Archive for the ‘Whistleblowers’ Category

FCPA “Tips” Continue To Be A Minor Component Of The SEC’s Whistleblower Program

Monday, November 23rd, 2015

whistleThe Dodd-Frank Act enacted in July 2010 contained whistleblower provisions applicable to all securities law violations including the Foreign Corrupt Practices Act.

In this prior post from July 2010, I predicted that the new whistleblower provisions would have a negligible impact on FCPA enforcement.  As noted in this prior post, my prediction was an outlier (so it seemed) compared to the flurry of law firm client alerts that predicted that the whistleblower provisions would have a significant impact on FCPA enforcement.  So anxious was FCPA Inc. for a marketing opportunity to sell its compliance services, some even called the generic whistleblower provision the FCPA’s “new” whistleblower provisions.

So far, there has not been any reported whistleblower award in connection with an FCPA enforcement action.  Given that enforcement actions (from point of first disclosure to resolution) typically take between 2-4 years, it still may be too early to effectively analyze the impact of the whistleblower provisions on FCPA enforcement.

Whatever your view on how the whistleblower provisions may impact FCPA enforcement, it was previously noted that the best part of the whistleblower provisions were that its impact on FCPA enforcement can be monitored and analyzed because the SEC is required to submit annual reports to Congress.

Recently, the SEC released (here) its annual report for FY2015 and of the 3,923 whistleblower tips received by the SEC in FY2015, 4.7% (186) related to the FCPA.

As noted in this similar post from last year, of the 3,620 whistleblower tips received by the SEC in FY2014, 4.4% (159) related to the FCPA. As noted in this similar post from two years ago, of the 3,238 whistleblower tips received by the SEC in FY2013, 4.6% (149) related to the FCPA.  As noted in this similar post from three years ago, of the 3,001 whistleblower tips received by the SEC in FY2012, 3.8% (115) related to the FCPA.  In FY2011 (a partial reporting year)  3.9% of the 334 tips received by the SEC related to the FCPA.

In short, FCPA “tips” have consistently constituted only a minor component of the SEC’s whistleblower program.

Yes, in the future there will be a whistleblower award made in the context of an FCPA enforcement action.  Yes, there will be much ink spilled on this occasion and wild predictions about this “new trend.”

Yet, I stand by my prediction – now 5.5 years old, that Dodd-Frank’s whistleblower provisions will have a negligible impact on FCPA enforcement.

SEC Potpourri

Monday, May 11th, 2015

SECLast week, the SEC released this document titled “Division of Enforcement Approach to Forum Selection in Contested Actions.”

In Foreign Corrupt Practices Act history, one can count the number of “contested” SEC FCPA enforcement actions on one hand, but the recent document is nevertheless an interesting read as it sets forth the SEC’s approach in determining whether an action proceeds as a civil action in federal court or an SEC administrative proceeding.

According to the document:

“There is no rigid formula dictating the choice of forum.  The Division considers a number of factors when evaluating the choice of forum and its recommendation depends on the specific facts and circumstances of the case.  Not all factors will apply in every case and, in any particular case, some factors may deserve more weight than others, or more weight than they might in another case.  Indeed, in some circumstances, a single factor may be sufficiently important to lead to a decision to recommend a particular forum. While the list of potentially relevant considerations set out below is not (and could not be) exhaustive, the Division may in its discretion consider any or all of the factors in assessing whether to recommend that a contested case be brought in the administrative forum or in federal district court.”

  • The document then sets forth the following factors;
  • The availability of the desired claims, legal theories, and forms of relief in each forum;
  • Whether any charged party is a registered entity or an individual associated with a registered entity;
  • The cost‐, resource‐, and time‐effectiveness of litigation in each forum;
  • Fair, consistent, and effective resolution of securities law issues and matters.

Under the last factors, the document states:

“If a contested matter is likely to raise unsettled and complex legal issues under the federal securities laws, or interpretation of the Commission’s rules, consideration should be given to whether, in light of the Commission’s expertise concerning those matters, obtaining a Commission decision on such issues, subject to appellate review in the federal courts, may facilitate development of the law.”

This statement is beyond concerning.

Unsettled and complex legal issues are deserving of an independent judiciary, not the SEC’s own administrative law judges. Contrary to the SEC’s assertion, the above preference does not facilitate the development of law, it hinders the development of law.


Speaking of SEC administrative actions, no surprise here – the SEC wins a very high percentage of its cases when brought before its own administrative law judges. According to this recent Wall Street Journal article:

“An analysis by The Wall Street Journal of hundreds of decisions shows how much of a home-court advantage the SEC enjoys when it sends cases to its own judges rather than federal courts. That is a practice the agency increasingly follows, the Journal has found.

The SEC won against 90% of defendants before its own judges in contested cases from October 2010 through March of this year, according to the Journal analysis. That was markedly higher than the 69% success the agency obtained against defendants in federal court over the same period, based on SEC data.”

As highlighted in prior posts (see here for instance), the predominate method by which the SEC has brought FCPA enforcement actions over the past few years have been through its own administrative process.  This is against the backdrop of the SEC never prevailing in an FCPA enforcement action when put to its ultimate burden of proof. (See here).


