[The following is excerpted from my latest book 2016-The Year in Corporate FCPA Enforcement: Cardinal and Provident (published by Compliance Week), in which I look at the most prolific year in FCPA enforcement and what it means for the compliance practitioner:]
We have never seen and may well never see again a year of Foreign Corrupt Practices Act (FCPA) corporate enforcements as we did in 2016.
The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) combined twenty-seven corporate enforcement actions and nearly $2.48bn in total fines and penalties, the highest since the statute’s enactment in 1977. The vast majority of that amount, some 90 percent, was generated by a few very large and significant FCPA enforcement actions involving the following entities: VimpelCom, Och-Ziff, Embraer, JPMorgan, Odebrecht/Braskem, and Teva. While these cases all involved substantial, company-wide bribery schemes, which led to their massive penalties, the majority of 2016’s FCPA enforcement actions involved relatively small-to-medium-sized penalties which involved less systemic, routine bribery schemes. Yet these smaller cases usually provided some of the most interesting fact patterns, which can be studied by chief compliance officers (CCOs) and compliance professionals to help prevent and detect bribery in their organizations.
*Source: Shearman & Sterling 2017 FCPA Digest
In addition to raw numbers of enforcement actions, the Top Ten FCPA enforcement lists have changed significantly as well, as demonstrated by the following tables:
Another way to consider an even more dramatic shift is to consider the 2007 enforcement action against the Norwegian company Aibel, which had the highest FCPA fine in the history of the world – ever. That amount was $27 million; I am not sure it even registers in the Top 30 any longer.
Global anti-corruption enforcement numbers
As dramatic as the shift in FCPA fines and penalties was in 2016, a key and long-lasting theme for 2016 was the globalization of enforcement. The DOJ and SEC worked diligently to increase professionalism around anti-corruption enforcement in jurisdictions outside the US.
...a key and long-lasting theme for 2016 was the globalization of enforcement.
Over the past few years, both the DOJ and SEC have worked to create a network of international cooperation in the global war against bribery and corruption. In addition to forming liaisons, they have put on conferences dedicated to the training of foreign prosecutors on investigations, best practices around anti-corruption compliance programs, and cooperation between countries in sharing of documents and other evidence. This has increased the sophistication of foreign prosecutors in both investigations of bribery and corruption and in understanding compliance programs around anti-corruption laws.
These trainings have enabled US authorities to garner relationships to assist US-based FCPA investigations. In 2016 we saw more joint and coordinated international investigations. This points towards not only parallel investigations but also coordinated resolutions. While the Organization for 
Economic Cooperation and Development (OECD) had previously been a large part of how the US made such connections, these formal trainings have allowed US regulators to make inroads directly into increasing prosecutions of such conduct.
In addition to this increased cooperation with US authorities, many other countries’ anti-corruption regulators are now also actively prosecuting bribery and corruption. Operation Car Wash in Brazil is a prime example not simply of increased assistance with the US but also enforcement, which is clearly going global.
The SEC press release1 regarding the VimpelCom enforcement action states that there was cooperation from the following regulatory and enforcement authorities outside the US: “Public Prosecution Service of the Netherlands (Openbaar Ministrie), National Authority for Investigation and Prosecution of Economic and Environmental Crime in Norway (ØKOKRIM), Swedish Prosecution Authority, Office of the Attorney General in Switzerland, and Corruption Prevention and Combating Bureau in Latvia.
Order your copy of 2016-The Year in Corporate FCPA Enforcement: Cardinal and Provident from Compliance Week.
Other valuable assistance was provided by the British Virgin Islands Financial Services Commission, Caymans Islands Monetary Authority, Bermuda Monetary Authority, and Central Bank of Ireland, Estonia Financial Supervisory Authority (Finantsinspektioon), Comisión Nacional del Mercado de Valores (Spain), Latvian Financial and Capital Market Commission, UAE Securities and Commodities Authority, Banking Commission of the Marshall Islands, and Gibraltar Financial Services Commission.” The final resolution required VimpelCom to pay $167.5MM to the SEC, $230.1MM to the DOJ, and $397.5MM to Dutch regulators.
According to the SEC press release2 regarding the Embraer enforcement action, the following regulatory bodies and enforcement agencies were involved: “…the Brazilian Federal Prosecution Service, the Brazilian Federal Police, Brazil’s Comissão de Valores Mobiliários, the South African Financial Services Board, the Swiss Financial Market Supervisory Authority (FINMA), the Banco Central del Uruguay, the Spanish Comisión Nacional del Mercado de Valores, and the French Autorité des Marchés Financiers.” The final resolution required Embraer to pay $107MM penalty to the DOJ and over $98MM to the SEC. Furthermore, Embraer received a $20MM credit on the amount of disgorgement based upon its payment to Brazilian authorities.
Finally, was the long list of enforcement and investigatory agencies involved in the Odebrecht/Braskem matter. In addition to the sharing of the fines and penalties of between $2.6 to $4.5BN between the US, Switzerland, and Brazil was the cooperation between the three countries. Both the DOJ and SEC press releases acknowledged the assistance of the Brazilian Ministério Público Federal (MPF) and Departamento de Polícia Federal and the Office of the Attorney General of Switzerland in providing significant cooperation to the full investigation.
