Archive for the ‘FCPA Inc.’ Category

Compliance 2.0 – A (Mostly) Meaningless Buzzword

Thursday, January 21st, 2016

buzzwordThis recent article in the Journal of Judgment and Decision Making titled “On the Reception and Detection of Pseudo-Profound Bullshit” caught my eye. The article focuses “on pseudo-profound bullshit, which consists of seemingly impressive assertions that are presented as true and meaningful but are actually vacuous.”

Perhaps you’ve noticed the emergence of the term “compliance 2.0″ in the Foreign Corrupt Practices Act space and beyond?

You can read a three part series on Compliance 2.0 (herehere, and here) on the FCPA Blog.

You can read a five part series on Compliance 2.0 (hereherehereherehere) on Corruption Crime and Compliance.

Panels at conferences are titled “Compliance 2.0: How to Build and Implement a Strong Compliance Program for FCPA” and other areas.

You can read the above links and decide for yourself whether those promoting Compliance 2.0 as some kind of secret sauce have a point or are mostly speaking in vague generalities and thus gobbledygook.

My own two cents is that Compliance 2.0, as used in the FCPA space, is mostly a meaningless buzzword.

Using the word “no” FCPA issue is a bit strong because, after all, a broken clock is right twice a day (pardon the buzzword / cliche).

However, few if any FCPA issues are going to be “nipped in the bud” (pardon the buzzword / cliche) based on the following purported components of Compliance 2.0: the reporting relationship between a board of directors and chief compliance officer or general counsel; a CEO or other executive officer’s “tone at the top” (another mostly meaningless buzzword in the FCPA space); or consideration of other stakeholders.

Rather, FCPA issues arise – and can thus best be mitigated and managed – by understanding how real people, operating in foreign countries with real business conditions, interact with real foreign officials.

The narrative roadmap for many FCPA issues is as follows.

  • Barriers, distortions and conditions create bureaucracy
  • Bureaucracy creates points of contact with foreign officials
  • Points of contact with foreign officials create discretion
  • Discretion creates the opportunity for a foreign official to misuse their position by making bribe demands.

Instead of complicating the compliance playbook with a mostly meaningless buzzword, business organizations should keep it simple and focus on blocking and tackling type issues (pardon the buzzword / cliche) such as the following questions relevant to conducting an FCPA risk assessment:

  • In which countries does the company do business?  As to each country, what is the country’s reputation for corruption?
  • Who are the company’s customers or potential customers in each country?  Is the customer a government (whether federal, state, or local) department, agency or instrumentality?  Does a government department, agency, or instrumentality, or individual associated with such units, have an ownership or equity interest in the customer?
  • How does the company do business and/or interact with customers or potential customers in the country?  Does the company use third parties in the foreign countries?
  • How does the company’s product enter and exit the country? Does the company use the services of a customs broker or freight forwarder?
  • What licenses, permits, or certifications does the company need to do business in the country?  As to each license, permit or certification, how does the company obtain such approvals?
  • Is the company subject to other unique forms of government regulation in the country?  What other points of contact does the company have with foreign government in the country (such as tax and immigration authorities)?

Understanding the answers to the above questions and incorporating them into an FCPA compliance program are leaps and bounds more important than “tone at the top” and the specifics of the reporting relationship between a chief compliance officer and the board of directors.

Moreover, Compliance 2.0, like most buzzwords, can be counter-productive because they create a false sense of results by inferring that adherence to the buzzword will show results. Indeed, a recent survey by the Institute of Leadership & Management suggests that a meaningful percent of employees consider management jargon as pointless and often irritating.

In short, decide for yourself whether Compliance 2.0 is a useful concept or mostly a meaningless buzzword.

And when you are done with that, turn your attention to Compliance 3.0 (see here).

Ten Things That Will Likely Happen In 2016

Tuesday, January 19th, 2016

predictionI’ve never been much for predictions when it comes to the Foreign Corrupt Practices Act and related topics.

After all, FCPA enforcement is often unpredictable largely on account of the enforcement agencies having a tremendous amount discretion (some would say too much), coupled with the fact that much FCPA enforcement takes place around conference room tables in Washington D.C. in the absence or practical absence of outside scrutiny.

Nevertheless, set forth below are ten things that will likely happen in 2016 (presented in a slightly jocular, yet equally serious manner) based on my experience in following FCPA enforcement (and the flow of FCPA information) as close as anyone for the past six years.


