Archive for the ‘FCPA Statistics’ Category

DOJ’s Empty Rhetoric On Individual FCPA Prosecutions Continues

Wednesday, September 17th, 2014

This previous post highlighted the empty rhetoric of a former DOJ Criminal Division Chief regarding individual FCPA prosecutions.

A change in leadership at the DOJ Criminal Division has not brought about a change in the rhetoric.

As noted in this Reuters FCPA article, current Chief of the Criminal Division Leslie Caldwell stated:

“Certainly…there has been an increased emphasis on, let’s get some individuals.”

“It’s very important for us to hold accountable individuals who engage in criminal misconduct in white-collar (cases), as we do in every other kind of crime.”

Once again, the rhetoric is empty.

Sure the DOJ can point to a few core actions in which the DOJ has “clustered” multiple defendants into one action to achieve notable individual prosecution numbers.  The April 2014 action against six individuals allegedly involved in a conspiracy to obtain Indian mining licenses is a good example as was the “clustering phenomenon” in the enforcement action against five individuals associated with Direct Access Partners.   As highlighted in this previous post (with statistics calculated through the end of 2013), 53% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just four cases and 75% of the individuals charged by the DOJ since 2008 have been in just nine cases.

In the vast majority of corporate FCPA enforcement actions (based presumably on the conduct of real individuals not ghosts as I indicated in my 2010 Senate FCPA testimony), the talk of individual prosecutions is nothing more than empty rhetoric.  Indeed, as highlighted in this previous post (with statistics calculated through the end of 2013) since 2008 approximately 75% of corporate FCPA enforcement have not (at least yet) resulted in any DOJ charges against company employees.

Consider the below chart with the 20 most recent corporate FCPA enforcement actions.  Only one has resulted (at least yet) in any DOJ charges against company employees.

Corporate Action

Related Prosecution of Company Employees

 

HP

No

Marubeni

No

Alcoa

No

ADM

No

Bilfinger

No

Weatherford

No

Diebold

No

Total

No

Ralph Lauren

No

Parker Drilling

No

Tyco

No

Pfizer

No

Nordam Group

No

Orthofix

No

Data Systems & Solutions

No

Biomet

No

BizJet / Lufthansa

Yes

Smith & Nephew

No

Marubeni

No

Magyar / Deutsche Telekom

No

The DOJ has long recognized that an FCPA enforcement program based solely on corporate fines is not effective and does not adequately deter future FCPA violations. For instance, in 1986 the DOJ Deputy Assistant Attorney General stated:

“If the risk of conduct in violation of the [FCPA] becomes merely monetary, the fine will simply become a cost of doing business, payable only upon being caught and in many instances, it will be only a fraction of the profit acquired from the corrupt activity. Absent the threat of incarceration, there may no longer be any compelling need to resist the urge to acquire business in any way possible.”

In 2010, the DOJ Deputy Chief of the Fraud Section likewise stated that a corporate fine-only FCPA enforcement program allows companies to calculate FCPA settlements as the cost of doing business.   In this new era, the DOJ has consistently stated that prosecution of individuals is a “cornerstone” of its FCPA enforcement strategy and in a 2012 speech the Assistant Attorney General stated: “If you look at the FCPA over the past 4 years, you’ll see we really have been vigorous about holding individuals accountable.” Add Caldwell’s recent statements to this long line of empty rhetoric.

Despite the rhetoric, the actual statistics demonstrate that FCPA enforcement is largely corporate enforcement only.

Friday Roundup

Friday, August 22nd, 2014

The FCPA in the hallways, Super Bowl bribery, no FCPA charges, quotable, survey says, FCPA reform advocate nominated to the federal bench, interesting homework assignment, scrutiny alert, and for the reading stack.  It’s all here in the Friday roundup.

FCPA in the Hallways

Avon’s FCPA scrutiny brought the FCPA to main street.  News Corp.’s and Wal-Mart’s FCPA scrutiny generated world-wide media coverage.  Will the FCPA next become the topic of discussion in middle school and high school hallways across America?

According to this TMZ report:

“A Canadian border official has been fired for allegedly accepting a $10,000 bribe in return for allowing members of Justin Bieber’s entourage with criminal records to enter Canada. Bieber’s camp reportedly gave a female officer at the Niagara Falls border thousands of dollars in backstage passes to get members of his posse into the country while he performed. Canada has a strict policy on not allowing people with certain types of criminal records to enter. It’s unclear when the alleged bribes went down … but Justin performed 2 shows in Toronto last year. The accusations surfaced after more of Bieber’s friends allegedly showed up at the border looking for the same special treatment — and the officers on duty blew the whistle. The Canada Border Services agency reportedly circulated an internal memo reminding officers not to take bribes … and to rat out anyone who does.”

In case you are wondering, there have been several FCPA enforcement actions in recent years concerning alleged payments to customs, immigration and other regulatory officials in connection with a business purpose broadly speaking.

Super Bowl Bribery?

Providing money or other things of value to a person or entity to influence the discretionary acts of that person or entity in connection with a business purpose is bribery … is it not?

Yet, according to this Wall Street Journal article, the above may determine which artist receives the coveted Super Bowl half-time performance slot.  According to the article, the NFL “has asked artists under consideration for the high-profile gig to pay to play” including whether the artists “would be willing to contribute a portion of their post-Super Bowl tour income to the league, or if they would make some other type of financial contribution, in exchange for the halftime gig.”

According to the article, the NFL’s only goal is to “put on the best possible show.”

No FCPA Charges

It is sometimes perplexing why certain alleged conduct results in Foreign Corrupt Practices Act charges, whereas other alleged conduct – clearly implicating the FCPA – does not result in FCPA charges.

Case in point, the recent DOJ prosecution of Alisa Bivens, a U.S. citizen and former foreign program director of International Adoption Guides Inc. (IAG – a South Carolina company).  (See here for the DOJ release).  Bivens recently pleaded guilty to defrauding the U.S. in violation of 18 U.S.C. 317.  As noted in the DOJ release:

“Bivens admitted as part of her plea that she and her co-conspirators submitted fraudulent documents to the State Department to facilitate adoptions of Ethiopian children by U.S. parents from 2006 until 2009.  In support of U.S. visa applications for the Ethiopian children, Bivens and others submitted false documentation, including contracts of adoption signed by orphanages that could not properly give the children up for adoption because, for example, the child in question was never cared for or never resided at the orphanage.”

The DOJ release further states:

“In entering her guilty plea, Bivens also admitted that she and others paid bribes to two Ethiopian officials so that those officials would help with the fraudulent adoptions.   The first of these two foreign officials, an audiologist and teacher at a government school, accepted money and other valuables in exchange for providing non-public medical information and social history information for potential adoptees to the conspirators.   The second foreign official, the head of a regional ministry for women’s and children’s affairs, received money and all-expenses-paid travel in exchange for approving IAG’s applications for intercountry adoptions and for ignoring IAG’s failure to maintain a properly licensed adoption facility.”

Quotable

U.S. Ambassador to China Max Baucus recently delivered this speech to the APEC Network of Anti-Corruption Authorities and Law Enforcement Agencies.  Ambassador Baucus stated:

“The Obama Administration takes a firm stand against American and foreign companies that engage in bribing foreign officials to obtain or retain business.  Other economies here do this as well. In the United States, one of the most effective tools we use to combat corruption is enforcement of the Foreign Corrupt Practices Act.  We pursue corruption at many levels:

  • corporations, both big and small;
  • everyone from sales agents to CEOs;
  • U.S. and foreign companies;
  • citizens and foreign nationals; and
  • direct payers and intermediaries.

Since 2009, the U.S. Department of Justice has taken in $3.4 billion from criminal fines, penalties and forfeitures. And the U.S. Securities and Exchange Commission has seized another $1 billion of profits obtained by illegal or unethical acts over the last ten years.  As a result, more American companies have changed the way they do business.  Companies are now more willing to voluntarily disclose corrupt behavior and report on solicitations for bribes.”

The last sentence of course is debatable.

Even so, what is not debatable is the following from Ambassador Baucus – “we need to adopt international best practices of transparency and rule of law” in the fight against corruption.

U.S. officials preach this virtue abroad, yet the reality is we need to work on these virtues here at home as well.

