Archive for the ‘FCPA Statistics’ Category

Like A Kid In The Candy Store

Friday, January 29th, 2016

Kid in Candy StoreLike every year around this time, I feel like a kid in a candy store given the number of FCPA year in reviews hitting my inbox.  This post highlights various FCPA or related publications that caught my eye.

Reading the below publications is recommended and should find their way to your reading stack.

However, be warned.  The divergent enforcement statistics contained in them (a result of various creative counting methods) are likely to make you dizzy at times and as to certain issues. There will be more on this issue in the near future.

Shearman & Sterling

The firm’s Recent Trends and Patterns in FCPA Enforcement is among the best year-after-year.

Content that caught my eye:

“It is … noteworthy that the DOJ’s and SEC’s prioritization of individual prosecutions comes as enforcement agencies continue to struggle while pursuing FCPA charges against individual defendants. Setbacks in United States v. Sigelman and United States v. Firtash may cause the Department to rethink its strategy. Indeed, while the DOJ has had some success extracting plea agreements, when put to its burden of proof the DOJ (and the SEC for that matter) has experienced difficulty in securing convictions and judgments. Given these struggles, it is possible that future individual defendants may be emboldened to test their chances against the government in court, potentially requiring the DOJ to devote even more resources to trying these individuals. While the DOJ and SEC have made it a clear priority to prosecute individuals for violations of the FCPA, the risk-reward calculations that prosecutors must consider before bringing charges could be altered going forward.”

[For more on this general topic, see “What Percentage of DOJ FCPA Losses is Acceptable?“]

[...]

“[Regarding so-called declinations] we note however, in the cases of Eli Lilly, Goodyear, Mead Johnson Nutrition, Hyperdynamics, and Bristol-Myers, the DOJ’s declination decision might also be explained by a possible lack of jurisdiction. Specifically, in each of the cases above, where all of the illicit conduct was committed by subsidiaries of the parent company, the DOJ may have concluded it was too difficult to prove that the subsidiaries’ conduct should be imputed on the corporate parent—bearing in mind that the DOJ has a higher burden of proof to sustain criminal FCPA charges against a company.”

[...]

“The DOJ’s 2015 prosecution of Daren Condrey in United States v. Condrey raises some questions as to whether government prosecutors are remaining faithful to the government instrumentality test set out in the Eleventh Circuit’s 2014 decision in United States v. Esquenazi.”

[For more on this topic, see this prior post]

[...]

“[Regarding the 2015 BNY Mellon "internship" enforcement action] [T]he government’s approach is bad policy. For better or worse, some of the most educated and most qualified potential hires in many countries are the children of government officials—individuals who benefited from their parents’ privileges and had the opportunity to attend prestigious schools, learn foreign languages, etc. If the government infers an intent to apply corrupt influence from the potential hire’s relationship to government officials, it is likely to chill hiring of such individuals, resulting in a completely unnecessary disadvantage to U.S. and other companies covered by the FCPA.”

Debevoise & Plimpton

The firm’s FCPA Update is the best monthly read there is and the most recent edition states:

“Even adding in amounts agreed or ordered to be recovered from individuals in FCPA cases, last year was by any objective measure one of more muted FCPA enforcement. Various theories can be advanced to explain these figures.

One, and probably the most plausible, is that, in a system of FCPA enforcement against companies that almost never ends in a trial, corporate resolutions require companies’ consent. It was only a matter of time for there to be a dry spell of large corporate resolutions. Thus, there were no large settlements last year because of the mundane fact that none of the larger cases in the pipeline was ready to be settled. Because of potential negotiation delays of various kinds in cases in the pipeline, it is conceivable if not likely there will be large settlements in 2016, which may dampen urges to downplay enforcement risk.

Still, a theory warranting consideration is that more companies subject to the FCPA are “getting it,” the possibility being that after a decade of vigorous enforcement the number of big cases that could be brought is markedly decreased. That the number of FCPA-related investigations reported by public companies declined by about 20 percent, year over year, arguably supports this theory.

But negating this theory is the large number of new foreign corruption matters reported daily in the media, and the kinds of political upheaval and developments in technology, social media culture, whistle-blowing, and transparency movements that drive anti-bribery enforcement. Given the broad jurisdictional reach of the FCPA (particularly as construed by the DOJ and SEC), a large percentage of the new cases reported in the media could well subject companies and individuals alike to future FCPA enforcement risks. These risks are magnified by a growing level of cross-border cooperation among anti-bribery enforcement agencies.