  • Sometime during the year there will be a lull in FCPA enforcement, yet one minor, inconsequential enforcement action will be announced (probably in the early spring) and everyone will write about it as well as the purported new trends and compliance messages from the enforcement action.  Why? Because it happens all the time as FCPA Inc. is an active group of writers that frequently make mountains out of mole hills by using recent enforcement action as a “hook” to market their practices and compliance services. In 2015, it was the late February enforcement action against Goodyear that generated a substantial amount of commentary. I fielded more media calls about this inconsequential action than any other FCPA enforcement action in recent memory. During one call, the reporter asked for my reaction, I looked outside my window and it was raining, and I said “well it’s raining out, it’s really no big deal.” The reporter said, “that may be true, but to others this is a thunderstorm.” Precisely my point.
  • On more than one occasion in 2016, the media contingent of FCPA Inc. is likely to publish an article or post that is false, misleading, embellished, breathless, or taken completely out of context.  Why? Because it happens all the time (see here for a collection of examples) and is the end result of non-lawyer journalist and/or FCPA Inc. participants with financial motives serving as the gatekeepers of much information.
  • The most active month for SEC enforcement will likely be September.  Why? Because September is the end of the SEC’s fiscal year and historical statistics demonstrate that September tends to be a very active month for FCPA enforcement.
  • Speaking of September, there will likely be some “major” DOJ/SEC policy speech.  Why? Because it happens almost every September as the enforcement agencies seemingly seek to reassert their authority and re-articulate their message after the summer hiatus.  In connection with this “major” policy speech (which in reality will likely not be “major” at all) the aforementioned media contingent of FCPA Inc. will likely churn out articles and client alerts (most of which will simply regurgitate the policy position as if the policy announcement – much of it old news to those informed – of a political actor represented a big deal).
  • In months leading up to November a certain for-profit conference firm will, in a truly disgraceful practice, likely market DOJ / SEC FCPA enforcement attorneys who will speak at their event as if the enforcement attorneys are a commodity they own and can profit from. Why? Because it happens every year. The speech delivered by the public officials at the private event will generate much FCPA Inc. media coverage, but sophisticated observers will have already heard the speech. Why? Because it will likely be basically the speech delivered last year at the event (See here and here).
  • Marketing the holidays seems to occur sooner and sooner each year, thus this next development will likely take place in November, but perhaps even as early as October or September. FCPA Inc. participants will churn out client alerts and publications warning of the FCPA risks of the holidays and gift giving.  Why? Because it happens every year and is convenient hook to try to sell compliance services.
  • Back to SEC FCPA enforcement. The SEC will likely not have to prove any of its FCPA enforcement theories to anyone other than itself.  Why? Because in the FCPA’s 38 year history, the SEC has never gone to trial in an FCPA matter (corporate or individual) and in the rare instances when it has been put to its ultimate burden of proof, the SEC has never prevailed. (See here).
  • Like September, December will also likely be an active month for FCPA enforcement. Why? Because even though December 2015 was a clear outlier, December is the end of the calendar year and historical statistics demonstrate that December tends to be a very active month for FCPA enforcement.
  • A high-ranking FCPA enforcement attorney will likely leave either the DOJ or SEC for a lucrative, guaranteed multi-million dollar position at a law firm and then almost immediately begin writing client alerts and other publications criticizing recent FCPA enforcement theories.  Why? Because it happens all the time and in 2016 or early 2017 there is likely to be substantial turnover at the DOJ and SEC given the change in executive administration.

Friday Roundup

Friday, January 15th, 2016

Roundup2Scrutiny alert, on cue, across the pond, survey says, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alert

According to various Nigerian media reports (here and here):

“A group which goes by the name: Concerned Itsekiri Coastal Dwellers Association, CICDA, has petitioned the United States, US Department of Justice, Criminal Division over alleged fraudulent and corrupt practices by some Delta state government officials with Chevron Nigeria Limited, CNL.”

In 2007 ,Chevron agreed to pay $30 million to resolve an FCPA enforcement action in connection with the Iraq Oil for Food program (see here).

