Have you noticed how many corporate FCPA enforcement actions recount old facts. Really old facts — sometimes from more than a decade ago. Why should we care about all that ancient history? Because cases that recount ancient history are another valuable clue about how FCPA enforcement works.
I analyzed seven consecutive corporate FCPA enforcement actions from 2020 and found that all involved non-compliant behavior that started at least eight years ago. In two cases, the conduct started ten years ago, in two others it started a dozen years ago, and one case involved illegal conduct that started 14 years ago.
Here are some reasons why there’s so much ancient history in FCPA cases:
The statute of limitations for FCPA offenses. The DOJ has five years in which to formally commence criminal prosecutions under the FCPA’s anti-bribery provisions, and six years under the FCPA’s accounting provisions. If the DOJ needs more time to gather foreign evidence, it can ask a judge to extend either limitation period up to three more years. The SEC can bring civil FCPA enforcement actions any time within five years from “when the claim first accrued.”
Conspiracy charges “stretch” the statute of limitations backward. Most FCPA prosecutions also involve the federal conspiracy statute, 18 U.S.C. § 371. For an anti-bribery conspiracy, the statute of limitations can reach back to criminal behavior more than five years old if the conspiracy continued at any time during the past five years. For conspiracies involving criminal accounting violations, the operative period would be six years.
Here’s part of what the Justice Manual (formerly the U.S. Attorneys Criminal Resource Manual) says:
Conspiracy is a continuing offense. For statutes such as 18 U.S.C. § 371, which require an overt act in furtherance of the conspiracy, the statute of limitations begins to run on the date of the last overt act. See Fiswick v. United States, 329 U.S. 211 (1946); United States v. Butler, 792 F.2d 1528 (11th Cir. 1986).
Big corporate FCPA cases are famous for featuring “long-running” bribery plots and accounting cover-ups that might have started a decade or more before the last overt act in the finally revealed conspiracy.
Corporate targets of FCPA investigations commonly waive the statute of limitations. When a company self-discloses an FCPA-related investigation, or when the feds launch their own investigation, target companies routinely agree to toll (waive) the FCPA’s statute of limitations. A tolling agreement indicates that a company will cooperate. There’s usually nothing to be gained by refusing to toll the statute of limitations. The feds would simply move faster to indict or charge the company (and perhaps more individuals from the company). Also, non-cooperation would likely result in a higher culpability score for the defendant corporation under the U.S. Sentencing Guidelines, meaning a bigger criminal penalty.
FCPA investigations take a lot of time. According to data from FCPA Tracker, nearly 20 percent of today’s ongoing FCPA-related investigations were first disclosed in 2015 or earlier. Even when an FCPA investigation is triggered by a specific complaint about an incident in a single country, the chances are high that the investigation will spread to the company’s operations in multiple countries and cover multiple years. That’s mainly because the DOJ and SEC want the full picture before they agree to a corporate settlement that involves a deferred- or non-prosecution agreement, or a declination. Sometimes issuers initially disclose narrow, single-country FCPA investigations, only to disclose later that the investigation has expanded to other countries. For example, in July 2016, Novartis disclosed an FCPA-related investigation involving South Korea. In January 2017, Novartis added Greece to the disclosure. In July 2017, it added Russia. Novartis’ June 2020 FCPA resolution involved behavior in all three countries, and in Vietnam.
The feds don’t face corporate-style deadlines. Big companies have to deal with monthly sales targets, quarterly budgets, annual debt repayment obligations, and so on. But the DOJ and SEC, in their enforcement roles, aren’t tied to the calendar or to frequent deadlines. They can move at their own speed. The feds often say they “follow the evidence,” wherever it leads and however long it takes. Some might argue that slow FCPA enforcement results in “justice delayed is justice denied.” But the feds would likely respond that they can’t ink a final FCPA resolution until they’re sure they know the full scope of a company’s FCPA misbehavior (or compliance).
What about those 2020 corporate enforcement actions? When Cardinal Health, Inc. resolved FCPA offenses last year, the SEC said the company first learned about its China compliance problem in late 2012. Novartis AG’s illegal payments to doctors outside the United States started in 2012, the DOJ said. Alexion Pharmaceuticals Inc. illegally paid doctors at government hospitals in Russia starting in 2011, and first retained a consultant with ties to health officials in Turkey in 2010. World Acceptance Corporation’s Mexico unit started violating the FCPA “from at least December 2010,” the SEC said. The offenses alleged in last year’s FCPA enforcement action against Airbus Group SE began in “at least 2008.” Herbalife Nutrition Ltd.’s China subsidiaries started their FCPA conspiracy around 2007. And Eni S.p.A.’s FCPA offenses in Algeria (via an agent) originated in early 2006.