Picking Up the Pace of FCPA Enforcement in 2013
Antibribery enforcement may have gotten off to a slow start in 2013, but by now, the Department of Justice’s 12 enforcement actions this year have already surpassed its 2012 enforcement total, according to Gibson Dunn’s “2013 Mid-Year FCPA Update.”
“This year we’re likely to end back up in the prior levels of 20 to 25” Foreign Corrupt Practices Act (FCPA) cases, says Gibson Dunn senior associate John Chesley, referring to the DOJ’s FCPA enforcement levels in 2008, 2009, and 2011.
One explanation for a seeming lull in enforcement activity is that, as the Justice Department becomes a more active investigator in international antibribery cases, it is also filing many cases under seal. “There may be some lag time between when cases are filed and when they actually become public,” says Chesley, who is a co-author of the firm’s report. For its part, the Securities and Exchange Commission has so far brought four FCPA enforcement actions this year.
Here are some key findings from the latest report:
New FCPA partners: The French
The DOJ and the SEC netted $398 million in fines and disgorgement from the French oil company Total S.A.—and offered a tip of the hat to their law enforcement allies in France.
“Acting Assistant Attorney General Mythili Raman noted in DOJ's press release announcing the settlement that this case represents ‘the first coordinated action by French and U.S. law enforcement in a major foreign bribery case,’ ” Gibson Dunn points out, “and evidences that the two countries ‘are working more closely today than ever before to combat corporate corruption.’ ”
Going forward, Total will have a French compliance monitor, and the DOJ settlement also states that any further cooperation by Total with U.S. authorities would have to “be consistent with French data protection, labor, and blocking statutes,” the report says. That is an encouraging stipulation for multinationals that have to comply with laws in two legal regimes that differ on data privacy issues, according to Chesley. “It recognizes that companies are placed in this very difficult position,” he says.
A first for broker-dealers
Two employees and one managing partner of the broker-deal Direct Access Partners LLC were arrested between May and June on FCPA bribery and other charges. “This case reportedly arises out of an SEC broker-dealer examination of DAP, which we believe is the first examination to result in FCPA charges,” Gibson Dunn notes.
The addition of a new group of FCPA enforcement targets is worth pointing out, in particular, since the SEC’s newly appointed chair, Mary Jo White, recently told Congress that hiring an additional 250 examiners at her agency in one of her “top priorities.”
Testing the reach of Dodd-Frank
Can a foreign citizen claim Dodd-Frank whistleblower protections for raising concerns about conduct abroad, by a foreign subsidiary that’s wholly owned by a foreign company? That’s one of the questions at the heart of a wrongful termination suit brought by a former compliance officer at Siemens China Ltd, which is owned by Germany’s Siemens AG—itself the subject of a mega-FCPA settlement in 2008.
The compliance officer, Meng-Lin Liu, says he was fired for pointing out alleged attempts by local business leaders to skirt the controls outlined in the 2008 settlement. Siemens, however, says Dodd-Frank doesn’t apply to this type of foreign fact pattern. Oral argument on Siemens’ motion to dismiss is scheduled for August 21 in the Southern District of New York. Meanwhile, a decision in a similar case involving General Electric and a former employee is pending in the Fifth Circuit.
Internal investigations and employee defamation suits
Back in 2009, Shell Oil handed the Justice Department the results of an internal investigation into how the company dealt with Nigerian customs officials, characterizing a project manager’s conduct as “unethical.” Last month, an appeals court in Texas said Shell can’t claim “absolute privilege” to fend off a defamation suit by that former employee, who was implicated by name in the report.
That means companies that want to fully cooperate with government regulators on an investigation and avoid generating additional litigation may find themselves staring at a rock and a hard place. “This is the most significant private civil litigation development in the FCPA context over the last six months,” Chesley tells CorpCounsel.com.
Goodbye to ‘neither admit, nor deny’?
The SEC’s review of its “neither admit, nor deny” policy in reaching corporate settlements could also have significant implications for private lawsuits. "I have reviewed the policy and the practice, and we are going to in certain cases be seeking admissions [from companies] going forward,” Chairwoman White said earlier this year.
Although in recent years the Justice Department has already required companies to admit to facts contained in FCPA settlements, it’s a big deal if the SEC does it, too. That’s because Justice often hammers out settlements with foreign subsidiaries, whereas the SEC almost exclusively charges U.S. parent companies in FCPA cases. An admission of liability by a U.S. parent would make civil litigation “more nettlesome,” says Chesley, adding, “I certainly wouldn’t want one of my clients to be the first.”