Hold the Champagne
The Foreign Corrupt Practices Act juggernaut appeared to get off to a slow start this year. Depending on how one classifies cases, there was either one enforcement action or none in the first quarter of 2013, according to a report from Miller & Chevalier.
But appearances can be deceiving. And in this case, it seems they were. That statistic is more a matter of timing than anything else, according to John Davis, coordinator of the firm's FCPA and international anticorruption practice group.
"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."
Here are key points from the firm's analysis for in-house lawyers eyeing the FCPA landscape:
- Corporate investigations launched: 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 declinationsinstances in which an agency decided to close an FCPA investigation without pursuing enforcementset a record pace this past quarter with nine reported," the study states. Davis points out possible explanations. One is that the agencies are "trying to close out some of the older investigations," and choosing not to take action. Another possibility is a focus on transparency. The U.S. Department of Justice has been criticized for failing to disclose declinations, Davis says. And companies want to be able to disclose, Davis explains, because "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 casesAmerican Banknote, Control Components, Kozeny, and Bizjetnone 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: America's neighbor to the north has proposed revisions to strengthen its own anticorruption law, the Corruption of Foreign Public Officials Act. It includes a new books and records offense and longer prison sentences. Along with the United Kingdom 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 going to be actively looking at your Canadian subsidiaries."