November 18th, 2015

Little New Information In Assistant AG Caldwell’s FCPA Speech

caldwellYesterday, Assistant Attorney General Leslie Caldwell delivered this speech before a Foreign Corrupt Practices Act audience.

To those well-versed on prior DOJ FCPA policy speeches, there was little new in Caldwell’s speech (and you can assess this for yourself by visiting this subject matter tag which highlights every DOJ FCPA policy speech in the public domain over the last several years).

The only “new” item in Caldwell’s speech was her announcement that the DOJ is ”preparing to add 10 new prosecutors to the Fraud Section’s FCPA Unit, increasing its size by 50 percent.” But here again, for years the DOJ and/or FBI have been trumpeting the ever increasing persons in their respective FCPA units.

Prior to excerpting, Caldwell’s speech, a few observations about the voluntary disclosure and “secret” FCPA enforcement aspects of Caldwell’s speech.

Voluntary Disclosure

Caldwell stated yesterday:

“[The DOJ] is not reliant on corporate self-reporting in the FCPA or any other context—indeed, the majority of our FCPA cases are investigated and prosecuted without a voluntary disclosure …”.

As noted in this December 2014, the DOJ previously said that it does not track voluntary disclosure statistics. However, as noted in the post, FCPA Professor does based on information in the DOJ’s own resolution documents.  The statistics (current as of the date in the post) were as follows.

  • Since 2011, there have been 31 core corporate DOJ FCPA enforcement actions.  17 of the enforcement actions (55%) have been based on voluntary disclosures per the DOJ’s own resolution documents.  This 55% figure actually under-represents the impact of voluntary disclosures on the DOJ’s FCPA enforcement program because several other FCPA enforcement actions (for instance against Smith & Nephew and Biomet) are generally viewed as “fruits” of a prior voluntary disclosure (Johnson & Johnson). Moreover, the Bilfinger enforcement action was the direct result of the prior Willbros enforcement action (an enforcement action based on a voluntary disclosure).

“Secret” FCPA Enforcment

For years, there have been whispers in the FCPA space about “secret” FCPA enforcement actions.  As noted in this prior post, the 2012 FCPA Guidance seemed to confirm such whispers as the Guidance stated:

  • “Historically, DOJ had, on occasion, agreed to DPAs with companies that were not filed with the court.  That is no longer the practice of DOJ.”
  • The Guidance also suggested that the DOJ has used non-prosecution agreements in individual FCPA-related case (e.g., “If an individual complies with the terms of his or her NPA, namely, truthful and complete cooperation and continued law-abiding conduct, DOJ will not pursue criminal charges.”  The Guidance also states that “in circumstances where an NPA is with a company for FCPA-related offenses, it is made available to the public through DOJ’s website.” (emphasis added).  This statement suggests that when an NPA is with an individual for FCPA-related offenses, the agreement is not made public.

In yesterday’s speech, Caldwell stated:

“We usually publicly announce corporate resolutions and pleas, and make the documents available on our website.” (emphasis added).

This statement only deepens the mystery surrounding apparent “secret” FCPA enforcement and the irony is that Caldwell’s statement was made in the same speech in which she stated “greater transparency benefits everyone.”

The remainder of this post excerpts Caldwell’s speech.

“I appreciate the opportunity to talk with you today about the Justice Department’s (DOJ) increasing attention to the investigation and prosecution of international corruption under the FCPA.

In 1977, when Congress enacted the FCPA, it called the “payment of bribes to influence the acts or decisions of foreign officials…unethical [and] counter to the moral experience and values of the American public.”  In the investigations leading to the act’s passage, Congress uncovered more than $300 million—or nearly $1.2 billion in 2015 dollars—in bribes paid by American companies to foreign officials.

Unfortunately, in the intervening 38 years, corruption has not disappeared.  In fact, as globalization increases, there is some evidence that corruption has as well.  The FCPA has, however, helped bring to justice some of the largest-scale perpetrators of economic corruption, and in 2014, companies paid more than $1.5 billion in corporate FCPA penalties to DOJ alone.  And that does not include payments made to other U.S. and foreign entities.  Clearly, our work to uphold the “moral experience and values of the American public” remains unfinished.

