This article was reprinted with permission
from FCPA Professor
$1.16 million in FCPA professional fees and expenses
per working day, show me the numbers, quotable, and for the reading
stack. It's all here in the Friday roundup.
Wal-Mart's FCPA Expenses
In this previous Friday
roundup, I calculated Wal-Mart's 2012 FCPA-related professional
fees and expenses as being approximately $604,000 per working day.
Yesterday in a first-quarter earnings conference
call (see here),
Wal-Mart disclosed as follows.
"Our core corporate expenses [included] $73 million in
expenses related to FCPA matters, which was above our forecasted range of $40
to $45 million. Approximately $44 million of the expenses represent costs
incurred for the ongoing inquiries and investigations, while $29 million covers
costs regarding the global compliance review, program enhancements and
Doing the math, Wal-Mart's first quarter FCPA-related
professional fees and expenses equal approximately $1.16 million per working
I observed in this
March 2011 article as follows.
"This new era of enforcement has resulted in wasteful
overcompliance, companies viewing every foreign business partner with
irrational suspicion, and companies deploying teams of lawyers and specialists
around the world spending millions to uncover every potential questionable or
unethical $100 corporate payment. This new era of enforcement has proven
lucrative to many segments of the legal, accounting, and compliance industries
and the status quo would, from their perspective, seem desirable."
The question again ought to be asked - does it really
need to cost this much or has FCPA scrutiny turned into a boondoggle for many
involved? For more on this issue, see my article "Big, Bold,
and Bizarre: The Foreign Corrupt Practices Act Enters a New Era."
Sticking with Wal-Mart, this Bloomberg
article provides an update on certain of the civil cases pending against
Wal-Mart based on the company's FCPA scrutiny.
Show Me The Numbers
Friday roundup highlighted comments by Senator Elizabeth Warren concerning the
SEC's neither admit nor deny settlement policy and how it
creates conditions in which there is "not much incentive to follow the
law." Senator Warren now wants to see research and analysis of the pro
and cons of this policy and other related regulatory settlement devices.
In this letter to, among others, Attorney General Eric
Holder and SEC Chairman Mary Jo White, Senator Warren writes, in pertinent
part, as follows.
"There is no question that settlements, fines, consent
orders, and cease and desist orders are important enforcement tools, and that
trials are expensive, demand numerous resources, and are often less preferable
than settlements. But I believe strongly that if a regulator reveals
itself to be unwilling to take large financial institutions all the way to
trial - either because it is too timid or because its lacks resources - the
regulator has a lot less leverage in settlement negotiations and will be forced
to settle on terms that are much more favorable to the wrongdoer.
[...] Have you conducted any internal research or analysis on trade-offs
to the public between settling an enforcement action without admission of
guilty and going forward with litigation as necessary to obtain such admission,
and if so, can you provide that analysis to my office. I am interested in
learning more about how your institution has evaluated the cost to the public
of settling cases without requiring an admission of guilt rather than pursuing
more aggressive actions."
Senator Warren is obviously concerned that settlement
policies and procedures facilitate the under-prosecution of alleged corporate
wrongdoer. This is a valid concern. Yet so is the concern that such
settlement policies and procedures also facilitate the over-prosecution of
corporate conduct. For more, see my article "The Facade of FCPA Enforcement",
including reference to the SEC's acknowledgment that settlement of an SEC
enforcement action does "not necessarily reflect the triumph of one party's
position over the other."
Crites (Dinsmore & Shohl and the former U.S. Attorney for the
S.D. of Ohio) stated as follows in a recent Law360 interview.
"The federal government passed the Foreign Corrupt
Practices Act in 1977 after discovering that American companies were making
millions of dollars in bribes to various foreign government officials. The law
was heralded as solving the problem by prohibiting companies and individuals
from offering or making payments to any foreign official with the purpose of
inducing the recipient to use their official position by directing business to
or continuing business with the briber. Over 35 years later, the basics of this
law are still necessary to prevent and punish unethical bribes but businesses
have discovered that the Department of Justice's interpretation of the law is
broader than anyone intended."
"DOJ has increased dramatically the number of
investigations and enforcement actions under the FCPA, creating what DOJ calls
a new era of FCPA enforcement. Unlike the activity in 1977, this
heightened enforcement does not come from illegal bribes but the DOJ's broad
interpretation of the law which is now being applied to otherwise legitimate
and ethical actions. The law is undeniably vague and few judicial decisions
exist to provide additional guidance. Without these restraints, DOJ has
embraced their power to apply the FCPA to unintended situations, resulting in a
climate of fear for American businesses that conduct any business abroad."
More from the recent Corporate Crime Reporter sponsored
conference. This article
concerns a panel on corporate monitors. Participating in the panel were
Dan Newcomb of Shearman & Sterling, George Stamboulidis of Baker
Hostetler, Gil Soffer of Katten Muchin, Joseph Warin of Gibson
Dunn, and John Buretta, chief of staff of the Criminal Division at the
Read more articles on the FCPA by Mike
Koehler at FCPA
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