Over the last 20 months, enforcement of the Foreign Corrupt Practices Act (“FCPA”) has continued to be a top priority for U.S. enforcement agencies. 2014 was a notable year in anti-corruption enforcement. While there were fewer FCPA enforcement actions in 2014 compared to 2013, the collection by the U.S. Department of Justice (“DOJ”) and the U.S. Securities and Exchange Commission (“SEC”) of a combined $1.56 billion doubled the amount collected in 2013. Two of the enforcement actions in 2014 – DOJ’s record $772 million settlement with Alstom, S.A. (“Alstom”) and DOJ and SEC collective actions against Alcoa Worldwide Alumina LLC (“Alcoa”) with a combined settlement of $384 million – jumped into the top 10 largest settlements of all time.
After a spike in enforcement during the fourth quarter of 2014, to levels not seen in four years, 2015 began with a considerable drop in FCPA enforcement actions. FCPA enforcement action in the first half of 2015 was dominated by the SEC, which settled four corporate dispositions with administrative cease-and-desist proceedings. In contrast, DOJ announced no corporate actions in the first half of 2015.
The last three months saw a pick-up of FCPA enforcement actions. In June and July, DOJ announced its first two corporate enforcement actions of the year, against IAP Worldwide Services, Inc., and Louis Berger International, Inc. (“LBI”). In late July, SEC announced its fifth corporate action, a $12 million administrative settlement with Mead Johnson. On August 12, DOJ and SEC announced a rare joint FCPA enforcement action against an individual, Vicente Garcia, a U.S. citizen and former head of Latin American sales of SAP SE. On August 18, 2015, SEC announced its sixth corporate action against Bank of New York Mellon Corp., which agreed to pay $ 14.8 million to resolve FCPA charges over internships.
Despite the recent rise of enforcement actions, enforcement actions in 2015 thus far, with the combined collection by the DOJ and SEC being less than $100 million, are far below the record year 2014. There is, however, often a lag of six months or more before investigations become public, if they ever do. It is difficult to predict the direction in which enforcement is trending, except to say that U.S. enforcement officials continue to assert their commitment to FCPA enforcement. Indeed, in January 2015, the U.S. Federal Bureau of Investigation revealed it had tripled the number of agents it has focused on overseas bribery, from 10 to more than 30.
Enforcement actions in 2014 and 2015 continue to show the value of cooperation and corporate self-reporting. In Alstom, Alstom, who failed to self-report and refused to cooperate initially, entered into a rare parent-level plea agreement with DOJ, albeit to books and records and internal controls charges, under which the company agreed to pay a $772 million fine, the largest criminal penalty ever under FCPA. One factor that DOJ cited in supporting the historical amount of the fine was Alstom’s failure to self-report and initial failure to cooperate. In Alcoa, the Sentencing Guidelines range for fines ($446 million – $892 million) was roughly comparable to that in Alstom ($523.8 million – $1,065.6 million). However, unlike Alstom, Alcoa self-reported and cooperated fully with U.S. authorities; Alcoa received a large departure from the Sentencing Guidelines range, managing to settle the charges with DOJ for a $223 million fine along with other compliance requirements. Further, in LBI, the DOJ and LBI entered into a three-year Deferred Prosecution Agreement (“DPA”) instead of a plea agreement to resolve anti-bribery charges in connection to the company’s alleged misconduct in India, Indonesia, Kuwait, and Vietnam. This accommodation was partly a result of LBI’s self-reporting, cooperation and remediation, according to the DPA.
Another highlight from the past 20 months of enforcement actions is the measurable impact of a properly maintained and effectively implemented compliance program on an FCPA investigation. Alstom typifies the adverse consequences of not investing in a strong compliance program. In addition to the company’s failure to self-report and refusal to cooperate fully in the investigation, DOJ cited its lack of an effective compliance and ethics program at the time of misconduct as a factor that the agency considered in reaching the resolution. Similarly, in Marubeni Corporation, Japanese trading company Marubeni Corporation, one of Alstom S.A.’s consortium partners, entered into a plea agreement with DOJ to resolve conspiracy and FCPA violations charges and agreed to pay an $88 million fine. The plea agreement similarly cited Marubeni’s “lack of an effective compliance and ethics program at the time of the offense” as one of the factors that the agency took into account in reaching an appropriate resolution.
Another instructive example is the SEC’s 2015 action against a global resources company, BHP Billiton, which appears to go further still, indicating that the mere existence of a superficial compliance program is not sufficient. In BHP Billiton, SEC charged the company with books and records and internal control violations in connection to the company’s sponsorship of more than 67 foreign government officials to attend the 2008 Summer Olympic Games in Beijing. Even though the company had placed some internal controls over the program, including asking its employees to complete a hospitality application that included a list of foreign bribery red flag questions for every individual whom they wished to invite, this was not deemed sufficient. The company agreed to pay a $25 million penalty to settle the charges. In announcing the settlement, Antonia Chion, Associate Director of the SEC’s Division of Enforcement, concluded that “[a] ‘check the box’ compliance approach of forms over substance is not enough to comply with the FCPA.” She further explained, “[a]lthough BHP Billiton put some internal controls in place around its Olympic hospitality program, the company failed to provide adequate training to its employees and did not implement procedures to ensure meaningful preparation, review, and approval of the invitations.”
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