In this recent speech, SEC Chair Mary Jo White talks about the SEC’s whistleblower program:

“There have always been mixed feelings about whistleblowers and many companies tolerate, at best, their existence because the law requires it.  I would urge that, especially in the post-financial crisis era when regulators and right-minded companies are searching for new, more aggressive ways to improve corporate culture and compliance, it is past time to stop wringing our hands about whistleblowers.  They provide an invaluable public service, and they should be supported.  And, we at the SEC increasingly see ourselves as the whistleblower’s advocate.

It has been nearly four years since the SEC implemented its whistleblower program.  While still evolving and improving, we have enough experience now to take a hard look at how the program is working and what we have learned.  Overall, I am here to say that the program is a success – and we will work hard at the SEC to build on that success.

The volume of tips has been greater and of higher quality than expected when the program was first adopted.  We have seen enough to know that whistleblowers increase our efficiency and conserve our scarce resources.  Importantly, internal compliance programs at companies also remain vibrant and effective ways to detect and report wrongdoing.  But despite the success of our program, the decision to come forward, especially in the face of internal pressure, is not an easy one.

The ambivalence about whistleblowers can indeed sometimes manifest itself in an unlawful response by a corporate employer and we are very focused at the SEC on cracking down on such misconduct.  We want whistleblowers – and their employers – to know that employees are free to come forward without fear of reprisals.  In 2014, we brought our first retaliation case and, this month, our first case involving the use of a confidentiality agreement that can impede whistleblowers from communicating with us.  This latter case has generated some controversy, which I will address shortly.  But, first, let’s look a bit closer at the four-year track record of the program.”

A portion of White’s speech also focused on “supporting internal compliance” and she stated:

“Let me say a bit more about company compliance programs.  When the Commission was considering its whistleblower rules, concerns were raised about undermining companies’ internal compliance programs.  Some commenters urged that internal reporting be made a pre-condition to a whistleblower award.  That was not done, but the final whistleblower rules established a framework to incentivize employees to report internally first.  A whistleblower’s participation in internal compliance systems is thus a factor that will generally increase an award, whereas interference with those systems will surely decrease an award. And, a whistleblower who internally reports, and at the same time or within 120 days reports to the Commission, will receive credit for any information the company subsequently self-reports to the SEC.

All indications are that internal compliance functions are as strong as ever – if not stronger – and that insiders continue to report possible violations internally first.  Although there is no requirement under our rules that the whistleblower be a current or former employee, several of the individuals who have received awards were, in fact, company insiders.  Notably, of these, over 80% first raised their concerns internally to their supervisors or compliance personnel before reporting to the Commission.

Many in-house lawyers, compliance professionals, and law firms representing companies have told us that since the implementation of our program, companies have taken fresh looks at their internal compliance functions and made enhancements to further encourage their employees to view internal reporting as an effective means to address potential wrongdoing without fear of reprisal or retaliation.  That is a very good thing, and, so far, we believe that the whistleblower program has achieved the right balance between the need of companies to be given an opportunity to address possible violations of law and the SEC’s law enforcement interests.”

In conclusion, White stated:

“The bottom line is that is that responsible companies with strong compliance cultures and programs should not fear bona fide whistleblowers, but embrace them as a constructive part of the process to expose the wrongdoing that can harm a company and its reputation.  Gone are the days when corporate wrongdoing can be pushed into the dark corners of an organization.  Fraudsters rarely act alone, unobserved and, these days, the employee who sees or is asked to make the questionable accounting entry or to distribute the false offering materials may refuse to do it or just decide that they are better off telling the SEC.  Better yet, either there are no questionable accounting entries or false offering materials to be reported in the first place or companies themselves self-report the unlawful conduct to the SEC.”


If SEC enforcement is an area of interest, you will want to check out this recent article in Securities Regulation Journal about Stanley Sporkin.

Among Sporkin’s other notable accomplishments, he was the Director of Enforcement at the SEC in the mid-1970′s when the so-called foreign corporate payments problem arose and he championed what would become the FCPA’s books and records and internal controls provisions.

Many have called Sporkin the “father of the FCPA” – a label I have always found curious given that Sporkin and his enforcement division were opposed to the FCPA’s anti-bribery provisions and wanted no part in enforcing those provisions.

To learn more about this, see “The Story of the Foreign Corrupt Practices Act.”

Fittingly Foolish

Monday, April 6th, 2015

FoolishLast week – on April Fools’ Day – the SEC announced this administrative action against KBR Inc.

It was fitting because the action was foolish.

In the words of the SEC:

“The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010, amended the Exchange Act by adding Section 21F, “Whistleblower Incentives and Protection.” The congressional purpose underlying these provisions was “to encourage whistleblowers to report possible violations of the securities laws by providing financial incentives, prohibiting employment-related retaliation, and providing various confidentiality guarantees.” [...]

To fulfill this congressional purpose, the Commission adopted Rule 21F-17, which provides in relevant part: (a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.”

As to KBR, the SEC stated:

“As part of its compliance program, KBR regularly receives complaints and allegations from its employees of potential illegal or unethical conduct by KBR or its employees, including allegations of potential violations of the federal securities laws. KBR’s practice is to conduct internal investigations of these allegations. KBR investigators typically interview KBR employees (including the employees who originally lodged the complaint or allegation) as part of the internal investigations.

