Feds Say Tough FCPA Actions Continue Despite Declinations
Federal agencies plan to keep taking tough anti-bribery actions despite the U.S. Justice Department’s recent decision to forgo cases when companies reveal the misconduct and take steps to remediate it, regulators said Wednesday.
Top white-collar enforcement officials with both DOJ and the U.S. Securities and Exchange Commission told lawyers and compliance experts at a conference on the Foreign Corrupt Practices Act that the Trump administration had not given corporations more latitude on corruption laws despite the policy changes.
The Justice Department issued a new corporate enforcement policy last year that sets out rules for “declinations” by DOJ in potential FCPA cases where a company can avoid prosecution and pay reduced fines if it voluntarily discloses the misconduct, assists in providing evidence against the individuals responsible and takes remedial action, as long as no aggravating circumstances are tied to a crime.
“I just find it a very effective and helpful policy to have,” Daniel Kahn, FCPA chief for the DOJ’s Fraud Section, told conference attendees at the Gaylord National Resort and Convention Center in National Harbor, Maryland. Kahn said the department wants to convey that a company coming in and doing the right thing can help the DOJ effectively prosecute some of the individuals who were involved. “I like the program,” Kahn said. “I guess I’m biased, but I’m happy with it.”
Kahn said the process also provides transparency to investigations. He said that since the policy has taken effect, all the companies that have voluntarily self-disclosed ended up with declinations.
The SEC, which does not pursue criminal cases, also has a declination policy for enforcement actions.
Although the regulators pointed to increased private-sector compliance with FCPA, a panel moderator, Martin Weinstein of Willkie Farr & Gallagher, asked them why there appears to be a disconnect between that and apparent increased enforcement.
“I actually don’t think there’s a disconnect,” Kahn said. “There’s a lot of factors leading to bigger fines, more cases.”
When there are “stones kicked up” by information about possible misconduct, that can lead to investigations about a wide range of issues at a company even if it has stepped up compliance efforts, he said. “We’re not naïve, right? We get that you’re still going to have issues. Every company has issues.
“Just because a company is investing in compliance, that doesn’t mean it’s committed to compliance,” he said, “and has a culture of compliance.”
Charles Cain, FCPA unit chief for the SEC’s Enforcement Division, said a company’s efforts to train people on the law does not always resolve the concern. “You can throw a lot of money at a problem, but is it effective?” he said. “There’s not enough people to investigate all the instances of corruption that are out there.”
DOJ is also looking to avoid duplicative penalties from other agencies and jurisdictions to avoid “piling on.” But some at the conferences questioned the value of sidestepping duplication when the Justice Department and SEC go after the same cases.
Stephanie Avakian, co-director of the SEC’s Division of Enforcement, said in a different panel that she does not see a problem with that because the two agencies are handling different aspects of the matter. Under their partnership, the DOJ is handling disgorgement and the SEC works on penalties, she noted.
“Broadly speaking. I wouldn’t expect to see any change from us in that regard,” she said.
Avakian also said she does not expect to see a policy mirroring the DOJ’s corporate enforcement policy, for similar reasons. “There’s a huge difference between a criminal case and a civil case,” she said, and most companies facing both possible actions would be “pretty happy in the end when they only end up with an SEC case.”
Avakian pushed back against recent reports that under Trump the securities regulator has backed off rigorous enforcement in general, telling the audience composed largely of corporate attorneys that there is no current effort to scale back investigations.
“There has been no backpedaling, backsliding … from a focus on corporate-type cases,” Avakian said during a panel discussion. “There’s been no pullback.”
Avakian was alluding to reports that the administration had begun an effort to peel back major corporate enforcement activities across a range of industries. However, she pointed to key SEC actions such as cases involving Walgreens, Clovis Oncology Inc. and Tesla as showing a commitment to enforcement. Those recent cases involved allegations of executives misleading investors and resulted in multimillion-dollar civil penalties.