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FCPA Predictions for 2015 (Part II of II)

2015.6The key to being a successful (FCPA) prognosticator is never to keep score. If you do, you are likely to be disappointed.

Instead, I follow the strategy of calculated distraction – for example, I predicted last year that the Avon case would be settled.   Never mind the fact that some of my other predictions did not come true.

I expect 2015 to be another big year in FCPA enforcement. In particular, along with settlement of a number of outstanding big investigations, I expect a full-scale return to prosecution of individuals, especially those connected to some of the large cases from last year.

From my perspective, as a former prosecutor, it is not a very hard task to increase individual criminal prosecutions. In almost every corporate case that is settled, there are bad actors who stand out in the facts. Keep in mind, for a company to acknowledge guilt there has to be at least one, and usually there are many more individuals whose conduct can be attributed to the company. Of course, there may be statute of limitations issues, or other countervailing considerations, but prosecutors need to make sure they secure tolling agreements or plan far enough in advance to indict individuals.

I expect the Justice Department to take a hard look at some individuals for criminal prosecution, especially from the Alstom, Avon, Bio-Rad, and other similar cases. Aside from these fertile sources, the Justice Department has plenty of potential targets in the Embraer and Wal-Mart case.

A second and significant issue to watch is the Justice Department’s increasing focus on internal controls for criminal prosecution. DOJ has not brought a stand-alone criminal case for circumventing internal controls or for books and records violations. In several 2014 cases, the Justice Department dug deep into the facts to identify instances where controls were circumvented. The prospect of aggressive criminal liability in this area is a scary and significant risk that could come to fruition in 2015.2015.3

On the global anti-corruption enforcement front, I expect that 2015 may bring a big first – a real SFO prosecution under the UK Bribery Act. I have criticized the FCPA Paparazzi for trumping up UK Bribery Act prosecutions to market and drum up business. However, despite all the problems getting off the ground, 2015 may bring the first real SFO prosecution, which I expect to be a piggyback case following on a US led FCPA prosecution.

DOJ will find some instances, like SBM Offshore, to defer to appropriate foreign jurisdictions for prosecution. DOJ’s handling of the SBM Offshore case reflected a shrewd political move that was intended to reward the Dutch for their cooperation or build bridges for future cooperation.

Finally, here is a list of predictions on prosecutions and upcoming settlements.

  1. Wal-Mart – If this case is resolved in 2015, it will be close to the end of the year. It is more likely that the case will be resolved in 2016.  When it is resolved, this will be the biggest of all cases, not necessarily in the size of the penalty but in the scope of the settlement. Individuals will be criminally prosecuted for participation in bribery schemes and obstruction of the internal investigation. DOJ knows that this is its biggest and most important case, and they will make sure the outcome reflects the important deterrent value of the case.
  2. Qualcomm – What started as a supposed “trivial” case has mushroomed because Qualcomm is not settling this case easily. The focus of the investigation was on job rewards for relatives of Chinese government officials. Apparently, the case has become something a little bit bigger. I do not expect DOJ to play much of a role in this case: the delay and long negotiations reflect the SEC’s control over the resolution.
  3. Embraer – This long-standing investigation will be resolved this year with a large fine and possible individual prosecutions. The case may be delayed further because of a new entrant, the Brazil prosecutors, who are looking for an initial showcase to use the Clean Companies Act. The US and Brazil law enforcement have a strong relationship and I expect the US to defer to Brazil’s entry, although Brazil has been slow to implement regulations for the Clean Companies Act.
  4. Cobalt – The SEC and Cobalt have been negotiating a resolution of this case for months. I expect a resolution of this long-standing and difficult relationship early to mid-2015. Cobalt has cooperated throughout the investigation but had the rug pulled out from them when it was discovered that Sonangol’s CEO had an undisclosed interest in one of Cobalt’s partners.
  5. fcpa.4Sigelman Prosecution – DOJ will win or secure a last-minute guilty plea from Mr. Sigelman in this criminal case. DOJ has a strong case based on documents and cooperating witnesses, co-defendants who plead guilty and agreed to testify against Mr. Sigelman.
  6. Avon Individuals – DOJ will announce indictments against multiple individuals in the Avon investigation. Based on the facts contained in the Avon settlement, DOJ would have to be asleep at the wheel to let individuals involved in the Avon case escape criminal prosecution, especially those who were actively involved in the cover-up.

Happy New Year to everyone and I am looking forward to another big year in FCPA enforcement, and more importantly, FCPA ethics and compliance issues. Stay tuned for some postings on significant ethics and compliance trends.

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