As to the rule of law, and as noted in this speech by former Federal Reserve Chairman Paul Volcker who was the keynote speaker at the International Bar Association’s annual conference:

“There is frank recognition that the combination of a weak rule of law and corruption is not only economically debilitating, but threatening the political health of both new and old democracies. I do not exclude the United States. We think of ourselves as exemplars of the rule of law. We are certainly world champions in the extent of legislation and regulation governing bribery, conflicts of interest, procurement procedures, campaign financing, protection of human rights and most of all, transparency. All of these are ingredients of what some think of as the rule of law. But we still face the sad fact that in the United States itself, only a quarter of Americans believe that corruption is not widespread in our country. My feeling is that the impression of serious corruption has increased further, a reflection largely of the concern that campaign financing has come to gravely distort the political process. Should we be satisfied that we live with a really effective rule of law, when the perceived need for heavy campaign spending has come to dominate our political process? We let those financing practices infringe in a very basic way upon the rule of law, with its sense of even-handedness and openness. Does it not breed behaviour that is accomplished by any reasonable definition of corruption?”

Survey Says

PwC’s 2014 State of Compliance Survey asked:  ”Please select your top 3 areas in terms of current perceived level of risk to your business.”  The most popular responses from survey participants were:

  • Industry-specific regulations – 31%
  • Privacy and confidentiality – 25%
  • Bribery/corruption – 22%

FCPA Reform Advocate Nominated to the Federal Bench

Earlier this week, President Obama announced his intent to nominate Haywood Stirling Gilliam, Jr. (Vice-Chair of Covington & Burling’s White Collar Defense and Investigations practice group) to serve on the United States District Court for the Northern District of California.

As noted in this previous post, in a 2013 Law360 Q&A Gilliam was asked “what aspects of your practice area are in need of reform and why?” and he stated:

“Foreign Corrupt Practices Act enforcement stands out as an area in need of further reform. Over the past several years, FCPA enforcement has been characterized by the U.S. Department of Justice and U.S. Securities and Exchange Commission advancing aggressive enforcement theories, but there have been limited opportunities for courts to scrutinize those theories. Most FCPA enforcement cases end in negotiated resolutions such as deferred prosecution or nonprosecution agreements. In that context, regulators often insist that the settling company or individual accept the government’s expansive theories as a condition of resolving the case.  For example, the DOJ has extracted penalties from non-U.S. based, non-U.S. traded companies not covered under the four corners of the statute by asserting broad theories such as aiding and abetting or conspiracy — even when the foreign entity has not taken any action in the U.S. As a practical matter, that could be a hard case to prove at trial — but the government almost never has to.  The result of this trend has been to enshrine the government’s aggressive enforcement positions as quasi-precedent: The law means what the DOJ and SEC say it means, and defendants (especially publicly traded companies) seldom have a realistic opportunity to push back in court, given the financial and practical costs of fighting a contested enforcement action. Relatively recently, district courts have begun to weigh in on these theories, which is a positive development, but there still is a dearth of FCPA case law as compared to other areas of criminal law.  This absence of settled law makes it challenging for companies to decide how to handle thorny FCPA compliance issues. For example, companies routinely face a difficult choice in deciding whether to self-report potential violations to the government, as opposed to thoroughly investigating and remediating the issues internally. While regulators insist that they will give “meaningful credit” to companies that self-report, the tangible benefits of doing so are far from clear. The recent FCPA resource guide issued by the DOJ and SEC says that the agencies place a “high premium” on self-reporting, but does not give concrete guidance as to how the government weighs self-reporting in deciding whether to charge a case, as opposed to offering a deferred prosecution or nonprosecution agreement, or declining the case outright. While the resource guide is a start, companies and their counsel would benefit from more specific guidance when they are weighing the potential, but uncertain, benefits of disclosure against the cost and distraction that can result from voluntarily handing the government a case that otherwise might not have come to its attention.”

Interesting Homework Assignment

Professors are supposed to give homework, not receive homework.

Yet, as highlighted in this Corporate Crime Reporter article, Professor Brandon Garrett (UVA) recently received a homework assignment from a federal court judge.

The assignment:  “to appear in [a] case as an amicus curiae for the limited purpose of providing the Court with advocacy on questions regarding the scope of the Court’s authority, if any, to consider the fairness and reasonableness of a deferred prosecution in deciding whether to accept or reject such an agreement.”

As noted in the Corporate Crime Reporter article, the DPA is between the DOJ and Saena Tech, a defense contractor and grew out of a domestic bribery investigation.

To say the least, I look forward to reviewing Professor Garrett’s homework and so should you.

