FCPA Enforcement Off to a Slow Start in 2013
Note: The charts in this article were updated on 6/19/13.
The juggernaut that is enforcement of the Foreign Corrupt Practices Act appeared to get off to a slow start this year: depending on how one classifies cases, there was either zero or one enforcement action taken in the first quarter of 2013, according to the latest report from Miller & Chevalier.
But to John Davis, coordinator of the firm’s FCPA and International Anticorruption Practice Group, that particular statistic is more a matter of timing than anything. “Companies should not look at the dearth of cases in the last quarter and think, ‘Now we don’t have to worry about this,’ ” he says. Rather, he adds: “Investigations take time, and [agencies] have been focusing on any number of them during that time frame.”
The firm’s analysis includes some key points for in-house counsel eyeing the FCPA landscape:
Corporate investigations are underway: From 2012, Miller & Chevalier counts 39 corporate investigations initiated by the government, “more than we have seen initiated in any prior year,” the report notes. That speaks to the number of potential cases in the pipeline, of course. But Davis says the figure points to another important trend: More companies are choosing to disclose FCPA investigations, in large part because the Securities and Exchange Commission tends to view them as material matters to investors. “More and more companies are taking the safe approach and effectively disclosing,” says Davis.
Uptick in disclosed declinations: “In contrast to the number of prosecutions, the number of disclosed declinations—instances in which an agency decided to close an FCPA investigation without pursuing enforcement—set a record pace this past quarter with nine reported,” the report states.
Davis points out a couple of possible explanations. One is that the agencies are “trying to close out some of the older investigations,” and choosing not to take action, he says. Another possibility is a focus on transparency. The U.S. Department of Justice has been criticized for a lack of disclosing declinations, Davis says. And for their part, companies want to be able to disclose them when they can, because, explains Davis, “It ends the uncertainty of an investigation.”
Game on for individual prosecutions: They’re happening. And since January 1, “courts have sentenced eight defendants in four cases—American Banknote, Control Components, Kozeny, and Bizjet—none of whom received prison terms beyond time already served,” according to the report. But, overall, prosecutors are coming up with “mixed results” in the courtroom, says Davis, and that means that, “for many of these individuals, it’s worth fighting if you have the resources.”
New jurisprudence: As individual matters head to court, they put the government’s theories on FCPA jurisdiction to the test. In February, two contrasting rulings in the Southern District of New York showed that “the facts matter” in every case, says Davis. For prosecutors, “They’re going to have to be better at establishing and explaining the facts they need to establish jurisdiction,” he says. And on the defense side, he adds, “You, as the lawyer for the defendant, are going to have to get down in the details.”
Oh, Canada: The U.S.’s neighbor to the north has proposed revisions to strengthen its own anticorruption law, the Corruption of Foreign Public Officials Act, including a new books and records offense, and longer prison sentences. So along with the U.K. and Germany, “Canada is one of the foreign countries that seems to be ramping up” in this arena, says Davis. The message to U.S. companies with operations in Canada is to conduct a fresh review of compliance: “They’re now actively going to be looking at your Canadian subsidiaries.”