Firms Predict Big FCPA Prosecutions in 2014
Sue Reisinger writes for Corporate Counsel, an American Lawyer affiliate.
Prosecution of corporations for overseas bribery will continue at a healthy clip in 2014, with increasing criminal penalties and more cooperation from other countries, according to new Foreign Corrupt Practices Act reports from three law firms.
The studies released this week include Gibson, Dunn & Crutcher’s “Year-End 2013 FCPA Update”; Hughes Hubbard & Reed’s “FCPA/Anti-Bribery 2013 Alert” [PDF]; and Shearman & Sterling’s “FCPA Digest—Recent Trends and Patterns in the Enforcement of the Foreign Corrupt Practices Act” [PDF], along with the firm’s full annual review of 2013 FCPA cases [PDF].
“Where once we watched the Shot Show prosecution crumble, we now see indictments and plea deals for even non-U.S. citizens and non-U.S. issuers,” according to Hughes Hubbard. Its anticorruption and internal investigations group is headed by Kevin Abikoff, formerly general counsel and head of compliance for American General Corp. The 432-page Hughes Hubbard report recaps 2013 cases, as well as major settlements back to 2005 and larger trends. It sees corporate monitors, which fell into disfavor, as again gaining prominence and being imposed in most high-profile cases.
“And where once we wondered if non-U.S. governments would continue to strengthen and enforce anti-bribery laws, we see resounding confirmation in the form of investigations and enforcement activity from previously unseen jurisdictions such as Australia and Canada,” the report states.
Hughes Hubbard also sees increased cooperation among international regimes; rising enforcement among development banks; expanded jurisdictional reach; prosecution of payments to non-government officials and private parties; and broader interpretations of what constitutes a “foreign official.”
Gibson Dunn’s report notes “a return to the robust enforcement totals of recent years, to a nearly fourfold increase in the size of the average corporate fine, to increasingly aggressive deployment of traditional criminal investigative techniques, to the expansion of multi-jurisdictional, [and] cross-border cooperation and prosecutions.”
Remarking on the high cost of resolving FCPA cases, Gibson Dunn states that in 2013 the average was more than $80 million—nearly four times the average in 2012. F. Joseph Warin, a former federal prosecutor, chairs the law firm’s white-collar defense and investigations group.
Its report adds: “And looking at the horizon of cases to come while speaking at the 2013 American Conference Institute FCPA Conference, DOJ’s FCPA Unit Chief said that he expects DOJ to bring more ‘top 10 quality type cases’ in 2014.”
The reference was to the top 10 companies that have paid the most money to resolve cases with the U.S. Department of Justice and the Securities and Exchange Commission. Siemens AG remains on top with $800 million in 2008, but two new companies broke into the top 10 in 2013: TOTAL S.A. with $398.2 million, and Weatherford International with $152.8 million.
Shearman’s report notes a dip in the number of cases brought in the past two years, but warns against thinking the drop is “an ebbing of the tide . . . given that a number of companies have disclosed investigations over the past year and the authorities have stated that they have a pipeline of cases they intend to resolve in the coming year.”
To look at average cost, Shearman dropped the outlier cases, such as those making the top 10 list and the lowest ones. “When the high and low outliers of each year are eliminated, the average penalty drops” from $80 million to around $28 million, the report states.
Shearman also notes a surge in requirement for hybrid monitors, usually 18 months with an independent monitor followed by 18 months of self-monitoring. And it agrees with other reports that prosecutors continue to pursue aggressive theories of jurisdictional reach and parent-subsidiary liability.
The chief editor of Shearman’s report was Philip Urofsky, a former federal prosecutor of FCPA cases. The firm’s full FCPA digest also includes compliance guidance on gifts, travel and entertainment, self-reporting and related topics.