Increased FCPA Enforcement Resources in the United States
On August 5, 2009, in a speech before the New York City Bar Association, Robert Khuzami, the Director of the Division of Enforcement of the United States Securities & Exchange Commission, announced that he was establishing five specialized enforcement units, one of which is devoted to enforcing the FCPA.16 According to Khuzami:
The Foreign Corrupt Practices Act unit will focus on new and proactive approaches to identifying violations of the Foreign Corrupt Practices Act, which prohibits U.S. companies from bribing foreign officials for government contracts and other business. While we have been active in this area, more needs to be done, including being more proactive in investigations, working more closely with our foreign counterparts, and taking a more global approach to the violations.17
The Enforcement Division also plans to increase its efforts at obtaining the cooperation of individuals as it has from corporations. Khuzami described such cooperation as “the source of some of the most credible and valuable evidence.” The Division intends to focus on four initiatives to increase such cooperation.
- Announce standards to evaluate cooperation by individuals in enforcement actions;
- Establish an expedited process for the Division Director to submit immunity requests to the Department of Justice;
- Promulgate procedures to provide witnesses oral assurances that the Division does not intend to file charges against them; and
- Recommend that the SEC enter into Deferred Prosecution Agreements with individuals or entities subject to full cooperation, a waiver of the statute of limitations, and compliance with certain undertakings.18
Notwithstanding these incentives to obtain the cooperation of individuals, Khuzami made clear that the Division does not “believe in being lenient for the sake of leniency, or for rewarding persons for simply complying with routine or expected requests. For that reason, the purpose of these tools is primarily to reward extraordinary cooperation.”19
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United Kingdom’s Serious Fraud Office Adopts U.S. Approach for Combating Corruption
On July 21, 2009, the United Kingdom’s Serious Fraud Office (“SFO”) issued guidance (the “Guide”) on its approach to dealing with overseas corruption, at the same time that it announced that it was committing 100 additional staff members to these enforcement efforts.20 The Guide sets out policies designed to encourage corporations to self-report overseas corruption in order to avoid criminal sanctions and instead be considered for possible civil settlement. Avoiding criminal sanctions could prove to be a significant benefit particularly in light of the threat of debarment from public contracts under Article 45 of the European Union Public Sector Procurement Directive. The issuance of the Guide moves the SFO one step closer to the U.S. approach to dealing with foreign corruption, namely encouraging voluntary disclosures and the development of robust anti-corruption compliance programs as a condition for obtaining a more favorable negotiated settlement.
In the Guide, which the SFO described as “a first attempt” to address the approach it is likely to take in cases involving self-reporting of violations, the SFO outlined the factors that will be considered when such reports are made. Interestingly, the SFO will consider the timing of the report, including whether a similar disclosure was made to the U.S. Department of Justice. The Guide makes clear that if the conduct involves the dual jurisdiction of the United States and the United Kingdom, the SFO expects to be notified “at the same time” as the Department. Once a report has been made, the SFO will then seek to determine, among other things, whether (1) the corporate board is committed to improving the corporate culture; (2) the corporation is willing to assist the SFO in any investigation; and (3) the corporation is willing to resolve the matter transparently and in the public interest through civil penalties, training, and external monitoring.
Assuming the SFO is satisfied with the corporation’s efforts, the SFO will discuss with the corporation the need for further investigation. To that end, the SFO will review the facts in a manner proportionate to the amount involved and the seriousness of the conduct and with a view to the likely cost and impact on the corporation’s business. The results of any further investigation will then be discussed with the SFO to enable settlement discussions, which, in appropriate instances, may involve assistance in reaching a “global settlement.”21 The SFO will expect that the company will implement a rigorous compliance program that includes all of the traditional elements found in U.S. deferred and non-prosecution agreements.
As in the case of the U.S. approach, the SFO will not give an unconditional guarantee that a self-report will not result in criminal prosecution.22 However, the Guide states that the SFO will seek to settle self-referral cases “wherever possible.”23 The Guide also makes it clear that civil settlements will not be available if board members were personally involved in the corrupt acts, or if they benefited from them. In such instances, the SFO would be prepared to enter into plea negotiations.24 Lastly, at the urging of many practitioners, the Guide notes that the SFO is initiating an opinion procedure process, similar to the one offered by the Department of Justice, pursuant to which the SFO may provide assurance that sanctions will not be imposed in a pre-reported transaction. Currently, the SFO is only prepared to give such assurances where mergers and acquisitions are involved.25
Shortly before the Guide was issued, the SFO secured its first guilty plea in a prosecution of a British company for overseas corruption.26 On July 10, 2009, Mabey and Johnson Ltd. (“Mabey”), a U.K.-based manufacturer of steel bridging, pleaded guilty to making improper payments to officials and other agents of the governments of Ghana and Jamaica, and to the Government of Iraq.27 The case arose from Mabey’s voluntary disclosure to the SFO in early 2008 that it had engaged in corrupt practices that were uncovered during an internal investigation initiated by the company.28 Mabey agreed to pay fines and reparations and to submit its compliance program to an SFO approved independent monitor for review and oversight. As a result of the SFO investigation, five of the company’s eight directors had resigned since the spring of 2008.29 The SFO hailed the case as a “model for other companies who want to self report corruption and have it dealt with quickly and fairly by the SFO.”30 However, the benefits of self-reporting remain to be seen pending sentencing by the U.K. court.
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