Despite a decline in enforcement actions by the Securities Exchange Commission (“SEC”) and the Department of Justice (“DOJ”), the first half of 2015 has continued to highlight the relevance and ever-evolving effects of the Foreign Corrupt Practices Act (“FCPA”). Notable in the first half of 2015 was the SEC’s willingness to look beyond the foreign official bribery provision of the FCPA, as it instituted actions for inadequate internal controls and violations of the FCPA’s books and records provisions against companies including Polycom, BHP Billiton, and Goodyear Tire & Rubber Company (“Goodyear”). In May, the DOJ demonstrated its willingness to go beyond the FCPA’s provisions to tackle foreign corruption. The Fédération Internationale de Football Association (“FIFA”) conspiracy resulted in the DOJ indictment of at least 14 individuals so far for racketeering, wire fraud, and money laundering. As the controversy continues to unravel, it demonstrates the concerted efforts of U.S. and foreign law enforcement authorities. Although the FIFA investigation has not yet resulted in FCPA actions, it provides insight into the DOJ’s willingness to use all available criminal statutes in its crusade against foreign corruption or bribery.
The common theme that has resonated throughout the first half of 2015 is the value placed on cooperation with government investigations. Though the focus on cooperation is not new—the November 2012 joint DOJ and SEC Resource Guide to the FCPA provided insight and guidance on this matter— the various settlements, declinations, and SEC and DOJ remarks during the first half of 2015 have indicated that it is a valuable tool in ensuring a greater potential for settlement and reduced penalties.
The SEC’s first enforcement action of the year, in January 2015, against PBSJ Corporation (“PBSJ”), resulted in a deferred prosecution agreement with a modest monetary penalty of $375,000. Though PBSJ was criticized for its failure to identify the bribery early, the SEC emphasized PBSJ’s immediate steps to remedy the situation, its voluntary disclosure, and its substantial cooperation with the investigation. Similarly, in the SEC’s February 2015 enforcement action against Goodyear, Goodyear accepted an administrative cease-and-desist order with no monetary penalty. Again, the SEC noted that its decision was guided by Goodyear’s willingness to cooperate with the investigation. The DOJ, in June 2015, made only its second public FCPA declination in the act’s history. PetroTiger’s “voluntary disclosure, cooperation, and remediation” were important factors leading to the DOJ’s ultimate decision not to prosecute the company. The DOJ issued its first public declination in 2012 and similarly cited Morgan Stanley’s voluntary disclosure and cooperation as among the factors prompting its decision not to prosecute. Although this public declination is only the second public announcement for the DOJ, six companies have publicly reported that the DOJ has concluded its investigations and declined to prosecute. Hyperdynamics Corporation (“Hyperdynamics”), in its announcement of the DOJ’s declination, noted that the DOJ had referenced the company’s cooperation as an important factor.
While cooperation with investigations has relieved companies of liability, it is important to note that cooperation is not without costs. Many companies, spending years cooperating with government investigations while simultaneously conducting internal investigations and remediation efforts, find themselves burdened by substantial costs and fees, and cooperation does not immediately result in a declination or modest penalty. In May 2015, BHP Billiton agreed to an administrative cease-and-desist order with the SEC. Despite the company’s substantial efforts toward cooperation and remediation, the SEC still imposed a $25 million penalty.
The SEC and DOJ have spoken extensively regarding the importance of cooperation during the first half of 2015. On March 3, 2015, Andrew J. Ceresney, SEC director of enforcement, addressed the CBI Pharmaceutical Compliance Congress in Washington, D.C. His speech noted the SEC’s efforts to ensure enhancements to the cooperation program, in the hope that an improved program would encourage companies to report suspected misconduct promptly. Ceresney emphasized that meaningful cooperation has resulted in reduced charges and penalties and even non-prosecution or deferred prosecution agreements. On May 13, 2015, Ceresney delivered remarks at the University of Texas School of Law’s Government Enforcement Institute. These remarks focused on the SEC cooperation program’s five-year anniversary. Ceresney noted four factors considered when evaluating a company’s cooperation: (i) self-policing, (ii) self-reporting, (iii) remediation, and (iv) cooperation. Ceresney again stated that the rewards of cooperation could range from the “‘extraordinary’ step of declining an enforcement action, to narrowing charges, limiting sanctions, or including mitigating or similar language in charging documents.”
Assistant Attorney General Leslie R. Caldwell of the DOJ also delivered cooperation-focused speeches during the first half of 2015. Caldwell’s April 17, 2015, remarks at New York University Law School’s Corporate Compliance and Enforcement Program addressed the benefits of transparency for the DOJ and for companies. Transparency allows companies to be fully aware of the potential benefits of cooperation, and to be aware of the types of consequences they would face for not cooperating with investigations. Caldwell emphasized the importance of shaping corporate culture and the DOJ’s efforts to “transparently communicate its expectations and the consequences of corporate misconduct” to ensure the deterrence of future wrongdoing.
Caldwell’s May 12, 2015, remarks at the New York City Bar Association’s Fourth Annual White Collar Crime Institute further illustrated the benefits of complete cooperation, while also citing cases where failure to cooperate has resulted in severe penalties in and out of the FCPA space—Alstom’s $772 million penalty, the largest in FCPA history, and BNP Paribas’s $8.9 billion penalty, the largest financial penalty in a criminal case, though not FCPA-related. Caldwell recognized that investigations have been costly for companies and stated that the DOJ would not instruct companies on how to investigate, but underscored the importance of due diligence, full and complete cooperation in the delivery of information, a willingness to disclose individual misconduct, and timeliness. Caldwell remarked that the DOJ does not expect companies to go overboard in their investigative efforts, but stressed the importance of thoughtful and reasonable efforts at cooperation. But on July 30, 2015, the chief of the DOJ Criminal Division’s Fraud Section announced that the DOJ will be hiring a former prosecutor to serve as a full-time expert in compliance programs to ensure that corporate compliance programs are more than “mere window dressing.”
Included below are summaries of the major enforcement actions, settlements, prosecutions, and declinations from the first half of 2015. We are pleased to offer this update and look forward to answering any questions or concerns you have about these significant developments in FCPA enforcement, compliance, and defense.