The Department’s revised FCPA Corporate Enforcement Policy—which will be incorporated into the United States Attorneys’ Manual—builds on and makes permanent the Department’s 2016 FCPA Pilot Program. While much of the commentary on the revised policy has focused on the potential benefits of voluntary self-disclosure and cooperation after an issue arises, the policy also provides updated guidance to all companies on the hallmarks of an effective compliance and ethics program – an important and practical takeaway for compliance officers, in-house counsel, boards and executives.
DOJ’s Revised FCPA Corporate Enforcement Policy Formalizes the 2016 FCPA Pilot Program
The Pilot Program set out to evaluate if the Department could motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in controls and compliance programs. One of the key components of the Pilot Program was the potential for substantial mitigation—including declination of prosecution in certain cases and, where warranted, a credit of up to a 50 percent reduction below the low end of the applicable U.S. Sentencing Guidelines’ fine range for companies that voluntarily self-disclose misconduct and cooperate and remediate to the Department’s satisfaction. Deputy Attorney General Rod Rosenstein expressed his satisfaction with the program’s results, which he heralded as a step forward in fighting corporate crime. He also noted that during the pilot period, the DOJ saw 30 voluntary disclosures to the FCPA Unit—compared to 18 during the previous 18‑month period.
In announcing the new formalized Policy, Deputy Attorney General Rosenstein emphasized that the Department will continue to strongly encourage voluntary disclosures and set forth what he considers to be the revised Policy’s three key features: READ MORE
The SEC has signaled plans to double down on its FCPA enforcement efforts and speed up FCPA investigations. On November 9, 2017, Steven Peikin, Co-Director of the SEC’s Enforcement Division, delivered a speech at New York University School of Law to commemorate the 40th anniversary of the FCPA and the 20th anniversary of the Organisation for Economic Co-Operation and Development Anti-Bribery Convention. In his speech, Peikin stressed the importance of the FCPA to the Commission’s enforcement mission and noted that the Commission will continue its commitment to FCPA enforcement. Pointing out that the Commission has brought 106 FCPA-related actions against individuals and corporations since forming its designated FCPA Unit in 2010, Peikin highlighted the Commission’s success in fostering a more predictable and uniform approach to FCPA enforcement and domestic and international partnerships in fighting corruption.
Peikin stressed the importance of collaborating with international colleagues in the fight to “eradicate[e] corruption and bribery” and pointed to recent global settlements, including the settlement with Telia (reported here), as examples of successful cross-border coordination and cooperation. Citing deterrence and investigation efficiencies as key benefits of global coordination, Peikin noted that he expects “the trend of the Enforcement Division working closely with foreign law enforcement and regulators in anti-bribery actions to continue its upward trajectory in the coming years.” READ MORE
The recent settlement by Telia Company AB (“Telia”), one of the first of the U.S. Department of Justice (“DOJ”) under the Trump administration and one of the largest FCPA enforcement actions to date, has been touted by some as a sign that enforcement will remain tough. In this area of the law with scant case law or other guidance for companies looking to evaluate their own conduct and compliance programs, do these charting and resolution documents offer anything new? Telia obtained the maximum downward departure from the US Sentencing Guidelines and avoided the imposition of an independent monitor – what can be gleaned from the facts of the resolution as to how?
On September 21, 2017, Telia, a Swedish telecommunications company, entered into a $965 million joint settlement with U.S., Dutch, and Swedish authorities. The settlement revolved around allegations that Telia bribed a foreign official (widely reported to be Gulnara Karimova, the eldest daughter of Uzbekistan’s former president Islam Karimov), to assist Telia and its Uzbeki subsidiary, Coscom LLC (“Coscom”) in expanding the company’s share of the Uzbeki telecommunications market. According to the settlement documents (Links to the settlements: DOJ and SEC), from 2006 to 2007, Telia made approximately $331 million in corrupt payments to secure approvals from the Uzbek Agency for Communications and Information and business in the Uzbek telecommunications sector, generating more than $2.5 billion in revenues and approximately $457 million in profit. READ MORE
On September 12, 2016, the SEC announced that it had reached a settlement with Jun Ping Zhang (“Ping”), a former executive of a Chinese subsidiary of Harris Corporation (“Harris”), regarding alleged violations of the Foreign Corrupt Practices Act (“FCPA”). The settlement was unusual, in that the SEC declined to also bring charges against Harris, an international communications and information technology company.