As you may know, that work is led by a team of federal prosecutors in the Criminal Division’s Fraud Section.  They are joined in this fight against international corruption by their colleagues in the Asset Forfeiture and Money Laundering Section—known as AFMLS—which pursues prosecutions against institutions and individuals engaged in money laundering, Bank Secrecy Act violations and sanctions violations.

AFMLS attorneys also seek the forfeiture of proceeds of high-level foreign corruption through the relatively new Kleptocracy Asset Recovery Initiative.  The two units complement each other in their efforts to hold both bribe payers and bribe takers accountable for their criminal conduct.

I would like to talk with you today about our ongoing efforts to enhance the Criminal Division’s ability to root out and prosecute corruption, and also to provide increased transparency about the division’s decision-making.

During this past year, we increased our FCPA resources, including by adding three new fully-operational squads to the FBI’s International Corruption Unit that are focusing on FCPA and Kleptocracy matters.  We are also preparing to add 10 new prosecutors to the Fraud Section’s FCPA Unit, increasing its size by 50 percent.  These new squads and prosecutors will make a substantial difference to our ability to bring high-impact cases and greatly enhance the department’s ability to root out significant economic corruption.

In addition to increased resources directed to FCPA cases, one of my priorities in the Criminal Division has been to increase transparency regarding charging decisions in corporate prosecutions.

Greater transparency benefits everyone.  The Criminal Division stands to benefit from being more transparent because it will lead to more illegal activity being uncovered and prosecuted.  This is in part because if companies know the consideration they are likely to receive from self-reporting or cooperating in the government’s investigation, we believe they will be more likely to come in early, disclose wrongdoing and cooperate.

On the flip side, companies can also better evaluate the consequences they might face if they do not merit that consideration.  In both ways, transparency helps achieve the deterrent purpose of the FCPA because comparatively opaque or unreasoned enforcement action can make it more difficult for companies to make their own rational decisions about how to react when they learn of a bribe.

Transparency also helps to reduce any perceived disparity, in that companies can compare themselves to other similarly-situated companies engaged in similar misconduct.  There are often limits to how much we can disclose about our investigations and prosecutions—particularly for investigations in which no charges are brought—but we are trying to be more clear about our expectations in corporate investigations and the bases for our corporate pleas and resolutions.

Let me provide some examples to illustrate this point.

Just a few months ago, the former co-CEO of PetroTiger pleaded guilty to conspiring to violate the FCPA.  He joined his fellow co-CEO and the company’s former general counsel in being convicted of bribery and fraud charges after a DOJ investigation that revealed a scheme to secure a $39 million oil-services contract for PetroTiger through bribery of Colombian officials.  This was serious misconduct that went to the very top of the company, and in a typical case, criminal charges for the company may well also have been appropriate.

We learned about this misconduct through voluntary disclosure by PetroTiger, however.  And after that self-disclosure, the company fully cooperated with the department’s investigation of the misconduct and of the individuals responsible for it.  As you likely know, the department ultimately declined to prosecute the company, or to seek any NPA (non-prosecution agreement) or DPA (deferred prosecution agreement) with it, even though we clearly could have done so.

By contrast, in December of last year—about a month after I last addressed this conference—Alstom S.A., the French power company, pleaded guilty to violating the FCPA.  In fact, Alstom was sentenced just last week.  Alstom admitted to its criminal conduct and agreed to pay a penalty of more than $772 million, the largest foreign bribery resolution with the Justice Department ever.  In addition, Alstom’s Swiss subsidiary pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA.  Two U.S.-based subsidiaries also admitted to conspiring to violate the FCPA and entered into deferred prosecution agreements.  The investigation resulted in criminal charges against five individuals, including four corporate executives, in connection with the bribery scheme.  To date, four of those individuals have pleaded guilty.