On Cue

This prior post analyzed the recent U.K. deferred prosecution agreement against Standard Bank (SB)  - specifically “what” the DPA resolved – and stated:
“Given the allegations and findings, it is curious why SB even voluntarily disclosed the conduct at issue to the SFO, particularly in light of Sec. 7′s adequate procedures defense.
But then again, counsel to SB (like counsel in other FCPA or related internal investigations) no doubt secured substantially more in legal fees by making the disclosure (compared to the other reasonable alternative of not disclosing and remedying any internal control deficiencies) plus the deferred prosecution agreement comes with post-enforcement action compliance obligation. Moreover, counsel achieved name recognition by being the first law firm to represent a Sec. 7 corporate defendant and secure a DPA on behalf of its client. (One can only imagine the speaking opportunities in the future for “how they did it”).”

As if on cue, the law firm that represented SB is currently marketing a seminar about the enforcement action.  The teaser e-mail states:

“Join the legal team who acted on the UK’s first ever Deferred Prosecution Agreement for a breakfast seminar about the process. [...] We hope you will join us to hear how this ground-breaking and highly anticipated agreement was arrived at, the pivotal legal points which were discussed, and the key lessons for senior in-house counsel from the process.”

Across the Pond

The U.K. Serious Fraud office recently announced:

“UK printing company Smith and Ouzman Ltd, [previously] convicted of making corrupt payments, was … ordered to pay a total of £2.2 million in a sentencing hearing at Southwark Crown Court. The conviction and sentence follows a four-year investigation by the Serious Fraud Office.

The … company, which specialises in security documents such as ballot papers and exam certificates, was convicted in December 2014 under the Prevention of Corruption Act 1906. The corrupt payments totalling £395,074 were made to public officials for business contracts in Kenya and Mauritania.

The sum broken down included a fine of £1,316,799 as well as £881,158 to satisfy a confiscation order applied for by the SFO and £25,000 in costs. The fine is payable in instalments every six months until the full amount is paid, while the confiscation order must be satisfied within 28 days and the costs paid within six months.

In passing sentence, Recorder Andrew Mitchell QC said:

“Corruption of foreign officials is damaging to the country in which the corruption occurs, is damaging to the reputation of UK business and of course, in the market in which a business operates, it is anti-competitive.”

Director of the SFO, David Green CB QC commented:

“The bribery of foreign officials by UK companies damages this country’s reputation, commercially, politically and ethically. The SFO will pursue such criminal behaviour at both the corporate and individual level.”

Survey Says

According to this recent survey of South Africans conducted by the Ethics Institute of South Africa and sponsored by Massmart, only 22% of respondents believe that it is possible to successfully navigate daily life in the country without paying a bribe.

For the Reading Stack

In a recent article “Four Ways to Improve SEC Enforcement,” Professor Andrew Vollmer (a former Deputy General Counsel of the SEC and former partner in the securities enforcement practice of Wilmer Cutler) touches on some basic rule of law principles that sometimes bear repeating

“The first way to improve SEC enforcement is for the Commission to assert violations of law based only on well established and widely accepted legal principles and not to base claims on new, untested, and extreme legal theories.


Regulating and enforcing by unelaborated and expanding legal rules raise serious issues for both the private party and the system as a whole. Once the government charges a private party, the person is labeled publicly as a law breaker, even if a small group of knowledgeable practitioners appreciates that the legal theory is new and untested, and faces severe and frequently career or business ending sanctions. The private party must incur the costs, distress, and adverse publicity associated with a defense or succumb and settle, and the pressure to settle is over-powering even when the SEC case lacks merit.

The threats to the overall system are equally grave, and here they come in two forms. First, a federal agency breaks fundamental bonds of trust and accountability in our system of democratic governance when it exceeds its governing law. An Executive Branch agency must take care to stay well within the legal boundaries set by Congress or it acts as lawlessly as those who really violated the securities laws.

Second, enforcement agencies must exercise their power within established rules and precedent so regulated persons know what is required of them and may act accordingly and “so that those enforcing the law do not act in an arbitrary or discriminatory way.” “A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required.” A charge based on a new agency legal interpretation is essentially a claim against an innocent person. “It is one thing to expect regulated parties to conform their conduct to an agency’s interpretations once the agency announces them; it is quite another to require regulated parties to divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference.” An SEC enforcement case based on an interpretation that has not been properly communicated to the public is not valid.

Thus, when the Chair said SEC enforcement should be “aggressive and creative,” she sent the wrong message to her staff. Expansive, untested theories of law to impose liability weaken the SEC’s enforcement efforts, short-change investigations of core misconduct, mistreat the private parties who must respond, and breach a trust between the agency and the country. One way to improve the SEC enforcement process therefore is to reward the staff for recommending cases based on established and accepted legal doctrines and to eschew over-reaching legal positions.