Another interesting concept in the global anti-corruption enforcement arena is the one pie concept. Increasingly, enforcement authorities are moving towards one total cost to anti-corruption violators, which would be equitably split up by authorities where the corruption occurred or by the countries which hold jurisdiction. It appears that that companies which self-disclosed to multiple regulators and extensively remediated, along the lines laid out in the FCPA Pilot Program, were more likely to garner credit with US regulators for fines paid to overseas authorities. Odebrecht/Braskem is a prime example of this.
All of this means that the SEC and DOJ, together with the OECD, created an active and robust international anti-corruption enforcement regime, which is moving literally across the globe. To that end, here is the Top Ten of international anti-corruption enforcement actions:
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Odebrecht/Braskem – $2.6bn – US, Switzerland and Brazil
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Siemens – $1.6bn in Germany and US
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VimpelCom – $795MM in US and The Netherlands
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Alstom – $772MM in US
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Halliburton – $604MM in US and Nigeria
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Teva Pharmaceutical – $519MM in US
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GSK – $498MM in China
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Och-Ziff – $412MM in US
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BAE – $400MM in US
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Total – $398MM in US
Key developments from 2016
A. Pilot Program
In April 2016, building on the Yates Memo issued in 2015, the DOJ announced the FCPA Pilot Program. Contemporaneously with the announcement of the Pilot Program, the Fraud Section of the Criminal Division of the DOJ released a written document3 which more fully detailed the specifics of this Pilot Program and provided more background and information for the compliance practitioner. The Pilot Program was designed to make clear the incentives for companies which came forward to self-report FCPA violations, cooperated with the government during the investigation, thoroughly remediated their compliance program, and disgorged the profits from their ill-gotten gains.
Commentators have had several different views of this new Pilot Program. The FCPA Professor4 has said the Pilot Program is nothing new and renewed his call for a compliance defense. Billy Jacobson, writing in the FCPA Blog,5 called the Pilot Program a “swing and a miss” and Mike Volkov6 said the Pilot Program is a “mixed bag”.
I find the Pilot Program to have provided solid, tangible benefits for the CCO or compliance practitioner...
My conclusion is different from all of these commentators. I find the Pilot Program to have provided solid, tangible benefits for the CCO or compliance practitioner around the issue of whether or not to self-disclose, coupled with more and additional information about the DOJ expectations for a best practices compliance program. The Pilot Program is discussed in greater detail in Chapter 7.
B. Globalization of anti-corruption enforcement
Both the DOJ and SEC had been communicating for several years about the increase with international cooperation for anti-corruption investigations. However, 2016 brought us a new level of international cooperation in enforcement actions. The VimpelCom case was an early indication of what was coming. December brought the largest international anti-corruption enforcement action of all-time, the Odebrecht/Braskem enforcement action involving penalties paid to the US, Brazil and Switzerland.
2016 brought us a new level of international cooperation in enforcement actions.
The fight against international corruption has been led by the US for many years but now other countries are more actively engaged. Both DOJ and SEC commentators have discussed the groundwork laid by US regulators in training prosecutors across the globe in investigation and enforcement techniques. These workshops and training programs paid off in spades in 2016 and will only continue to do so in the future. But equally important is the establishment of key relationships with like-minded prosecutors and investigators across the globe. Indeed, the Brazilian prosecutors and their subsequesnt prosecutions from the Java Lito (Operation Car Wash) investigation have pointed to US investigators and prosecutors as both their inspiration and their model.
C. Compliance programs – Back to the basics
Through the use of the remediation prong of the Pilot Program, the DOJ has re-emphasized the need for operationalization of a corporate compliance program. In the context of enforcement actions, the DOJ has rewarded companies which took the specific step of disciplining, up through termination, of employees involved in the illegal conduct; however, for companies which failed to do so, they brought criminal charges.
Beyond these criminal actions, one other key theme was the almost routine nature of most of the bribery schemes involved in the 2016 enforcement actions, particularly in SEC-only actions. These enforcement actions involved the Accounting Provisions, including both books and records and internal controls. Aaron Murphy noted back in 2010, in his book Foreign Corrupt Practices Act, “while it is theoretically possible to have good controls but bad books and records (and vice versa), the two generally go hand in hand – where there are record-keeping violations, an internal controls failure is almost presumed because the records would have been accurate had the controls been adequate.” It is the most basic component of FCPA compliance, i.e. doing compliance, that companies fail to engage in and this failure leads to very costly FCPA investigations and violations.
References
1. US Securities and Exchange Commission, “VimpelCom to Pay $795 million in Global Settlement for FCPA Violations”, February 2016.
2. US Securities and Exchange Commission, “Embraer Paying $205 million to Settle FCPA Charges”, October 2016.
3. US Department of Justice, “The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance”, April 2016.
4. FCPA Professor, “DOJ Announces ‘New’ One-Year FCPA ‘Pilot Program’”, April 2016.
5. Jacobson, B., “Billy Jacobson on the New FCPA Guidance: DOJ swings and misses”, April 2016.
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What do the FCPA enforcement actions of 2016 signify? More importantly what are the lessons to be drawn from these cases for compliance going forward? What about the FCPA Pilot Program, what does it portend for the future.
You can parse the facts and figures but if you want to understand what 2016 means going forward for the compliance profession, my latest book is the single must-have book around the most prolific year in FCPA enforcement history.
Purchase of copy of the book from Compliance Week here