Given the significant scope of the misconduct in that case—including the involvement of corporate executives—it is fair to say that the factors we look at in these cases weighed in favor of some kind of criminal disposition.  And it would also be fair to point out that what was missing in those factors was any strong argument, of the type that PetroTiger was able to make, for prosecutorial consideration for Alstom’s own efforts to mitigate the misconduct.  Rather, unlike PetroTiger, Alstom did not voluntarily disclose the misconduct and refused to cooperate with our investigation until years later, after we had already charged company executives.

When we talk about this kind of credit for mitigation in FCPA corruption cases, we cannot talk simply about “cooperation.”  Cooperation is only one element of mitigation.  In our view, a company that wishes to be eligible for the maximum mitigation credit in an FCPA case must do three things: (1) voluntarily self-disclose, (2) fully cooperate and (3) timely and appropriately remediate.

When a company voluntarily self-discloses, fully cooperates and remediates, it is eligible for a full range of consideration with respect to both charging and penalty determinations.

Of course, in some cases the scope or seriousness of the criminal activity or the company’s history will mandate a criminal resolution, but in those cases it will be even more important for the company to present the strongest possible mitigation.  And companies that fail to self-disclose but nonetheless cooperate and remediate will receive some credit.  But that credit for cooperation and remediation will be measurably less than it would have been had the company also self-reported.

Let me walk through now in more detail the elements of those three factors.

First, as I have said before, companies for the most part have no obligation to self-disclose criminal wrongdoing to the Justice Department.  That has not changed.  And we are not reliant on corporate self-reporting in the FCPA or any other context—indeed, the majority of our FCPA cases are investigated and prosecuted without a voluntary disclosure and sometimes, as in the Alstom case, without corporate cooperation.

As time passes and the world continues to shrink, we have more and more sources of information about FCPA violations, ranging from whistleblowers, to foreign law enforcement, to competitors, to current and former employees, the foreign media, and others.   So if you discover an FCPA violation that you opt not to self-report, you are taking a very real risk that we will one day find out, or that we already know, and you will not be eligible for the full range of potential mitigation credit.

That said, we recognize that companies often are reluctant to self-report FCPA violations, especially when they believe that we may not otherwise learn of the misconduct.  And we also recognize that FCPA investigations present challenges for us that make them different in some important ways from other types of white collar crime.

By their nature, overseas bribery schemes can be especially difficult to detect, investigate and prosecute.  Individuals who violate the FCPA and relevant evidence often are located overseas—sometimes in jurisdictions with which we have limited relationships.  FCPA violations often involve one or more third parties, such as resellers or agents, also located overseas.  Money often moves through multiple offshore accounts, usually in the names of shell corporations.  The transactions almost always are concealed in some fashion from the company’s books and records.  And the company often is much better-positioned than the Justice Department to get to the bottom of things in an efficient and timely fashion.

For these reasons, voluntary self-disclosure in the FCPA context does have particular value to the department.   Because of that, we want to encourage self-disclosure by making clear that, when combined with cooperation and remediation, voluntary disclosure does provide a tangible benefit.

What do I mean by voluntary self-disclosure?  I mean that within a reasonably prompt time after becoming aware of an FCPA violation, the company discloses the relevant facts known to it, including all relevant facts about the individuals involved in the conduct.

To qualify, this disclosure must occur before an investigation—including a regulatory investigation by an agency such as the SEC—is underway or imminent.  And disclosures that the company is already required to make by law, agreement or contract do not qualify.

Second, in line with the focus on individual accountability for corporate criminal conduct announced earlier this year by Deputy Attorney General Sally Yates, companies seeking credit must affirmatively work to identify and discover relevant information about the individuals involved through independent, thorough investigations.

Companies cannot just disclose facts relating to general corporate misconduct and withhold facts about the individuals involved.  And internal investigations cannot end with a conclusion of corporate liability, while stopping short of identifying those who committed the underlying conduct.

In addition to identifying the individuals involved, full cooperation includes providing timely updates on the status of the internal investigation, making officers and employees available for interviews—to the extent that is within the company’s control—and proactive document production, especially for evidence located in foreign countries.