Prior to the promulgation of Rule 21F-17 and continuing into the time that Rule 21F-17 has been in effect, KBR has used a form confidentiality statement as part of these internal investigations. Although use of the form confidentiality statement is not required by KBR policy, the statement is included as an enclosure to the KBR Code of Business Conduct Investigation Procedures manual, and KBR investigators have had witnesses sign the statement at the start of an interview.

The form confidentiality statement that KBR has used before and since the SEC adopted Rule 21F-17 requires witnesses to agree to the following provisions: I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department. I understand that the unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.”

And now for the foolish part.  The SEC specifically stated:

“Though the Commission is unaware of any instances in which (i) a KBR employee was in fact prevented from communicating directly with Commission Staff about potential securities law violations, or (ii) KBR took action to enforce the form confidentiality agreement or otherwise prevent such communications, the language found in the form confidentiality statement impedes such communications by prohibiting employees from discussing the substance of their interview without clearance from KBR’s law department under penalty of disciplinary action including termination of employment. This language undermines the purpose of Section 21F and Rule 21F-17(a), which is to “encourage[e] individuals to report to the Commission.”

Based on the above, the SEC found that KBR violated Rule 21F-17.

Without admitting or denying the SEC’s findings, KBR agreed to pay a civil monetary penalty of $130,000.

A far more prudent approach would have been for the SEC to issue a Section 21(a) Report of Investigation (see here).

The supreme irony of the SEC’s enforcement action?

While faulting KBR for its non-existent, theoretical muzzling of individuals, the SEC routinely muzzles corporate defendants in SEC enforcement actions.

For instance, the recent PBSJ deferred prosecution agreement with the SEC stated:

“Respondent agrees not to take any action or to make or permit any public statement through present or future attorneys, employees, agents, or other persons authorized to speak for it, except in legal proceedings in which the Commission is not a party in litigation or otherwise, denying, directly or indirectly, any aspect of this Agreement or creating the impression that the statements in [the Statement of Facts” are without factual basis. [...] Prior to issuing a press release concerning this Agreement, the Respondent agrees to have the text of the release approved by the staff of the Division.”

The Ralph Lauren non-prosecution agreement and the Tenaris deferred prosecution agreement contained the same muzzle clauses.


Monday, November 24th, 2014

Wal-Mart Related

Here is what Wal-Mart said in its recent 3Q FY 2015 earnings call.

“FCPA and compliance-related costs were approximately $41 million, which represents approximately $30 million for the ongoing inquiries and investigations and approximately $11 million for our global compliance program and organizational enhancements. Last year, FCPA and compliance-related costs were $69 million for the third quarter.  Through the third quarter of this year, we have spent $137 million on FCPA  and compliance-related costs, versus our guidance of between $200 and  $240 million. We expect to be near the low end of the guidance for the full  year.”

Doing the math, that is approximately $640,000 in FCPA-related expenses per working day.

Over the past approximate two years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses. While some pundits have ridiculed me for doing so, such figures are notable because, as has been noted in prior posts and in my article “Foreign Corrupt Practices Act Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny.  Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.

While $640,000 per working day remains eye-popping, Wal-Mart’s recent figure suggests that the company’s pre-enforcement action professional fees and expenses have crested as the figures for the past four quarters have been approximately $662,000, $855,000, $1.1 million and $1.3 million per working day.

In the aggregate, Wal-Mart’s disclosed pre-enforcement professional fees and expenses are as follows.

FY 2013 = $157 million.

FY 2014 = $282 million.

FY 2015 (first three quarters) = $137 million.


Another ripple of FCPA scrutiny and enforcement highlighted in “Foreign Corrupt Practices Act Ripples” is shareholder litigation in connection with FCPA scrutiny.

On that score, plaintiffs firm Robbins Geller Rudman & Dowd LLP recently sued the SEC in federal court seeking certain documents in the SEC’s possession concerning Wal-Mart’s FCPA scrutiny.  In the complaint, Robbins Geller alleges that the SEC has improperly denied its Freedom of Information Act document requests.  The complaint alleges that the SEC’s reliance on a FOIA exemption concerning documents “compiled for law enforcement purposes” does not apply because the documents sought “were provided by and retained by Walmart, the subject of the SEC investigation, and therefore not “compiled for law enforcement purposes.”


India’s Economic Times reports:

“The Indian arm of American retail giant Walmart has terminated a mid-level manager amid investigations into alleged violations of U.S. anti-bribery laws in the country. Two years ago, when the company was known as Bharti Wal-Mart, it had sacked its chief financial officer and the entire legal team in connection with the same probe. The mid-level manager, who received a termination notice last week, is also required to be available for questioning by the U.S. Department of Justice in the next five years.”


Petrobras, an oil and gas company in Brazil, has been the focus of much recent news.

Recently, the Financial Times reported that the DOJ and SEC have opened investigations into the company and reported that “U.S. authorities are looking into whether Petrobras or its employees, middlemen, or contractors, violated the FCPA.”  It was reported that there is also an open investigation in Brazil and the Financial Times noted that “prosecutors in Brazil allege that Petrobras and its contractors overinflated the cost of capital expenditure projects and acquisitions by hundreds of millions of dollars and paid part of the proceeds to politicians from the ruling Workers’ Party coalition.”  According to the Financial Times, the “ruling coalition politicians received 3 percent of all contracts.”