And as the Obama Administration heads into its final year, with a new Attorney General and Assistant Attorney General for the Criminal Division now settled into their roles, the likelihood of increased enforcement seems relatively high.”

Gibson Dunn

The firm’s Year-End FCPA Update is also a quality read year after year.

Gibson Dunn also released (here) its always informative “Year-End Update on Corporate Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs).”

It begins as follows.

“2015 was a blockbuster year in corporate non-prosecution agreements (“NPA”) and deferred prosecution agreements (“DPA”), by sheer numbers alone.  Skyrocketing to 100 [87 NPAs and 13 DPAs], in 2015 the number of agreements more than doubled the numbers in every prior year since 2000 , when Gibson Dunn first began tracking NPA and DPA data.”

Davis Polk

The firm’s Trends in Anti-Corruption Enforcement is here. A visual FCPA Resolution Tracker is here.

Jenner Block

The firm’s Business Guide to Anti-Corruption Laws 2016 is here.

Hogan Lovells

The firm’s Global Bribery and Corruption Review is here.

Arnold & Porter

The firms Global Anti-Corruption Insights is here.

Why Does The SEC Have An FCPA Unit?

Tuesday, January 26th, 2016

Women ThinkingNotwithstanding the fact that the SEC played an important role (indeed a more prominent role than the DOJ) in addressing the foreign corporate payment payments problem in the 1970s’s that led to enactment of the Foreign Corrupt Practices Act, it is a historical fact that the SEC never wanted any role in enforcing the FCPA’s anti-bribery provisions.

It is also a historical fact that the SEC did not object to various bills introduced during the FCPA reform debates of the 1980′s that sought to “divest” the SEC of enforcement authority over the anti-bribery provisions.

In both cases, the SEC explicitly stated that enforcement of the anti-bribery provisions was not central to the SEC’s investor protection mission.

Against this backdrop, it is strange that the SEC announced in August 2009 that it was forming a specialized FCPA Unit. In making the announcement, then SEC Enforcement Director Robert Khuzami stated:

“The Foreign Corrupt Practices Act unit will focus on new and proactive approaches to identifying violations of the Foreign Corrupt Practice Act, which prohibits U.S. companies from bribing foreign officials for government contracts and other business. While we have been active in this area, more needs to be done, including being more proactive in investigations, working more closely with our foreign counterparts, and taking a more global approach to these violations.”

In January 2010, the five specialized SEC units, including the FCPA Unit, were formally launched. In making the announcement, Khuzami stated:

“These specialized units address both challenges through improved understanding of complex products and markets, earlier and better capability to detect emerging fraud and misconduct, greater capacity to file cases with strike-force speed, and an increase in expertise throughout the Division.”

Since 2010, the SEC’s FCPA Unit has steadily grown. For instance, in previous public comments Kara Brockmeyer (SEC FCPA Unit Chief) stated:

“the SEC FCPA Unit has about three dozen staff dedicated full-time to the FCPA.  This number is in addition to other enforcement attorneys in SEC offices outside of DC who may also work on FCPA cases.”

SEC FCPA Unit staff are public employees and as public employees it is worth asking the question: what are these approximate 40 people doing on a daily basis?

For instance, in 2014 and 2015 the SEC brought 16 corporate FCPA enforcement actions. 7 (approximately 45%) were the result of corporate voluntary disclosures. In such actions, the word “enforce” the FCPA is a bit too much, when the reality is the SEC largely “processes” the corporate voluntary disclosure.

Regardless of the origins of the SEC’s corporate FCPA enforcement actions, is the SEC actually litigating these cases and having to prove anything (a task that can require substantial time and resources if the defendant is mounting a defense)?

Nope.

Of the 16 corporate FCPA enforcement actions brought by the SEC over the past two years, 14 (88%) were resolved through administrative actions or a deferred prosecution agreement. The other two actions were resolved through settled civil complaints.

As one of only five “specialized units” at the SEC, one might think that a reasonably proportionate total of the SEC’s overall enforcement actions would come from the FCPA Unit.

Not true.

Since 2011, the SEC has broken its enforcement statistics into specific categories. As highlighted by the SEC’s own data below, FCPA enforcement actions are a miniscule percentage of overall SEC enforcement actions.

