DOJ and SEC Representatives Discuss FCPA Enforcement (with Bondi Comment)
At the 31st International Conference on the Foreign Corrupt Practices Act ("FCPA"), Assistant Attorney General of the Criminal Division of the U.S. Department of Justice ("DOJ") Leslie R. Caldwell, and Director of the Division of Enforcement at the SEC Andrew Ceresney, spoke about recent corruption-related enforcement actions and investigations, DOJ and SEC priorities, and their views on current trends in FCPA practice.
Mr. Ceresney emphasized that the SEC obtained more than $380 million in disgorgement during the last fiscal year, and noted that the SEC had a "robust pipeline" of ongoing investigations around the world. Concurring with these sentiments, Ms. Caldwell noted that the DOJ had convicted more than 50 individuals in corruption-related cases and obtained fines and forfeitures of approximately $3 billion from over 50 companies since 2009. Both Mr. Ceresney and Ms. Caldwell noted the importance of proceedings against individuals - civil and criminal, as appropriate - and Mr. Ceresney stated that "individual prosecutions have the largest deterrent impact." In investigating individuals and seeking to bring them to account, the DOJ and the SEC have forged multilateral relationships with their counterparts in countries around the world. Ms. Caldwell noted that this international cooperation is "enhancing not only our own FCPA enforcement efforts but is also resulting in anti-corruption enforcement actions by other countries."
Ms. Caldwell and Mr. Ceresney each stressed the importance of cooperation of corporations who discover potential violations of the FCPA. Although both speakers acknowledged that voluntary disclosure remains an important part of the DOJ's case development strategy, Ms. Caldwell stressed that "we are far from reliant on it," noting that in both the recent Direct Access Partners and Marubeni Corporation cases, the DOJ developed the cases on their own. Mr. Ceresney encouraged companies to make voluntary disclosures and cooperate completely. Both Mr. Ceresney and Ms. Caldwell reiterated that voluntary disclosures and complete cooperation by corporations would result in reduced fines or penalties and, in some cases, alternative dispositions or even non-prosecution.
Ms. Caldwell made clear that she anticipated complete cooperation, explaining that, while she did not expect corporations to "boil the ocean" in conducting internal investigations, the DOJ did require a "thorough, appropriately tailored investigation of the misconduct." She stated that the DOJ would not look kindly on corporations that delayed in disclosing an executive's conduct, attempted to whitewash the facts or hid behind data privacy laws to avoid producing documents.
Mr. Ceresney noted that the SEC's whistleblower program was paying dividends, describing the program as "very successful, even transformative." Noting that the SEC had received more than 3,620 tips in the last year from potential whistleblowers, Mr. Ceresney stated that the whistleblower program "has changed the calculus" for companies deciding whether to disclose.
Bondi Comment: The DOJ can show clear examples of the value of self-reporting and cooperating. The SEC, on the other hand, has difficulty showing the real value of self-report and cooperating in recent years, as the current Enforcement regime have levied steep penalties even where companies have gone the extra mile of self-reporting, self-policing, cooperating, and remediating – the four main factors of the Seaboard Report, the Commission’s policy statement on cooperating. Will the pendulum ever swing in favor of a company not reporting as the norm? Doubtful. With the whistleblower bounty program and other measures designed to detect corporate misconduct, the risk of not self-reporting is often way too high. But the real “carrot” of self-reporting to the SEC is starting to get smaller as the “stick” of not self-reporting is getting larger.