This time of year, FCPA prognosticators abound. Just as the arrival of a New Year is heralded by the popping of champagne corks, January brings with it much gazing into our FCPA crystal balls. Looking back over the prior year, we do our best to offer insight into what enforcement trends the New Year will bring.
A few scant days into 2016, much has already been written about the relative dearth of DOJ FCPA enforcement actions in 2015. Indeed, the DOJ resolved a mere ten enforcement actions last year, eight of them against individuals.
That leaves two actions involving business entities. The combined criminal fines imposed in that pair of cases amounted to an unremarkable $24.2 million.
Observers have compared such paltry numbers to the halcyon days of 2005, just as the FCPA was really heating up. Gone, it would seem, are the record-demolishing criminal fines of recent years and cautionary tales. Perhaps American businesses can finally draw a collective sigh of relief, and stop worrying so much about the FCPA.
But, to coin a phrase from Mark Twain, reports of the FCPA’s demise are greatly exaggerated. The FCPA is here to stay, and I predict that 2016 is going to be an active year for enforcement actions. Here’s why.
First and foremost, we shouldn’t allow ourselves to get too tied up in the numbers. The DOJ Fraud Section does not manage FCPA cases like a public company — in other words, the DOJ doesn’t have to “make its numbers” by the end of the quarter or the end of the year. It’s not trying to impress or satisfy investors.
FCPA investigations are done when they’re done, regardless of when the calendar year comes to a close. In some years, there’ll be a lot of settlements, and in other years, not so many. We therefore shouldn’t expend too much mental energy trying to figure out if FCPA enforcement is waxing or waning based on the number of enforcement actions resolved in any given twelve-month period.
Second, if we must focus on the numbers, then we should make sure to look at all the relevant data. True, only two companies resolved criminal enforcement actions in 2015. But that’s only part of the story. There’s a whole host of other numbers we should examine that tell a very different story.
Let’s start with the number of ongoing investigations. As reported by the FCPA Blog, 84 companies have disclosed on-going and unresolved FCPA investigations in their SEC filings. That’s a formidable number.
We should also view those 84 on-going investigations through the lens of the Yates memo. Remember that the Yates memo dictates that companies will only get cooperation credit if they furnish the DOJ with “all relevant facts about the individuals involved in corporate misconduct.” That means that the aforementioned 84 companies will have to “completely disclose” the identities of naughty employees to be “eligible for cooperation credit.” We should therefore expect that a whole lot of individuals will face FCPA scrutiny in the coming year.
Moreover, the Fraud Section is staffing up rather dramatically. Last November, Assistant Attorney General Leslie Caldwell announced that the DOJ plans to hire 10 additional prosecutors into its FCPA unit. That effectively doubles — yes, doubles — the number of lawyers at Justice dedicated to FCPA enforcement. That doesn’t sound like an agency in retreat.
Let’s not forget about the FBI’s relatively new FCPA field units. Early last year, the FBI announced the establishment of three new international corruption squads that focus on the FCPA. The creation of these squads more than quadrupled the number of FBI special agents assigned to investigating FCPA violations — from 5 to 23.
Still looking for more numbers? The budget for these special FBI units is $15 million. That looks more like a surge than a draw-down.
Finally, in 2015 the SEC hummed along on its own and racked up eight enforcement actions against companies, and imposed almost $110 million in civil fines and penalties in the process. This is consistent with the SEC’s enforcement efforts over the last three years.
Moreover, SEC Enforcement Director Andrew Ceresney raised the enforcement bar — and associated worries — when he announced in November that the Commission will only consider deferred prosecution agreements and non-prosecutions agreements in situations where companies have self-reported FCPA violations. If you don’t self-report? Count on the more draconian cease-and-desist order as resolution of your case.
So, as I swirl the proverbial tea leaves, I foresee continued robust FCPA enforcement in 2016. We should avoid the temptation to see 2015 as the start of a downward trend. As heightened FCPA enforcement enters its second decade, we should look at the entire picture, and gird ourselves for what promises to be a very busy year.
Bill Steinman, pictured above, is the senior partner at Steinman & Rodgers LLP, a boutique law firm in Washington, D.C. specializing in international anti-corruption compliance and investigations. He can be contacted here.