  • FY 2014 – FCPA actions .9% of total actions
  • FY 2013 – FCPA actions .7% of total actions
  • FY 2012 – FCPA actions 2% of total actions
  • FY 2011 – FCPA actions 2.7% of total actions

[Note: the SEC's fiscal year is not a calendar year]

There is certainly more to having an FCPA unit than srictly enforcement action output.

Nevertheless, given the above output it is a fair question to again ask – what do the approximately 40 people in the SEC’s FCPA Unit actually do on a daily basis?

More fundamentally, why does the SEC have an FCPA Unit?

A Summary Of FCPA Enforcement Statistics

Monday, January 18th, 2016

Survey ResultsFCPA Professor has been the place to visit this month for in-depth 2015 Foreign Corrupt Practices Act enforcement statistics as well as comparisons to historical statistics.

If you missed the daily posts, no worries.

This post consolidates in one place the statistics published on FCPA Professor in January.

*****

This post highlights various facts and figures from 2015 SEC FCPA enforcement. The post breaks down the statistics into specific categories such as settlement amounts, settlement specifics, and voluntary disclosures as well as provides a comparison to historical statistics.

This post highlights various facts and figures from 2015 DOJ FCPA enforcement. The post breaks down the statistics into specific categories such as settlement amounts, settlement specifics, voluntary disclosures, and monitors as well as provides a comparison to historical statistics.

This post compares 2015 corporate FCPA enforcement to prior years and highlights how overall corporate FCPA enforcement in 2015 was up slightly compared to 2014 and 2013 corporate enforcement even though DOJ corporate FCPA enforcement in 2015 was at its lowest level since 2006 and even though overall FCPA settlement amounts were well below historical averages.

This post highlights the alleged “foreign officials” from 2015 corporate DOJ and SEC FCPA enforcement actions. Similar to prior years,  the majority of corporate enforcement actions involved, in whole or in part, employees of alleged state-owned or state-controlled entities. In 2015, these entities ranged from health care providers, to sovereign wealth funds, to a real estate development firm, a sugar factory, a cement company, a diamond mine, and an oil and gas company.

This post focuses on individual FCPA enforcement actions by the SEC and highlights the key fact, that despite SEC rhetoric about the importance of individual enforcement actions, of the 81 corporate SEC FCPA enforcement actions since 2008, 67 (or 83%) have not (at least yet) resulted in any SEC charges against company employees.

This post contains the same analysis regarding individual FCPA enforcement actions by the DOJ and likewise highlights the key fact, that despite DOJ rhetoric about the importance of individual enforcement actions, of the 69 corporate DOJ FCPA enforcement actions, 50 (or 72%) have not (at least yet) resulted in any DOJ charges against company employees. Moreover, DOJ individual FCPA actions exhibit a clustering phenomenon in that 53% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just six cases and 72% of the individuals charged by the DOJ since 2008 have been in just eleven cases.

Further to the analysis of DOJ individual actions, as highlighted in this post there is a sharp public – private divide.  In short, of the 107 individuals charged by the DOJ with FCPA criminal offenses since 2008, 82 of the individuals (77%) were employees or otherwise affiliated with private business organizations.  This is a striking statistic given that 53 of the 69 corporate DOJ FCPA enforcement actions since 2008 (79%) were against publicly traded corporations.

DOJ Individual Actions: The Strange Public – Private Divide

Thursday, January 14th, 2016

SurpriseThis recent post highlighted certain facts and figures regarding the DOJ’s prosecution of individuals for FCPA offenses in 2015 and historically.

As highlighted in the prior post, DOJ FCPA individual enforcement actions are significantly skewed by a small handful of enforcement actions and the reality is, despite the DOJ’s rhetoric, that 72% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees.

Another very interesting and significant picture emerges when analyzing DOJ individual FCPA prosecutions based on whether the individual charged was employed by or otherwise associated with a publicly traded corporation or a private business organization.

Of the 107 individuals charged by the DOJ with FCPA criminal offenses since 2008, 82 of the individuals (77%) were employees or otherwise affiliated with private business organizations.  This is a striking statistic given that 53 of the 69 corporate DOJ FCPA enforcement actions since 2008 (79%) were against publicly traded corporations.

In the 16 private business organization DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 9 of those actions (56%).  In contrast, in the 53 publicly traded corporation DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 10 of those cases (19%). Indeed, since 2012 there have been only three instances of an individual associated with a publicly traded company being criminally charged with FCPA violations (Garth Peterson, Alain Riedo and Vicente Garcia).

In short, a DOJ FCPA enforcement against a private business organization is approximately three times more likely to have a related DOJ FCPA criminal prosecution of an individual than a DOJ FCPA enforcement action against a publicly traded corporation.

