Brought to you by the Real Law Editorial Team
Misery loves companies. U.S. federal enforcement officials have declared this to be the “new era” of the Foreign Corrupt Practices Act (FCPA), and most executives are worried about their risk exposure, i.e, their chances of being miserable. Those who aren’t concerned should be. To keep their spirits up, corporations and their boards and executive teams will have to pay close attention to how FCPA enforcement is playing out, especially in relation to the relatively new Dodd-Frank provisions.
There Goes the Neighborhood
Suits and settlements have become more and more common over the last handful of years. The enforcement of anti-bribery and corruption regulations has greatly increased, particularly in the U.S., led by the Department of Justice (DOJ) and the Securities Exchange Commission (SEC).
Both agencies have had successes enforcing the FCPA. In 2010, the SEC even set up a special unit to pursue FCPA prosecutions. Since then, the agencies’ success can be measured in the size of the settlements they have won, with the top 10 corporate FCPA settlements adding up to more than $3 billion.
The FCPA Blows Up: Dodd-Frank and the Whistleblowers
In the years ahead, that number will keep going up. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) turned up the heat on the almost 80-year-old FCPA. Section 922 in particular is hot, providing a rewards program for whistleblowers who help the SEC uncover securities violations, including FCPA infringements.
Whistleblowers can now receive up to 30 percent of the monetary sanctions or recovery obtained by the SEC. That could mean millions, and that creates quite a motive. Additionally, whistleblowers are granted extra protections, such as being able to remain anonymous up until the point of receiving their award. Expect more people to blow the whistle.
Tigers Made of Paper?
While all this sounds impressive, it’s important to keep it in perspective. The SEC does not have a stellar overall batting average, and has been berated in the courts and the press for bungled securities-related prosecutions. The DOJ had to drop its biggest sting operation earlier this year. Only two companies have ever had to defend themselves in court against the FCPA, and the government ended up embarrassed both times. Perhaps that’s why almost every FCPA suit against a company has resulted in a settlement. In comparison, the DOJ has been much more successful pursuing violations of the False Claims Act.
Also, despite the lofty incentives on paper, the current DOJ is not exactly considered friendly to whistleblowers. Since the “Fast and Furious” scandal, the federal government has had to create a new ombudsman position to protect whistleblowers in the future.
It’s Going to Get Personal
In comparison, the federal government has been much more successful at pursuing individuals. While most recent FCPA cases against companies stop short of trial if the company promises to change its compliance behavior, many cases against individuals are resolved by the defendants pleading guilty to one or more criminal charges.
The prosecutions against individuals like Bernie Madoff, Raj Rajaratnam, and even Wesley Snipes have been much more successful. Over the last five to 10 years, individual defendants in FCPA cases have not done well at trial, and despite recent setbacks, this seems to point the way forward. The DOJ even considers individual prosecution a “cornerstone” of its strategy.
Get Ready for the Future
The future of enforcement is being widely discussed. The combination of rising global anti-corruption regulatory activity, mushrooming third-party risk, more protections and incentives for whistleblowers, more cooperation and competition among international enforcement agencies, and higher expectations for compliance means one thing: it’s time to get ready.
LexisNexis Presents: Best Practices for Complying with Anti-Bribery and Corruption Regulations
Global companies and their employees need to understand how the Dodd-Frank Act and the FCPA intersect, as well as how larger international investigations will proceed. Explore the current state of play during a free pre-recorded webinar. Our panel of experts will discuss these developments and ways that businesses can address challenges through risk assessment, due diligence, and management oversight.
Join Gwendolyn Hassan, Esq., Manager of Corporate Compliance, Navistar, Inc.; Stephen Martin, Esq., Baker & McKenzie; and Marc Litt, Esq., Baker & McKenzie, as they discuss the following topics:
- Domestic and international laws and enforcement efforts today
- The motivations behind legislative reform and the results of recent cases
- Causes of increased enforcement risks
- Particular risks to financial institutions and medical device manufacturers
- Special considerations: government clients, third parties, and acquisitions
- Best practices for minimizing risk: risk assessment, due diligence, and management oversight
- Standards for auditing and testing your anti-corruption compliance program