Some have expressed concern that we now expect companies to conduct more extensive—and expensive—investigations to obtain credit for cooperating.  That is not the case.  As I have said before, we are not asking companies to boil the ocean.

As always, we continue to expect investigations to be thorough and tailored to scope of the wrongdoing, and to identify the wrongdoing and the wrongdoers.  We expect cooperating companies to make their best effort to uncover the facts with the goal of identifying the individuals involved.  To the extent companies and their counsel are unclear about what this means, we remain willing to maintain an open dialogue about our interests and our concerns, which should help save companies from aimless and expensive investigations.

A company that does not have access to all the facts, despite its best efforts to do a thorough and timely investigation, will not be at a disadvantage.  Our presumption is that the corporate entity will have access to the evidence, but if there are instances where you do not, or you are legally prohibited from handing it over, then, again, you need to explain that to us.  And know that we will test the accuracy of your assertions.

We, of course, recognize that we sometimes can obtain evidence that a company cannot.  We often can obtain from third parties evidence that is not available to the company.  Also, we know that a company may not be able to interview former employees who refuse to cooperate in a company investigation.  Those same employees may provide information to us, whether voluntarily or through compulsory process.  Likewise, there are times when, for strategic reasons, we may ask that the company stand down from pursuing a particular line of inquiry.  In these circumstances, the company of course will not be penalized for failing to identify facts subsequently discovered by government investigators.

Finally, remediation includes the company’s overall compliance program as well as its disciplinary efforts related to the specific wrongdoing at issue.  For example, we will consider whether and how the company has disciplined the employees involved in the misconduct.  We will also examine the company’s culture of compliance including an awareness among employees that any criminal conduct, including the conduct underlying the investigation, will not be tolerated.

A well-designed and fully-implemented compliance program is key.  Such a program should have sufficient resources relative to the company’s size to effectively train employees on their legal obligations and to uncover misconduct in its earliest stages.  Compliance personnel should be sufficiently independent so that they are free to report misconduct even when committed by high-ranking officials.

Because this area is nuanced, the Fraud Section has recently retained an experienced compliance counsel to help assess these programs.  She has many years of experience in the private sector assisting global companies in different industries build and strengthen compliance controls.  We look forward to her insights on issues such as whether the compliance program truly is thoughtfully designed and sufficiently resourced to address the company’s compliance risks and whether proposed remedial measures are realistic and sufficient.  She also will be interacting with the compliance community to seek input about ways we can work together to advance our mutual interest in strong corporate compliance programs.

Let me reiterate: there is no requirement that a company self-disclose, fully cooperate or remediate FCPA offenses, and failure to do those things, or to do them to the standards I have described here, in and of itself, does not mean that charges will be filed against a company any more than it would with respect to an individual.  But when it comes to serious, readily-provable offenses, companies seeking a more lenient disposition on the basis that they took steps to mitigate the offense after it was discovered are on notice of what the Criminal Division looks for when we consider these mitigating factors.

Just as we expect transparency from companies seeking prosecutorial consideration for mitigating an FCPA offense, we are doing our best to act in kind.  We recognize that information about the bases for our corporate guilty pleas and resolutions is an important reference point for companies that are evaluating whether to self-disclose a violation or cooperate.

In each of our corporate resolutions—be it a guilty plea, NPA or DPA—we aim to provide a detailed explanation of the key factors that led to our decision.  These include a detailed recitation of the misconduct, as publicly admitted by the company and the corporation’s cooperation—if any—and remedial measures.  We usually publicly announce corporate resolutions and pleas, and make the documents available on our website.

We know that the overwhelming majority of companies try to do the right thing the overwhelming majority of the time.  And we applaud the efforts of corporate counsel and executives alike in establishing and enforcing FCPA compliance programs to prevent violations.  I think we can all agree that the FCPA’s ultimate goal – like that of the other criminal statutes we enforce on a daily basis – is not the prosecution and punishment of individuals and companies engaged in bribery as a business practice but rather an end to corruption before it begins.  I would much prefer to report lower figures in terms of FCPA prosecutions and penalties in future years if it meant less corruption were occurring.

