Comments of U.S. officials and others at a November conference on the FCPA provide a critical snapshot of the current state of play in still increasingly stringent U.S. enforcement of the FCPA and growing international cooperation to pursue anti corruption law enforcement well beyond U.S. borders. Addressing the question of the most significant recurring issues that the SEC is seeing in cases that they investigate, Ms. Brockmeyer highlighted companies’ use of third-party intermediaries. In the past two years, up to 70 percent of the cases in the SEC’s FCPA Unit have involved joint ventures, vendors, suppliers or other third parties.
During one session, Kara Brockmeyer, chief of the SEC’s FCPA Unit in the Division of Enforcement, and Charles Duross, deputy chief in the DOJ’s Fraud Section and head of the FCPA Unit, reviewed key anticorruption enforcement in the past year and discussed priorities for future enforcement efforts.
U.S. officials at the conference also described increasing international cooperation and coordination of FCPA enforcement efforts with enforcement officials in other countries. Although their comments were delivered with the customary disclaimer that their statements were not binding on their agencies and that the views they expressed were their own and not those of the agencies where they work, these comments provide a valuable window into the focus and direction of FCPA enforcement in the months ahead.
Addressing the question of the most significant recurring issues that the SEC is seeing in cases that they investigate, Ms. Brockmeyer highlighted companies’ use of third-party intermediaries. In the past two years, up to 70 percent of the cases in the SEC’s FCPA Unit have involved joint ventures, vendors, suppliers or other third parties. She noted that the SEC is bringing the bright-line cases in this area, not the small grey area cases. She also emphasized that common red flags for these relationships include:
- A lack of a business purpose for the third-party relationship, or the offering of duplicative services already being provided to the company from another source;
- A higher discount or a lower price offered by the third party to the principal company than other third parties providing similar services or goods to the company or in the industry;
- No infrastructure in place that would permit the third party to deliver the agreed services; and
- Problematic travel and entertainment, e.g. the Stryker case.
Mr. Duross noted that two-thirds of the top 20 largest criminal FCPA case resolutions have occurred in the last three and one-half years, and that three of the top five largest penalties ever issued have been in the last three years. He highlighted that 2013 was the fifth biggest year in terms of penalties, and that the number could be expected to increase before the end of the year. Overall, he said that companies are doing better with their compliance, but that the DOJ caseload is still large, including more than one hundred and fifty cases in progress. Mr. Duross gave five key characteristics of criminal FCPA enforcement:
(1) The FCPA is here to stay
(2) It applies to every business sector
(3) Enforcement continues to focus on individuals
(4) FCPA enforcement has gone global
(5) Corporate monitors (including the newly employed hybrid-monitorship where after eighteen months or so, the monitorship can convert to self-reporting) will continue to be required when appropriate
Read more …