Understanding The Government’s Stated FCPA Priorities For 2014

Tuesday, April 29, 2014 - 12:14

Among the many challenges facing companies operating in a global market, the U.S. Foreign Corrupt Practices Act (FCPA) continues to hold its position at or near the top of the list. The myriad difficulties presented by the FCPA can be traced to an overarching tension: on one hand, the Act remains among the U.S. enforcement community’s top priorities, and on the other hand, it has proven extremely difficult to pinpoint the authorities’ evolving expectations regarding compliance with the Act. In an effort to ease some of this tension, the SEC and DOJ jointly released a Resource Guide to the U.S. Foreign Corrupt Practices Act in November 2012. Unfortunately, the Resource Guide left a great many practical issues unresolved, and therefore companies and practitioners alike continue to look to the FCPA enforcement authorities for clarity about their expectations. Much like the iconic E.F. Hutton slogan from the 1970s and 1980s, when the FCPA authorities talk, people listen.

Over the past several months, despite the leadership shuffle within DOJ’s FCPA unit, several clear messages have emerged from the two lead agencies: first, recent speculation about a trending decline in FCPA enforcement is unfounded; second, the U.S. FCPA enforcement authorities intend to increase collaboration with their foreign counterparts; third, compliance programs must reflect thoughtful and careful assessments of risk, and they should prioritize third-party due diligence; and last, DOJ intends to bring cases more “swiftly, efficiently and effectively.”

“The FCPA Is Here To Stay”

In the wake of several recent courtroom setbacks for the government in FCPA cases, many practitioners interpreted the apparent decline in public FCPA enforcement actions as indicative of a possible downward trend in FCPA enforcement. In response, Charles Duross – the former head of DOJ’s FCPA unit – emphasized late last year that “the FCPA is here to stay,” supporting his point by highlighting increased resources within the FCPA unit, as well as a significant pipeline of FCPA cases. In particular, he noted that DOJ now has at its disposal a larger number of lawyers and contractors with foreign language skills.[1] Even more recently, the outgoing acting head of DOJ’s Criminal Division, Mythili Raman, noted that fighting global corruption is “a core priority of the Department of Justice” and described the DOJ’s efforts against corruption as a “baseline imperative” for law enforcement.[2] Consistent with these pronouncements, SEC Chair Mary Jo White recently stated that the FCPA is always “among the top priorities of both the Justice Department and the SEC.”[3]

“Cooperation With Foreign Agencies To Grow In The Coming Years”

DOJ and SEC leaders have recently touted increased collaboration with their foreign counterparts in connection with both multinational investigations and also with training. Charles Duross asserted that it is now a “fact of life” that foreign authorities will become more involved in investigations as time goes on.[4] To illustrate his point, Duross noted that he had spoken on several occasions with his counterparts in other countries regarding how investigations are proceeding and to discuss information pertaining to particular investigations.[5] More recently, Duross’s successor as head of DOJ’s FCPA unit, Patrick Stokes, stated his intention to continue his predecessor’s emphasis on foreign cooperation. Stokes noted that the Department is beginning to see more information sharing, more assistance with extradition, and in some cases a shared case load with foreign law enforcement authorities. He characterized this increased collaboration as “tremendously helpful” to the Department.[6] Stokes cited the Total and PetroTiger cases as recent illustrations that companies should expect to see more cross-border coordination between the U.S. and foreign governments in future investigations.[7]

During the International Conference on the FCPA in November 2013, Andrew Ceresney, co-director of the SEC Enforcement Division, credited the increase in global anti-corruption legislation with improving the ability of other countries to provide “meaningful and timely assistance” in SEC investigations.[8] Ceresney went on to assert that the SEC “fully expect[s] the pace and extent of our cooperation with foreign agencies to grow in the coming years.”[9] Moreover, at a similar conference just a few weeks earlier, Kara Brockmeyer, chief of the SEC’s FCPA Unit, stated that the SEC had recently expanded its cooperation with other jurisdictions in several ways. She highlighted a recent training program attended by representatives from approximately 30 countries at which the SEC trained the attendees on best practices employed by U.S. authorities in anti-corruption investigations.[10]

These pronouncements by DOJ and SEC leadership suggest several implications for companies operating within the jurisdictional ambit of the FCPA. Among these implications, corruption investigations outside the U.S. may quickly lead to inquiries by U.S. authorities and vice versa. Accordingly, multinational companies cannot assume that “local” investigations will remain local. An investigation by Polish authorities under Polish corruption laws very well may precipitate an outreach by U.S. FCPA authorities, and an investigation by U.S. authorities into conduct in Poland could easily lead to a knock on the company’s door in Warsaw by Polish corruption investigators. The echo chamber effect created by multiple, simultaneous investigations by authorities in different countries can be more than a little challenging. When authorities in one jurisdiction inquire about a particular issue, companies should brace for “me, too” requests from authorities in other jurisdictions. Obviously, such situations raise complicated legal issues (e.g., attorney-client privilege considerations, data privacy restrictions) and a host of more basic logistical issues, as well. 

In response to this uptick in collaboration by law enforcement authorities, companies may want to lay the groundwork for responding rapidly to multijurisdictional inquiries. First, they should consider designating personnel to report investigations or even high-profile media allegations to a central function (or person) within the company as quickly as possible. Second, they may want to identify in advance the professional service firms that could be needed – immediately – in the event of an outreach by law enforcement (e.g., local law firms, forensic accountants, public relations firms, etc.). Third, companies should verify that they can quickly collect, process and transfer data needed in connection with such multijurisdictional investigations in a manner consistent with any local data privacy restrictions. Navigating through these multijurisdictional investigations can be very difficult, and companies should avoid wasting any precious time at the outset of such an investigation on these and other logistical issues.

