Among the flurry of resolutions in the final days of the Obama administration, two “repeat offenders” settled FCPA cases: Zimmer Biomet Holdings, Inc. (“Zimmer Biomet”) and Orthofix International N.V. (“Orthofix”). Zimmer Biomet and Orthofix are hardly the first such “repeat offenders.” In July 2016, Johnson Controls Inc. (“JCI”) settled an enforcement action involving activities of a Chinese subsidiary with the Securities and Exchange Commission (“SEC”), and the DOJ simultaneously “declined” to bring any charges. Each of these companies was a “repeat offender” in having previously settled FCPA-related allegations.
By analyzing and comparing these three recent resolutions, this Article highlights factors that may influence whether U.S. authorities bring follow-on FCPA enforcement actions and, if so, what penalties they seek to impose. As discussed below, companies are well advised to make concrete compliance enhancements in an effort to avoid recidivist status and the significant penalties that can accompany a second resolution. Continue reading →
The explosion in Foreign Corrupt Practices (FCPA) enforcement is a turning point for white collar practice to which many discussions on this blog owe their origins. For over two decades the FCPA rested mostly dormant. From 1977, when the statute was enacted, until 2000, the federal government pursued only fifty-two FCPA enforcement actions. No more than five such actions were brought in a single year, and in four of those years, zero actions were commenced. But then, at the beginning of the twenty-first century, U.S. prosecutors and securities enforcers eagerly embraced the statute, initiating 379 FCPA cases between 2001–2015, reaching an annual high of 56 cases in 2010.
In a new paper in Law & Contemporary Problems, my colleague Rachel Brewster and I offer a broad theoretical accounting for this dramatic development. It is an outside-in, inside-out story, featuring international organizations, policy makers, prosecutors and regulators, and the defense bar as the central characters responsible for awakening the FCPA and creating the robust anti-corruption enforcement regime that exists today. Continue reading →
Earlier this year, we noted that it was difficult, if not impossible, at that point to predict with confidence how the new administration might change white-collar criminal law enforcement priorities and practices. Three months later, however, some clearer signals are beginning to appear. In a pair of speeches delivered last week, on April 18 and April 20, Acting Principal Deputy Assistant Attorney General Trevor McFadden, a Trump Administration appointee, gave strong indications that the Department of Justice will continue to engage in active white-collar criminal enforcement, without substantial changes in direction from the previous administration. And in a speech yesterday, Attorney General Jeff Sessions promised continued prosecution of corporate fraud and misconduct and strong enforcement of the Foreign Corrupt Practices Act and other anti-corruption laws.
In his more detailed speeches, McFadden rejected what he called the “myth” that DOJ under AG Sessions was not interested in prosecuting white-collar crime. Continue reading →
The international legal obligation to protect human rights has long been understood to be the province of sovereign states, not of corporations or individuals. In the United States, litigation against corporations invoking statutes such as the Alien Tort Statute, the Torture Victim Protection Act, and the Trafficking Victims Protection Act has blurred that line – providing private plaintiffs a cause of action to address alleged human rights violations in a variety of circumstances.
The nuance of that litigation would take numerous additional posts to cover, but even against that backdrop, for corporations the general requirement to respect human rights traditionally has been more a matter of social expectation than legal and regulatory requirements, falling under the rubric “corporate social responsibility” (“CSR”) rather than “hard law.” Continue reading →
The liability of legal persons for foreign bribery and related economic offenses is a key feature of the emerging legal infrastructure for the global economy. Without it, governments face a losing battle in the fight against the bribery of foreign public officials and other complex economic crimes.
Long criticized for ineffective enforcement of their anti-corruption legislation, French authorities are taking steps to enhance their efforts. On November 8, 2016, France finally passed a “Proposed Law Regarding Transparency, the Fight Against Corruption and the Modernization of Economic Life,” known as the Loi Sapin II. The French Constitutional Council currently is examining the law, which is likely to be adopted before the end of the year in the form endorsed by the French National Assembly, subject to minor amendments. The Loi Sapin II provides for some significant changes in the current French anti-corruption legal and regulatory administrative structure, as well as some specific amendments to the general French criminal law and procedures. Continue reading →
The OECD Working Group on Bribery – the group responsible for monitoring implementation of the OECD’s Anti-Bribery Convention – has just closed a request for comments on the topic of liability of legal persons for foreign bribery. I submitted a comment, and I hope that others did as well, but I am afraid that instead of focusing on the issues I was asked to comment on I focused on my worries about the overall purpose of the exercise.
There is no question that the issues raised by the OECD are important. Imagine if the U.S. legal system did not have corporate criminal liability, how would it affect the scope and the intensity of corporate compliance? Would we still have compliance officers reporting directly to the board, supplier agreements replete with anti-corruption reps and warranties, and multi-million dollar internal investigations? Consider the potential effects of even a modest reform, such as treating the existence of an effective compliance program as a complete defense. Or, moving in the opposite direction, what if firms convicted of foreign bribery were automatically disbarred from all government contracts? Continue reading →
On September 29, 2016, the U.S. Department of Justice (“DOJ”) issued two letters “closing its investigations” into alleged violations of the U.S. Foreign Corrupt Practices Act by HMT LLC, a Texas based manufacturer, supplier and servicer of above ground liquid storage tanks, (the “HMT Declination”) and NCH Corporation, a Texas based industrial supply and maintenance corporation (the “NCH Declination). Unlike in the three earlier “declinations” the DOJ issued since the start of its FCPA Enforcement “Pilot Program,” the companies here (HMT and NCH) are not issuers, so there were no parallel Securities and Exchange Commission (“SEC”) enforcement actions. Each declination also includes what are described as findings of the DOJ’s investigation underlying violations of the FCPA and a requirement that each company pay “disgorgement” to the U.S. Treasury. The HMT and NCH declinations therefore raise the question of whether and to what extent the Pilot Program, in addition to offering guidance on how to receive a declination, has altered the meaning of what a declination ordinarily will be. Specifically, under what circumstances can a company receive a declination without the DOJ publicizing its “findings” and the company paying disgorgement (i.e., a “clean” declination)? Continue reading →
On October 27, 2016, Davis Polk presented its 2016 DOJ and FCPA Resolution Tracker, updated through the end of Q3. The tracker details key characteristics of corporate and individual FCPA resolutions, and is available through the link below.
To what extent can a nonresident foreign national be prosecuted for violations of the Foreign Corrupt Practices Act (FCPA)1 when he neither is an agent of a domestic concern nor has committed acts while physically present in U.S. territory? Does the fact that the FCPA explicitly creates criminal liability in only these two situations mean that he cannot be charged for conspiring to violate the Act, or aiding and abetting a violation? Such was the issue presented to Judge Janet Bond Arterton in United States v. Hoskins.2 Her rejection of the government’s conspiracy and accomplice theories in that case is presently up on appeal in the Second Circuit, but an intervening Supreme Court case may well lead the Circuit to see the case a bit differently. Continue reading →