Another area worth attention is the time SEC investigations take. Potential wrongdoing must be investigated promptly and charges, when justified, must be brought promptly to serve a range of important interests. Avoiding delay during investigations helps deter, uses SEC resources efficiently, reduces uncertainty and costs for private parties, keeps evidence fresh, and promotes finality.

Unfortunately, investigations lasting for many years are the norm.


Extended investigations disserve the enforcement process and the persons being investigated. The delays increase the costs of defense and the burdens on private parties. Lengthy investigations create uncertainty for both companies and individuals, and uncertainty about the SEC’s plans can harm reputations, stall careers, and postpone financings and investments, research, and product development.

The delays also seriously harm the quality of justice and the SEC’s cases.”


A good weekend to all.

Friday Roundup

Friday, December 4th, 2015

Roundup2Top blog, event notice, scrutiny alerts and updates, what do DOJ FCPA attorneys do, quotable, and for the reading stack.  It’s all here in the Friday Roundup.

Top Blog

I am pleased to share that FCPA Professor has been honored by the American Bar Association as a “Top 100 Blawg.”  (See here).

Described by others as “the Wall Street Journal concerning all things FCPA-related,” and “the most authoritative source for those seeking to understand and apply the FCPA,” FCPA Professor has previously been named a Top Law Blog for in-house counsel by Corporate Counsel and a Top 25 Business Law Blog by LexisNexis.  FCPA Professor readers include a world-wide audience of attorneys, business and compliance professionals, government agencies, scholars and students, journalists and other interested persons.

In addition to informing readers of FCPA news and developments in a timely and in-depth manner, FCPA Professor is a comprehensive website which features, among other things:

  • links to original source documents;
  • a detailed FCPA 101 page;
  • a resource portal; and
  • hundreds of subject matter categories designed to facilitate in-depth FCPA research and analysis.

All of this takes time, money, and substantial effort, yet the content on FCPA Professor is provided free to readers and without compromising and distracting advertisements.

If FCPA Professor adds value to your practice or business or otherwise enlightens your day and causes you to contemplate the issues in a more sophisticated way, please consider a donation – a voluntary yearly subscription - to FCPA Professor.  Yearly subscriptions to other legal publications or sources of information can serve as an appropriate guide for a donation amount.

Event Notice

I will be participating in a free telephonic event on Tuesday, December 8, 2015 at 3pm EST. Sponsored by the Young Advocates and Criminal Litigation Committees of the ABA, the event is titled: “Ask the Professor: What You Need to Know About Anti-Bribery Laws.”

The event will be moderated by Terra Reynolds (Paul Hastings). Click here to learn more and to register.

Scrutiny Alerts and Updates

British American Tobacco

The company, with ADRs traded in the U.S., was recently the focus of this in-depth piece by the BBC. According to the article:

“[T]he BBC obtained hundreds of documents that reveal how BAT employees bribed politicians, public officials and even people working for a rival company in Africa. [...] In 2012, BAT lobbyist Julie Adell-Owino arranged bribes totalling US$26,000 for three public officials in Rwanda, Burundi and the Comoros Islands. All three officials were connected to a United Nations effort to reduce the number of tobacco related deaths.”

As highlighted in this prior post, in 2010 U.S. tobacco companies Alliance One and Universal Corporation resolved FCPA enforcement based on alleged improper payments, including in Africa.

J.P. Morgan

The Wall Street Journal focuses on J.P. Morgan’s FCPA scrutiny for its alleged hiring practices in China. According to the article, J.P. Morgan hired 222 candidates under a program known internally as “Sons and Daughters.” The article makes much of the alleged fact that 45% of the hires were referred by Chinese government officials or employees of state-owned companies.  However, according to the article, an equal percentage (44%) were nongovernmental referrals – an issue that could be relevant to corrupt intent.


This recent post highlighted Vimpelcom’s disclosure of a $900 million reserve in connection with its FCPA and related scrutiny. The prior post noted that the disclosure was ambiguous as to the various components of the $900 million.

Bloomberg reports:

Vimpelcom “is in talks to pay about $775 million — a near record — to settle U.S. allegations it paid bribes in Uzbekistan to win business, according to three people familiar with the matter. The Amsterdam-based company’s resolution with the Justice Department and the Securities and Exchange Commission could be announced in January, said the people, who asked not to be identified because details of the proposed settlement aren’t public.”

