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Andy Spalding
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Jessica Tillipman
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Bill Steinman
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Richard L. Cassin
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Elizabeth K. Spahn
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Cody Worthington
Contributing Editor

Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
Contributing Editor

Shruti J. Shah
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Russell A. Stamets
Contributing Editor

Richard Bistrong
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Eric Carlson
Contributing Editor

Is an ‘industry sweep’ headed your way?

It’s a familiar FCPA enforcement pattern. Companies in the same segment fall like dominoes. Medical device makers, pharmas, banks, mobile phone operators, oil and gas service providers and producers — all have had their turn in the enforcement spotlight.

Why do industry sweeps happen? FOMO — Fear Of Missing Out — is one underlying cause. When a peer somehow gains a market advantage, competitors rush to adopt whatever produced the edge, sometimes forgetting about compliance.

For medical device makers, it was paying doctors (directly or indirectly) to implant their products. Pharmas also found ways to funnel cash or soft money to healthcare professionals in return for prescribing their drugs. Mobile phone operators formed joint ventures with members of ruling families. Swiss logistics firm Panalpina attracted a slew of oil and gas services clients by using corrupt payments in Africa and the Middle East to speed up customs clearance.

Unaoil became a go-to intermediary in the oil and gas segment by spreading corrupt payments around in multiple countries. The FIFA-related corruption prosecutions exposed the intensely competitive and corrupt world of soccer broadcasting rights. And on it goes.

Industry sweeps can be a natural byproduct of any successful anti-corruption prosecution. It starts with one company or executive getting caught. Cooperation usually means spilling the beans about others in the industry. The evidence incriminates an ever-expanding cast of characters. Well-aimed subpoenas fly out of Main Justice or the SEC as prosecutors grow wise to a segment’s questionable business practices. More targets roll over, and the industry sweep gathers momentum.

The princeling cases are an example: First, BNY Mellon paid nearly $15 million to resolve FCPA offenses. The SEC said it awarded coveted internships to family members of officials connected to a Middle Eastern sovereign wealth fund. Then, JPMorgan Chase paid $264 million in penalties to the DOJ, SEC, and Federal Reserve for awarding jobs to relatives and friends of Chinese government officials to win banking deals. Next, Credit Suisse paid a $47 million penalty to the Justice Department to end an FCPA investigation into Asia hiring practices. A year later, Deutsche Bank paid the SEC $16 million to settle FCPA offenses for hiring public officials’ relatives in China and Russia.

Industry sweeps can produce huge enforcement actions. Four mobile phone operators are on the FCPA Top Ten list. The DOJ and SEC imposed about $3.5 billion in total penalties against Ericsson, Telia, MTS, and VimpelCom.

What about now? Are industry sweeps still relevant?

According to data provided by FCPA Tracker, 17 companies in oil and gas-related segments have ongoing FCPA investigations. There are still at least seven telecommunications companies with open FCPA investigations, five banks, and five healthcare firms.

Here’s a factoid that may or may not mean anything. Lots of same-industry FCPA investigations come in threes. Three tobacco companies, three aerospace firms, three media companies, three mining companies, and three gaming companies have all disclosed ongoing FCPA-related investigations, according to FCPA Tracker. Are those “groups of three” a signal of potentially wider industry sweeps on the way?

There are still one-off FCPA enforcement actions, standalone cases from various industries. An example from 2020 is World Acceptance Corporation, a South Carolina-based consumer loan company. It paid the SEC $21.7 million to resolve FCPA offenses caused by a subsidiary that bribed government and union officials in Mexico. In 2019, retailer Walmart Inc. paid the DOJ and SEC $282.7 million to settle allegations about payments to intermediaries and having weak anti-corruption internal controls in Brazil, China, India, and Mexico. And in 2018, business information provider Dun & Bradstreet  Corporation paid about $9 million to resolve FCPA charges arising from improper payments by two Chinese subsidiaries. Those three cases weren’t part of industry sweeps, at least not yet.

Still, most new FCPA enforcement actions are echoes of earlier enforcement actions in their industries. It pays, then, for compliance professionals to focus attention on patterns of investigation and enforcement that might impact their segment.

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