Scrutiny Alerts

Och-Ziff

Bloomberg goes in-depth in this article “The Hedge Fund and the Despot” concerning Och-Ziff’s relationships in Zimbabwe and the company’s overall scrutiny.

Barclays

Previous posts (here) have detailed Barclay’s scrutiny on both sides of the Atlantic regarding its business relationships with various Middle Eastern investors.

Reuters reports

“Britain’s fraud prosecutor could decide as soon as next month whether to charge former Barclays executives over undisclosed payments the bank made to Qatari investors in 2008.”

According to the article, “U.S. authorities are also investigating the same Barclays’ Qatari commercial agreements and whether third-party relationships breached anti-bribery rules.”

Reading Stack

From Bloomberg, an in-depth look at  the Libyan Investment Authority (LIA) and its relationships with various companies in the financial services industry which has resulted in FCPA scrutiny.

Informative article here titled “Land of Confusion:  Insurance Coverage for Pre-Suit FCPA Investigation Costs Under D&O Liability Policies.”

An interesting front-page read here from the Wall Street Journal regarding China’s anti-corruption crackdown.

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A good weekend to all.

Comparing DOJ FCPA Enforcement To SEC FCPA Enforcement Is Not A Valid Comparison

Thursday, July 17th, 2014

This recent Wall Street Journal Risk & Compliance Journal headline stated “SEC Stays on the FCPA Sidelines” and states in relevant part:

“The Securities and Exchange Commission has largely stayed on the sidelines of anti-bribery enforcement so far this year … The agency has brought just two enforcement actions tied to the Foreign Corrupt Practices Act in the first six months of the year, compared to 13 brought by the Justice Department.”

For starters, there have not been 13 FCPA enforcement brought by the DOJ this year and, once again, it is only through creative counting methods that some industry participants are able to reach numbers.  As noted in this recent post, thus far this year the DOJ has brought 3 corporate enforcement actions (HP related entities, Alcoa and Marubeni) and 3 core individual enforcement actions (5 individuals in connection with Indian mining licenses, 3 individuals associated with PetroTiger and 2 individuals added to the 2013 case involving individuals associated with broker-dealer Direct Access Partners).  As highlighted several times on these pages, the most reliable way to keep FCPA statistics is using the “core” approach (i.e. the Indian mining licenses case is one “core” action, etc.), an approach endorsed by the DOJ and an approach that is a commonly accepted method used in other areas.

Regardless of counting method, comparing DOJ FCPA enforcement to SEC FCPA enforcement is not a valid comparison because – sticking with the “sidelines” reference – the DOJ and SEC “play” on different fields.

As demonstrated visually below, the SEC has FCPA jurisdiction over only issuers and associated person (78dd-1 – a relatively narrow slice of the range of “persons” subject to the FCPA).

The DOJ, by contrast, has FCPA jurisdiction over issuers and associated persons (78dd-1), as well as domestic concerns (78dd-2 – all U.S. companies regardless of form of business organization and U.S. persons) and persons other than issuers or domestic concerns (78dd-3 – literally any company in the world or any person in the world to the extent certain jurisdictional requirements are met).

Jurisdiction

In 2014, when the DOJ and SEC are playing on the same field – that is issuer FCPA enforcement actions – there is perfect 2 for 2 overlap as the SEC also brought enforcement actions against HP and Alcoa.  (Marubeni is not an issuer).  Even if it wanted to, the SEC could not bring FCPA charges against individuals in the Indian mining license enforcement action, individuals associated with PetroTiger or individuals associated with Direct Access Partners (although the SEC did bring non-FCPA charges against certain of the Direct Access Partners individuals because the entity was a broker-dealer).

In short, it is not that the SEC is staying on the “sidelines,” rather it is not allowed under the FCPA to step onto the same “playing field” as the DOJ.

In case you are wondering, in 2013 the DOJ brought 6 issuer FCPA enforcement actions (ADM, Weatherford, Diebold, Total, Ralph Lauren and Parker Drilling) and in all 6 of those DOJ issuer actions there were also related SEC enforcement actions against those same issuers.  In 2013, the SEC brought an additional 2 issuer enforcement actions (Stryker and Philips) that the DOJ theoretically could have joined, but here, it is not surprising that the SEC, a civil law enforcement agency, brought more issuer cases than the DOJ, a criminal law enforcement agency.  To complete the analysis from 2013, there was 1 DOJ enforcement action (Bilfinger) involving a non-issuer and thus the SEC was not allowed on that “playing field”).