The below information highlights all individuals criminally charged with FCPA violations since 2008 and whether they were associated with a publicly traded company or private business organization.

Individuals Charged With FCPA Criminal Offenses Since 2008 (Employer / Affiliation)

Bold = employed or affiliated with a private business entity

Gerald Green, Patricia Green (owners / operators of several private companies)

Martin Eric Self (employees of Pacific Consolidated Industries LP – a private business entity)

Shu Quan Sheng (owner of AMAC International Inc., but acting on behalf of French Company A – a publicly traded corporation)

Misao Hioki (employee of Bridgestone Corporation – a publicly traded corporation)

Nam Nguyen, Joseph Lukas, Kim Nguyen, An Nguyen (employees / agents of Nexus Technologies – a private business entity)

James Tillery and Paul Novak (employee / agent of Willbros Group)

Albert Jack Stanley, Jeffrey Tesler, Wojciech Chodan (employees / agents of KBR Inc., – a publicly traded corporation and/or other publicly traded corporations)

Richard Morlock, Stuart Carson, Hong Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, Han Yong Kim, Mario Covino (employees of Control Components Inc. – a private business entity)

Ousama Naaman (agent of Innospec – a publicly traded corporation)

John Jospeh O’Shea, Fernando Maya Basurto (employee / agent of ABB Ltd. – a publicly traded corporation)

Charles Paul Edward Jumet, John Warwick (employees of Ports Engineering Consultants Corporation – a private business entity)

Jorge Granados, Manuel Caceres, Juan Pablo Vasquez, Manuel Salvoch (employees of Latin Node Inc. – a private business entity)

Juan Diaz, Antonio Perez, Joel Esquenazi, Carlos Rodriguez, Marguerite Grandison, Jean Fourcand, Washington Vasconez Cruz, Amadeus Richers, Cecilia Zurita (employees / agents of Terra Telecommunications Corp., Telecom Consulting Services Corp., JD Locator Services, Inc. or Cinergy Telecommunications – all private business entities)

Enrique Faustino Aguilar, Angela Maria Gomez Aguilar, Keith Lindsey, Steve Lee (employees / agents of Lindsey Manufacturing Corp. – a private business entity)

Richard Bistrong (employee of Armor Holdings Inc. – a publicly traded corporation)

Jonathan Spiller John Mushriqui, Jeanna Mushriqui, David Painter, Lee Wares, Pankesh Patel, Ofer Paz, Israel Weisler, Michael Sacks, John Benson Wier, Haim Geri, Yochanan Choan, Saul Mishkin, R. Patrick Caldwell, Stephen Giordanella, Andrew Bigelow, Helmie Ashiblie, Daniel Alvirez, Lee Allen Tolleson, John Gregory Godsey (all employees of private business entities), Mark Morales (employee of Allied Defense Group – a publicly traded corporation), Amaro Goncalves (employee of Smith & Wesson – a publicly traded corporation)

Bobby Elkin (employee of Alliance One International – a publicly traded corporation)

Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Stephan Signer, Eberhard Reichert, Carlos Sergi and Miguel Czysch (employees / agents of Siemens – a publicly traded corporation)

Garth Peterson (employee of Morgan Stanley, a publicly traded corporation

Peter DuBois, Neah Uhl, Bernd Kowalewski, Jald Jenson (associated with BizJet Int’l – a private business entity)

William Pomponi, Lawrence Hoskins, David Rotschild, Frederic Pierucci (associated with Alstom Power – a private business entity [note the individuals were charged under the dd-2 prong of the FCPA even though Alstom (the parent company) was a publicly traded company]

Joseph Sigelman, Knut Hammarskjold, Gregory Weisman (associated with Petro Tiger Ltd – a private business entity)

Dmitry Firtash, Andras Knopp, Suren Gevorgyan, Gajendra Lal, Periyasamy Sunderalingam (associated with DF Group – a private business entity)

Benito Chinea, Joseph DeMeneses, Tomas Clark, Alejandro Hurtardo, Ernesto Lujana (associated with Direct Access Partners – a private business entity)

Alain Riedo (associated with Maxwell Technologies – a publicly traded corporation)

Dmitrij Harder (associated with Chestnut Consulting Group – a private business entity)

James Rama (associated with IAP Worldwide – a private business entity)

Richard Hirsch, James McClung (associated with Louis Berger Int’l – a private business entity)

Vicente Garcia (associated with SAP – a publicly traded corporation)

Daren Condrey (associated with Transport Logistics International – a private business entity)

Roberto Rincon, Abraham Shiera (associated with private business entities)

A Focus On DOJ Individual Actions

Tuesday, January 12th, 2016

Criminal LawYesterday’s post focused on SEC individual FCPA actions and this post highlights certain facts and figures concerning the DOJ’s prosecution of individuals for Foreign Corrupt Practices Act offenses in 2015 and historically.

