Such programs, properly implemented, will also help companies avoid other problems at foreign subsidiaries, like self-dealing, embezzlement and financial fraud.

As part of our settlements, we have on occasion required the retention of a monitor to assist in administering such compliance programs. For those companies that have developed robust programs during the investigation, we have required self-reporting and certifications. But the overwhelming message that one has to take away from our actions is how important such programs are for ensuring compliance.

Of course, it is critical for such programs to be real programs. When I was in private practice, I saw companies that had great paper programs but did not implement them effectively. When the business would push back, they would remove requirements and make exceptions. The best companies would put the compliance program ahead of business interests and allow decisions to be made to ensure compliance with the law, no matter the business consequences. It is that sort of attitude that is the measure of whether such programs will be successful.

As I said, we have seen many companies improving and properly implementing their compliance programs, as the message from our cases over the years has penetrated the legal and compliance community. But there is still more work to be done, particularly for small-to-medium sized companies trying to enter foreign markets to grow their businesses. As those businesses seek to expand and globalize, their compliance functions must keep pace.

[...]

The bottom line is that no responsible company should operate overseas without a comprehensive compliance program to guard against FCPA risk.

One other aspect of compliance programs is the benefit that companies will derive from having them if a problem should arise. I can tell you that the SEC staff will look well on companies that have robust programs and that the existence of such programs will pay dividends should an FCPA issue arise despite the existence of such programs.”

Under the heading “Cooperation,” Ceresney stated:

“Related to the issue of the existence of FCPA compliance programs, I wanted to focus for a moment on self-reporting and cooperation. The existence of FCPA compliance programs place the company in the best position to detect FCPA misconduct. But the question is what a company does once it learns of such misconduct. There has been a lot of discussion recently about the advisability of self-reporting FCPA misconduct to the SEC. Let me be clear about my views — I think any company that does the calculus will realize that self-reporting is always in the company’s best interest. Let me explain why.

Self-reporting from individuals and entities has long been an important part of our enforcement program. Self-reporting and cooperation allows us to detect and investigate misconduct more quickly than we otherwise could, as companies are often in a position to short circuit our investigations by quickly providing important factual information about misconduct resulting from their own internal investigations.

In addition to the benefits we get from cooperation, however, parties are positioned to also help themselves by aggressively policing their own conduct and reporting misconduct to us. We recognize that it is important to provide benefits for cooperation to incentivize companies to cooperate. And we have been focused on making sure that people understand there will be such benefits. We continue to find ways to enhance our cooperation program to encourage issuers, regulated entities, and individuals to promptly report suspected misconduct. The Division has a wide spectrum of tools to facilitate and reward meaningful cooperation, from reduced charges and penalties, to non-prosecution or deferred prosecution agreements in instances of outstanding cooperation.

Last year, for example, we announced our first-ever non-prosecution agreement in an FCPA matter with a company that promptly reported violations and provided real-time, extensive cooperation in our investigation.

More commonly, we have reflected the cooperation in reduced penalties. Companies that cooperate can receive smaller penalties than they otherwise would face, and in some cases of extraordinary cooperation, pay significantly less.

[...]

The bottom line is that the benefits from cooperation are significant and tangible. When I was a defense lawyer, I would explain to clients that by the time you become aware of the misconduct, there are only two things that you can do to improve your plight — remediate the misconduct and cooperate in the investigation. That obviously remains my view today. And I will add this — if we find the violations on our own, and the company chose not to self-report, the consequences will surely be worse and the opportunity to earn significant credit for cooperation may well be lost.

[...]

The SEC’s whistleblower program has changed the calculus for companies considering whether to disclose misconduct to us, knowing that a whistleblower is likely to come forward. Companies that choose not to self-report are thus taking a huge gamble because if we learn of the misconduct through other means, the result will be far worse.”

Under the heading “Items of Value,” Ceresney stated:

“The statute precludes the payment or provision of “anything of value” to a foreign official in order to induce that official to take official action for the purpose of obtaining or retaining business. Obviously, money or property is an item of value. Gifts to foreign officials also easily qualify as items of value.

But we also have successfully brought FCPA cases where other, less traditional, items of value have been given in order to obtain or retain business. For example, in three separate actions, Stryker, Eli Lilly and Schering-Plough, we brought bribery charges against pharmaceutical or medical technology companies that made contributions to charities that were headed by or affiliated with foreign government officials to induce them to direct business to the companies.

We also have charged companies for providing items of value to family members of foreign officials. In Tyson Foods, for example, we charged the company for providing no-show jobs to the spouses of foreign officials who were responsible for certifying the company’s products for export. More recently, in Weatherford, we charged the company for a variety of bribes to foreign officials and their families, including paying for the honeymoon of an official’s daughter and a religious trip by an official and his family that was improperly recorded as a donation.

As these examples make clear, bribes come in many shapes and sizes. So it is critical that we carefully scrutinize a wide range of unfair benefits to foreign officials when assessing compliance with the FCPA — whether it is cash, gifts, travel, entertainment, or employment of the family and friends of foreign officials. We should and will continue to pursue a broad interpretation of the FCPA that precludes bribery in all forms.”

In conclusion, Ceresney stated:

“[T]he Enforcement Division will continue to look for opportunities to enhance our impact with respect to FCPA enforcement. We have made significant progress over the last 10 years but there is still much more we can do. We will continue our efforts to level the playing field for companies doing business abroad and hold corrupt actors accountable when they fail to play by the rules.”