Why it matters: In addition to the “Sons and Daughters” resolution covered elsewhere in this newsletter, there have been other interesting developments of note in connection with the Foreign Corrupt Practices Act (FCPA). Key among these was the November 8, 2016 presidential election that will usher in a new DOJ administration and possible changes in the priority and focus of the government’s FCPA enforcement efforts. Speaking at a recent post-election FCPA conference, Deputy Attorney General Sally Q. Yates said that, at least with respect to individual accountability for corporate wrongdoing, she was “optimistic” that the new administration would continue the current administration’s policies because “individual accountability isn’t a Democratic principle or a Republican principle, but is instead a core value of our criminal justice system that perseveres regardless of which party is in power.”
Detailed discussion: Below, we touch briefly on recent “State of the FCPA” speeches that were given by DOJ and SEC officials both pre- and post-presidential election, focusing on one by Deputy Attorney General Sally Q. Yates that addressed head-on her thoughts as to whether the new incoming administration will continue the DOJ’s current policies regarding holding individual corporate wrongdoers accountable. We also review some recent noteworthy FCPA resolutions and securities filing disclosures. Read on for a roundup.
The “State of the FCPA”
On November 30, 2016, Deputy Attorney General Sally Q. Yates spoke at the 33rd Annual International Conference on the Foreign Corrupt Practices Act in Washington, D.C. about the eponymous “Yates memo,” released in September 2015, which reiterated the DOJ’s policies and renewed emphasis on holding individual wrongdoers accountable for corporate misconduct. Yates addressed the majority of her remarks to the resolutions with individuals that had been entered into since the Yates memo was issued and the DOJ’s ongoing efforts to be transparent and address all questions and concerns about the policy.
Toward the end of her remarks, Yates turned to the immediate future and said that “perhaps the most commonly asked question [I hear of late] is one that I can’t fully answer, which is: what comes next?” Yates continued that “[i]n 51 days, a new team will be running the department, and it will be up to them to decide whether they want to continue the policies that we’ve implemented in recent years.” Notwithstanding this, Yates said that she is “optimistic” because “[h]olding individuals accountable for corporate wrongdoing isn’t ideological; it’s good law enforcement.” Yates noted that in her almost three decades at the DOJ, she had worked under attorneys general appointed by both Democratic and Republican presidents “[a]nd I know—because I’ve witnessed it myself—that individual accountability isn’t a Democratic principle or a Republican principle, but is instead a core value of our criminal justice system that perseveres regardless of which party is in power.”
Yates acknowledged that there are a “significant” number of corporate investigations that began after the Yates memo was issued that won’t result in resolutions until “way into the next administration.” She said that she remains confident, however, that the line prosecutors and agents will diligently continue to investigate these cases irrespective of which party is in power and “in coming months and years, when companies enter into high-dollar resolutions with the Justice Department, you’ll see a higher percentage of those cases accompanied by criminal or civil actions against the responsible individuals. It won’t be every case, but the investments we’re making now are likely to yield a real increase in the years ahead.” Yates concluded her remarks by saying that “[i]n the days ahead, this institution—and those who lead it—will continue the hard work of rooting out corruption here and abroad. And we will remain determined to protecting and strengthening our values of justice, fairness, and the rule of law. That has always been, and will always be, at the core of the Department of Justice.”
There were a few other “State of the FCPA” speeches given in recent months by DOJ and SEC officials that bear noting, one of which was post-election, and the other two of which were pre-election:
- Also on November 30, 2016, SEC Director of Enforcement Andrew Ceresney (who announced his resignation on December 8, 2016, effective year-end) gave the keynote speech at the 33rd Annual International Conference on Foreign Corrupt Practices Act summarizing the SEC’s recent successful FCPA enforcement efforts.
- On November 3, 2016, Assistant Attorney General Leslie Caldwell spoke at the George Washington University Law School highlighting the DOJ’s enforcement efforts with respect to the FCPA and touting the success of the FCPA Pilot Program in the six months since its enactment.
- On October 20, 2016, Attorney General Loretta Lynch spoke in Rome, Italy about global enforcement efforts to combat international fraud and corruption, and cited to recent high-profile FCPA resolutions to support her statement that the FCPA is an effective and “powerful” tool for the U.S. government.
