2023 FCPA Year in Review — Questioning the Tea Leaves and Trends
FCPA trends often are relatively easy to describe and often overblown as a marketing technique by the usual cast of paparazzi suspects. (Self-proclaimed prognosticators that often push incorrect themes to promote business, or those that restate profound grasps of the obvious). 2023 has been a strange year in a number of respects — socially, politically and even in the small universe of DOJ enforcement and FCPA.
Why do I say that? For two years, this Administration has been pushing initiatives and made aggressive statements about enforcement policies, all designed to ready everyone for a large number of FCPA enforcement matters. The record, however, has not been backed up. Instead, we have witnessed DOJ policy changes, compliance guidance, voluntary disclosure encouragements, new merger and acquisition incentives. But along the way, something is missing — FCPA enforcement actions.
As a long-time DOJ prosecutor, I strongly believe in the hard work and dedication of federal law enforcement and prosecutors. Often, DOJ may make strong statements of enforcement and then back them up. In the last few years, we have experienced a disconnect. And I am perplexed by the failure to produce.
In the last three years, corporate fines for FCPA violations totaled: $345 million in 2021; $1.3 billion in 2022; and $819 million in 2023. Of course, I do not mean to belittle DOJ’s performance in 2022, which included the massive Glencore resolution. But the two years around 2022 — 2021 and 2023 stand out as slow years and the absence of any significant blockbuster cases. This stands in stark contrast to the six years before that: $2.4 billion in 2016; $1.1 billion in 2017; $1.3 billion in 2018; $2.7 billion in 2019; and $5 billion in 2020 (Goldman Sachs Malaysia year).
Perhaps even more perplexing in my view is the decline in individual FCPA prosecutions, a number one priority of DOJ’s Corporate Enforcement Program, particularly in the FCPA arena. After a record year in 2019 of 34 criminal indictments, I expected and predicted that DOJ would eclipse 40 cases each year. The decline in 2020 to 22 cases was expected in the year of the pandemic. But 2021 only 26 individuals were prosecuted, 23 in 2022 and a measly 12 in 2023 (3 of which were reindictments to move cases to a proper jurisdiction or respond to district court dismissals).
In the face of this uneven performance, it is no longer acceptable to offer the pipeline ups and downs theory. Something else is happening here — maybe it is the delays in coordinating international settlements with other jurisdictions? Or perhaps it is that the number of voluntary disclosures are tricking in at a much lower rate? Whatever the cause, the decline is difficult to explain.
On the other hand, when it comes to the SEC, 2023 was a consistent year with 9 corporate FCPA settlements and one involving the CFTC. The pace is relatively consistent with one significant exception. The SEC has not initiated an individual prosecution for at least two years. While the SEC has made statements as to the importance of individual prosecutions, the omission of any new individual prosecutions is inconsistent with its otherwise steady performance.
2023 saw a new and interesting enforcement pattern — two significant prosecutions: Tysers/Wood reinsurance companies and Freeport Trading were built on earlier declinations and individual prosecutions that were then used to build strong cases against other companies and used to leverage significant FCPA settlements. In the Tysers/Wood case, DOJ took the declination and cooperation awarded in 2022 to Jardine Lloyd Thompson and the 2020 prosecution of a significant government official in Ecuador to assemble significant cases against the other conspiracy participants. Similarly, DOJ built a significant prosecution against Freepoint Trading with the steady cooperation of a Petrobras official and individual prosecutions/cooperation agreements.
This new pattern revealed that DOJ prosecutors are now mining corporate cooperation-declination agreements and individual cases to leverage information against other corporate entities.
Overall, this information suggests that DOJ efforts to mine existing resources to a greater extent reflects a dwindling number of “new” cases, those that begin with voluntary disclosures. It is very possible that companies, with the guidance of learned counsel, are following a different strategy — identify potential violations, avoid disclosure to the government, remediate the problem after a root cause analysis and document every step taken in case the government learns about such misconduct. Such a strategy is risky, but in many cases may reflect a more nuanced balancing of costs and benefits. 2024 will be an interesting data point and may provide a clearer picture of exactly where DOJ stands in the FCPA enforcement landscape — so Stay Tuned for an interesting year!!