2017 was a year of transition for US enforcement of the Foreign Corrupt Practices Act (FCPA) and saw a significant increase in global anti-corruption enforcement. As noted in our 2017 FCPA Mid-Year Review, last year began with a flurry of FCPA enforcement at the end of the Obama Administration, followed by a prolonged lull as the Trump Administration reviewed enforcement policies and filled key positions at the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC). FCPA enforcement resumed in earnest in the third and fourth quarters of the year, putting 2017 well within the typical range of reported corporate and individual prosecutions for the last five years. Those enforcement trends continued in the first quarter of 2018, with both the DOJ and SEC inking corporate resolutions.
After the transition of administrations, the DOJ, under President Trump, avoided public changes to pre-existing enforcement policies. In November 2017, the DOJ formalized, with certain amendments, the FCPA Pilot Program by incorporating a new FCPA Corporate Enforcement Policy into the US Attorneys’ Manual. The program creates a presumption, absent aggravating circumstances, that a company will receive a declination if it self-discloses, cooperates in the government’s investigation, and remediates, but the payment of disgorgement and/or forfeiture remains a requirement of such a declination. Even where aggravating circumstances exist and declination is unavailable, companies meeting the disclosure, cooperation, and remediation expectations will be eligible to receive a 50% discount off the fines calculated under the US Sentencing Guidelines (USSG), consistent with the Pilot Program. Although the Yates Memorandum is currently under review, Deputy Attorney General Rosenstein has publicly asserted that the DOJ is committed to the “common themes” put forward in that Memorandum and remains committed to pursuing criminal resolutions against individuals. The number and range of individual prosecutions in 2017 appears to confirm that approach, as does the settlement in Transportation Logistics International, Inc. in the first quarter of 2018, which justified a dramatically reduced penalty based on, among other reasons, the prosecution of the executives who allegedly directed the scheme.
The SEC under President Trump and Chairman Clayton also appears committed to enforcing the FCPA and holding individuals accountable for misconduct. Chairman Clayton and Steven Peikin, Co-Director of the Enforcement Division, have commented on the importance of the SEC’s anti-corruption enforcement, and the SEC’s enforcement record to date appears to corroborate these public comments. Settlements with Halliburton and Alere suggest the SEC will continue to pursue civil enforcement actions against issuers for violations of the FCPA’s accounting provisions, and settlements with Mondelēz and Kinross show continued commitment to enforce violations of the FCPA arising from mergers and acquisitions (M&A). The SEC continues, however, to face headwinds in the courts. The Supreme Court’s decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017), that disgorgement penalties are subject to the federal five-year statute of limitations, may hinder the SEC’s ability to complete large multi-year investigations.
In perhaps the most important trend in anti-corruption enforcement, the recent trend of multilateral anti-corruption cooperation and enforcement between US FCPA enforcement authorities and their counterparts abroad further accelerated. 2017 began in an interlude between two landmark multilateral enforcement actions: Odebrecht (Brazil, US, and Switzerland) and Rolls-Royce (UK, US, and Brazil). The trend continued in the third and fourth quarters of 2017 with large, multi-jurisdictional settlements involving Telia (US, Sweden, and the Netherlands) and Keppel Offshore (US, Brazil, and Singapore). Penalties for these multilateral settlements were orders of magnitude larger than some settlements before only the DOJ or SEC, suggesting that the largest and most serious cases continue to garner attention from enforcement authorities across the globe. Also notable is that the largest portion of those penalties went not to the US Treasury, but to the coffers of non-US enforcement authorities.
Consistent with this growing global crackdown on corruption, the past year also saw a steady increase in anti-corruption legal and enforcement developments around the world, including investigation and prosecution of matters that had no FCPA enforcement component. In December 2017, the United Kingdom published its Anti-Corruption Strategy 20172022, calling for the establishment of a National Economic Crime Centre, and the French Anti-Corruption Agency published guidelines for compliance with the Law on Transparency, the Fight against Corruption and Modernization of Economic Life, nicknamed “Sapin II.” In Latin America, Brazil continues to aggressively pursue anti-corruption enforcement, most notably through Operation Car Wash, and anti-corruption laws in both Argentina and Peru became effective in the first quarter of 2018. In Asia-Pacific, China, Korea, India, and Australia are all in the midst of legislative changes related to anti-corruption laws, and domestic enforcement of graft and corruption laws continues to rise. While the World Bank Sanctions Board issued several significant decisions, the number of negotiated resolutions reached by contractors and consultants with the Integrity Vice Presidency continues to rise, obviating the need for a sanctions referral.
While it is still too early to see the fruits of investigations initiated during the current administration, from what is publicly known about the current pipeline, we anticipate that these trends will continue in 2018.