24 July 2014
There are few letters as anxiety provoking for a company as these four: FCPA. The U.S. Foreign Corrupt Practices Act has been around since 1977, but its application and enforcement are always growing and changing. Staving off potential corruption and bribery risks overseas has become particularly challenging for companies in an era where business is getting ever more global. But enforcement of the FCPA by the U.S. Department of Justice and the U.S. Securities and Exchange Commission isn’t slowing down either.
Law firm Mayer Brown recently released its midyear legal update on the FCPA, which reveals that there has been plenty happening on this front since 2014 began. A combination of new case law and developments in enforcement around the world can help in-house attorneys figure out how to update their strategies for dealing with FCPA risk.
The number of FCPA enforcement actions initiated in the first half of the year is down a bit from the same period last year. According to a separate report from Gibson, Dunn & Crutcher, the number of enforcement actions through 2014's first six months is 13 from the DOJ and two from the SEC. Within the same time period last year, the number of DOJ actions was the same, but the SEC had initiated four actions.
Larry Urgenson, who is a partner at Mayer Brown and leader of the firm’s anticorruption and FCPA practice, as well as a member of its white-collar defense and compliance practice, told CorpCounsel.com that this slight decrease by no means indicates that enforcement efforts are losing steam. “The enforcement policies are no less aggressive, and I don’t think that over the long run the FCPA enforcements will decrease. I think they’ll increase,” he said.
Urgenson believes that any small downturn may be in part because of personnel turnover in government agencies. However, with the growth in whistleblower statute protections in the last few years that apply to the FCPA, he doesn’t expect the lull to last long. “Those statutes’ effects have not yet been felt,” he said.
Of the FCPA cases that have been decided in the first half of 2014, the Mayer Brown legal update identified U.S. v. Esquenazi, decided in May by the U.S. Court of Appeals for the Eleventh Circuit, as perhaps the most notable. In Esquenazi, two former executives of a U.S. company, Terra Telecommunications Corp., were found guilty of participating in a scheme to bribe officials at Haiti Teleco, that country’s state-owned telecom.
“I think this is a landmark case because it is a confirmation that the FCPA applies to state-owned enterprises under certain circumstances,” explained Urgenson. The FCPA prohibits bribery of foreign officials, which the law defines as “any officer or employee of a foreign government or any department, agency or instrumentality thereof.” Though the defendants argued that Haiti Teleco was not enough of a part of Haitian government functions to count as an “instrumentality,” the Eleventh Circuit disagreed.
“The big news will be what happens with the next case in terms of the state-owned enterprise,” Urgenson said. Companies will have to keep an eye on this issue, he pointed out, as an extension of the FCPA to cover more commercial, state-owned enterprises could have a huge impact in countries like China.
Another important point made by Mayer Brown in its update was that cooperation with prosecutors during FCPA proceedings continues to make a positive difference in the outcome for a company. In two of the most significant FCPA settlements of 2014 so far (involving Alcoa Inc. and Hewlett-Packard Co.), cooperation helped the companies negotiate a lower payout than they likely would have otherwise.
The Alcoa companies, for example, had to pay $384 million to the government to settle the FCPA case. Although this is no small price, it still beats the initial minimum base fine set by the government: $446 million. In many of the case documents, explained the legal update, the DOJ expressly acknowledged the companies’ ongoing support for the investigation, including a 2008 voluntary disclosure.
The first six months of the year also have brought major developments in the foreign regulatory enforcement space, showing that the U.S. isn’t the only country interested in thwarting international white-collar crime. Although Urgenson doubts that levels of regulatory enforcement for bribery and corruption in other countries will reach U.S. levels any time soon, he noted that foreign regulators are “on the radar screen” and “occupying more and more attention.”
According to the update, this growing international interest may cause foreign regulators to cooperate more with the U.S. government as it investigates and prosecutes FCPA violations. In the Alcoa case, for example, the U.S. noted cooperation from enforcement agencies in many countries, including the U.K. Serious Fraud Office, as well as law enforcement offices in Australia and Switzerland.
Other countries are also getting tougher and taking on more anticorruption investigations. The update noted the new Clean Company Act in Brazil, the antibribery law that went into effect in January, as well as the strengthening of the UK Bribery Act this year as drivers of worldwide enforcement activity.
Reprinted with permission from the July 24, 2014 edition of Corporate Counsel © 2014 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.