On Thursday, March 10, the World Compliance Tour came to
Houston. It featured presentations by Michael Volkov, of the law firm of Mayer
Brown; Ryan Morgan, of World Compliance; and Richard Cassin, author of the FCPA Blog. The session was very informative
on a wide range of topics related to the Foreign Corrupt Practices Act (FCPA).
This post will focus on Cassin's presentation and his theory for the dramatic
increase in FCPA enforcement over the past five years.
Most FCPA practitioners are familiar with the increase in
enforcement actions by both the Department of Justice (DOJ) and Securities and
Exchange Commission (SEC). The numbers bear this out, as shown in this summary
SEC Enforcement Actions
DOJ Enforcement Actions
There have been many theories as to why this increase
occurred. One is that companies were forced to review and report failures in
books and records testing required under Sarbanes Oxley. Another, perhaps more
cynically, is that the government discovered a cash cow in the form of fines,
penalties and profit disgorgement from FCPA criminal and civil enforcement
actions. However, Cassin presented another theory, being that the change
all came about after 9/11.
Cassin posited that the events of 9/11 changed the US
Government's perception of corruption. Investigations into the full scope of
9/11 demonstrated that foreign governmental corruption can lead to leaky
borders, problems with passport control, immigration issues and corrupt
influences which allow foreign governments to release information that it would
normally keep reserved. These, and perhaps other factors, led then President
George W. Bush to "ramp up enforcement efforts against corrupt based upon
national security concerns."
As evidence of this he pointed to two of his blog posts
on the subject of Presidential Proclamation 7750. Cassin wrote in post
the Kleptocrats, Part I" that Proclamation 7750 "suspended entry into
the United States of past and present foreign officials whose corrupt practices
have had "serious adverse effects on the international economic activity of
U.S. businesses, U.S. foreign assistance goals, the security of the United
States against transnational crime and terrorism, or the stability of
democratic institutions and nations." Also barred from entry are the foreign
officials' spouses, children, and dependents who benefited from the
In his second posting on Proclamation 7750, entitled, "Proclamation
7750 Unwrapped" Cassin wrote about his discussions with anonymous
background sources from the US State Department, the US agency tasked with
implementing Proclamation 7750. These sources told him that FCPA does not
"reach the kleptocrats - it applies only to bribe-payers and not bribe-takers.
And the truth, as the kleptocrats know, is that they're beyond the reach of
practically all the laws of other countries. There just aren't that many big
sticks to use against corrupt foreign officials."
In addition to the national security issue, Cassin listed
what he believed to be other factors in the continued increase in FCPA
enforcement actions, after the change to the Obama Administration. These
factors included that President Obama has elevated the discussion by linking
corruption as a violation of basic human rights; the new Dodd-Frank
Whistleblower program, which Cassin reported is bringing in one tip per day to
the SEC; and that various international NGOs are performing investigations
regarding corruption and providing this information to the US Government.
Finally, noted by Michael Volkov in his presentation; if you ramp up and hire
more new federal agents and attorneys to enforce anti-corruption, these new
government employees will find something to enforce.
Cassin's conclusion is that increased FCPA enforcement is
here to stay. He listed several countries which have implemented or enhanced
their respective national anti-corruption laws. He even point to China, which
he featured in his March 10 blog posting, which recently passed a law that
prohibits Chinese nationals and PRC companies from paying bribes to non-PRC
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2011
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