As highlighted numerous times on FCPA Professor over the past several years, the DOJ frequently talks about the importance of individual FCPA prosecutions. Assistant Attorney General Leslie Caldwell has stated that “certainly…there has been an increased emphasis on, let’s get some individuals” and that it is “very important for [the DOJ] to hold accountable individuals who engage in criminal misconduct in white-collar (cases), as we do in every other kind of crime.”

DOJ FCPA Unit Chief Patrick Stokes has said that the DOJ is “very focused” on prosecuting individuals as well as companies and that “going after one or the other is not sufficient for deterrence purposes.”

Most recently, Deputy Assistant Attorney General Sung-Hee Suh stated:

“[T]he prosecution of individuals for corporate wrongdoing has been and continues to be a high priority for the Criminal Division and for the Justice Department as a whole.”

Against this backdrop, what do the facts actually show?

Since 2000, the DOJ has charged 141 individuals with FCPA criminal offenses.  The breakdown is as follows.

  • 2000 – 0 individuals
  • 2001 – 8 individuals
  • 2002 – 4 individuals
  • 2003 – 4 individuals
  • 2004 – 2 individuals
  • 2005 – 3 individuals
  • 2006 – 6 individuals
  • 2007 – 7 individuals
  • 2008 – 14 individuals
  • 2009 – 18 individuals
  • 2010 – 33 individuals (including 22 in the Africa Sting case)
  • 2011 – 10 individuals
  • 2012 – 2 individuals
  • 2013 – 12 individuals
  • 2014 – 10 individuals
  • 2015 – 8 individuals

An analysis of the numbers reveals some interesting points.

Most of the individuals – 107 (or 76%) were charged since 2008.  Thus, on one level the DOJ is correct when it states that there has been an “increased emphasis” on individual prosecutions – at least as measured against the historical average given that between 1978 and 1999, the DOJ charged 38 individuals with FCPA criminal offenses.

Yet on another level, a more meaningful level given that there was much less overall enforcement of the FCPA between 1978 and 1999, the DOJ’s statements about its focus on individuals represents hollow rhetoric as demonstrated by the below figures.

Of the 107 individuals criminally charged with FCPA offenses by the DOJ since 2008:

  • 22 individuals were in the failed (and manufactured) Africa Sting case;
  • 9 individuals (minus the “foreign officials” charged) were in the Haiti Teleco case;
  • 8 individuals were in connection with the Control Components case;
  • 8 individuals were in connection with the Siemens case;
  • 5 individuals were associated with DF Group in the Indian mining licenses case;
  • 5 individuals were associated with Direct Access Partners;
  • 4 individuals were in connection with the Lindsey Manufacturing case;
  • 4 individuals were  in connection with the LatinNode / Hondutel case;
  • 4 individuals were in connection with the Nexus Technologies case;
  • 4 individuals were in connection with the BizJet case; and
  • 4 individuals were in connection with the Alstom case.

In other words, 53% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just six cases and 72% of the individuals charged by the DOJ since 2008 have been in just eleven cases.  This was previously highlighted as the clustering phenomenon of DOJ individual FCPA actions.

Considering that there has been 69 corporate DOJ FCPA enforcement actions since 2008, this is a rather remarkable statistic.  Of the 69 corporate DOJ FCPA enforcement actions, 50 (or 72%) have not (at least yet) resulted in any DOJ charges against company employees.

Compare this figure to FCPA enforcement prior to 2004.

As highlighted in this prior post, from 1977 to 2004 approximately 90% of DOJ criminal corporate FCPA enforcement actions RESULTED in related charges against company employees.

Why the change?

Read the recent article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement” in which a hypothesis is tested as well as to see comprehensive charts detailing every DOJ corporate FCPA enforcement and whether the action also resulted in related charges against company employees.

In short, and as demonstrated by the statistics, DOJ FCPA individual enforcement actions are significantly skewed by a small handful of enforcement actions and the reality is that 72% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees.