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Anti-Corruption | Q4 2017 • 1
2017 Year In Review ............................................. 1
Changes in DOJ and SEC Policies .................... 2
Major Corporate Anti-Corruption Enforcement Actions .......................................... 6
Noteworthy Individual Anti-Corruption Enforcement Actions .......................................... 9
Other Developments ........................................ 10
IN THE INTERIM ............................................... 12
2017 YEAR IN REVIEW
2017 marked another significant year for Foreign Corrupt Practices Act (FCPA) enforcement with more than $1.45 billion in related corporate penalties. This follows last year’s record and represents the second-highest year of penalties since enactment of the statute. Some view this as a signal that the Trump administration is continuing to enforce it aggressively. While this may be true, it is important to note that the large penalties total was driven primarily by Telia, which paid over $730 million in fines and is one of many cases initiated under the previous administration.
Nonetheless, several other signs point to FCPA enforcement being very much alive and well under the new administration. First, both Attorney General Jeff Sessions and Securities and Exchange Commission (SEC) Chairman Jay Clayton have made it clear that continuing to enforce the FCPA is a priority of both agencies and that the agencies have a number of cases in the pipeline. Second, both agencies have generally maintained the level of resources devoted to FCPA enforcement, and the FCPA units at the Department of Justice (DOJ) and the SEC are headed by experienced prosecutors who have worked in the government for multiple administrations. Finally, changes in administrations often delay certain enforcement actions as positions are filled within the agencies, which likely occurred this past year. Overall, signals indicate that FCPA enforcement will continue to be a key focus rather than cease as some had wishfully predicted.
Importantly, 2017 also marked the continuing cooperation between U.S. regulators and prosecutors and law enforcement officials from around the globe on anti-corruption enforcement actions. The Odebrecht case, for example, resulted in a $2.6 billion-dollar settlement—the largest global fine ever imposed in a corruption case with fines coordinated among the United States, Brazil and Switzerland. Less than $100 million of that settlement was paid to U.S. regulators. Telia represented major cooperation among United States, Dutch and Swedish regulators resulting in a global settlement of $965 million. And Rolls-Royce paid approximately $170 million in U.S. penalties as part of an $800 million global resolution of investigations in three countries—the United States, the United Kingdom and Brazil.
Both the Odebrecht and Rolls-Royce cases also continued the trend of the United States focusing on anti-corruption activities arising out of Latin America. Indeed, allegations involving acts of bribery in Latin America represented almost 50 percent of the
Anti-Corruption | Q4 2017 • 2
settlements in 2017. And U.S. regulators have publicly stated that there are more in the pipeline. This trend is likely driven by the cooperation that exists between the United States and many Latin American countries.
While corporate enforcement actions illustrated the continued focus of regulators on anti-competitive conduct, the focus on holding individuals accountable under the FCPA followed the path that the Yates memo formalized in 2016 and continued strong in 2017. There were 21 convictions or guilty pleas involving FCPA violations in 2017. And significantly, individual enforcement abroad was on the rise with, for example, approximately 80 individuals charged around the world in connection with the Odebrecht case.
In 2017, DOJ also made two noteworthy and formal announcements regarding its policies with respect to FCPA enforcement. In November 2017, Deputy Attorney General Rod Rosenstein announced changes to DOJ’s FCPA corporate enforcement policy, formalizing incentives for companies to self-disclose misconduct. These changes enhanced the incentives that had been offered in connection with the FCPA pilot program that DOJ had launched under the Obama administration. The new policy provides that if a company satisfies the standards of voluntary self-disclosure, full cooperation and timely and appropriate remediation, DOJ will apply a strong presumption in favor of resolving the case through a declination. The practical implication of this policy on companies, however, remains to be seen, as no matters have been resolved under it.
The second announcement came in February 2017 when DOJ’s Fraud Section released compliance program guidance in the form of a list of topics and sample questions that DOJ uses to evaluate the effectiveness of compliance programs for companies implicated in misconduct. The compliance program guidance is intended to provide the public with more transparency about federal prosecutors’ review of compliance programs under the DOJ corporate charging guidelines, but it also serves as a practical guide to assist companies in implementing and enhancing compliance programs, which DOJ has indicated will vary based on the size and risk profile of each company.
These enforcement trends, along with other updates and insights, are discussed in more detail below.
CHANGES IN DOJ AND SEC POLICIES
DOJ Launches New FCPA Corporate Enforcement Policy
A significant 2017 FCPA development occurred on November 29 when Deputy Attorney General Rosenstein announced changes to DOJ’s FCPA corporate enforcement policy. Rosenstein stated that DOJ’s efforts to encourage voluntary disclosure of conduct in violation of the FCPA via the FCPA pilot program, which began in 2016, “proved to be a step forward in fighting corporate crime” but that “there were opportunities for improvement.”
To that end, Rosenstein announced a new policy that offers a further incentive to companies to self-disclose: If a company satisfies the standards of voluntary self-disclosure, full cooperation and timely and appropriate remediation, DOJ will apply a strong presumption in favor of resolving the case through a declination. That presumption may be overcome in cases involving aggravated circumstances related to the nature or seriousness of the offense or if the offender is a recidivist. Even where aggravated circumstances are involved, DOJ will recommend a 50 percent reduction from the low end of the sentencing guidelines fine range where a company voluntarily self-discloses and otherwise satisfies the requirements of the policy. Criminal recidivists, however, may not be eligible for that credit. This revised policy, likely an effort by DOJ to increase the number of companies availing themselves of similar benefits under the FCPA pilot program, is now set forth in the United States Attorneys’ Manual as the FCPA Corporate Enforcement Policy.
…the focus on holding individuals accountable under the FCPA followed
the path that the Yates memo formalized in 2016 and continued
strong in 2017.
Deputy Attorney General Rosenstein announced
a new policy that offers a further incentive to
companies to self-disclose.
Anti-Corruption | Q4 2017 • 3
DOJ’s Fraud Section released a document on its website titled “Compliance
Program Guidance” that contains a list of topics
and sample questions that DOJ uses to evaluate the
effectiveness of compliance programs for companies
implicated in misconduct.
Rosenstein stated that the enhancements are intended to provide “greater certainty for companies” deciding whether to voluntarily disclose potential wrongdoing and to enable DOJ to “efficiently identify and punish criminal conduct.” He emphasized that the policy provides “greater clarity” about the government’s decision-making.
In connection with encouraging disclosures under the policy, Rosenstein emphasized the favorable outcomes in recent cases involving self-disclosure, highlighting that only two of the 17 FCPA-related criminal resolutions since 2016 were voluntary disclosures under the FCPA pilot program and those were both resolved through a nonprosecution agreement without the requirement for a compliance monitor. This was in comparison to 10 other resolutions that required corporate compliance monitors. Rosenstein emphasized that DOJ was not offering immunity to companies, however, noting that while DOJ had declined to prosecute seven additional matters that were voluntarily disclosed during the FCPA pilot program, DOJ did seek disgorgement of ill-gotten gains.
While announcing the policy, Rosenstein emphasized another FCPA trend in recent years— the continued evolution of DOJ’s focus on individual prosecutions—stating:
Effective deterrence of corporate corruption requires prosecution of culpable individuals. We should not just announce large corporate fines and celebrate penalizing shareholders. Most American companies are serious about engaging in lawful business practices. Those companies want to do the right thing. They need our support to protect them from criminals who seek unfair advantages.