Why it matters: Recent pronouncements by Attorney General Jeff Sessions, Acting Principal Deputy Assistant Attorney General Trevor N. McFadden and recently confirmed SEC chair Jay Clayton have provided assurances that the DOJ and SEC will continue to "vigorously enforce" white collar laws as a high government priority.
Detailed discussion: Recent pronouncements by DOJ and SEC authorities have indicated that those agencies have every intention of holding enforcement of white collar and corporate misconduct laws as a high government priority. On April 24, 2017, Attorney General Jeff Sessions spoke at the Ethics and Compliance Initiative Annual Conference in Washington, D.C., where he assured the attendees that, while he understood "there can be some uncertainty when there is a new Administration or new leadership at the Justice Department," the DOJ "remains committed to enforcing all the laws. That includes laws regarding corporate misconduct, fraud, foreign corruption and other types of white-collar crime." Specifically, with respect to the Foreign Corrupt Practices Act, Sessions said that it was "critical" that the FCPA be enforced:
"Congress enacted [the FCPA] 40 years ago, when some companies considered it a routine expense to bribe foreign officials in order to gain business advantages abroad. This type of corruption harms free competition, distorts prices, and often leads to substandard products and services coming into this country. It also increases the cost of doing business, and hurts honest companies that don't pay these bribes. Our department wants to create an even playing field for law-abiding companies. We will continue to strongly enforce the FCPA and other anti-corruption laws. Companies should succeed because they provide superior products and services, not because they have paid off the right people."
Sessions also said that the DOJ will continue to hold individuals accountable for corporate misconduct, because "[i]t is not merely companies, but specific individuals, who break the law. We will work closely with our law enforcement partners, both here and abroad, to bring these persons to justice." In addition, Sessions said that, when making charging decisions, the DOJ will "continue to take into account whether companies have good compliance programs; whether they cooperate and self-disclose their wrongdoing; and whether they take suitable steps to remediate problems." Although he did not mention it by name, Sessions was in effect describing the DOJ's FCPA Pilot Program, which had an initial 12-month trial period that ended on April 5, 2017. However, in a March 10, 2017, speech at the ABA National Institute on White Collar Crime in Miami, FL, Acting Assistant Attorney General Kenneth A. Blanco announced that the DOJ was extending the Pilot Program beyond its initial trial period so that the DOJ could "begin the process of evaluating the utility and efficacy of the 'Pilot Program,' whether to extend it, and what revisions, if any, we should make to it. The program will continue in full force until we reach a final decision on those issues." We summarized the Pilot Program in our April 6, 2016, newsletter alert titled "DOJ Launches New FCPA Voluntary Disclosure Pilot Program."
The week prior, on April 20, 2017, Acting Principal Deputy Assistant Attorney General Trevor N. McFadden spoke at the American Conference Institute's 19th Annual Conference on the Foreign Corrupt Practices Act in New York. McFadden began his remarks by saying that he wanted to "dispel the myth" that the DOJ "no longer is interested in prosecuting white collar crime." While acknowledging that, in the three months since the new administration took over, the DOJ had been primarily focused on prosecuting violent crimes, "the Criminal Division is fully engaged in combatting crime in all its forms, and no matter what color collar its perpetrators wear. … [crimes] such as: fraud, bribery, public corruption, organized crime, trade secret theft, money laundering, securities fraud, government fraud, healthcare fraud and computer and Internet fraud—to name a few."
Speaking specifically about the FCPA, McFadden assured the conference attendees that FCPA enforcement at the DOJ was "as alive as ever." McFadden stressed that, under the new administration, the "Fraud Section and FCPA Unit's aims are not to prosecute every company we can, or break our own records for the largest fines or longest prison sentences. Our aim is to motivate companies and individuals voluntarily to comply with the law." McFadden continued:
"We recognize that business organizations are our partner in the fight against corruption, because they are in the best position to detect risk, to take preventative measures and to educate those who act on its behalf on best practices. We hope that, in this cooperative effort, we can reduce corruption with effective compliance programs that prevent nefarious conduct from happening and through effective prosecutions to resolve violations in a way that punishes the conduct and deters similar future misconduct."
McFadden said that "motivated as ever by the importance of ensuring a fair playing field for honest corporations doing business abroad, the department continues to vigorously enforce the FCPA," including holding individuals accountable for corporate misconduct. McFadden noted that in recent years there has been a "notable increase" in international cooperation with the DOJ's counterparts in other countries such that "cooperation with our foreign partners has become a hallmark of our work." In this regard, McFadden said that the DOJ will be looking to reach global resolutions that "apportion penalties between the relevant jurisdictions so that companies seeking to accept responsibility for their prior misconduct are not unfairly penalized for the same conduct by multiple agencies."
McFadden concluded that, above all else, the DOJ wanted to be "transparent about our expectations" with respect to FCPA enforcement, pointing to the recently extended Pilot Program as "one example of an effort to provide more transparency and consistency for our corporate resolutions." Echoing the sentiments of both Sessions and Blanco, McFadden said that "[w]e are now conducting a full assessment of the Pilot Program to consider how we can most effectively motivate companies and individuals to voluntarily comply with the law and how we can appropriately communicate our prosecutorial priorities and expectations to parties subject to the FCPA. The program will continue in full force as we evaluate it and until we reach a final decision regarding its permanence."
Finally, on April 4, 2017, Bloomberg BNA reported that then-nominee for SEC chair Jay Clayton (he was confirmed by the Senate on May 2, 2017) signaled in written answers to questions from the Senate Banking Committee that if confirmed he had every intention of enforcing the FCPA, calling it a "powerful and effective tool" and that fighting corporate corruption abroad is an "important government mission." Clayton's answers were in marked contrast to a 2011 New York City Bar Association paper he co-wrote that was critical of the FCPA.
Focus on the FCPA
Why it matters: Here, we recap a couple of government announcements from this year pertaining to the FCPA, both concerning resolutions with individuals in connection with previously announced FCPA corporate resolutions:
- The most recent announcement was by the SEC on April 24, 2017, and involved two former executives at the Hungarian-based telecommunications company Magyar Telekom that agreed to pay financial penalties of $250,000 and $150,000, respectively, and accept officer-and-director bars, to settle allegations that they violated the FCPA in connection with the 2011 parallel civil and criminal resolution in which MT paid $95 million to settle charges that it bribed officials in Macedonia and Montenegro to "win business and shut out competition in the telecommunications industry."
- Before that, on Jan. 26, 2017, the DOJ announced that it had charged two former executives of hedge fund Och-Ziff Capital Management Group with being the "driving forces behind a far-reaching bribery scheme" that violated the FCPA. We reported on the DOJ's resolution with Och-Ziff, its first FCPA resolution with a hedge fund, in our November 2016 newsletter under "FCPA Focus—SEC Edition." For coverage of additional significant FCPA enforcement actions announced so far this year, see our February 2017 newsletter under "Three Significant FCPA Resolutions Straddle the New Year" and "More FCPA, Bribery and Corruption, Oh My!"