Why Do Most Of The Top FCPA Settlements Involve Foreign Companies?

Wednesday, July 9th, 2014

[There is still time to register for the FCPA Institute in Milwaukee next week (July 16-17th).  The FCPA Institute is a unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills. To register see here]

Over the past several months, I’ve been asked the same general question several times:  why are so many foreign companies found in the top ten list of FCPA enforcement actions?

This post explains why and the answers are fairly straight-forward when one understands the factors under the advisory Sentencing Guidelines that impact fine amounts.

Below is the current top ten list of corporate FCPA enforcement actions in terms of settlement amount.

Company

Amount

              Year 
  1.  Siemens $800   million(DOJ – $450 million)(SEC – $350 million) 2008
  2.  KBR / Halliburton $579   million(DOJ – $402 million)(SEC – $177 million) 2009
  3.  Total $398   million(DOJ – $245 million)(SEC – $153 million) 2013
  4.  Alcoa $384   million(DOJ – $209 million)(SEC – $175 million) 2014
  5.  Snamprogetti / ENI $365   million(DOJ – $240 million)(SEC – $125 million) 2010
  6.  Technnip $338   million(DOJ – $240 million)(SEC – $ 98 million) 2010
  7.  JGC $219   million(DOJ – $219 million) 2011
  8.  Daimler $185   million(DOJ – $94 million)(SEC – $91 million) 2010
  9.  Weatherford   Int’l $153   million(DOJ – $87 million)(SEC – $66 million) 2013
  10.  Alcatel-Lucent $137   million(DOJ – $92 million)(SEC – $45 million) 2010

All but KBR/Halliburton and Alcoa are enforcement actions against foreign companies.

In analyzing the top ten enforcement actions, it is important to first recognize the following salient fact:  4 of the enforcement actions (KBR/Halliburton, Snamprogetti/ENI, Technip and JGC) are the same core enforcement action as the companies were all consortium partners pursuing through the same agents the same $6 billion Bonny Island, Nigeria liquified natural gas project.

The most important factor in determining fine amounts in FCPA enforcement actions under the advisory Sentencing Guidelines is net final benefit allegedly received from the improper payments.  Same is true when it comes to SEC disgorgement amounts.  Not surprisingly, given the Bonny Island project at issue, the net final benefits alleged in the enforcement actions were large.  As detailed here, in KBR/Halliburton the figure was alleged to be approximately $236 million; in Technip approximately $199 million; in Snamprogetti/ENI approximately $214 million; and in JGC approximately $195 million.

Thus, net final benefit allegedly received from the improper payments (and disgorgement amounts related thereto) easily explains 4 of the enforcement actions (the same core enforcement action) in the top 10.

It also explains large settlement amounts in other actions involving foreign companies as well.

Siemens of course was in a league by itself as the enforcement agencies stated that “for much of its operations across the globe, bribery was nothing less than standard operating procedure for Siemens.”  According to the enforcement agencies, the “pattern of bribery by Siemens was unprecedented in scale and geographic scope” and the “corruption involved more than $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas.”  The DOJ’s sentencing memorandum states that calculating a traditional loss figure under the Sentencing Guidelines “would be overly burdensome, if not impossible” given the “literally thousands of contracts over many years.”

Like the Bonny Island enforcement actions, the Total enforcement action also involved alleged improper payments in connection with large oil and gas projects in Iran.  According to the DOJ, the alleged value of the benefit received from the improper payments was approximately $147 million.

Large financial benefits received from alleged improper payments in connection with large projects or contracts are a major reason why so many foreign companies are found in the FCPA’s top 10 list of settlements.

However, it is not the only reason as other factors under the advisory Sentencing Guidelines can also increase fine amounts in FCPA enforcement actions.

Three such factors are the involvement of high-level personnel in the alleged improper conduct, the failure to voluntary disclose, and lack of cooperation. Application of these factors (which result in a company’s so-called “culpability score” under the Guidelines) to foreign companies has also contributed to large settlement amounts.