In a move that highlights both the increased focus on holding individuals accountable and the credit that can be earned through cooperation, the U.S. Securities and Exchange Commission (“SEC”) announced last week that, for the first time, it entered into a deferred prosecution agreement (“DPA”) with an individual allegedly involved in a Foreign Corrupt Practices Act (“FCPA”) case. On February 16, 2016, the SEC announced a DPA with Yu Kai Yuan, a former employee of software company PTC Inc.’s Chinese subsidiaries. The SEC agreed to defer civil FCPA charges against Yu for three years in recognition of his cooperation during the SEC’s investigation. PTC also reached a settlement with the SEC, in which the company agreed to disgorge $11.8 million. Prior to the Yu DPA, the SEC had entered into one DPA with an individual in November 2013, in a matter involving a hedge fund manager allegedly stealing investor assets. However, never before this time was a DPA with the SEC related to an FCPA case.
Internal investigations are an ever-present challenge for companies. They can involve virtually any topic and arise in myriad ways. Embezzlement, accounting improprieties, bribery, and financial statement adjustments can all lead to a closely scrutinized investigation, with likely triggers of whistleblower reports, news articles, litigation demands, or regulatory inquiries. The common denominator is that they present high pressure and/or high stakes. Consequently, it is imperative that matters not be made worse through a flawed internal investigation. In today’s post, we cover some of the essential topics to keep in mind when managing an internal investigation to ensure that the investigation itself does not cause or exacerbate harm to the company.
On April 9, 2014, the Securities and Exchange Commission announced that Hewlett-Packard had agreed to pay more than $108 million to settle Foreign Corrupt Practices Act actions brought by the SEC and the Department of Justice. These actions were based on HP’s subsidiaries’ alleged payments of more than $3.6 million to Russian, Polish, and Mexican government officials to obtain or maintain lucrative public contracts. The settlement is important because it highlights the SEC’s and DOJ’s continued focus on companies’ internal controls, particularly in the FCPA arena. It also shows that the SEC may be able to use lesser, non-fraud offenses in which the underlying conduct involves a fairly de minimis amount of money to police behavior and subject companies to significant financial consequences. READ MORE
On November 14, 2012, the Department of Justice (“DOJ”) and Securities Exchange Commission (“SEC”) issued a much anticipated Resource Guide to the U.S. Foreign Corrupt Practices Act. Despite the fact the Guide is 130 pages, it is a surprisingly easy read. It provides a rare glimpse into the DOJ and SEC’s interpretation of the FCPA and the guiding principles for enforcement. Although the Guide will undoubtedly provide much awaited guidance on existing issues with which companies are currently grappling, it also serves to reinforce the well held belief that the DOJ and SEC are taking a hard line view on the FCPA.
The Guide provides insights into the government’s view on various aspects of the FCPA and covers issues surrounding both the Anti-Bribery Provisions as well as Books and Records and Internal Controls Provisions. Below are just a few key highlights.
The Guide lays out explanations of the key provisions of the FCPA, and offers hypothetical examples that highlight the DOJ and SEC’s interpretation of those key provisions. For example, in a lengthy discussion regarding what “anything of value” means, the guide discusses the various forms that an improper benefit can take–from travel expenses to payments of cash through “consulting fees” or “commissions” to expensive gifts. Examples of proper gifts is also discussed: “Some hallmarks of appropriate gift-giving are when the gift is given openly and transparently, properly recorded in the giver’s books and records, provided only to reflect esteem or gratitude, and permitted under local law. Items of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items, are unlikely to improperly influence an official, and, as a result, are not, without more, items that have resulted in enforcement action by DOJ or SEC.” READ MORE