 “The Best Compliance Programs Are Tailored To The Risks,” And Particularly Those Posed By “The Third-Party Agents Whose Job It Is To Get You The Business”

During the 18th Annual Corporate Counsel Institute in Washington, DC, Kara Brockmeyer stated that the “best compliance programs are geared toward the risks” – both the risks associated with operating in particular geographies, as well as the risks presented by a company’s particular industry or business model.[11] Brockmeyer observed that a compliance program must include a process for thoughtfully identifying and prioritizing risks, ideally through audits or risk-based testing.[12]

While speaking at two recent events, Brockmeyer also emphasized the crucial importance of third-party due diligence. At the SEC Speaks event, Brockmeyer identified failure to properly vet third-party representatives as one of the biggest issues in the FCPA arena today, and she stressed the importance of effective third-party due diligence in a robust compliance program.[13] Just one month later, while speaking at the 18th Annual Corporate Counsel Institute, Brockmeyer again stressed that if companies elect to devote additional energy and resources to any component of their compliance programs, she would recommend devoting it to “the high-risk issues like the third-party agents whose job it is to get you the business.”[14]

These statements by Brockmeyer highlight an overarching point that FCPA authorities have been stressing for some time: when it comes to anti-corruption compliance programs, one size most definitely does not fit all. While this message is somewhat daunting given the limited guidance otherwise offered by the authorities, there is a silver lining. Simply because a particular compliance measure works well for one company, it does not necessarily follow that the measure will prove effective for another company. Accordingly, companies should not feel bound to duplicate compliance program measures “blessed” by the FCPA enforcement community in settlements with other companies. Companies should indeed assess the specific risks posed by their particular geographic footprint and business model, and craft compliance programs that focus resources on the greatest risks. In doing so, those designing or tweaking the compliance program should be mindful of the authorities’ continued focus on third-party due diligence. 

FCPA Cases To Be Brought “Swiftly, Efficiently And Effectively”

At the ABA White Collar Conference in March of this year, Patrick Stokes noted that DOJ’s FCPA unit plans to bring cases “swiftly, efficiently, and effectively,” drawing on the resources of U.S. Attorneys’ Offices where possible in order to move cases forward quickly.[15] While it remains to be seen whether and how Stokes’s plan translates into actual practice, a meaningful acceleration in the speed of FCPA cases would have mixed implications for companies. Obviously, many companies swept into prolonged FCPA investigations to date would have welcomed a more expedited end to the process. FCPA investigations routinely go on for years. However, companies caught up in FCPA investigations often employ the time between onset and resolution of an investigation to improve their compliance programs and controls, and to otherwise reduce the likelihood of recurring issues. Accordingly, while most companies will welcome an acceleration of FCPA investigations, such a development will require that companies also accelerate their remedial actions – a not insignificant proposition.

Conclusion

Until such a time as there is greater clarity around the expectations of FCPA enforcement authorities, we must continue looking to the authorities’ pronouncements about their evolving expectations and intentions.  The pronouncements noted in this article reflect a few of the most noteworthy observations and statements of intent offered over the past several months. Since the statements are consistent with enforcement trends leading into 2014 – with the possible exception of Patrick Stokes’s forecast about the speed of FCPA cases – companies should consider whether the authorities’ recent guidance suggests any changes to their compliance programs.


[1] Charles Duross, Former Deputy Chief of the Fraud Section, Criminal Division, U.S. Department of Justice, Remarks at the International Conference on the U.S. Foreign Corrupt Practices Act, Washington, DC (Nov. 19, 2013).

[2] Mythili Raman, Former Acting Assistant Attorney General for the Criminal Division, Remarks at the Global Anti-Corruption Compliance Congress, Washington, DC (March 20, 2014).

[3] Mary Jo White, Chair of the U.S. Securities and Exchange Commission, Interview with Brian Lamb, C-SPAN Q&A (Feb. 12, 2014), video available at http://www.c-span.org/video/?317755-1/qa-mary-jo-white.

[4] Charles Duross, Former Deputy Chief of the Fraud Section, Criminal Division, U.S. Department of Justice, Remarks at the American Bar Association 2013 FCPA Conference, Washington, DC (Sept. 19, 2013).

[5] Id.

[6] Patrick Stokes, Deputy Chief of the Fraud Section, Criminal Division, U.S. Department of Justice, Remarks at the 28th Annual National Institute on White Collar Crime, Miami Beach, FL (March 6, 2014).

[7] See id.

[8] Andrew Ceresney, Co-Director of the SEC Enforcement Division, Remarks at the International Conference on the U.S. Foreign Corrupt Practices Act, Washington, DC (Nov. 19, 2013).

[9] Ceresney (Nov. 19, 2013).

[10] Kara Brockmeyer, Chief of the SEC FCPA Unit, Remarks at the American Bar Association 2013 FCPA Conference (Sept. 19, 2013).

[11] Kara Brockmeyer, Chief of the SEC FCPA Unit, 18th Annual Corporate Counsel Institute, Washington, DC (March 13, 2014).

[12] Id.

[13] Kara Brockmeyer, Chief of the SEC FCPA Unit, SEC Speaks, Washington, DC (Feb. 21, 2014).

[14] Brockmeyer (March 13, 2014).

[15] Stokes (March 6, 2014).

 

Zachary J. Harmon is a Partner in King & Spalding’s Washington, DC office and is a member of the firm’s Special Matters & Government Investigations Practice Group. Grant W. Nichols is an Associate in the Special Matters/Government Investigations practice group in King & Spalding’s Washington, DC office.

Please email the authors at zharmon@kslaw.com or gnichols@kslaw.com with questions about his article.