There was plenty to ponder when looking for the biggest FCPA stories from last year. The flurry of enforcement actions in January before the transition in Washington to a new Administration. Suspense about whether the new crew would enforce the FCPA at all. Two hundred and ten whistleblower tips to the SEC about potential FCPA violations. And some startling mega-cases that reshuffled the Top Ten list.
But when the ball dropped on 2017, our picks for the three most important FCPA stories of the year are these:
Number 3 – More individuals held accountable. First under the Pilot Program, and now under the new DOJ guidance, companies are trying to qualify for cooperation credit. That puts more attention than ever on the individuals actually responsible for the overseas bribery. The fruits of the policy were evident in 2017.
Last year a dozen individuals either pleaded guilty or were convicted of FCPA offenses. Seven others were indicted, and eight were sentenced.
(For comparison, in 2016 ten individuals pleaded guilty to FCPA criminal charges and two individuals were sentenced for criminal FCPA offenses. In 2015, four individuals pleaded guilty to DOJ charges and two were indicted on new charges. And in 2014, six individuals pleaded guilty to DOJ charges.)
The DOJ promised more individual prosecutions. In 2017, it happened.
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Number 2 – The new guidance. In November Rod Rosenstein announced that the FCPA Pilot Program had become permanent, and that the DOJ had incorporated it into the U.S. Attorneys’ Manual.
Contributing editor Bill Steinmen wrote a helpful post about what’s new in the guidance:
First, a presumption of declination. Companies that satisfy the cooperation standards will enjoy a presumption that they’ll receive a declination, Bill said. Don’t pop the corks too soon, however. The presumption is subject to several rather substantial qualifiers, he said.
Second, an unqualified 50 percent. Full credit for voluntary self-disclosure, full cooperation and timely and appropriate remediation could qualify for a 50 percent reduction from the bottom end of the Sentencing Guidelines range. The old language in the Pilot Program said the credit could be “up to” a 50 percent reduction. The “up to” is gone.
Third, those worrisome messaging apps. Full remediation credit for corporations now requires them to prevent “employees from using software that generates but does not appropriately retain business records or communications.” It’s not going to be easy for companies to control the use of messaging apps such as Snapchat and Wickr. But at least the guidance is clear.
Fourth, more clarity around “de-confliction.” The new policy, Bill said, makes clear that the DOJ may request companies to hold off on certain investigative steps (such as interviewing specific individuals) so that the agency can proceed with its own investigation. But these de-confliction requests will be “narrowly tailored,” and will last for a “limited period of time.” And the DOJ will notify the company when it has lifted the de-confliction request.
Finally, a new way companies need to demonstrate appropriate remediation. Companies have to undertake a root cause analysis of the conduct in question. “Of all the changes in the new policy, this is perhaps my favorite,” Bill said. It’s about corporate ethics and culture. It’s how companies that have had a problem can really fix things and move forward.
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Number 1 – New structure for global FCPA resolutions. It’s official. The DOJ and SEC have a new way to structure global settlements with companies accused of overseas corruption. The feds impose a total penalty on the FCPA defendant, but allow some of that amount to be paid to enforcement authorities and regulators in other countries.
That’s what happened in 2017 with Keppel Offshore & Marine Ltd. and its U.S. subsidiary in their $422 million FCPA resolution. The deferred prosecution agreement with Keppel Offshore and the plea agreement with its U.S. unit assessed the full penalty.
But the DPA said half the penalty is payable in Brazil. A quarter is payable in Singapore. And a quarter is payable to the United States Treasury. According to the DPA, if Keppel pays less than the allocated amounts in Brazil or Singapore, it’s obligated to pay the difference to the United States.
Telia Company’s $965 million resolution in September 2017 also followed this new pattern. There, the total penalties were specified in the DOJ’s deferred prosecution agreement and the SEC’s administrative order. Telia’s DPA, like Keppel’s, said the total criminal penalty would be offset by penalties paid to Dutch and Swedish authorities.
The practice was also used in late 2016 for the Odebrecht / Braskem FCPA enforcement action, which allowed for offsets against payments to authorities in Brazil and Switzerland, and for VimpelCom in early 2016, where some SEC-ordered disgorgement was payable to the Netherlands.
Why is the new structure important? It helps companies avoid paying penalties more than once for the same bribery offenses. The DOJ deals with enforcement agencies in other countries, keeping the global resolution process more orderly.
The new settlement structure also encourages other countries to enforce their anti-corruption laws. Who doesn’t want a share of the penalties flowing from a huge FCPA settlement? Now other countries can have that if they bring their own enforcement actions but coordinate the process through the U.S. It’s a multiplicity of actions, without the chaos. That’s good policy.
Welcome to the era of enlightened global enforcement.
Richard L. Cassin is the publisher and editor of the FCPA Blog.
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