2017 FCPA Year in Review (Part I of II)
With the close of 2017, FCPA enforcement continues as a major priority for the US Department of Justice. Notwithstanding fears and concerns that the new administration would turn its back on FCPA enforcement, the Justice Department’s work continues unabated and unhindered. All the doomsayers have to admit that no big changes have occurred in the Justice Department’s commitment to battle global corruption.
Looking at the scorecard, DOJ brought FCPA enforcement actions against 6 companies (and one non-prosecution agreement), totaling approximately $845 million in fines and penalties, and 13 individual criminal guilty pleas or indictments for FCPA violations (excluding United Nations prosecution case). The SEC brought enforcement actions against 6 companies, totaling approximately $262 million in penalties, and 3 individuals (one of whom settled). All in all, the government took in approximately $1.1 billion in fines and penalties for FCPA violations.
There is no question that, with the exception of individual prosecutions, 2017 was a decline from the record-setting pace of 2016. Some of that has to be explained based on the transition to a new administration.
The Two Big Events: FCPA Corporate Enforcement Policy and the Rise in Individual Prosecutions
First, and most significantly, the new FCPA Corporate Enforcement Policy has put to rest much of the carping and criticizing surrounding FCPA enforcement. There will always be naysayers, negative forces and pessimists surrounding the Justice Department’s efforts, but the new FCPA Corporate Enforcement Policy has effectively killed FCPA reform efforts, arguments for an unwise and unproven compliance defense and other technical and wordy “reforms” and so-called “ideas” that turn out to be ill-advised, or unworkable in practice.
The FCPA Corporate Enforcement Policy is well-thought out, carefully crafted based on years of experience and set in stone. In practice, it gives companies a way out of prosecution – voluntary disclosure, cooperation and remediation will equal a declination. If you choose not to disclose, or if you fall under an aggravating circumstance, you will pay a price but you can still earn a significant discount.
Second, building on the Yates Memorandum and the new FCPA Corporate Enforcement Policy, the Justice Department revealed its ongoing work and success in focusing on individual prosecutions. The numbers are beginning to tell the tale, and I expect this trend to continue for the foreseeable future – individuals will be prosecuted for FCPA violations.
In the last year, the Justice Department prosecuted a total of 13 individuals. This is no accident. The Yates memorandum has had an impact, and the new FCPA Corporate Enforcement Policy will act as a force multiplier to increase this focus because of the requirement that corporations identify culpable individuals and provide specific evidence for each individual. Any company seeking a declination or a 50 percent discount will have to cough up evidence targeting individuals in the company involved in illegal bribery schemes.
Two Less Significant, But Important Trends: Remediation Expectations and Globalization
There are two other trends, both of which should be noted, but are not as significant as the two mentioned above.
Third, the Justice Department’s expectations as to remediation in the disciplinary prong have reached a crescendo in terms of expectations. A company seeking benefits under the new FCPA Corporate Enforcement Policy better have used a meat cleaver when it comes to disciplining executives and employees involved in FCPA bribery violations. This remediation requirement extends not just to firing and disciplining those directly involved, but the Justice Department has made it clear that it expects supervisors should be disciplined when they should have known about misconduct or prevented such misconduct. Companies that “protect’ executives from this standard and impose no penalties on them will be subject to second-guessing by the Justice Department and a potential loss in millions for a reduction under the new enforcement policy.
Finally, FCPA enforcement in 2017 reflected the growing maturity of the global anti-corruption enforcement program. Most FCPA enforcement actions now involve multi-jurisdiction collaboration and coordination with penalty offsets among the participating countries. This is a positive development that reflects the fairness of reducing the risk of multiple punishments for the same conduct. This trend is likely to continue since Justice Department officials have sought to address the overlapping enforcement issues involved in a coordinated, global anti-corruption program.