The apparent FCPA scrutiny of Petrobras is interesting on many levels.

For starters, certain FCPA enforcement actions have involved Petrobras employees – not as a payor of alleged improper payments – but as the recipient of alleged improper payments.  The enforcement theory of course is that the company making the alleged improper payments violated the FCPA’s anti-bribery provisions because Petrobras was an alleged “instrumentality” of the Brazilian government and thus Petrobras employees were “foreign officials” under the FCPA.

On the flip side of course is the fact that Petrobras has ADRs listed on a U.S. exchange and thus would be considered by the enforcement agencies to be an “issuer” subject to the FCPA.

In short, the enforcement theory that employees of SOEs are “foreign officials” results in an interesting paradox of sorts should there be an FCPA enforcement action against Petrobras as Petrobras employees would have been on “both sides” of the FCPA – an occurrence that has likely never happened before.  Taking the enforcement theory to its logical conclusion also means that the U.S. government is apparently investigating whether the Brazilian government has engaged in corruption.  A host of legal and policy issues would seem to arise.

Another interesting issue to ponder from Petrobras’s apparent FCPA scrutiny is whether any alleged improper payments by Petrobras – either directly or indirectly through others – to Brazilian officials would truly represent payments to ‘foreign officials.”

As highlighted in this prior post concerning the first FCPA enforcement action against a foreign issuer (albeit not charging violations of the anti-bribery provisions), according to a knowledgeable source at the SEC at the time, there was a belief that there were no “foreign” officials involved because Montedison, an Italian company, allegedly bribed Italian officials.

This dynamic has not been present in other foreign issuer FCPA enforcement actions (for instance Siemens did not allegedly bribe German “officials,” Technip did not allegedly bribe French “officials”, etc.) but would be present in any FCPA enforcement action against Petrobras.

Regarding the potential FCPA scrutiny of Petrobras, it appears that the subject of inquiry concerns potential payments made by third parties on behalf of Petrobras or at least with the knowledge of Petrobras employees.  As I indicated to the Wall Street Journal in this story:

“The vast majority of FCPA enforcement actions are indeed based upon indirect payments. If Petrobras paid an inflated amount to a contractor, the questions will be why, were they aware it was inflated, and what steps did they take to remedy the situation, or did they just accept the inflated amount with an inkling or suspicion that it would go somewhere else?”

More recently, the story continues to evolve and as highlighted in this recent Wall Street Journal article:

“Federal police [in Brazil last week] arrested 18 people, including Renato Duque, former director of engineering and services at Petrobras. Authorities allege he and others were part of a bribery and money-laundering scheme that has siphoned hundreds of millions of dollars from the state-owned oil firm into the pockets of employees, contractors and politicians. Police also served dozens of search warrants and raided the offices of 11 companies they suspect of participating in a scam. The companies, which include Brazilian multinationals Odebrecht SA, Camargo Corrêa SA, Construtora OAS SA and others, are suspected of colluding to inflate the costs of work performed for Petrobras. Prosecutors allege some of the resulting profits were funneled to Petrobras executives and high-level politicians, including some members of the president’s ruling Workers’ Party, a charge the party has repeatedly denied.”

As a result of the controversy swirling about the company, Petrobras recently announced that it was “unable to release its third quarter 2014 financial statements at this time.”

Separately, Reuters reported:

“Petrobras said on Monday it had received a subpoena from the U.S. Securities and Exchange Commission asking for documents relating to an investigation it is pursuing. [...]  Petrobras did not provide details as to what documents the SEC had requested. The company is also under investigation by the U.S. Department of Justice, according to a person familiar with the matter who was not authorized to speak publicly about the matter. [...] The U.S. investigation, conducted by both the SEC and the DOJ, is “broad” in nature and has been ongoing since at least the start of 2014, the person said.”

In short, the apparent FCPA scrutiny of Petrobras raises several interesting issues worthy of pondering.  Should there be an enforcement action against the company for violating the FCPA’s anti-bribery provisions, it would be historic for the reasons discussed above.

Whistleblower Statistics

The Dodd-Frank Act enacted in July 2010 contained whistleblower provisions applicable to all securities law violations including the Foreign Corrupt Practices Act.  In this prior post from July 2010, I predicted that the new whistleblower provisions would have a negligible impact on FCPA enforcement.  As noted in this prior post, my prediction was an outlier (so it seemed) compared to the flurry of law firm client alerts that predicted that the whistleblower provisions would have a significant impact on FCPA enforcement.  So anxious was FCPA Inc. for a marketing opportunity to sell its compliance services, some even called the generic whistleblower provision the FCPA’s “new” whistleblower provisions.

So far, there has not been any whistleblower award in connection with an FCPA enforcement action.  Given that enforcement actions (from point of first disclosure to resolution) typically take between 2-4 years, it still may be too early to effectively analyze the impact of the whistleblower provisions on FCPA enforcement.

Whatever your view, I previously noted that the best part of the new whistleblower provisions were that its impact on FCPA enforcement can be monitored and analyzed because the SEC is required to submit annual reports to Congress.  Recently, the SEC released (here) its annual report for FY2014.

