This article was reprinted with permission from FCPA Professor
It is mid-January and, like every year around this time, I feel like a kid in a candy store given the number of FCPA year in reviews hitting my inbox. This post highlights various FCPA or related publications that caught my eye.
Reading these publications are recommended and should find their way to your reading stack. However, be warned. The divergent enforcement statistics contained in them are likely to make you dizzy at times and as to certain issues.
Given the increase in FCPA Inc. statistical information and the growing interest in empirical FCPA-related research, I again highlight the need for an FCPA lingua franca (see here for the prior post), including adoption of the “core” approach to FCPA enforcement statistics (see here for the prior post), an approach endorsed by even the DOJ (see here), as well as commonly used by others outside the FCPA context (see here)
The firm’s Year-End FCPA Update is a quality read year after year.
Consistent with this prior post “FCPA Settlement Amounts Have Come a Long Way In a Short Amount of Time,” the Update notes as follows. “An unmistakable characteristic of the year in FCPA enforcement is that the market rate for resolving a corporate FCPA enforcement action spiked precipitously in 2013.”
Numerous previous posts have highlighted various double standards relevant to FCPA enforcement and the following passage from the Update is well-stated.
“The paradigm of international anti-corruption enforcement is frequently viewed, at least in the United States, through the prism of U.S. enforcers determined to root out the illicit dealings of corrupt foreign officials. We speak of sovereign nations as “risky neighborhoods” in which to do business, denoted by dark shades of red on the ubiquitous Transparency International Corruption Perceptions Index (“CPI”). So the authors frequently note the quizzical looks on the faces of audience members in training sessions when we reveal that the United States barely qualifies as a Top 20 country on the CPI, tied at 19 with South America’s Uruguay. To be sure, the less-than-stellar CPI ranking of the United States has as much to do with an unparalleled domestic enforcement regime as any other factor, but the sad truth is that corruption is not a problem unique to government officials outside our borders.”
Gibson Dunn also released (here) its always informative “Year-End Update on Corporate Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs).” The update: “(1) identifies the NPAs and DPAs announced in 2013 and the trends they reflect; (2) surveys the role NPAs and DPAs may play in federal civil litigation collateral to the criminal resolutions of the agreements themselves; (3) analyzes the challenges that non-contradiction clauses in NPAs and DPAs can present for companies when they address the underlying conduct and facts outside the context of the criminal settlement; and (4) discusses debarment and suspension implications of NPAs and DPAs.”
According to the Update, of the 28 NPAs or DPAs the DOJ (or SEC) entered into in 2013, 8 (28%) were in FCPA enforcement actions and the FCPA was the single largest source of NPAs and DPAs in 2013 in terms of primary allegation.
According to previous Gibson Dunn reports on this subject, in 2012 (a year in which saw a large number of trade sanctions, export controls, and money laundering enforcement actions resolved via NPAs or DPAs) 23% of all NPAs and DPAs were in FCPA enforcement actions; in 2011, approximately 40% of DOJ NPAs or DPAs were in FCPA enforcement actions; and in 2010, approximately 50% of DOJ NPAs or DPAs were in FCPA enforcement actions.
Shearman & Sterling
The firm’s “Recent Trends and Patterns in the Enforcement of the FCPA” is also another quality read year after year.
Consistent with Philip Urofsky’s previous critique of the Ralph Lauren Corporation enforcement action (see here), the report states as follows.
“We have previously highlighted the SEC’s disconcerting practice of charging parent companies with anti bribery violations based on the corrupt payments of their subsidiaries, even when the facts alleged in the pleadings do not establish any parental involvement in bribery. In the Ralph Lauren case, both the SEC and DOJ took an even larger leap, by seemingly imposing apparently strict criminal and civil liability on a parent company for the corrupt acts of its subsidiary. […] Neither agency … included any allegation of any authorization, direction, or control by RLC of its subsidiary’s corrupt conduct, or even its knowledge of such conduct. […] [T]he government apparently intends to treat a subsidiary as the parent’s agent by focusing not on the formal relationship, present in all cases, between a parent and a subsidiary, informed by the practical realities of how the parent and subsidiary interact, and then apply “traditional principles of respondeat superior” to hold the parent liable for bribery by the subsidiary, whether or not specifically authorized, directed, or controlled by the parent. Under this theory, a subsidiary is virtually always an agent of its parent, and thus the parent is strictly liable for any acts ‘‘within the scope of [the agent’s] duties’’ and intended to benefit the parent—even if the parent had policies prohibiting bribery. This flagrantly disrespects the corporate form and the black letter rule that to ‘‘pierce the corporate veil’’ the parent must have operated the subsidiary as an alter ego and itself paid no attention to the corporate form. Although we have noted elements of this approach in prior SEC actions, the DOJ’s espousal of such a theory is particularly worrisome, as it impacts non issuer domestic concerns and foreign companies —a much broader universe of companies. […] The fact that the Ralph Lauren case was resolved through an NPA rather than a DPA (or a guilty plea) does not excuse this approach—when the DOJ announces it will not prosecute but requires the company to admit to facts establishing a criminal violation of the law, it is stating, as a fact, that the company committed a crime. In such case, it is obligated to demonstrate, through the pleadings, in whatever form they are presented, that it could, in fact, prove each and every element of the offense.”
The firm’s Winter Alert is thick and comprehensive and begins in dramatic fashion:
“To paraphrase Mark Twain, reports of the FCPA’s death were greatly exaggerated. Although at times many pillars of anti-corruption enforcement seemed to be crumbling or at least showing cracks, 2013 has seen a string of developments that reinforce that anti-bribery laws — and their vigorous enforcement — are here to stay. Where once we watched the Shot Show prosecution crumble, we now see indictments and plea deals for even non-U.S. citizens and non-U.S. issuers. Where once we saw monitorships seemingly falling into disfavor, we now see them restored and imposed in the most high-profile, high-stakes cases.”
Other Items for the Reading Stack
See here for “Mitigating Potential Bribery-Related Risks Associated With Minority Owned and Non-Controlled Joint Ventures” by Covington & Burling attorneys Robert Amaee, David Lorello, John Rupp and Ashely Sprague.
See here for “Top Ten Compliance Trends for the New Year” by Perkins Coie attorneys Markus Funk and Sambo Dul.
Read more articles on the FCPA by Mike Koehler at FCPA Professor.
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