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What did Paul Pellitier (a former Principal Deputy Chief of the Criminal Division’s Fraud Section) think about Assistant Attorney General Leslie Caldwell’s recent “we do not expect companies to aimlessly boil the ocean” speech (see here for the prior post). Pellitier wrote in a guest post on the FCPA Blog:
“Somewhat surprisingly, however, AAG Caldwell seemed to place the blame for the arduousness of government FCPA investigations squarely on companies for “spend[ing] years, and many millions of dollars, investigating potential violations.”
Although AAG Caldwell’s candid remarks provide enough reason to be hopeful, they don’t address critical distinctions between corporate internal investigations and the government’s own overarching criminal investigations that may serve to cause investigatory delays.
As an initial observation, it remains an unavoidable fact that companies simply are not incentivized to incur substantial costs by acting needlessly in the conduct of those internal inquiries. Moreover, while it may be true that, on occasion, a company has “boiled the ocean” in the conduct of an internal investigation, the notion that federal investigators would routinely permit an “aimless” internal inquiry to negatively affect the course or duration of the government’s investigation is, at base, unconvincing.
There is no doubt, however, that, regardless of the level of corporate cooperation, government investigators and prosecutors are not merely museum docents here. As AAG Caldwell pointed out, the government does not (and cannot) sit idly by and rely exclusively on the company’s internal investigation in making its charging decisions, but rather, conducts its own independent inquiry and “pressure tests” the company’s internal investigation. As such, the government plainly is the driver of the investigatory bus.”
As to Pellitier’s comments, it is of course true that “companies simply are not incentivized to incur substantial costs by acting needlessly in the conduct of those internal inquiries.”
Yet it may be true that: (i) FCPA Inc. may be so incentivized; (ii) FCPA Inc. participants are often the go-between between the DOJ/SEC and a company’s board of directors / audit committee; and (iii) few board of directors / audit committees are going to reject FCPA Inc. advice when the issue is a high-profile, sensitive, potentially criminal FCPA matter.
Scrutiny Alerts and Updates
Here is what Brian Robinson (CFO, General Cable Corporation) said on a recent earnings conference call about the company’s FCPA scrutiny.
“I wanted to provide an update regarding the ongoing FCPA-related investigation. The general scope of our internal investigation remains broadly consistent with our past disclosures and we continue to believe, subject to any new developments, that our internal investigation will be concluded or substantially concluded later in this calendar year. As we’ve stated before, once we complete our internal review, we cannot predict how long it will take the SEC or DOJ to conclude their work or what the ultimate outcome may be, including the amount of any fines or penalties we may pay.
We also cannot guarantee that the scope of this ongoing investigation will not change or expand in the future as it unfolds. As we’ve said before, any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition of substantial fines, civil and criminal penalties, and equitable remedies including disgorgement and injunctive relief.
In February of this year, based on the analysis completed at that time, with the assistance of our external counsel and forensic accountants, we concluded that we are able to reasonably estimate the amount of profit derived from sales made to the Angolan government owned public utilities that we believe are likely to ultimately be disgorged in connection with our ongoing investigation. As a result, we recorded an estimated charge in the amount of $24 million as an accrual as of December 31, 2014. The accrued amount reflects only an estimate of the Angola related profits reasonably likely to be disgorged and does not include provision for any fines, civil or criminal penalties, or other relief. There has been no change in the amount of accrual since it was put in place in February.”
Bank of New York Mellon Corp. recently disclosed:
“In January 2011, the Enforcement Division of the U.S. Securities and Exchange Commission (the “SEC Staff”) informed several financial institutions, including BNY Mellon, that it had commenced an inquiry into certain of their business practices and relationships with sovereign wealth fund clients. In the third quarter of 2014, the SEC Staff issued Wells notices to certain current and former employees of BNY Mellon, informing them that the SEC Staff has made a preliminary determination to recommend enforcement action against them for alleged violations of the U.S. Foreign Corrupt Practices Act in connection with the provision of a limited number of internships to relatives of sovereign wealth fund officials. BNY Mellon received a similar Wells notice in the fourth quarter of 2014. On Jan. 23, 2015, BNY Mellon received an additional subpoena from the SEC expanding the scope of the SEC’s inquiry into the provision of internships and employment opportunities offered to officials and relatives of officials at government-related entities. BNY Mellon has fully cooperated with the SEC Staff’s investigation.”
Speaking of the above disclosure, this World Finance video (7 minutes in length) asks “is bribery part of life on Wall Street?” (Note- challenging enforcement agency interpretations of facts or law (as recently highlighted here) is not lobbying as suggested in the video).
A good weekend to all.