Of the 3620 whistleblower tips received by the SEC in FY2014, 4.4% (159) related to the FCPA. As noted in this similar post from last year, of the 3,238 whistleblower tips received by the SEC in FY2013, 4.6% (149) related to the FCPA.  As noted in this similar post from 2012, of the 3,001 whistleblower tips received by the SEC in FY2012, 3.8% (115) related to the FCPA.  In FY2011 (a partial reporting year)  3.9% of the 334 tips received by the SEC related to the FCPA.

Yes, in the future there will be a whistleblower award made in the context of an FCPA enforcement action.  Yes, there will be much ink spilled on this occasion and wild predictions about this “new trend.”  Yet, I stand by my prediction – now 4.5 years old, that Dodd-Frank’s whistleblower provisions will have a negligible impact on FCPA enforcement.

DOJ And SEC Officials Talk FCPA

Thursday, November 20th, 2014

Speaking8In what has become a mid-November tradition, DOJ and SEC officials yesterday gave speeches at a Foreign Corrupt Practices Act conference.

Topics discussed included the following:  individual prosecutions, voluntary disclosure and cooperation, compliance programs, asset recovery, foreign law enforcement cooperation.  (For factual information concerning DOJ and SEC individuals prosecutions see this prior post and as relevant to the issue of “success” – a topic touched upon in both speeches – you might want to read the article ”What Percentage of DOJ FCPA Losses is Acceptable?“)

In many respects, yesterday’s DOJ and SEC speeches were very similar to previous speeches delivered by enforcement agency officials in September and October (see here, herehere and here for prior posts).

This post excerpts this speech by Assistant Attorney General Leslie Caldwell and this speech by Andrew Ceresney, Direct of the SEC’s Enforcement Division.


Caldwell began her remarks as follows.

“I want to focus my remarks on one of our most important enforcement priorities – our efforts to combat corruption around the world.

At the Criminal Division, we are stepping up our efforts in the battle against corruption, at home and abroad.  Through our Public Integrity Section, which prosecutes corruption cases involving U.S. federal, state, and local officials, we are attacking domestic corruption.

More relevant to this audience, we are also deeply committed to fighting corruption abroad.  Now, more than ever, we are bringing to justice individuals and corporations who use foreign bribery as a way to gain a business advantage.  In part, we are doing this using the tools and methods that have made our past enforcement efforts so successful – FCPA prosecutions and penalties.

But there have been some really big changes in the Justice Department’s FCPA work since I last worked there.  First, thanks to the expertise and knowledge we have acquired over the years, we are now able to investigate FCPA cases much more quickly.  We also are better equipped to prosecute individuals who are actually making corrupt payments, as well as intermediary entities hired to serve as conduits for bribes.

And now we also are prosecuting the bribe takers, using our money laundering and other laws.  And, importantly, we have begun stripping corrupt officials of the proceeds of their corruption involving both bribes and kleptocracy, using both criminal and civil authorities.

The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are really two sides of the same anti-corruption coin.  We bring those who pay bribes to justice, no matter how rich and powerful they are.  But by itself, that is not enough.  We also attack corruption at its source – by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.

Another big change – one that has been building for years but now has really developed momentum – is that we increasingly find ourselves shoulder-to-shoulder with law enforcement and regulatory authorities in other countries.  Every day, more countries join in the battle against transnational bribery. And this includes not just our long-time partners, but countries in all corners of the globe.

Together with our foreign law enforcement and regulatory partners we are taking a truly global approach to rooting out international corruption.  And make no mistake, this international approach has dramatically advanced our efforts to uncover, punish and deter foreign corruption.

Increasingly, we and our counterparts share information about bribery schemes.   We report schemes to one another.  And, where appropriate, we discuss strategy and coordinate our use of investigative techniques, so that we can obtain the best possible results, especially in very high-impact cases.

These efforts are incredibly important. The World Bank estimates that more than $1 trillion is paid every year in bribes, which amounts to about 3 percent of the world economy.  That amount is stunningly wasteful.  No one benefits from corruption other than the corrupt officials.

But corruption is far more insidious and harmful than can be measured numerically.  We all know that when corruption takes hold, the fundamental notion of playing-by-the-rules gets pushed to the side, and individuals, businesses and governments instead begin to operate under a fundamentally unfair – and destabilizing – set of norms.  This undermines confidence in the markets and governments, and destroys the sense of fair play that is absolutely critical for the rule of law to prevail.

In emerging economies, corruption stifles economic development that would lift people out of poverty, improve infrastructure, and better people’s lives.  And the fruits of corruption can prop up autocratic and oppressive rulers even in wealthier countries.

Make no mistake, the effects of foreign corruption are not just felt overseas.  In today’s global economy, the negative effects of foreign corruption inevitably flow back to the United States.  For one, American companies are harmed by global corruption.  They are denied the ability to compete in a fair and transparent marketplace.  Instead of being rewarded for their efficiency, innovation, and honest business practices, U.S. companies suffer at the hands of corrupt governments and lose out to corrupt competitors.

International corruption also presents broader public safety concerns.  Indeed, criminal networks of all kinds, including narcotics traffickers, cyber criminals, terrorists, and human traffickers, often take advantage of countries whose commitment to the rule of law is weakened by corruption of its officials.  And, as we’ve seen in the more extreme cases, thoroughly corrupted regimes have created safe havens for criminals by giving them a secure base from which they can orchestrate their criminal activities.