By increasing the size of our FCPA force and by incentivizing early reporting and thorough compliance programs through increased transparency, we are making progress towards that goal.  With the help of companies and their counsel, we can get there sooner.  To that end, we look forward to continuing the dialogue of which this conference is a part.”

Posted by Mike Koehler at 12:03 am. Post Categories: "Secret" FCPA EnforcementEnforcement Agency PolicyEnforcement Agency SpeechesVoluntary Disclosure

November 17th, 2015

The FCPA’s New Era of Enforcement Turns 5

5yearsFive years ago, on November 16, 2010, then DOJ Assistant Attorney General Lanny Breuer stated before an FCPA audience “we are in a new era of FCPA enforcement; and we are here to stay.”

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.

  • For 2010, see here
  • For 2011, see here
  • For 2012, see here
  • For 2013, see here
  • For 2014, see here

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.

Posted by Mike Koehler at 12:03 am. Post Categories: Uncategorized

November 16th, 2015

The FCPA Guidance Turns 3

the party is overThree years ago, on November 14, 2012, the DOJ and SEC released the FCPA guidance. The guidance generated a substantial amount of buzz, but the festive coverage soon subsidized as the guidance turned 1, 2, and now 3 years old.

Yet, on this third anniversary of the FCPA guidance, it is useful to take a look back, particularly because the DOJ is rumored to be considering additional FCPA guidance that no doubt, if released, will likewise generate a substantial amount of buzz and festive coverage.

As highlighted in this post, the 2012 FCPA guidance was a long-time coming to say the least.

For instance, in the 1988 FCPA amendments Congress encouraged the DOJ to issue FCPA guidance. The DOJ refused. In 2002, the OECD encouraged the DOJ to issue FCPA guidance. The DOJ refused. In 2010, the OECD again encouraged the DOJ to issue FCPA guidance. The DOJ again refused. In the aftermath of the November 2010 Senate FCPA hearing the DOJ was again encouraged to issue FCPA guidance.  The DOJ again refused.

It was only after the FCPA reform movement gained steam in 2011 that the DOJ made the political move in announcing that FCPA guidance would be forthcoming. Tellingly as to the DOJ’s political motivations, actual issuance of the guidance took over one year and occurred a few days after the 2012 elections.  For more on the above chronology of events, see the article “Grading the FCPA Guidance.”

As discussed in this November 2012 post, there was little new information in the guidance to those previously knowledgeable about the FCPA and its enforcement. Yet, to those persuaded by non-lawyer journalist coverage of FCPA topics and/or selling FCPA compliance services, the guidance was indeed “new.”

Sure, the guidance was a useful document to the extent it captured in one document the DOJ and SEC’s views on the FCPA and related topics.

But that is all the guidance did.

Criticism of the guidance was widespread, including by former high-ranking DOJ officials. (See this prior post rounding up approximately 50 law firm client alerts, etc. regarding the guidance).  For instance, Steven Tyrrell, former chief of the DOJ fraud section stated that the guidance was “more of a scrapbook of past DOJ and SEC successes than a guide book for companies who care about playing by the rules.” (See also this prior post highlighting former Deputy Attorney General Larry Thompson’s views on the guidance.)

Indeed, the guidance did not represent the “law,” but rather DOJ and SEC interpretations of the law and as highlighted in this article the guidance was not a well-balanced portrayal of the FCPA as it was replete with selective information, half-truths, and, worse information that was demonstratively false.

Even so, in the guidance, and in connection with its release, the enforcement agencies made some sensible statements (see here for the prior post) such as:

  • the enforcement agencies are “focused on bribes of consequence – ones that have a fundamentally corrosive effect on the way companies do business abroad.”
  • enforcement efforts are focused on “payments of real and substantial value that clearly represent an unambiguous intent to bribe a foreign official to obtain or retain business”
  • enforcement agencies are “interested in companies spending compliance dollars in the most sensible way” and that the guidance can help companies as to where they can “minimize investment and where they can maximize it.”

As highlighted in this prior post, one of the more useful aspects of the guidance is that it could thus be used as a measuring stick for future enforcement activity.

Since the guidance, there have been approximately 30 corporate FCPA enforcement actions.  Several of these enforcement actions such as Ralph LaurenPhillipsStryker, Allianz, Bruker, Layne Christensen, Smith & Wesson, BNY Mellon, Mead Johnson, BHP Billiton, FLIR Systems- raise the issue of whether the enforcement agencies are indeed acting consistent with their own guidance, let alone the FCPA statue itself.

In short, three years has passed since the guidance and not much has changed.

It would seem that the only thing that has changed is that the principal spokespersons / authors of the guidance are now part of FCPA Inc. making millions in the private sector advising companies against the FCPA enforcement climate they helped create.

As far back as 1982 it was recognized in the FCPA context that the United States should be a nation of laws, not a nation of men and women issuing non-binding guidance.

The 2012 FCPA guidance was just that – men and women issuing non-binding guidance.

As FCPA Inc. anticipates a new round of rumored non-binding FCPA guidance by men and women, let’s remember this.

Indeed, just as the men and women who authored the 2012 guidance soon left the government, the men and women who draft this next round of rumored FCPA guidance are likely to exit the government in the next two years.

Posted by Mike Koehler at 12:04 am. Post Categories: Guidance

November 13th, 2015

Friday Roundup

Roundup2A plethora of scrutiny alerts and updates, dismissed, quotable, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

Crawford & Company

The company, a “provider of claims management solutions to the risk management and insurance industry, as well as to self-insured entities, with an expansive global network serving clients in more than 70 countries.” recently disclosed:

“The Company has voluntarily self-reported to the Securities and Exchange Commission (the “SEC”) and the Department of Justice (the “DOJ”) certain potential violations of the Foreign Corrupt Practices Act discovered by the Company during the course of its regular internal audit process. Upon discovery, the Company, with the oversight of the Audit Committee and the Board of Directors, proactively initiated an investigation into this matter with the assistance of external legal counsel and external forensic accountants. The Company has been cooperating fully, and expects to continue to cooperate fully, with the SEC and the DOJ in this matter. The Company cannot currently predict when or what, if any, action may be taken by the SEC or the DOJ, or other governmental authorities, or the effect any such actions may have on the Company’s results of operations, cash flows or financial position.”

In the same disclosure, the company disclosed approximately $3.4 million in “legal and professional fees … related to the ongoing investigation of potential violations of the Foreign Corrupt Practices Act.”

SciClone Pharmaceuticals

One of the longest instances of FCPA scrutiny concerns SciClone Pharmaceuticals. The company has been under FCPA scrutiny since August 2010 and recently disclosed:

“As previously disclosed, since 2010 the SEC and the US Department of Justice (“DOJ”) have each been conducting formal investigations of the Company regarding a range of matters, including the possibility of violations of the Foreign Corrupt Practices Act (“FCPA”), primarily related to certain historical sales and marketin g activities with respect to the Company’s China operations. I n response to these matters, the Company’sBoard appointed a Special Committee of independent directors (the “Sp ecial Committee”) to oversee its response to the government inquiry. Based on an initial review, the Special Committee decided to undertake an independent investigation as to matters reflected in and arising from the SEC and DOJ investigations in order to evaluate whether any violation of the FCPA or other laws occurred. The Company continue s to cooperate fully with the SEC and DOJ in the conduct of their investigations.

The Company has engaged in settlement discussions with the SEC related to its investigation into possible violations of the FCPA by the Company. The Company has finalized the terms of an offer of settlement of these matters, subject to final approval by the Commissioners of the SEC. Under the terms of the offer of settlement, the Company, without admitting or denying liability, would consent to the entry of an administrative order requiring that the Company cease and desist from any future violations of the FCPA. The Company also would pay disgorgement of $9.4 million, prejudgment interest of $0.9 million and a civil money penalty of $2.5 million. If the offer of settlement is approved by the Commissioners of the SEC, an administrative order will be issued by the SEC and $ 12,826,000   (which was placed in an escrow facility subsequent to September 30, 2015) will immediately be released to the SEC .

