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Global Anti-Corruption Enforcement: American Style. By: Tai H. Park. The U.S. Department Of Justice (“DOJ”) Has Aggressively Enforced Its Anti-Bribery Statute, The Foreign Corrupt Practices Act (“FCPA”) Against Multinational Companies For Decades.
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Global Anti-Corruption Enforcement: American Style By: Tai H. Park
The U.S. Department Of Justice (“DOJ”) Has Aggressively Enforced Its Anti-Bribery Statute, The Foreign Corrupt Practices Act (“FCPA”) Against Multinational Companies For Decades. • The fines collected against companies in the past two years have reached record levels, with some exceeding $1 billion in US Dollars. • Annual Revenues to U.S. From Corporate Fines is Billions of Dollars. • There are signs that non-U.S. law enforcement agencies are ramping up their own anti-corruption efforts, applying techniques and approaches that mirror the DOJ’s traditional (and highly successful) processes.
WHY?Lots of Money at Relatively Low Cost. • The Revenue Stream to the Government Treasuries Is Substantial. • DOJ Has A Template For Successful Prosecutions At Relatively Low Cost to the Government. • Increasing Demand For Transparency and Fairness In Globalized Economy
This Discussion Examines: 1. Some key features of U.S. corporate investigations and prosecutions; 2. The trends we are seeing globally and signs that non-U.S. authorities are adopting U.S. prosecutorial tools; 3. Suggestions about how to get ready as international white collar lawyers.
Key Features of DOJ Corporate Investigations – Make Companies Do Most of the Work • Require Companies to Detect Wrongdoing • Incentivize Companies to Self-Report to Government • Require Cooperation through Internal Investigations • Disable Litigation Through Doctrine of Respondeat Superior • Incentivize Early Resolution By Paying Large Financial Penalty
1. Requiring Systems For Detection of Misconduct • Corporate Compliance Programs and Internal Financial Control Requirements; • Whistleblower and “Report Up” Requirements; • External Auditors • Section 10A Investigations
2. Self-Report Misconduct to Government • “When a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, all in accordance with the standards set forth below, there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender.” • U.S. Dep’t of Justice, Justice Manual § 9-47.120 (2019), https://www.justice.gov/jm/jm-9-47000-foreign-corrupt-practices-act-1977.
3. Require Cooperation – Read: “Do a Thorough Internal Investigation and Report Results to Government in Real Time.” The company’s “cooperation included conducting a thorough internal investigation, proactively sharing in real time facts discovered during the internal investigation and sharing information that would not have been otherwise available to the department, making regular factual presentations to the department, facilitating interviews of and information from foreign witnesses, and voluntarily collecting, analyzing and organizing voluminous evidence and information for the department in response to requests, including translating key documents.” • DOJ Press Release: “Petróleo Brasileiro S.A. – Petrobras Agrees to Pay More Than $850 Million for FCPA Violations,” Sept. 27, 2018.
4. Liberal Use of Negotiated Settlements for Early Resolution Without Costly and Risky Litigation. • Four Possible Dispositions of Investigations • Declination • NonProsecution Agreement • Deferred Prosecution Agreement • Guilty Plea • Non-Prosecution or Deferred Prosecution Agreements: • Admit Wrongdoing • Pay a Large Fine • Disgorge Any Profits • Call it a Day • Declination: government decides not to seek any punishment. Some common circumstances for declination are: • There was no provable criminal activity found (or one of the key elements of an FCPA offense is clearly missing); • The offense was limited, the company had a good compliance program that the employee violated, and the company took swift action to terminate the bad employee, further tightening controls; and/or • The company self-reported and thereafter fully cooperated. • Non-Prosecution Agreement • Government agrees not to charge the company but the company admits to wrongdoing and agrees to a fine and potentially other conditions imposed by the company, including the installation of a monitor. • The company agrees to continue to cooperate fully with the government. • Deferred Prosecution Agreement • Very similar to Non-Prosecution Agreements except that criminal charges are actually filed in court, but not pursued. After an agreed period of time (often three years) of good behavior, the government dismisses the charges.
The Government’s Leverage – Doctrine of Respondeat Superior Why Self-Report, turn over Internal Investigation, only to have Government use information to impose heavy penalty? Why not refuse their demands and batten down the hatches? • Answer: the doctrine of respondeat superior: • In theory, if one employee acting within the scope of his employment engages in a crime, the company is itself criminally liable. • Companies are also unwilling to suffer the collateral consequences of an indictment.