Bloomberg also goes in-depth into the burgeoning Uzbekistan telecom scandal here.


The company (formerly known as Parametric Technology) has been under FCPA scrutiny since 2011 and recently disclosed:

“We have been in discussions with the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) to resolve an investigation concerning expenditures by our business partners in China and by our China business, including for travel and entertainment, that apparently benefited employees of customers regarded as state owned enterprises in China. This matter involves issues regarding compliance with laws, including the U.S. Foreign Corrupt Practices Act. We have recorded liabilities of $28.2 million as a result of our agreements in principle with those agencies to settle the matter. There can be no assurance that we will enter into final settlements on the agreed terms with these agencies or, if not, that the cost of any final settlements, if reached, would not exceed the existing accrual. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.”


The media continues to gush over Wal-Mart’s FCPA scrutiny.  In the latest example, the Wall Street Journal reports:

“A U.S. investigation into potential foreign bribery by Wal-Mart Stores Inc. has unearthed evidence of possible misconduct by the retailer in Brazil, after investigators found little to support the sweeping allegations involving Mexico that initially prompted the probe, according to documents and people familiar with the matter. Federal prosecutors are examining $500,000 in payments that they believe ultimately went to an individual hired to obtain government permits the company needed to build two stores in Brasília, Brazil’s capital, between 2009 and 2012, an investigative document shows.”

What do DOJ FCPA Attorneys Do?

To the extent a job listing is an accurate depiction, this is what DOJ FCPA attorneys do:

“The Criminal Division, U.S. Department of Justice, is seeking qualified, experienced attorneys for two-year renewable term positions in the Fraud Section located in Washington, DC. The incumbent will serve as a Trial Attorney in the Foreign Corrupt Practices Act (FCPA) Unit or the Securities & Financial Fraud Unit (SFF) and, as such, will independently direct, conduct, and monitor investigations, prepare for and conduct trials, and advise on pleadings and other court filings.

Generally, as a Trial Attorney in the FCPA Unit or the SFF Unit, the incumbent:

  • In collaboration with unit managers, carries out and fosters effective investigations and prosecutions, including advising on strategy and legal complexities, and developing litigation priorities, policy, and legislative recommendations. Recommends charging decisions and proposes dispositions with regard to assigned cases.
  • Partners with and leads Assistant U.S. Attorneys and attorneys in other federal law enforcement agencies in the development, management and trial of complex white collar and corporate investigations and prosecutions. Engages in all phases of investigation and litigation, including, but not limited to, using the grand jury, advising federal law enforcement agents, utilizing international evidence collection tools, preparing appropriate pleadings, and litigating motions and trials before U.S. District Courts across the country.
  • Collaborates with foreign prosecutors and foreign law enforcement officers on international investigations.
  • Evaluates reports of potential violations of the FCPA / securities and financial fraud laws from both internal and outside sources to determine whether investigation is warranted.
  • Advises and instructs Assistant U.S. Attorneys on complicated questions of law and Departmental policy with respect to the FCPA / securities and financial fraud laws.
  • Represents the United States in direct negotiations and discussions with corporate counsel and high-level officials. Participates in discussions with opposing counsel for defendants and in the formulation of settlements often having far-reaching legal consequences.
  • Advises and consults with the Assistant Attorney General, Deputy Assistant Attorney General, Section Chief, et al., reporting on the status of all cases and matters related to civil/criminal remedies.
  • Serves as an expert, providing advice and policy determinations in matters involving the planning, discussion and coordination of the activities related to the investigation and litigation of FCPA cases. Oversees the preparation and litigation assignments of lower graded attorneys, paralegals and clerical personnel.”


One thing high-ranking DOJ officials most certainly do is give numerous speeches.

In the latest example, DOJ Deputy Assistant Attorney General Sung-Hee Suh delivered this keynote address at the ABA Criminal Justice Section’s inaugural Global White Collar Crime Institute in Shanghai (an event, I am pleased to say, was organized by my Southern Illinois University School of Law colleague Professor Lucian Dervan).

Set forth below is an expert of Suh’s address.