The Company has not yet reached a resolution of these matters with the DOJ and management continues to work diligently to obtain closure on this matter.”

Brookfield Asset Management

The company which previously disclosed FCPA scrutiny recently disclosed:

“[I]n 2012 we were notified by the SEC that it was conducting an anti-bribery and corruption investigation related to a Brazilian subsidiary of ours that allegedly made payments to certain third parties in Brazil and those payments were, in turn, allegedly used, with our knowledge, to pay certain municipal officials to obtain permits and other benefits. The U.S. Department of Justice (“DOJ”) opened an investigation in 2013. A civil action against our Brazilian subsidiary by a public prosecutor in Brazil has been ongoing since 2012. All involved have denied the allegations. The SEC and DOJ sought information from us and we cooperated with both authorities in this regard. In 2012, a leading international law firm conducted an independent investigation into the allegations, and based on the results of that investigation we have no reason to believe that our Brazilian subsidiary or its employees engaged in any wrongdoing. In June 2015 the SEC staff informed us in writing that it concluded its investigation and, based on the information it has to date, does not intend to recommend an enforcement action against us. We hope to resolve any remaining outstanding matters in due course and do not expect that any legal outcome will be financially material to the company.”

Alexion Pharmaceuticals 

The company which previously disclosed its FCPA scrutiny this past summer recently disclosed:

“As previously disclosed, in May 2015, we received a subpoena in connection with an investigation by the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting information related to our grant-making activities and compliance with the Foreign Corrupt Practices Act (FCPA) in various countries. The SEC also seeks information related to Alexion’s recalls of specific lots of Soliris and related securities disclosures. In addition, in October 2015, Alexion received a request from the U.S. Department of Justice for the voluntary production of documents and other information pertaining to Alexion’s compliance with the FCPA. Alexion is cooperating with these investigations. At this time, Alexion is unable to predict the duration, scope or outcome of these investigations. Given the ongoing nature of these investigations, management does not currently believe a loss related to these matters is probable or that the potential magnitude of such loss or range of loss, if any, can be reasonably estimated.”

Alexion was founded by a Yale University professor and the above disclosure was viewed as a big deal by the Yale Daily News (see here).


According to various media reports (see here and here), Houston-based Hines, a privately-owned real estate firm, is conducting an internal investigation in connection with alleged payments in Brazil involving Petrobras officials.  According to reports, the internal investigation follows a report in a Brazilian newspaper that appeared over the summer alleging improper payments by Hines Brazil in relation to commissions for Petrobras office leases in Rio de Janeiro.

Noble Corp.

Noble Corporation recently disclosed:

“We have used a commercial agent in Brazil in connection with our Petróleo Brasileiro S.A. (“Petrobras”) drilling contracts.  We understand that this agent has represented a number of different companies in Brazil over many years, including several offshore drilling contractors. This agent has pled guilty in Brazil in connection with the award of a drilling contract to a competitor and has implicated a Petrobras official as part of a wider investigation of Petrobras’ business practices.  We are not aware of any improper activity by Noble in connection with contracts that Noble has entered into with Petrobras, and we have not been contacted by any authorities regarding such contracts or the investigation into Petrobras’ business practices.”

As highlighted in this previous post, in 2010 Noble Corp. resolved an $8.2 million FCPA enforcement action  ($2.6 million via a DOJ NPA and $5.6 million in disgorgement and interest via a SEC complaint) in connection with alleged conduct in Nigeria.


This recent post asked where does the truth lie in FCPA enforcement actions?

The post focused on the Mexico prong of the HP enforcement action in which the DOJ and SEC alleged that HP Mexico indirectly made cash payments to a Pemex Chief Information Officer. After the enforcement action, Pemex disclosed in an SEC filing that “the Internal Control Body of [Pemex] concluded its investigation after finding no improper payment.”

HP highlighted the Pemex disclosure in its defense of civil RICO claims brought by Pemex that accused HP of paying bribes to win contracts. As highlighted here, Pemex recently dismissed its lawsuit.


