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The top three FCPA stories of, ahem, 2020

For the FCPA community (and the entire human race), 2020 was a You’ve-Got-to-be-Kidding-Me year. But for our top stories, let’s jump past the pandemic and straight to the FCPA, and more specifically to three aspects of enforcement — the Good, the Bad, and the Missing.

1. The Good – A record-smashing enforcement year. The DOJ and SEC have brought FCPA enforcement actions against 12 companies in 2020 and imposed financial penalties (fines and disgorgement) totaling $6.4 billion. The companies won’t pay it all to the U.S. Treasury; the feds give some FCPA defendants credit for amounts they pay enforcement authorities in other countries. But the DOJ and SEC imposed $6.4 billion in FCPA penalties, and that amount has to be paid somewhere.

For comparison, in each of 2019 and 2018, FCPA penalties were around $2.9 billion, and in 2017 were $1.8 billion.

How does our “modern era” compare with earlier times? Total FCPA penalties in 2005 were $37 million, $300,000 in 2000, and $0 in 1995.

(Thanks to FCPA Blog+ for the nifty stats.)

2. The Bad – Goldman Sachs kicked compliance personnel to the curb. With its $3.3 billion FCPA resolution in October, the Wall Street behemoth became the first American company to top our Top Ten list. If that wasn’t infamy enough, details about how Goldman’s business side treated compliance personnel are awful.

After compliance officers blocked Goldman from taking on notorious wheeler-dealer Low Taek Jho AKA “Jho Low” as a private wealth management client, some business groups kept dealing with him.

In a March 13, 2010 email to a high-level business committee executive and others, Goldman’s regional head of compliance expressed frustration with the pressure to approve Low despite the red flags:

This has been an exceptionally trying experience I have to admit, and I believe that no matter what we do [a Goldman private wealth management executive] is not willing to accept that we are not in a position to onboard this prospect [Jho Low]. . . I do not believe we will ever be able to get comfortable with this matter. I’d like to shut this down once and for all . . . It is seldom that one sees a vendor report, which has been backed up verbally by them, that so clearly states that we should exercise extreme caution.

Has there ever been a more prophetic compliance warning? The DOJ eventually indicted Jho Low for allegedly arranging $1.6 billion in bribes to officials in Malaysia and Abu Dhabi and looting at least $4.5 billion from the Malaysia sovereign wealth fund 1MDB.

3. The Missing – FCPA enforcement against Chinese companies. In 64 FCPA enforcement actions, some or all of the illegal behavior happened in China. So, how many parent companies based in China have been nabbed for violating the FCPA? One — Keyuan Petrochemicals Inc. in 2013. It makes no sense. Why aren’t Chinese parent companies appearing as FCPA defendants?

Short answer: They’re beyond the reach of U.S. law. How do we know? The DOJ and SEC have said so, as have many of the 150 Chinese companies now listed on U.S. stock exchanges. They cite an inability to enforce U.S. court judgments in China, blocking statutes that make collecting evidence in China almost impossible, and an “audit integrity” problem.

Regarding the latter: The PRC government prohibits the U.S. Public Company Accounting Oversight Board, or PCAOB, from inspecting auditors in China. That means public accounting firms are unable to verify audit reports about companies headquartered there. In response, the U.S. Congress this month adopted the Holding Foreign Companies Accountable Act. If the White House signs the bill, U.S. exchanges will delist Chinese companies in three years unless the PCAOB or federal regulators can inspect their financial audits.

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Those are my picks for the three big FCPA stories of 2020.

I could have mentioned how lockdowns, travel restrictions, quarantines, and remote work are changing the compliance profession. Or how we learned in 2020 that Citigroup now categorizes 15 percent of its employees as “risk, regulatory, and compliance staff,” which means the bank has an astounding 30,000 risk and compliance-related personnel. Or Airbus paying about $4 billion to an unlikely alliance of enforcement authorities from France, the UK, and the United States to settle coordinated bribery and trade charges.

I could even have mentioned how in 2020 it became clear the DOJ expects compliance officers to be super executives — well qualified, adequately funded, autonomous from the rest of management, and directly reporting to and informing the board.

What a year. It proved again there’s never been a more challenging and exciting time to be a compliance professional.

Buckle up for 2021.

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1 Comment

  1. With so much financial stresses as we faced another very stressful 2021 due to the pandemic and ramp-up of the business activities, more compliance issues will be discovered, and truly compliance professionals have to buckle up for more exciting rides!


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