For instance, as noted in this prior post, the Daimler action, like Siemens, involved allegations regarding a “corporate culture that tolerated and/or encouraged bribery,” the involvement of various high-level executives, and allegations of improper conduct at the highest levels of the company including the boardroom.  Not surprisingly, as noted in the DOJ’s sentencing memorandum, Daimler’s culpability score was increased based on these allegations which then increased the fine range.

Moreover, few, if any, of the enforcement actions involving foreign companies were the result of voluntary disclosures – a practice that is “foreign” to most legal regimes outside of the U.S.

As to cooperation, as noted in this prior post, JGC Corp. was dinged by the DOJ for “initially declining to cooperate” with the DOJ. This factor, among others, increased the company’s “culpability score” under the Guidelines.

Each FCPA enforcement action is of course unique, involving specific projects or contracts, specific actors, and specific responses to alleged wrongdoing.  Yet common factors in all of the enforcement actions involving foreign companies in the top 10 list are some combination of very large projects or contracts, involvement of high level executives or board members in the alleged improper payments, lack of voluntary disclosure and lack of, or delayed, cooperation in the enforcement agencies’ investigation.

Few enforcement actions against U.S. companies have involved a combination of more than one of these factors – hence the few U.S. companies in the FCPA’s top ten list.

So there you have it – an answer to the often asked question – why do most of the top FCPA settlements involve foreign companies?

So is the conclusion to be drawn that foreign companies in the FCPA’s top 10 list are less ethical and less committed to corporate governance best practices?  Perhaps, but it is important to note that the majority of foreign company enforcement actions in the top 10 involved conduct that allegedly took place in the 1990′s or early 2000′s.

“Friday” Roundup

Thursday, July 3rd, 2014

On the brink of trial, statistics of note, the over-hyped U.K. Bribery Act turns 3, say what?, and for the reading stack.  It’s all here in a special Thursday edition of the Friday roundup.

On The Brink of Trial

This February 2012 post highlighting the SEC’s enforcement action against Mark Jackson and James Ruehlen (a former and current executive of Noble Corp. respectively) asked – “will the SEC be put to its burden of proof.”  Among other things, the post noted that the SEC has never prevailed in an FCPA enforcement action when put to its burden of proof.

With the passage of time, the SEC’s case against the defendants was consistently trimmed as the SEC attempted to meet its burden (see this post as well as here).  Among other things, a portion of the SEC’s claims were dismissed or abandoned on statute of limitations grounds and the trial court judge ruled, in an issue of first impression, that the SEC has the burden of negating the FCPA’s facilitation payments exception.

On the brink of the SEC’s first-ever FCPA trial (trial was scheduled to begin next week), the parties have agreed to settle.

Without admitting or denying the SEC’s allegations, Jackson consented to a final judgment permanently restraining and enjoining him from violating the FCPA’s books and records provisions.  Jackson was represented by, among others, David Krakoff (Buckley Sandler).  In a release, Krakoff stated:

“We are very pleased with today’s settlement.  It resolves allegations that have hung over Mr. Jackson for many years without any admission of liability, without any payment of money and without any restriction on Mr. Jackson’s future employment opportunities.  Mr. Jackson can now move forward with his life and career.”

Without admitting or denying the SEC’s allegations, Ruehlen consented to a final judgment permanently restraining and enjoining him from aiding and abetting FCPA books and records violations.  Ruehlen was represented by, among others, Joseph Warin and Nicola Hanna (Gibson Dunn).  In a release, Warin stated:

“We are very pleased with yesterday’s settlement.  Mr. Ruehlen is an exemplary and dedicated employee who first brought the allegations to light and fully cooperated with the SEC’s investigation.  While we were looking forward to presenting our case to a jury, the settlement of one record-keeping claim – without any admission of liability or wrongdoing, monetary penalty, or restriction on Mr. Ruehlen’s employment – satisfactorily ends the matter and allows Jim to focus his energies on his work for Noble.”

In neither consent is Jackson or Ruehlen required to pay any civil fine.

Score this one as you see fit, but my take is that this case represents yet another SEC failure in an FCPA enforcement action when put to its burden of proof.  As the Second Circuit recently recognized, SEC neither admit nor deny settlements are not about the truth, but pragmatism.

Statistics of Note

EY recently released its 13th annual Global Fraud survey (the results were based on interviews with more than 2,700 executives across 59 countries).  Statistics of note include the following.