On internal investigations:

“Until last year, I worked for 15 years in private practice representing companies – often in the context of criminal or regulatory investigations. I believe I have a good sense of the challenges that companies and their counsel face in determining the appropriate scope of an internal investigation. But some of those challenges appear to stem from a misperception that the longer and more expensive and more resource intensive the company’s internal investigation, the more favorably the government will view the company’s cooperation. But broad, aimless investigations by a company – just as by the government – are counter-productive. As we in the Criminal Division have long emphasized, and continue to stress today, an investigation should be narrowly focused on getting to the bottom of what happened, identifying who within the company was involved, and – if the company seeks cooperation credit — providing that information to us on a timely basis.”

On transparency:

“[W]e understand that it has not always been clear why the Department required a corporate entity to plead guilty to resolve a criminal case, as opposed to a deferred or non-prosecution agreement, or why we declined to pursue a criminal resolution altogether with another corporate entity that engaged in similar misconduct. I have also heard companies and their counsel say that they have no idea how the government’s monetary resolutions were arrived at – that it sometimes appears as if the government just picks these numbers out of thin air. Also notable has been the trend among companies over the last several years against voluntary self-reporting, including – and perhaps especially – in the FCPA space, in part due to what is perceived, as noted during this morning’s sessions, that there is little or no benefit to self-reporting. Some lawyers have advised their clients that it’s simply more rational to wait to see if the government comes knocking and then cooperate if and when that happens.”


“[T]o those companies that are disinclined to self-report in the belief that the government will never know – I say, think again. In the anti-corruption space, the Fraud Section and the Federal Bureau of Investigation are deploying significantly more resources to detect and prosecute companies that choose not to self-disclose in FCPA cases. We’re hiring an additional 10 prosecutors in the FCPA Unit, an increase of over 50%, and the FBI has established three new squads devoted to international corruption investigations and prosecutions.”

On compliance programs:

“No compliance program is foolproof. We understand that. We also appreciate that the challenges of implementing an effective compliance program are compounded by the everincreasing cross-border nature of business and of criminal activity. Many companies’ businesses are all over the world. They are creating products and delivering services not only here in China but overseas and are operating across many different legal regimes and cultures. We also recognize that a smaller company doesn’t have the same compliance resources as a Fortune-50 company. Finally, we know that a compliance program can seem like “state of the art” at a company’s U.S. headquarters, but may not be all that effective in the field, especially in far-flung reaches of the globe.”


For your viewing pleasure, a video of a roundtable with new DOJ compliance counsel Hui Chen and DOJ Fraud Section Chief Andrew Weissmann.  The first portion of the event consisted of the DOJ officials respond to (likely scripted) questions by a moderator, the second portion – when the video recorder was turned off – consisted of the DOJ officials responding to audience questions.

Reading Stack

I did not come up with the title of the entry or its narrative, but I did answer the questions posed to me in this Corporate Crime Reporter entry about the political aspects of FCPA enforcement as well as questions about an FCPA compliance defense – a defense I have long advocated for (see here for the article “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”


A Wall Street Journal op-ed by Professor Lucian Dervan titled “The Injustice of the Plea-Bargaining System.”


A good weekend to all.

The Pressing Need For Diligence In The FCPA Space

Tuesday, November 3rd, 2015

Excuse MeIn running FCPA Professor for over six years, I literally search for FCPA content every day. There is a lot of good stuff out there that is frequently highlighted on these pages.

There is also a lot of not so good stuff out there and I have frequently lamented (see here, herehere and here) about the pressing need for diligence in the FCPA space.

It’s as if certain outlets or commentators believe they possess a de facto license or privilege to say whatever they want to say without the need for context, without the need for original source support, and without the need for diligence to make sure claimed sources actually support the point attempted to be made.

One of the most egregious examples I’ve seen of late is this Corporate Counsel article that amounts to little more than a law firm “puff piece.” The headline reads “Covington Saves Small Company From FCPA Peril” and the article states in full:

“When a small oil exploration company came under investigation for violating the Foreign Corrupt Practices Act, it could have been the end. Houston-based Hyperdynamics had a single asset: the concession to drill for oil off the coast of Guinea in West Africa. But in 2013, it was hit with a grand jury subpoena from the U.S. Department of Justice seeking information about how the company got the concession, followed by another from the U.S. Securities and Exchange Commission. The company’s drilling partner initially said the existence of the investigation justified a refusal to proceed with the drilling. And then, there was the Ebola crisis. By January 2015, Hyperdynamics’ stock price had declined by 85 percent; in February 2015, it was delisted from the New York Stock Exchange. For help, Hyperdynamics turned to a team at Covington & Burling led by partner Nancy Kestenbaum, along with Lanny Breuer and Barbara Hoffman. The strategy, according to the firm: “real-time, extensive cooperation with the government, including frank discussions of the company’s finances and prospects, to try to resolve the investigations quickly enough to allow the company to survive and get back to drilling for oil.” It worked. In May, the DOJ closed its investigation without bringing any charges. And on Tuesday, the company settled with the SEC, agreeing to pay a $75,000 penalty for alleged books and records violations, without admitting wrongdoing. The settlement didn’t even merit a press release from the SEC. In the administrative order settling the case, the SEC said Hyperdynamics failed to accurately record $130,000 in public relations and lobbying expenses in 2007-2008. The payments were listed as being made to unrelated third parties, but the company later determined that an employee in Guinea controlled the entities.”