You have no doubt heard my predecessors speak of the evils of corruption.  It is because of these evils that the fight against international bribery has been, and continues to be, a core priority of the Department of Justice.

Our commitment to the fight against foreign bribery is reflected in our robust enforcement record in this area, which includes charges against corporations and individuals alike from all over the world.  Since 2009, we have convicted more than 50 individuals in FCPA and FCPA-related cases, and resolved criminal cases against more than 50 companies with penalties and forfeiture of approximately $3 billion.  Twenty-five of the cases involving individuals have come since 2013 alone.  And those are just the cases that are now public.  These individuals run the gamut of actors involved in bribery schemes: corporate executives, middlemen, and corrupt officials.”

Caldwell next focused on asset recovery and international cooperation:

“As our enforcement actions demonstrate, we are focusing our attention on bribes of consequence – ones that fundamentally undermine confidence in the markets and governments.  And our record of success in these prosecutions has allowed us to show – rather than just tell – corporate executives that if they participate in a scheme to improperly influence a foreign official, they will personally risk the very real prospect of going to prison.


Stripping individuals of the proceeds of their conduct – and thus depriving them of the very profits that are driving the corrupt conduct in the first place – is one technique that we are using increasingly in our fight against foreign bribery.  And, we are not just pursuing these corrupt proceeds through criminal actions.

The FCPA Unit’s efforts to eradicate foreign corruption also are assisted by the work of our Kleptocracy Asset Recovery Initiative, through which prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section and Office of International Affairs are pursuing ill gotten riches from corrupt officials using our civil authority. [...] [W]e are ready, willing, and able to confiscate the riches of corrupt leaders who drain the resources of their countries for their own benefit.”

[O]ur efforts to hold bribe takers as well as bribe payors accountable for their criminal conduct are greatly aided by our foreign partners.  Transnational bribery is a global problem and an international solution truly is beginning to develop.  Every day, more countries reject the notion that bribery in international business is inevitable and acceptable.  Indeed, in just the last few years several countries have enacted new anti-corruption laws or enhanced existing laws.  Admittedly, the global trend against foreign corruption continues to face many challenges, but the tide has turned and I truly believe that it is now on our side.

This level of collaboration is the product of hard work and strategic coordination, which has allowed us to forge the international partnerships that are essential to fight global corruption.  For example, just a couple of weeks ago, about 200 judges, prosecutors, investigators, and regulators from more than 50 countries, multi-development banks, and international organizations around the world joined prosecutors, investigators, and regulators from the Criminal Division, SEC, and FBI in Washington, D.C., for a week long training course to exchange ideas and best practices on combating foreign corruption.

I had the opportunity to participate in this meeting and saw its value first-hand.  The meeting provided a critical opportunity for the people who fight global corruption in the trenches every day to meet face-to-face, discuss ongoing cases, identify new opportunities to collaborate, and improve intelligence sharing.

The results from this increased international collaboration speak for themselves.”


[T]hese coordinated global actions sent a powerful message – countries all over the world are now engaged in the fight against foreign bribery and together, we can and will hold to account individuals and companies who engage in corruption, regardless of where they operate or reside.

The increase in international collaboration is not only enhancing our own FCPA enforcement efforts but it is also resulting in anti-corruption enforcement actions by other countries.”


Continued international collaboration is absolutely critical if we are going to have a meaningful impact on corruption across the globe and we are committed to maintaining – and enhancing – our working relationships with our foreign partners.

By enhancing our coordination with our overseas counterparts, continually improving our already successful methods of investigating and prosecuting FCPA cases, and increasing our efforts to prosecute corrupt officials and recover their ill-gotten gains, we are now, more than ever, making a tangible difference in the fight against foreign bribery.”

Caldwell next shifted to voluntary disclosure and cooperation and stated:

“When I last worked at the department and even over the 10 years that I was in private practice, it seemed that many FCPA investigations were initiated by self-disclosures.  While we of course still welcome self-disclosure, today we are far from reliant on it.


And in a world of whistleblowers and international cooperation, I expect that will be the case more often than not going forward.  That said, we still encourage and reward self-disclosure and cooperation.

When you detect significant potential criminal conduct at your company, or a company that has retained you, I encourage you to disclose it to the Justice Department – and to do so in a timely manner.  As I am sure you all know, the department’s Principles of Federal Prosecution of Business Organizations provides that prosecutors should consider “the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents” in deciding how to proceed in a corporate investigation.

So, in addition to promptly disclosing the conduct to us, I also encourage you to conduct a thorough internal investigation and to share with us the facts you uncover in that investigation.  We do not expect you to boil the ocean in conducting your investigation but in order to receive full credit for cooperation, we do expect you to conduct a thorough, appropriately tailored investigation of the misconduct.

And we expect you to provide us useful facts in a timely manner.  And that includes, importantly, facts about the individuals responsible for the misconduct, no matter how high their rank may be.


The sooner you disclose the conduct to us, the more avenues we have to investigate culpable individuals.  And, the more open you are with us about the facts you learned about that conduct during your investigation, the more credit you will receive for cooperation.

