On November 11, the The Wall Street Journal ran a story with a fairly provocative headline: "U.S. Justice Department Makes Radical Shift on Foreign Bribery Enforcement." Whether DOJ is making a radical shift or not, corporate and individual risk from foreign corruption conduct remains high. An individual or company sitting with federal prosecutors in a Washington conference room will take no solace in the fact that there were only two settlements in 2015 before that article was published. More importantly, corruption event risk remains the same as evidenced by the criminal sentence and imposition of a $772 million fine against Alstom, S.A. two days after the article was published.
On-the-ground corruption remains the same: from rampant in some parts of the world diminishing to minimal risk in others. Every day, companies and their personnel deal with small and large demands, extortionate, collusive, corrupt and other. In addition, the human beings representing companies remain the same: individual employees, managers, supervisors, officers, representatives, agents, consultants, advisors, lawyers, accountants and others who face the realities of operating in corrupt environments daily.
Meanwhile, the backdrop on enforcement is comprised of:
- growing US and international resources specifically focused on corruption (new corruption-dedicated FBI agents, the anti-kleptocracy initiative, corruption-dedicated prosecutors, etc.)
- increased whistleblower activity
- so-called "industry sweeps"
- international cooperation among enforcement agencies
- SEC's position of holding steady on enforcement activity
- the Yates memo's guidance on cooperation credit
- DOJ's recent hire of a compliance professional to sort the real compliance programs from the paper programs.
The on-the-ground corruption risk combined with the conduct of the individuals that act for companies means that the growing international enforcement mechanism will be used against companies and individuals more, not less. Even if the incentives to self-report will drop, the US government is bringing growing pressure to bear on rooting out corruption.
If a company has a corruption event, that company and its personnel cannot simply ignore the event. An event must be investigated and remediated; even if a decision is taken later not to self-report. As we have seen, ignoring the risk is not a defense. And, if the temptation is to relax on compliance in the face of fewer DOJ settlements and higher prosecutor turnover, then more (not fewer) individual and gatekeeper prosecutions will occur. The risk is real, it's not going away and the cost of failing to take the right course is set out clearly in Alstom.
The criminal sentencing in Alstom imposed the obligation to pay a criminal fine in excess of $772 million, the largest ever imposed in an FCPA case. DOJ noted several factors in setting the amount of the fine, including:
Alstom’s failure to voluntarily disclose the misconduct, even though it was aware of related misconduct at a US subsidiary that previously resolved corruption charges with the department in connection with a power project in Italy; Alstom’s refusal to fully cooperate with the department’s investigation for several years; the breadth of the companies’ misconduct, which spanned many years, occurred in countries around the globe and in several business lines, and involved sophisticated schemes to bribe high-level government officials; Alstom’s lack of an effective compliance and ethics program at the time of the conduct; and Alstom’s prior criminal misconduct, including conduct that led to resolutions with various other governments and the World Bank.
The Alstom enforcement action reflects the type of global investigation that has become commonplace, pulling together information from Indonesia, Switzerland, the United Kingdom, France, Germany, Italy, Singapore and Taiwan. Now, the growing concern is that these countries will levy their own penalties for the conduct, thereby raising the broader risks to even higher levels.
If addressing legal risk on a global scale is on your radar screen, assessing the risks faced and tailoring the program to detect and prevent bribery and corruption in that setting remains the best course to lower that risk. Now is not the time to think that the risk of investigation and prosecution is lower, nor is it the time to think that an organization's investment in meeting applicable standards should be trimmed.