Tuesday, November 14, 2017

Strong FCPA enforcement levels the playing field for honest companies, say SEC, DOJ officials

By Lene Powell, J.D.

International bribery used to be commonplace in competing for overseas contracts. In some countries, it was even tax-deductible. As an accepted practice, bribery rewarded bad actors, punished ethical companies and individuals, facilitated organized crime and authoritarian rule, and weakened the rule of law.

But strong anti-corruption laws and increasing coordination between the SEC, Department of Justice, and foreign counterparts has achieved extraordinary results, said SEC and DOJ officials at a conference marking the 40th anniversary of the Foreign Corrupt Practices Act (FCPA) and the 20th anniversary of the Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention. As Steven R. Peikin, co-director of the SEC Enforcement Division, observed, international resolutions featuring criminal liability and massive fines are sending strong messages of deterrence to companies and individuals who might otherwise see bribery and corruption as a way of maximizing their commercial advantage.

And according to Acting Assistant Attorney General Kenneth A. Blanco, tireless work really has made a difference over the past few decades in changing international acceptance of corruption. “Because of the efforts of the OECD Working Group on Bribery, and our law enforcement partners at home and overseas, we have transitioned from a world in which bribery of foreign officials was considered a sound business strategy, to one in which bribery is treated like the corrosive crime that it is,” said Blanco.

International coordination. Peikin sees a “sharply upward trajectory” in the level of cooperation and coordination among regulators and law enforcement worldwide. In the past fiscal year alone, the Commission has publicly acknowledged assistance from 19 different jurisdictions in FCPA matters.

Peikin and Blanco both pointed to Odobrecht and Braskem, the largest FCPA case in history, as an outstanding success. In that case, a Brazilian petrochemical manufacturer agreed to pay $957 million as part of a global settlement including the SEC, DOJ, and authorities in Brazil and Switzerland. The company pleaded guilty in the U.S. and, importantly, must cooperate with the ongoing investigations of individuals in the respective countries. So far approximately 80 people have been charged in connection with the cases.

In addition to helping in gathering evidence and building the case, international coordination allowed penalties to be apportioned fairly between the countries and avoided duplicative fines, said Blanco. This fairness in applying penalties gives companies the proper incentives to cooperate fully with the relevant jurisdictions.

Another massive resolution was In the Matter of Telia Company AB, in which Swedish telecommunications giant Telia Company AB agreed to pay more than $965 million to settle charges that the company and a subsidiary violated the Foreign Corrupt Practices Act by paying bribes to win business in Uzbekistan. That case involved coordination with Dutch and Swedish law enforcement.

Individual accountability. Holding individuals accountable can be a challenge, said Peikin. Often, the individuals involved are foreign nationals who reside overseas. Even when they can be charged in the U.S., in many cases they have limited or no assets in the U.S., limiting the options for enforcing any monetary judgments obtained. But given that holding individuals accountable is critical to the goals of deterrence, incapacitation, and just punishment, he expects that the SEC continue to have “intense focus” on the question of individual responsibility in every FCPA investigation.

Blanco also noted a focus on individual accountability, and said that since 2016 the DOJ has brought more than 35 criminal cases against individuals and 17 cases against corporations in connection with foreign bribery charges. In 2017 so far, the DOJ has announced convictions or guilty pleas by 17 individuals in FCPA-related cases. This is more than in any previous year and there is more to come, he said.

Statute of limitations. One of the principal challenges in bringing an FCPA case is the interplay between the length of time it takes to conduct an FCPA investigation and the statute of limitations, said Peikin. The misconduct may have aged by the time the SEC learns of it, and FCPA cases often take a long time to develop because they are complex and require the collection of evidence abroad.

Compounding this is the recent Supreme Court decision in U.S. v. Kokesh, in which the Court held that Commission claims for disgorgement are subject to the general five-year statute of limitations, said Peikin. Kokesh has already had an impact and the SEC has had no choice but to redouble efforts to bring cases as quickly as possible. But this makes sense in any case, he said, because cases have the highest impact and litigation efforts are most effective when the SEC brings cases close in time to the alleged wrongful conduct.

No comments: