WILL THE NEW ERA OF FCPA ENFORCEMENT BECOME A NEW ERA OF COMPLIANCE?
Enforcement officials have declared this to be the New Era of FCPA enforcement. Few would question that statement. There have been more FCPA cases brought in the last few years than in any other period since the statutes were passed. The recent disclosures about Wal Mart in the New York Times have turned the once little known statute into a daily conversation topic. The question at this juncture is not if this is a New Era of FCPA enforcement but whether it will become the New Era of FCPA compliance.
The FCPA was passed in the wake of the Watergate scandals amid revelations that corporations had undisclosed slush funds. The SEC brought a series of “questionable payment” cases based on the then existing provisions of the securities laws. As these cases unfolded the FCPA was passed with the focus of precluding business from bribing foreign officials. The Act was seen as an instrument of foreign policy. It also sought to bring a new ethics to the market place by ensure that goods and services would compete on a level playing field rather than through backroom deals and suit cases of surreptitiously passed cash.
Enforcement lagged for years. Today however there is a new, aggressive approach to the statutes, spawning what enforcement officials call the New Era of FCPA enforcement. It is characterized by an increasing number of industry sweeps, more whistleblowers, huge sumps paid by corporations to settle cases, increasing amounts being paid by corporations to earn cooperation credit and more prosecutions of individuals.
Predictably, the New Era has also spawned demands for statutory reform. Lead by business groups such as the U.S. Chamber of Commerce, there have been repeated calls for statutory amendments which include the recognition of a procedures defense, relief for business organizations involved in mergers and new definitions for key terms such as “instrumentality.”
Congress has held hearings. The DOJ has promised additional guidance. Meetings have been conducted. Reform is the critical topic on the seminar circuit where everyone is rushing to discuss it. Many are debating whether the Wal-Mart revelations will blunt the reform movement. Others have wondered if the collapse of the Africa Sting cases will dull the push of New Era enforcement officials. While it may be difficult to determine if Congress will act, there is little reason to think that enforcement officials will not continue to be aggressive.
Some New Era trends may be changing however. Enforcement officials have vigorously rejected calls for a procedures defense. Yet the recently settled Peterson case is arguably a signal the business community should not ignore. There a former Morgan Stanley employee was prosecuted for bribery in China. The case is significant not for its specific facts however, but because it is the first time the DOJ has publicized its determination not to prosecute a business organization. The DOJ’s press release states that the declination is based on a range of factors which include self-reporting, cooperation and procedures. Significantly, the papers from both the criminal and the civil cases contain detailed descriptions of the compliance procedures of the firm, serving to highlight their important role in the resolution of the cases.
Peterson does not create the kind of compliance procedure envisioned by those calling for statutory reform. Yet the case clearly represents a significant step for enforcement officials. In view of the current New Era trends, the inaction of Congress on statutory reform, and Peterson now is the time for corporate officials to step-up and implement effective FCPA compliance procedures. This does not mean that every bell and whistle in the market place needs to be purchased. What it does mean is that reasonably designed procedures, tailored to the organization and driven from the top of the firm should be implemented and maintained.
Peterson does not guarantee that the implementation of FCPA procedures will constitute a complete defense in every instances. At the same time the instillation of reasonably designed procedures should serve demonstrate a compliance oriented culture which negates the kind of intent necessary to prove violations of the statute. In this regard it should at least mitigate any potential liability for the firm and that of employees who follow them. In contract the failure to implement effective procedures in view of current trends could be viewed as ineffective corporate governance.
ABA Program: The New Era of FCPA Enforcement and the Collapse of the Africa Sting Cases: Time to Reevaluate? Tuesday June 5, 2012, 12:00 PM to 1:30 PM EST, Live in Washington, DC and webcast.
Moderators: Thomas O. Gorman, Partner, Dorsey & Whitney LLP, Washington, D.C. and Frank C. Razzano, Partner, Pepper Hamilton, LLP, Washington, D.C.
Panel: John D. Buretta, Deputy Asst. AG, Criminal Division, DOJ, Washington, D.C.; Charles E. Cain, Deputy Chief FCPA Unit, SEC, Washington, D.C.; France Chain, Senior Legal Analyst, Anti-Corruption Division, OECD, Paris, France; Prof. Mike Koehler, Butler University, Indianapolis, Ind.; Hon. Stanley Sporkin, Washington, D.C.; Greg D. Andres, Partner, Davis Polk, New York, New York; Eric Bruce, Partner, Kobre & Kim, New York, New York. Live Presentation from Washington, DC.
Co-hosted by Dorsey & Whitney LLP and Pepper Hamilton, LP at Penthouse at Hamilton Square, 600 Fourteenth St., N.W. Washington, D.C. Click here for more information (here)