But, if you delay notifying us about an executive’s conduct or attempt to whitewash the facts about an individual’s involvement, you risk receiving any credit for your “cooperation.”

This does not mean that we expect you to use law-enforcement style techniques to investigate your employees.  To the contrary, it simply means that when you do an internal investigation, and you choose to cooperate with us, you should understand that we will expect to hear not just what happened, but who did what, when, and where.

We also expect that a truly cooperating company will provide relevant documents in a timely fashion, even if those documents are located overseas.  We recognize that some countries’ laws pose real challenges to data access and transfer of information, but we also know that many do not.

The Criminal Division investigates and prosecutes a large volume of international cases and through these cases, we have developed an understanding of these laws.  We will not give full cooperation credit to companies that hide behind foreign data privacy laws instead of providing overseas documents when they can.  Foreign data privacy laws exist to protect individual privacy, not to shield companies that purport to be cooperating in criminal investigations.

Put simply, cooperation – and the quality and timeliness of that cooperation – matter.  This is a well-established principle that we have applied in criminal cases across the spectrum – from violent and organized crime cases to corporate fraud cases – for decades.

If a company works with us, it not only helps the Department, but it helps itself.


Fighting corruption is not a choice we have made. It is, increasingly, a global imperative.  Given the critical nature of this mission, we are bringing more resources to bear than ever before – and we will continue doing so.  We have achieved significant successes using our traditional FCPA enforcement tools.  We are building on those successes and continuing to evolve our enforcement efforts.  Especially with the power of so many countries now standing by our side, we are determined to use every lawful means available to hold the perpetrators of corruption to account.”


Ceresney began his remarks as follows.

“Pursuing such [FCPA] violations remains a critical part of our enforcement efforts, as international bribery has many nefarious impacts, including sapping investor confidence in the legitimacy of a company’s performance and undermining the accuracy of a company’s books and records. Our specialized FCPA unit as well as other parts of the Enforcement Division continue to do remarkable work in this space, bringing significant and impactful cases often in partnership with the DOJ and FBI. [...] Looking ahead, I anticipate another productive year of FCPA enforcement, as we have a robust pipeline of investigations across the globe. I thought I would spend my time this morning discussing some areas we will be focusing on in the coming year and beyond, and then, if we have time, I can take some questions.”

Under the heading “Focus on Individuals,” Ceresney stated:

“Let me start with cases against individuals. It is a hot topic of the day, in the face of some significant enforcement actions against entities alone, to ask the question of whether enforcement actions against entities are as impactful as actions against individuals, and whether actions against entities actually deter misconduct.

I always have said that actions against individuals have the largest deterrent impact. Individual accountability is a powerful deterrent because people pay attention and alter their conduct when they personally face potential punishment. And so in the FCPA arena as well as all other areas of our enforcement efforts, we are very focused on attempting to bring cases against individuals.

That is not to say that cases against companies are unimportant — in fact, I think FCPA enforcement is perhaps one of the best examples of how actions against entities can have a tremendous deterrent effect. Our actions against entities have had a tremendous impact in the last 10 years on FCPA compliance. Companies have increased their compliance spending and focus exponentially — the attendance at this conference is but one example of that. And these actions continue to provide significant deterrence and send important messages about areas that companies should be focused on. Every action we bring is scrutinized closely and dissected for information on areas of risk. That is a great dynamic and one we should continue to foster. But individual accountability is critical to FCPA enforcement — and imposing personal consequences on bad actors, including through bars and monetary sanctions, will continue to be a high priority for us.

Now it is important to recognize that FCPA cases against individuals can present some unique challenges for us and we simply are unable to bring cases against individuals in connection with a number of our cases. For example, in many cases we face significant investigative hurdles, including difficulties in gathering specific testimony and documents from overseas that will be admissible at trial. This is one area where we have been working closely with our counterparts in other jurisdictions, to access foreign witnesses, bank statements, and company records. These efforts have been more and more successful as we form strong partnerships with other countries to combat corruption.

When the conduct involves foreign nationals — as it often does — another challenge can be establishing personal jurisdiction over the bad actor. We have had some favorable decisions in this area, but it still remains a challenge in certain cases. Statute of limitations issues also complicate these cases.

Despite these various challenges, we continue to vigorously pursue cases against individuals.”

Under the heading “Importance of FCPA Compliance Programs,” Ceresney stated:

“This is a message that I think has started to get through in the past 5 years. Nothing situates a company better to avoid FCPA issues than a robust FCPA compliance program.

The best companies have adopted strong programs that include compliance personnel, extensive policies and procedures, training, vendor reviews, due diligence on third-party agents, expense controls, escalation of red flags, and internal audits to review compliance. You can look to our Resource Guide on the FCPA that we jointly published with the DOJ, to see what some of the hallmarks of an effective compliance program are. I won’t mention them all because you should be familiar with many that relate to policies, procedures and training. But, I’ll highlight just a few others. Companies should perform risk assessments that take into account a host of factors listed in the guide and then place controls in these risk areas. Companies should have disciplinary measures in place to deter violations and compliance programs should be periodically tested and reviewed to ensure they are keeping pace with the business. Such programs, properly implemented, will also help companies avoid other problems at foreign subsidiaries, like self-dealing, embezzlement and financial fraud.

