FCPA Appetite Still Strong

While, on the face of it, this may not appear as an outwardly astonishing finding, questions over the Trump administration’s appetite to pursue FCPA cases have continued to cast a shadow over the future of the US overseas anti-corruption enforcement efforts, particularly as Trump himself has previously spoken disparagingly of the Act.

That said, last Autumn, the US Department of Justice (DoJ) gave the biggest indication so far of the current administration’s commitment to enforcement when it made its FCPA Pilot Programme permanent, introducing a new policy on declinations whereby if corporates voluntarily disclose violations, and fully cooperate, they will now escape prosecution or criminal action; a change from the previous position where declinations were a ‘consideration’.

While FCPA enforcement actions initiated by the US Securities and Exchange Commission(SEC) decreased from 32 in 2016, under the leadership of ex-chair Mary Jo White, to just 10 in 2017 under chair Jay Clayton, with six actions at the mid-year point, 2018 is proving a more ambitious year for the SEC which this month fined Credit Suisse for corrupt hiring practices in Asia (not captured by the report and also joint with the DoJ), as well as Panasonic in May over charges relating to its avionics business, again in Asia.

In comparison, the DoJ, saw a stark jump from 21 actions in 2016 to 29 actions in 2017, with 11 brought in the first half of 2018.

Many of the actions brought by the DoJ and SEC in 2017 will have been a result of investigations brought under the previous administration coming to fruition. However, the report did identify a “diverse mix” of activity in 2018, from relatively modest to large financial penalties, the first ever US-French coordinated bribery resolution (with Société Générale (SocGen) and investment manager Legg Mason over payments to a Libyan intermediary) and “numerous criminal prosecutions of individual defendants”.

Between the two agencies, 11 enforcement actions were brought against companies up to the end of June 2018, including Transport Logistics International over alleged corrupt payments to a Russian state-owned company. In this case, the company received a USD 2 million deferred prosecution agreement (DPA), which the report identified as a “significant departure” from the DoJ-calculated fine of USD 21.4 million, owing to independent ‘inability-to-pay’ analysis which confirmed the company’s position that a fine of more than USD 2 million would have jeopardised its ability to operate.

The Panasonic settlement, comprising USD 147 million to the SEC and a DPA with the DoJ where it paid a USD 137 million criminal penalty, was the first joint SEC/DoJ action of 2018.

The DPA, said Gibson Dunn, included an “additional proviso” of diversity which must be a consideration in the list of qualifications required of the appointed compliance monitor, who is to be appointed for a compulsory two-year period; in-keeping with the DoJ’s own commitment to diversity and inclusion.

The SocGen/Legg Mason settlement demonstrated not only a coordinated approach between US and French authorities on the matter of the Libyan payments, but also a willingness to bundle on un-related charges; in this instance, criminal fraud charges brought by the DOJ and the Commodity Futures Trading Commission (CFTC) relating to SocGen’s alleged involvement in LIBOR-rigging.

SocGen paid nearly USD 293 million apiece to the DoJ and the Parquet National Financier, and USD 475 million to the CFTC and USD 275 million to the DoJ on the LIBOR charges – amounting to over USD 1.3 billion in total.

Legg Mason, which was deemed to have played a lesser role in the Libyan payments, entered into a non-prosecution agreement with the DoJ, paying just over USD 64 million, although a separate FCPA fine from the SEC is imminent.

PILING ON

Enforcement actions aside, the report identified FCPA-related developments relating to the DoJ’s administration of criminal enforcement.

Under the new ‘Policy in Coordination of Corporate Resolution Penalties’, announced in May this year, the DoJ has said that it aims to discourage the ‘piling on’ by multiple enforcement authorities of penalties against a company for the same conduct.

While this may appear to be good news for lawyers defending their clients and wishing to limit prosecutorial exposure from multiple jurisdictions, as discussed at CDR’s recent Business Crime Symposium, Gibson Dunn said: “In our view, the policy largely reflects pre-existing DOJ practice in the FCPA arena, where DOJ routinely coordinates resolutions with the SEC and, increasingly, participates in cross-border resolutions by, among other things, crediting a company’s payments to foreign enforcement authorities in calculating the US criminal fine.”

WHISTLEBLOWERS

As predicted by the SEC’s chief of the Office of the Whistleblower Jane Norberg in an interview with CDR at the beginning of 2017, the agency’s whistleblower programme has moved forward as it always has, despite the change in government; with a total of USD 90 million granted in whistleblower rewards in April 2018 alone, and more than USD 266 million to 55 individuals since the programme’s launch in 2012 (introduced via The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)).

However, in February this year, the country’s Supreme Court handed down judgment in Digital Realty v Somers, ruling that retaliation provisions in Dodd-Frank, which protect whistleblowers from retaliation by their employer, only applies to those who have reported an alleged violation to the SEC, and not to those who have first reported the matter internally without reporting it to the SEC.

While some in CDR’s above-mentioned article advocated for internal reporting and resolution ‘before’ the matter is escalated to the SEC (or a regulator), Gibson Dunn pointed to opinion by some market commentators that the ruling would encourage the opposite, whereby employers will now be entirely bypassed.

Notwithstanding, the firm pointed to studies which “routinely show” that whistleblowers first report internally, and then to a regulator if they feel their complaint has not been addressed, and said: “We are not certain that this phenomenon will change, at least dramatically, and we thus advise our clients and friends that it is more important now than ever for companies to scrutinise their internal policies and procedures to ensure that they encourage internal reporting, protect those who do, and robustly investigate the concerns expressed.”