A “Slow Down” in FCPA Enforcement

Wait a minute – where are the fireworks?  Where are all the FCPA enforcement actions?  What happened to all the predictions of a big enforcement year (including my own).

The Justice Department and the SEC almost ended the second quarter without any significant enforcement actions – Data Systems and Solutions was the only significant enforcement action for the quarter.

The FCPA paparazzi is up in arms claiming that FCPA enforcement is “leveling off,” or that the pace of enforcement is “ close” to 2011  whish was slower because it was the “year of the trial.”  Law firms are wringing their hands wondering how they can “scare” businesses with the latest FCPA enforcement action.

Let’s face it – 2010 was a banner year for FCPA enforcement – 6 of the top 10 settlements were announced in 2010. Since then, in 2011 and 2012, the numbers are down.  At the same time, during these past two tears, the number of the SEC disclosures of anti-corruption problems and internal investigations has been rising.  Numerous major companies have announced FCPA issues and are in the midst of conducting internal investigations.

So, what is happening over at DOJ and the SEC?  What gives?  Here are some possible explanations.  See which one(s) you think may be accurate.

1.  This is just a blip which reflects no significant trend except that some major cases have ended and new ones are starting up.

2.  The number of declinations has increased significantly in response to political pressure from Capitol Hill and the Chamber of Commerce.

3.  The DOJ and SEC have a number of major investigations on their plate which is eating up resources and slowing down processing of more “routine” cases.

4.  The FCPA program is suffering from a bureaucratic bottleneck in that the Criminal Division Front Office, Deputy Attorney General’s Office (and possibly the Attorney General’s Office) have been slow to review and approve proposed settlements.

5.  Companies are slowing down their internal investigations and progress in the hope that the Obama Administration will be voted out of power and replaced by a more business-friendly Romney Administration.

6.  FCPA and SEC staff turnover has slowed down work output as new staff are assigned to investigations.

 My picks from above are 3, 4 and 5. 

Major Investigations – DOJ and the SEC have a number of major investigations which have been launched, including Wal-Mart, Hollywood-China, financial institutions, Kazakhstan Oil and Logistics, Libyan Oil (ENI and Total), Cobalt Angola, and others.  At the same time, they are devoting resources to over 20 ongoing investigations in the pharmaceutical and medical device industries, and they are in the midst or close to wrapping up major investigations involving Weatherford, Alstom, Hewlett-Packard, and Avon. 

Bureaucratic Bottlenecks – The DOJ approval process for any settlement is mind-numbingly slow and painful to experience.  Once negotiated at the staff level, it is reviewed within the Fraud Division by Chuck Duross and relevant Assistant Chief(s), travels to the Fraud Division Front Office, next to the Criminal Division Front Office, next to the Deputy Attorney General’s Office, and possibly, depending on the significance of the case, to the Attorney General’s Office.  The review and approval process can take a long time. 

Political Stalling – Believe it or not, politics can enter into timing of settlements.  Washington grinds to a halt as the election approaches, especially those elections where there is a potential for a significant change in power.  Many in the business community are hoping for a change in Administrations and perceive that a Romney Justice Department would be more favorable to resolving an FCPA case than an Obama Administration.  I am not so sure that the difference will be very significant.  After all, the ramp up in FCPA enforcement occurred during the Bush Administration.  But you never know.  Companies may be hoping for such a change.

Whatever the explanation is, you can rest assured that the “slow down” does not reflect any significant sea change in FCPA enforcement.  The wheels of justice will continue to roll, albeit a little slower during 2012. 

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2 Responses

  1. July 18, 2012

    […] decreases?  How do you market decreasing FCPA enforcement?  As Michael Volkov recently stated (here) on his Corruption, Crime and Compliance site  “law firms are wringing their hands […]

  2. January 14, 2013

    […] Even if I try to stretch some of the “important” cases such as Pfizer or Morgan Stanley, the fact is that FCPA enforcement has been slowing down.  There are lots of potential causes of this reduction, and I have written about that before.  (Here). […]