As part of our settlements, we have on occasion required the retention of a monitor to assist in administering such compliance programs. For those companies that have developed robust programs during the investigation, we have required self-reporting and certifications. But the overwhelming message that one has to take away from our actions is how important such programs are for ensuring compliance.

Of course, it is critical for such programs to be real programs. When I was in private practice, I saw companies that had great paper programs but did not implement them effectively. When the business would push back, they would remove requirements and make exceptions. The best companies would put the compliance program ahead of business interests and allow decisions to be made to ensure compliance with the law, no matter the business consequences. It is that sort of attitude that is the measure of whether such programs will be successful.

As I said, we have seen many companies improving and properly implementing their compliance programs, as the message from our cases over the years has penetrated the legal and compliance community. But there is still more work to be done, particularly for small-to-medium sized companies trying to enter foreign markets to grow their businesses. As those businesses seek to expand and globalize, their compliance functions must keep pace.


The bottom line is that no responsible company should operate overseas without a comprehensive compliance program to guard against FCPA risk.

One other aspect of compliance programs is the benefit that companies will derive from having them if a problem should arise. I can tell you that the SEC staff will look well on companies that have robust programs and that the existence of such programs will pay dividends should an FCPA issue arise despite the existence of such programs.”

Under the heading “Cooperation,” Ceresney stated:

“Related to the issue of the existence of FCPA compliance programs, I wanted to focus for a moment on self-reporting and cooperation. The existence of FCPA compliance programs place the company in the best position to detect FCPA misconduct. But the question is what a company does once it learns of such misconduct. There has been a lot of discussion recently about the advisability of self-reporting FCPA misconduct to the SEC. Let me be clear about my views — I think any company that does the calculus will realize that self-reporting is always in the company’s best interest. Let me explain why.

Self-reporting from individuals and entities has long been an important part of our enforcement program. Self-reporting and cooperation allows us to detect and investigate misconduct more quickly than we otherwise could, as companies are often in a position to short circuit our investigations by quickly providing important factual information about misconduct resulting from their own internal investigations.

In addition to the benefits we get from cooperation, however, parties are positioned to also help themselves by aggressively policing their own conduct and reporting misconduct to us. We recognize that it is important to provide benefits for cooperation to incentivize companies to cooperate. And we have been focused on making sure that people understand there will be such benefits. We continue to find ways to enhance our cooperation program to encourage issuers, regulated entities, and individuals to promptly report suspected misconduct. The Division has a wide spectrum of tools to facilitate and reward meaningful cooperation, from reduced charges and penalties, to non-prosecution or deferred prosecution agreements in instances of outstanding cooperation.

Last year, for example, we announced our first-ever non-prosecution agreement in an FCPA matter with a company that promptly reported violations and provided real-time, extensive cooperation in our investigation.

More commonly, we have reflected the cooperation in reduced penalties. Companies that cooperate can receive smaller penalties than they otherwise would face, and in some cases of extraordinary cooperation, pay significantly less.


The bottom line is that the benefits from cooperation are significant and tangible. When I was a defense lawyer, I would explain to clients that by the time you become aware of the misconduct, there are only two things that you can do to improve your plight — remediate the misconduct and cooperate in the investigation. That obviously remains my view today. And I will add this — if we find the violations on our own, and the company chose not to self-report, the consequences will surely be worse and the opportunity to earn significant credit for cooperation may well be lost.


The SEC’s whistleblower program has changed the calculus for companies considering whether to disclose misconduct to us, knowing that a whistleblower is likely to come forward. Companies that choose not to self-report are thus taking a huge gamble because if we learn of the misconduct through other means, the result will be far worse.”

Under the heading “Items of Value,” Ceresney stated:

“The statute precludes the payment or provision of “anything of value” to a foreign official in order to induce that official to take official action for the purpose of obtaining or retaining business. Obviously, money or property is an item of value. Gifts to foreign officials also easily qualify as items of value.

But we also have successfully brought FCPA cases where other, less traditional, items of value have been given in order to obtain or retain business. For example, in three separate actions, Stryker, Eli Lilly and Schering-Plough, we brought bribery charges against pharmaceutical or medical technology companies that made contributions to charities that were headed by or affiliated with foreign government officials to induce them to direct business to the companies.

We also have charged companies for providing items of value to family members of foreign officials. In Tyson Foods, for example, we charged the company for providing no-show jobs to the spouses of foreign officials who were responsible for certifying the company’s products for export. More recently, in Weatherford, we charged the company for a variety of bribes to foreign officials and their families, including paying for the honeymoon of an official’s daughter and a religious trip by an official and his family that was improperly recorded as a donation.

As these examples make clear, bribes come in many shapes and sizes. So it is critical that we carefully scrutinize a wide range of unfair benefits to foreign officials when assessing compliance with the FCPA — whether it is cash, gifts, travel, entertainment, or employment of the family and friends of foreign officials. We should and will continue to pursue a broad interpretation of the FCPA that precludes bribery in all forms.”

In conclusion, Ceresney stated:

“[T]he Enforcement Division will continue to look for opportunities to enhance our impact with respect to FCPA enforcement. We have made significant progress over the last 10 years but there is still much more we can do. We will continue our efforts to level the playing field for companies doing business abroad and hold corrupt actors accountable when they fail to play by the rules.”