Friday FCPA Roundup for Week Ending July 4

Friday FCPA Roundup for Week Ending July 4

 This article was reprinted with permission from FCPA Professor

On the brink of trial, statistics of note, the over-hyped U.K. Bribery Act turns 3, say what?, and for the reading stack. It’s all here in a special Thursday edition of the Friday roundup.

On The Brink of Trial

This February 2012 post highlighting the SEC’s enforcement action against Mark Jackson and James Ruehlen (a former and current executive of Noble Corp. respectively) asked – “will the SEC be put to its burden of proof.”  Among other things, the post noted that the SEC has never prevailed in an FCPA enforcement action when put to its burden of proof.

With the passage of time, the SEC’s case against the defendants was consistently trimmed as the SEC attempted to meet its burden (see this post as well as here). Among other things, a portion of the SEC’s claims were dismissed or abandoned on statute of limitations grounds and the trial court judge ruled, in an issue of first impression, that the SEC has the burden of negating the FCPA’s facilitation payments exception.

On the brink of the SEC’s first-ever FCPA trial (trial was scheduled to begin next week), the parties have agreed to settle.

Without admitting or denying the SEC’s allegations, Jackson consented to a final judgment permanently restraining and enjoining him from violating the FCPA’s books and records provisions. Jackson was represented by, among others, David Krakoff (Buckley Sandler).

Without admitting or denying the SEC’s allegations, Ruehlen consented to a final judgment permanently restraining and enjoining him from aiding and abetting FCPA books and records violations. Ruehlen was represented by, among others, Joseph Warin and Nicola Hanna (Gibson Dunn).

In neither consent is the defendant required to pay any civil fine.

Score this one as you see fit, but my take is that this case represents yet another SEC failure in an FCPA enforcement action when put to its burden of proof. As the Second Circuit recently recognized, SEC neither admit nor deny settlements are not about the truth, but pragmatism.

Statistics of Note

EY recently released its 13th annual Global Fraud survey (the results were based on interviews with more than 2,700 executives across 59 countries). Statistics of note include the following.

“Despite the aggressive enforcement environment, our research suggests that the percentage of companies that have anti-bribery/anticorruption (ABAC) policies has increased by only 1% over the past two years, and a persistent minority has yet to take even the basic steps toward an effective compliance program. One in five businesses still does not have an ABAC policy. Less than 50% of respondents have attended ABAC training. There has been a reduction in the level of reporting on compliance issues to boards.”

“The survey results show that executives in different roles have a differing view of the level of risk. 27% of chief compliance officers (CCOs) believe bribery and corrupt practices happen widely in their country versus 38% of all respondents — so they appear to have a more optimistic view than their colleagues. 18% of sales and marketing executives believe it is common practice to use bribery to win contracts in their sector versus 12% of all respondents — so they appear to have a more pessimistic view than their colleagues.”

“Additionally, the survey results suggest that compliance efforts may not always be targeting the right risks in the most effective way. Less than a third of businesses are always or very frequently conducting anti-corruption due diligence as part of their mergers and acquisitions process. 45% of organizations are not mitigating risks by introducing a whistleblower hotline. ABAC training is less likely to occur in jurisdictions where there is a higher perceived risk of bribery. Sales and marketing executives are the least likely of all our respondents to be included in risk assessments — despite being exposed to and aware of significant risks. ABAC training, for example, is more likely to be attended by executives in mature markets, where corruption is perceived to be lower, than in higher-risk emerging markets. Of the survey population, 58% of respondents in developed markets had received ABAC training, compared with just 40% in emerging markets.”

Consistent with the observation in this recent post, these survey results again ought to prompt questions whether the current approach to enforcement – as well as enforcement policy – are effective.

Bribery Act Turns 3

The U.K. Bribery Act, a massively over-hyped law when it was being proposed and went live, has turned three. On the day it went live, I offered the following two cents.

“As with any new law, there is likely to be a learning phase for both the enforcement agencies and those subject to the law. That was certainly the case in the U.S. in the years following passage of the FCPA in 1977. Thus, it very well may be the case that there are no enforcement actions for some time (recognizing that it often takes a few years from beginning of an inquiry to resolution of an action). Thus the greatest immediate impact of the Bribery Act is sure to be the compliance ethic it inspires. I expect that the enforcement actions that may develop over time to focus on egregious instances of corporate conduct on which no reasonable minds would disagree. I do not get the sense, based on public comments of the Ministry of Justice and the Serious Fraud Office, that the envelope will be pushed too far in the early years of the Bribery Act.”

Indeed, there has yet to be an “FCPA-like” Bribery Act enforcement action. This troubles Transparency International – see here.

Say What?

Speaking of the Bribery Act, this is from “The Lawyer” regarding corruption allegations at FIFA and the ability of the U.K. Serious Fraud Office to bring an enforcement action against FIFA sponsors.

“Section 7 [of the U.K. Bribery Act] is entitled “Failure of commercial organisations to prevent bribery”. Its reach is as global as the World Cup. The fact that FIFA is a Zurich-based NGO does not mean it’s offside. Similarly for the sponsors so long as some aspect of their business is carried out in the UK. A single sale of an Adidas football boot via a Visa credit card is sufficient for David Green [Director of the SFO] to apply to the courts for search warrants in order to unleash dawn raids on their UK HQs.”

Regarding the italicized portion … say what?

For the Reading Stack

See here for the always informative Debevoise & Plimpton FCPA Update. Regarding the Second Circuit’s recent decision in SEC v. Citigroup, the Update states:

“For companies subject to the SEC’s authority to enforce the FCPA, the Second Circuit’s decision in the Citi matter provides some comfort that a corporate resolution requiring judicial approval, once achieved, should be subject to appropriate deference when it comes before a district court for review. At the same time, however, the decision also reinforces the understanding that resolutions achieved by settlement, even if approved by a court, do not constitute legal precedent.”

An interesting read here from the BBC regarding “contemporary business culture” in China.

“Chinese workplaces are just as political as those anywhere else in the world, some would argue more so because the value placed on outward harmony in Chinese culture drives the rivalry underground. [...]  The politics in a multinational’s China operation can be especially insidious when there’s a thin layer of western management attempting to operate according to principles which have limited purchase in the Chinese business culture beneath.”

Aboard the “bribery express” – from Eurasianet.

****

A Happy Independence Day to U.S. readers and a good weekend to all.

 Read more articles on the FCPA by Mike Koehler at FCPA Professor.

For more information about LexisNexis products and solutions, please connect with us through our corporate site.