“Despite the aggressive enforcement environment, our research suggests that the percentage of companies that have anti-bribery/anticorruption (ABAC) policies has increased by only 1% over the past two years, and a persistent minority has yet to take even the basic steps toward an effective compliance program.  One in five businesses still does not have an ABAC policy.  Less than 50% of respondents have attended ABAC training.  There has been a reduction in the level of reporting on compliance issues to boards.”

“The survey results show that executives in different roles have a differing view of the level of risk.  27% of chief compliance officers (CCOs) believe bribery and corrupt practices happen widely in their country versus 38% of all respondents — so they appear to have a more optimistic view than their colleagues.  18% of sales and marketing executives believe it is common practice to use bribery to win contracts in their sector versus 12% of all respondents — so they appear to have a more pessimistic view than their colleagues.”

“Additionally, the survey results suggest that compliance efforts may not always be targeting the right risks in the most effective way.  Less than a third of businesses are always or very frequently conducting anti-corruption due diligence as part of their mergers and acquisitions process.  45% of organizations are not mitigating risks by introducing a whistleblower hotline.  ABAC training is less likely to occur in jurisdictions where there is a higher perceived risk of bribery. Sales and marketing executives are the least likely of all our respondents to be included in risk assessments — despite being exposed to and aware of significant risks.  ABAC training, for example, is more likely to be attended by executives in mature markets, where corruption is perceived to be lower, than in higher-risk emerging markets. Of the survey population, 58% of respondents in developed markets had received ABAC training, compared with just 40% in emerging markets.”

Consistent with the observation in this recent post, these survey results again ought to prompt questions whether the current approach to enforcement – as well as enforcement policy – are effective.

Bribery Act Turns 3

The U.K. Bribery Act, a massively over-hyped law when it was being proposed and went live, has turned three.  On the day it went live, I offered the following two cents.

“As with any new law, there is likely to be a learning phase for both the enforcement agencies and those subject to the law. That was certainly the case in the U.S. in the years following passage of the FCPA in 1977. Thus, it very well may be the case that there are no enforcement actions for some time (recognizing that it often takes a few years from beginning of an inquiry to resolution of an action). Thus the greatest immediate impact of the Bribery Act is sure to be the compliance ethic it inspires. I expect that the enforcement actions that may develop over time to focus on egregious instances of corporate conduct on which no reasonable minds would disagree. I do not get the sense, based on public comments of the Ministry of Justice and the Serious Fraud Office, that the envelope will be pushed too far in the early years of the Bribery Act.”

Indeed, there has yet to be an “FCPA-like” Bribery Act enforcement action.  This troubles Transparency International – see here.

Say What?

Speaking of the Bribery Act, this is from “The Lawyer” regarding corruption allegations at FIFA and the ability of the U.K. Serious Fraud Office to bring an enforcement action against FIFA sponsors.

“Section 7 [of the U.K. Bribery Act] is entitled “Failure of commercial organisations to prevent bribery”. Its reach is as global as the World Cup. The fact that Fifa is a Zurich-based NGO does not mean it’s offside. Similarly for the sponsors so long as some aspect of their business is carried out in the UK. A single sale of an Adidas football boot via a Visa credit card is sufficient for David Green [Director of the SFO] to apply to the courts for search warrants in order to unleash dawn raids on their UK HQs.”

Regarding the italicized portion … say what?

For the Reading Stack

See here for the always informative Debevoise & Plimpton FCPA Update.  Regarding the Second Circuit’s recent decision in SEC v. Citigroup, the Update states:

“For companies subject to the SEC’s authority to enforce the FCPA, the Second Circuit’s decision in the Citi matter provides some comfort that a corporate resolution requiring judicial approval, once achieved, should be subject to appropriate deference when it comes before a district court for review. At the same time, however, the decision also reinforces the understanding that resolutions achieved by settlement, even if approved by a court, do not constitute legal precedent.”

An interesting read here from the BBC regarding “contemporary business culture” in China.

“Chinese workplaces are just as political as those anywhere else in the world, some would argue more so because the value placed on outward harmony in Chinese culture drives the rivalry underground. [...]  The politics in a multinational’s China operation can be especially insidious when there’s a thin layer of western management attempting to operate according to principles which have limited purchase in the Chinese business culture beneath.”

Aboard the “bribery express” – from Eurasianet.

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A Happy Independence Day to U.S. readers and a good weekend to all.