Other recent FCPA enforcement actions/resolutions/disclosures of note
- On October 24, 2016, the DOJ announced that Brazilian aircraft manufacturer Embraer S.A. (Embraer) agreed to resolve criminal FCPA charges and pay a criminal penalty of more than $107 million in connection with both schemes involving the bribery of government officials in the Dominican Republic, Saudi Arabia and Mozambique, and the payment of millions of dollars in India via a sham agency agreement. In addition, the SEC concurrently announced that, in its parallel investigation, Embraer agreed to pay over $98 million in disgorgement and interest to resolve FCPA violations with respect to the same conduct. The DOJ said that Embraer admitted that its executives and employees paid bribes to government officials and falsified books and records in connection with aircraft sales to foreign governments and state-owned entities, earning Embraer profits of nearly $84 million from aircraft sales. The DOJ said that, as part of the criminal resolution, Embraer entered into a three-year deferred prosecution agreement (DPA), pursuant to which Embraer admitted to its involvement in a conspiracy to violate the FCPA’s anti-bribery and books and records provisions and to its willful failure to implement an adequate system of internal accounting controls. In addition to paying the criminal penalty under the DPA, Embraer agreed to continue to cooperate with the DOJ’s investigation, enhance its compliance program, implement a more adequate system of internal accounting controls, and retain an independent corporate compliance monitor for a term of three years. The DOJ said that it reached its resolution with Embraer based on a number of factors, including the fact that Embraer did not voluntarily disclose the FCPA violations (although it did cooperate with the DOJ’s investigation after the SEC served it with a subpoena) nor did it “engage in full remediation.” Embraer will also pay a yet-to-be-determined amount to Brazilian authorities under parallel civil proceedings in Brazil.
- On October 20, 2016, the SEC announced that Houston-based FMC Technologies agreed to pay a $2.5 million penalty to settle charges that it violated the books and records provisions of the FCPA by overstating profits in one of its business segments. The company consented to the SEC’s order without admitting or denying the charges. In addition, two former executives at the company agreed to pay penalties aggregating $40,000 to settle charges that they caused the violations in order to meet internal targets.
- On November 15, 2016, Israel-based Teva Pharmaceutical Industries Limited disclosed in a Form 6-K that it was in “advanced discussions” with the DOJ and SEC and had reserved $520 million for an FCPA settlement. Teva said in the filing that “[f]or several years, Teva has conducted a voluntary worldwide investigation into business practices that may have implications under the U.S. Foreign Corrupt Practices Act (‘FCPA’), following the receipt, beginning in 2012, of subpoenas and informal document requests from the SEC and the DOJ with respect to compliance with the FCPA in certain countries. Management has established a provision of approximately $520 million based on advanced discussions with the DOJ and SEC to settle these FCPA matters. The provision relates to conduct in Russia, Mexico and Ukraine during the time period covering 2007-2013. Any final settlement would be subject to court, DOJ and SEC Commission approval.”
- On October 21, 2016, Swedish telecom Telia Company (formerly TeliaSonera) disclosed in a securities filing that it had reserved $1.45 billion to settle FCPA allegations with the DOJ and Dutch authorities relating to a bribery scheme in Uzbekistan. Telia previously disclosed in September 2016 that it had received a settlement proposal from U.S. and Dutch authorities of approximately $1.4 billion. Telia’s disclosure is related to the VimpelCom investigation pursuant to which VimpelCom paid $795 million to U.S. and Dutch authorities to resolve similar FCPA bribery claims in February 2016 (covered in our March 2016 newsletter under “A Bad Day for Kleptocracy: U.S. and Multiple International Authorities Coordinate to Prosecute and Forfeit Global Assets of VimpelCom”).
- On October 17, 2016, Lennox International Inc. said in a securities filing that it had self-disclosed a $425 (i.e., less than $500) bribe paid to a Russian customs official. The FCPA Blog, which reported the disclosure, speculated that the company made the unusual disclosure of such a small bribe in an effort to comply with the FCPA Pilot Program, which encourages corporate self-disclosure. The company said in the filing that its audit committee had launched an internal investigation with outside counsel and forensic accountants to see if the issue was widespread.