Um excuse me but … as noted in this prior post, according to Hyperdynamics, the company spent $12.7 million on its FCPA investigation. How can a journalist write a story about a law firm “saving” a company and how the law firm’s strategy “worked” without mentioning this relevant fact?

Another recent example involved a commentator claiming that the SEC’s “broken windows” enforcement policy  (in other words the SEC is pursuing even the smallest securities law violations to send a deterrent message) is “showing FCPA results.”

Um excuse me but … one-third of SEC corporate enforcement actions thus far in 2015 thus far (and 57% in 2014)  were the result of corporate voluntary disclosures. The notion that the SEC “is policing the beat, and vigorously pursuing” small FCPA violations pursuant to a “broken windows” policy would seem not to apply to voluntary disclosures where the SEC largely just processes corporate voluntary disclosures. Moreover, the SEC FCPA enforcement actions from 2015 (and 2014) that were not the apparent result of voluntary disclosures began years ago – long before the “broken window” enforcement theory was declared in October 2013.

Another recent example involved a commentator claiming that the generally low level of FCPA enforcement thus far in 2015 is the result of “declinations” (whatever that term means) based on corporate voluntary disclosures and cooperation. The commentator then proceeded to list four “declinations” by either the DOJ or DOJ and SEC (Gold Fields Ltd., Net 1 UEPS Technologies, Inc., Hyperdynamics, and BHP Billiton) to support the assertions.

Um excuse me but … none of the above FCPA inquiries were believed to be the result of corporate voluntary disclosures. Moreover, two of the inquiries (Gold Fields and Net 1) were presumably launched after foreign media reports. Moreover, every time there is a claimed “declination” of anti-bribery charges involving a foreign company (such as BHP Billiton) commentators rarely mention that such a company can only become subject to the anti-bribery provisions to the extent the conduct has a U.S. nexus.  There was absolutely no U.S. nexus alleged by the SEC in the BHP action.

What is happening in the FCPA space is really no different than what is happening in other spaces in this age of reactionary commentary and journalism.

Whether it is media coverage of politics, citizen-police interactions, or FCPA issues, the narrative seems to matter more than the facts.

Specific to the FCPA space, it must be acknowledged that certain FCPA sites serve as billboards for FCPA Inc.

It must also be recognized that much of FCPA media reporting is done by FCPA Inc. participants themselves in search of convenient hooks to sell their own FCPA related compliance products or services.  For instance, the Wall Street Journal is owned by Dow Jones & Company which has its own Risk & Compliance Division which offers “data solutions … designed to help [companies] mitigate regulatory, commercial and reputational risks” including anti-bribery and corruption.  Likewise, Thomson Reuters, a large international news agency with multiple publications, offers Thomson Reuters Accelus which markets and sells so-called solutions for enterprise Governance, Risk and Compliance (GRC) management, including anti-bribery and corruption. In short, many FCPA media sources have, just like the FCPA Inc. participants providing investigative and compliance services, a vested business interest in making FCPA enforcement appear more robust than it actually is and creating convenient narratives.

The end result is often an FCPA “echo chamber” of sorts in which FCPA Inc. narratives are repeated by many media outlets (on the assumption that the narratives are accurate), readers of such media sources view the FCPA narratives as being accurate because they appear in apparent reputable sources, and then others interested in FCPA topics cite to the media sources for evidence that the narratives are true.

In Freakonomics it was noted:

“Journalists need experts as badly as experts need journalists.  Every day there are newspaper pages and television newscasts to be filled, and an expert who can deliver a jarring piece of wisdom is always welcome.  Working together, journalists and experts are the architects of much conventional wisdom.”

However, often in the FCPA space the conventional wisdom is wrong.