This past year marked the 40th anniversary of the U.S. Foreign Corrupt Practices Act (“FCPA”). Since its enactment in 1977, the U.S. Department of Justice (the “DOJ”) has brought approximately 300 FCPA enforcement actions, while the U.S. Securities and Exchange Commission (the “SEC”) has brought approximately 200 cases. This anniversary year, the first year of the Trump administration, demonstrated that the FCPA continues to be a powerful tool in combating corruption abroad and encouraging compliance at global companies.
Prominent law enforcement and regulatory officials have referred to financial sector compliance officers, as “essential partners” in ensuring compliance with relevant laws and regulations, whose “difficult job[s]” merit “appreciat[ion] and respect.” Officials have noted the critical role these professionals play in shaping the culture of financial institutions, as well as the industry more generally. However, a series of recent enforcement actions in which financial sector compliance officers have been personally sanctioned has strained this partnership, fueling concerns among financial sector compliance officers that they are being unfairly targeted.
Law enforcement and regulatory officials have responded to these concerns with assurances that both the ethos of a partnership and their even-handed enforcement approach remain intact. Officials have stressed that in the rare instances in which financial sector compliance officers have been held personally accountable, the majority had engaged in affirmative misconduct. Rarer still, they contend, are cases where compliance officers were found to have exhibited “wholesale” or “broad-based” failures in carrying out responsibilities assigned to them. In these particular cases, officials have stressed that the enforcement actions proceed only when, after carefully weighing the evidence, the facts indicate that the compliance officers “crossed a clear line.”Continue reading →
“Corporate criminal law . . . operates firmly in a deterrence mode.” The ultimate goal of that deterrence is prevention. But recent evidence suggests that deterrence—and in particular, the corporate fine (the favorite tool of deterrence theorists)—is not particularly good at the job. For a host of structural and practical reasons, corporate fines do not influence corporate behavior as we might have hoped. In a forthcoming article, Clockwork Corporations: A Character Theory of Corporate Punishment, I propose abolishing the corporate fine and offer an alternative framework for structuring corporate punishment. The proposal expands on a strategy prosecutors already employ, albeit imperfectly, as part of corporate deferred prosecution agreements: mandating corporate reform. On this new approach, such government-directed reform would be the exclusive means of corporate punishment, and judges and judge-appointed monitors, rather than prosecutors, would be in the driver’s seat. This “character” theory of punishing corporations could beat deterrence theory at its own game by preventing more corporate crime. Continue reading →
Large-scale data breaches can give rise to a host of legal problems for the breached entity, ranging from consumer class action litigation to congressional inquiries and state attorneys general investigations. Increasingly, issuers are also facing the specter of federal securities fraud litigation.
The existence of securities fraud litigation following a cyber breach is, to some extent, not surprising. Lawyer-driven securities litigation often follows stock price declines, even declines that are ostensibly unrelated to any prior public disclosure by an issuer. Until recently, significant declines in stock price following disclosures of cyber breaches were rare. But that is changing. The recent securities fraud class actions brought against Yahoo! and Equifax demonstrate this point; in both of those cases, significant stock price declines followed the disclosure of the breach. Similar cases can be expected whenever stock price declines follow cyber breach disclosures. Continue reading →
The following post provides an overview of the key findings from our research on the enforcement outcomes of the Australian Securities and Investments Commission (ASIC) for the five-year period from 1 July 2011 to 30 June 2016. The full journal article can be accessed here.
ASIC is Australia’s corporate, markets, financial services and consumer credit regulator. This government organization regulates Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit. ASIC dedicates a significant amount of resources (around 70%) to surveillance and enforcement activity, reflecting its view that enforcement is an important part of its regulatory role. Continue reading →
The following is the first post in a series of three on recent SEC enforcement. The full report can be accessed here. A note of caution to the readers: the SEC does not share enforcement data. All three posts are based on a database of SEC enforcement actions I have put together along with several research assistants, covering the period between 2007 and 2017. The data was collected by hand, and reviewed at least once. Entries were compared with SEC releases and reports, but the chance of error remains.
Last week, the SEC released its enforcement report for fiscal year 2017. In it, the SEC reported moderate declines in the number of filed enforcement actions, 754 compared with 868 in fiscal year 2016, and in the total monetary penalties ordered, $3.8 billion compared with $4.1 billion in fiscal 2016. The narrative accompanying the release suggests that despite the change in SEC leadership, enforcement remains consistent. Continue reading →
In a recent post to this blog, Professor Amy Sepinwall made a startling argument. Reflecting on the debate between liberals and conservatives over the Sentencing Reform and Corrections Act of 2016, she strongly suggested that the Act’s strengthening of the mens rea element in criminal cases should be limited to the disadvantaged and not extended to “the already advantaged.” She applauded the proposed bill for providing “deserved fairness for the disadvantaged,” but appeared to lament the fact that a more stringent mens rea requirement under that bill would be available for “some senior corporate management ‘fat cats,’” as well. This position is consistent with her defense of the “responsible corporate officer” doctrine, which does away with any mens rea requirement in certain cases against high level corporate officers. Continue reading →
On October 25, 2017, the United Kingdom Supreme Court issued a fascinating and potentially groundbreaking opinion, in a civil suit for contract breach called Ivey v. Genting Casinos (UK) Ltd. As this post will explain, the UK Supreme Court refined a major component of English law of white-collar crime, while purporting to relegate that component to the dustbin.
The central problem in the substantive criminal law of white-collar offenses—an issue I have pursued in much of my scholarship (here, here, here, and here, for example)—is how the law draws lines between seriously morally wrongful business practices and those that are acceptable, even if, in hindsight, regrettably unwelcome. The perennial challenge is to draw lines that are sufficiently clear to warn potential wrongdoers of criminal sanctions and that mark out only serious wrongdoers for imprisonment, while crafting those lines to be sufficiently broad and flexible to apply, and thus be effective, in an ever accelerating and more complex industrial world. Continue reading →
In late June, FIFA, the world’s governing soccer organization, released the “Garcia Report,” chronicling the extensive corruption and conflicts of interest that occurred in FIFA’s awarding of the men’s 2018 and 2022 World Cup venues. Part1 summarized the report’s findings. Part 2 discusses how specific steps and safeguards can mitigate the risks of misconduct and ensure cooperation among FIFA officials – and at any organization.
FIFA’s problems started at the top. FIFA’s investigators found an astounding number of executive committee members committed misconduct and showed disdain for the investigation. FIFA’s failures were systemic and reflected a culture of corruption. An organization’s culture cannot be fixed simply by strengthening rules or creating a targeted compliance program. Indeed, these are meaningless if the leaders themselves are corrupt. Executives must have integrity and show a commitment to everyone’s compliance with the law. FIFA needs to identify candidates for its executive committee that have shown integrity and a dedication to complying with rules and laws. Continue reading →
The first installment of this two-part series summarizes the Garcia Report’s findings of misconduct. Author Brandon Fox also focuses on the difficulties investigators faced as a result of leaders failing to cooperate and contrasts the misconduct and lack of cooperation to the U.S. Soccer Federation’s behavior.
In late June, FIFA, the world’s governing soccer organization, released the Garcia Report chronicling the extensive corruption and conflicts of interest that occurred in FIFA’s awarding of the men’s 2018 and 2022 World Cup venues. This article summarizes the Garcia Report’s findings of misconduct, focusing on the difficulties investigators faced as a result of leaders failing to cooperate, and discusses how specific steps and safeguards can mitigate the risks of misconduct and ensure cooperation among FIFA officials – and at any organization.Continue reading →