The Consequence Of The DOJ Template: • Billions of dollars annually flow to the U.S. government from corporate prosecutions. • Increased incentive for corporations to take anti-bribery laws seriously and to implement processes to prevent them where possible. • Benefits the Global Financial Environment
Traditional Transnational Governmental Cooperation. • DOJ Leads with Aggressive FCPA Enforcement • Foreign enforcement agencies assist. • 2008, German prosecuting authorities take the DOJ’s lead but then pursue their independent investigation of Siemens AG. • Siemens paid a total of $1.6 billion, with half of that amount going to each of the U.S. and Germany. • An Evolution of this Model • In past three years, the DOJ has shared fines roughly equally with the Netherlands, Brazil, Singapore and France. • Société Générale: $292 million to the U.S. and $293 million to France. • VimpelCom: Over $397 million to the U.S. and the same amount to the Netherlands. • Keppel Offshore & Marine Ltd., split $421 million three ways among the U.S., Brazil, and Singapore.
Brazil Stands Out • In December of 2016, Odebrecht, the Brazilian construction conglomerate entered into a guilty plea with the DOJ where it agreed to pay the U.S. $253 million with the other $3 billion going to Brazil and Switzerland (mostly Brazil). • In September 2018, Petrobras, a Brazilian oil company, agreed in a non-prosecution agreement, to pay the U.S. $170,640,000 while Brazil would receive $682,560,000.
The Trend of Non-U.S. Corporate Enforcement Activity. • Increased Enforcement Activity • Brazil’s Operation Lava Jato (“Car Wash”) • Hundreds of politicians and corporate executives convicted • China pushes out new laws and guidelines for Corporate Enforcement • Sustained prosecutions in recent years • Former President of Interpol and Vice Minister of the Ministry of Public Security: Meng Hongwei.
Trend Toward Adoption of DOJ Template France: • “Law on Transparency, Corruption and Modernization of the economy” (the “Sapin II” law) requires: • Comprehensive anti-corruption compliance programs for large corporations; must include internal whistleblowing mechanism. • Permits something equivalent to the deferred prosecution agreements called the “judicial public interest agreement” (“Convention judiciaire d’intérêt public” or “CJIP”). • The law also created a new agency: the French Anticorruption Agency(“Agence Française Anticorruption” or “AFA”), tasked with preventing corruption in the public and private sectors. • The AFA-PNF guidelines published last July heavily encourages self-reporting and cooperation through internal investigations turned over to the government. • 3.7 billion euro fine against UBS this past February 2019. After Bank failed to reach agreed resolution.
Trend Toward Adoption of DOJ Template (cont’d) • United Kingdom: • July 2019, SFO Issues Written Guidance on Corporate Cooperation – Requiring disclosure of internal investigation • Adopts Deferred Prosecution Agreements as mechanism for resolution • Current SFO Director is former Deputy General Counsel to the FBI in the U.S. • Considering law that would provide for corporate criminal liability if company “failed to prevent bribery.” • Departure from law that requires proof that senior executive directed the misconduct. • Germany: • Draft legislation permitting leniency if internal investigation is disclosed to government • Brazil: • Recent Legislation to establish whistleblowerprograms. • Requiring effective complianceprogram.
Trend Toward Adoption of DOJ Template (cont’d) • Argentina: • Enactment of a new law on corporate criminal liability. Previously, only individuals had been held criminally liable for bribery. • Law provides for companies to avoid prosecution if they self-disclose the misconduct, put in place a compliance program and disgorge any illegal proceeds of the bribery. • “Effective Collaboration Agreements,” permitting a kind of non-prosecution or deferredprosecutionagreement with companies. • India: • Recent amendments to the anti-bribery law include a requirement that company directors certify that the company has adequate compliancesystems in place and that they are working as designed. • This is similar to Section 302 of the Sarbanes-Oxley Act in the U.S. laws that require such certifications from senior officers of a public company
Trend Toward Adoption of DOJ Template (cont’d) • The World Bank • Companies seeking to win projects in developing countries worldwide, where the projects are funded in part by the World Bank, face many of the same anti-fraud and anti-bribery requirements. • A company found guilty of a violation can be suspended or debarred from any further work on projects involving the World Bank funds or other related international funding sources. • The Bank’s Integrity Vice Presidency unit and the related Office of Suspension and Debarment determine the corporate penalties for violations using many of the same factors that the DOJ and other U.S. agencies use in considering corporate liability (see General Principles and Guidelines for Sanctions): • Cooperation (to include internal investigations). • Existence of a compliance program. • It employs anonymous hotlines and whistleblower mechanisms. • Resulted from a comprehensive study of the Bank’s sanctions practices and a report issued in 2002 by the former U.S. Attorney General Richard Thornburgh who led the DOJ.
The Response of Multinational Companies and Their Advisors: • Institute Sound and Effective Compliance Programs • Meaningfully combat bribery • Good for business • Lenient Treatment by Governmental Authorities. • Bribery can no longer be considered cost of doing business in high risk jurisdictions. Need to recalculate the cost-benefit analysis. • Guard Against Government Overreach • Does respondeat superior make sense? • Why penalize for not self-reporting • Why must cooperation include disclosing internal investigations designed to remediate? • Stay Tuned As Enforcement Trends Evolve