Sound advice from Marcus Asner (Arnold & Porter) in this Law360 article titled “A Measured Approach to Internal Investigations” in which he rightly notes: “Outside law firms and vendors … have strong economic incentives to expand investigations.”

For the Reading Stack

From Clifford Chance, an updated version of “A Guide to Anti-Corruption Legislation in Asia Pacific.


A good weekend to all.

Posted by Mike Koehler at 12:03 am. Post Categories: Alexion PharmaceuticalsBrookfield Asset ManagementCrawford & CompanyH-PHinesInvestigative FeesNoble CorporationSciClone Pharmaceuticals

November 12th, 2015

Change Ahead At The DOJ?

ChangeIn prior years, November has witnessed FCPA policy announcements from the DOJ.

For instance, as highlighted here, in November 2012 the DOJ (and SEC) released the FCPA Guidance. As highlighted here, in November 2010, then Assistant Attorney General Lanny Breuer announced “we are in a new era of FCPA enforcement and we are here to stay.”

According to this Washington Post article, the DOJ may soon release information in ”an effort to increase the incentive for companies to be forthcoming about wrongdoing by their officials and give the business community clearer guidance on penalties under the Foreign Corrupt Practices Act.”

Given the frequency in which media reporting on FCPA issues is wrong, incomplete, or out of context, the prudent course (which will be adopted here) is not to react to the media reporting, but to reserve judgment until the DOJ actually releases information.

At present however, the Washington Post reports:

“[C]oncerns within the Justice Department that the prospective change is too lenient on firms that have violated the law have led senior officials in the criminal division to delay its issuance, according to U.S. officials who spoke on the condition of anonymity to describe internal discussions.

“It’s not a bad thing to provide companies with more transparency” on department policy, but the draft policy “lets them off the hook too easily,” said one person familiar with the matter.

The proposed policy strongly recommends that prosecutors should decline to bring charges against a company that voluntarily discloses violations of the FCPA and cooperates with the government in its investigation — including by furnishing information on employees who may have violated the law.

The Justice Department declined to comment.

Under review is the extent to which companies should be excused even for egregious misconduct because they have voluntarily disclosed it, cooperated with the investigation and taken remedial steps.


The proposal contemplates that the decision not to prosecute could be accompanied by a fine in the form of forfeiture of company profits. But in general the goal is to enhance the incentive for companies to cooperate by providing more certainty that doing so would not result in a stiff penalty or a criminal charge. Also, there would be no statement of facts that lays out the company’s misbehavior as there is now with many resolutions of FCPA investigations.


The department in general is seeking to boost its ability to battle foreign bribery. Earlier this year, the FBI announced that, in partnership with the Justice Department’s fraud section, it established three international corruption squads, in New York City, Los Angeles and Washington.

And to complement that move, the fraud section will soon add 10 prosecutors to the FCPA unit — increasing the number of line attorneys by more than half.

Nonetheless, there are companies that now weigh the odds of getting caught if they do not come forward with knowledge of a crime. They think “why not just wait to see whether law enforcement — whether here in the U.S. or overseas — discovers the wrongdoing?” said Andrew Weissmann, chief of the fraud section, in a speech in May. “Why not stay mum and see if it gets discovered and then, if necessary, cooperate to mitigate the damage?”


But some skeptics within the department argue that while giving companies clearer guidance is a good thing, the practical effect of the proposed policy change would be that a greater number of cases that should be pursued would be dropped.

The number of “declinations” — decisions not to prosecute — would rise. “It means that self-reporting and cooperation would be a ticket out of criminal liability for a company, even if the reported misconduct is serious and substantial,” said a second individual familiar with the draft policy.

On the flip side, the individual said, if a company does not self-disclose and a violation is discovered, it is much more likely to get charged. “It’s almost like an amnesty program,” he said. “But if you don’t take advantage of the self-reporting, it ups the stakes for companies who choose to keep quiet.”

Posted by Mike Koehler at 12:03 am. Post Categories: DOJEnforcement Agency Policy