As noted in this post five years ago today, it was never clear why a new era of FCPA enforcement was being declared.
After all, the FCPA had not changed one word since 1998. However, with creeping frequency the enforcement theories leading up to the declaration of the FCPA’s new era had most certainly changed, as had the way in which the DOJ (and SEC) began resolving FCPA enforcement actions.
Since that day five years ago, I have written on a near-daily basis about various aspect of this new era of FCPA enforcement. Indeed, “The FCPA in a New Era” was the title of my 2014 book. (Click here to learn more about the book and see what others have said about “The FCPA in a New Era.”).
Much has happened during the past five years, but then again much has not changed and there remain serious and good faith questions about the FCPA and how the DOJ and SEC enforce the FCPA.
To better understand the many FCPA and related developments during the past five years, you may want to review the following year in review articles.
From my perch, the five most significant trends during the past five years are the following.
- The wide gap between corporate FCPA enforcement and related individual enforcement actions. The DOJ and SEC have long recognized that corporate enforcement only does not achieve maximum deterrence. Yet, as highlighted in this prior post, during the past 5+ years, approximately 75% of corporate DOJ FCPA enforcement actions have not resulted in any related enforcement action against a company employee and approximately 80% of corporate SEC FCPA enforcement actions have not resulted in any related enforcement action against a company employee. Instead of asking the “but why was nobody charged question,” as I stated in my 2010 Senate testimony the more appropriate question is do corporate FCPA enforcement actions necessarily represent provable FCPA violations?
- In answering the above question, it is important to understand how the DOJ and SEC have come to resolve corporate enforcement actions in this new era of enforcement. NPAs and DPAs have dominated DOJ FCPA enforcement during the past five years as approximately 85% of corporate FCPA actions involved in whole or in part an NPA or DPA. The common thread in these resolution vehicles is the absence (or practical) absence of judicial scrutiny. In this new era of FCPA enforcement, the SEC also began using NPAs and DPAs, but with the SEC the bigger story has been the SEC’s frequent use of administrative orders to resolve corporate FCPA enforcement actions. Indeed, in 2014 approximately 85% of SEC corporate enforcement actions were resolved administratively in the absence of any judicial scrutiny.
- As predicated in my 2010 article, “The Facade of FCPA Enforcement,” other nations would soon grow envious of the ease in which the U.S. government resolved FCPA enforcement actions and the ease in which settlement amounts flowed into the U.S. treasury. Thus, it was predicted that other nations would soon start modeling their enforcement of FCPA-like laws on the U.S. alternative resolution model. Sure enough, the U.K. formally adopted (but has not yet used) DPAs to resolve Bribery Act offenses, Canada wants alternative resolution vehicles, Australia wants alternative resolution vehicles and the list goes on and on. This is why, among other reasons, the way in which the U.S. government resolves FCPA enforcement actions matters.
- The 11th Circuit’s 2014 decision in Esquenazi notwithstanding, the DOJ has a very poor record in this new era of FCPA enforcement when actually put to its burden of proof. The Africa Sting debacle, the Lindsey Manufacturing et al prosecutorial misconduct debacle, the O’Shea loss (to read more about these instances – see “What Percentage of DOJ FCPA Losses is Acceptable?“) the Sigelman debacle, and the SEC caving in and offering a very lenient settlement to Jackson and Ruehlen on the eve of trial, all of these instances represent the government having a serious problem proving FCPA violations when put to its burden of proof. Yet despite these struggles, the DOJ and SEC consistently tout their successful FCPA enforcement program by exercising leverage against risk averse business organizations. In short, during this era of FCPA enforcement, the DOJ and SEC have elevated quantity over quality.
- During this new era, FCPA enforcement became a top priority for the U.S. government, and government enforcement officials have stated that “we in the United States are in a unique position to spread the gospel of anti-corruption” and that FCPA enforcement ensures not only that the United States “is on the right side of history, but also that it has a hand in advancing that history. However, this lofty rhetoric, besides being breathless, is largely hollow as the U.S. crusade against bribery suffers from uncomfortable truths and double standards and you can decide for yourself whether the U.S. “practices what it preaches” when it comes to the enforcement of bribery laws and whether the United States is indeed “in a unique position to spread the gospel of anti-corruption” by reading this recently published article.
As the FCPA’s new era turns 5, it is important to recognize that the notion of zero corruption (a position explicitly or at least implicitly advanced by some) is simply foolish for the same reason it is foolish to suggest that other crimes will be eliminated.
Rather, the goal of FCPA enforcement should be to minimize FCPA violations and to create policies and procedures that best yield this goal.
Unfortunately, the policies and procedures advanced by the DOJ and SEC since 2010 have not been successful and recent events such as the Yates Memo (yet another DOJ policy memo) and additional rumored FCPA guidance would seem to indicate.
What will the next five years of FCPA enforcement look like?
I have my guesses, but regardless of the answer, you can be sure that every FCPA enforcement action and every FCPA or related development will be highlighted and analyzed right here on FCPA Professor just like the past five years.