1. Prof.(Emeritus) Michael Bixby September 8, 2017
The Foreign Corrupt Practices Act (FCPA) and Other International Anti-Bribery Laws
Prof.(Emeritus) Michael Bixby
September 8, 2017

2. The Foreign Corrupt Practices Act
U.S. federal law, enacted in 1977
History—what led to passage of the law?

3. The Foreign Corrupt Practices Act
The Watergate investigation disclosed:
400 corporations (including many well-known companies) paid bribes of more than $300 million to foreign officials to secure contracts
Much news media coverage and public outcry in U.S. and abroad led to passage of FCPA
FCPA is enforced by both SEC and DOJ

4. FCPA Enforcement The first 27 years—1977-2004 From 2005-2016
Total of 64 prosecutions (2.4 per year)
From
138 prosecutions from (27.6/yr)
279 prosecutions from (39.85/yr)
74 prosecutions started in 2010, then the number leveled off at for several years until increasing in
2016 was a record year for fines and prosecutions. DOJ and SEC filed 53 enforcement actions (2nd most ever), with settlement of more than $2 billion in fines and penalties (most ever)

5. # of FCPA Prosecutions

6. How about a token of appreciation?

7. Key Sections of the FCPA
The Anti-Bribery sections, apply to:
Any issuer, domestic concern or “any person”
Who makes an offer, payment, or promise to pay anything of value
To any foreign official, foreign political party or official, or any person, knowing that the payment would be passed on to a foreign official or political party
To corruptly influence an official act or decision, induce an action or an omission to act in violation of a lawful duty, or to secure any improper advantage
Or to induce any act or decision that would assist the company in obtaining, retaining or directing business to any person
[15 U.S.C. Section 77dd and subsequent sections]

8. Defenses to FCPA charges
Payments which are legal in the country in which they are made
Payments considered “reasonable and bona fide expenditures”

9. Grease Payments “Grease Payments” are allowed by FCPA:
For “Facilitating payments” for “routine government actions”
Must be “non-discretionary actions”, ordinarily performed by officials
Examples are: obtaining permits, licenses or other official documents, expediting lawful customs clearances, obtaining entry or exit visas”
FCPA does not put a dollar limit on such payments, but no prosecutions have been brought for payments less than $1000

10. Accounting Provisions
Primarily apply to publicly-held “issuers,” those companies
Whose securities are registered with the SEC under the Securities Act of 1933, or
Which are required to file reports with the SEC under the Securities Exchange Act of 1934
This section requires record-keeping and internal control measures
The FCPA requires all financial dealings of the issuer to be reported, not just bribes
Law also applies to companies which own at least 50% of the stock of a foreign subsidiary

11. Enforcement cases in last 3 years
2014 was a big year for enforcement
2015 Enforcement actions declined
New Cases
Resolved
Collected
DOJ 17 10
$1.25 Billion
SEC 9 2
$320 Million
New Cases
Resolved
Collected
DOJ 10 2
$24.2 Million
SEC 11 9
$118 Million

12. DOJ announced several new moves in late 2015
Tripling the number of FBI agents investigating foreign FCPA cases from 10 to 30
Hiring a dedicated compliance expert to monitor corporate compliance programs
Doubling the number of DOJ prosecutors devoted to FCPA cases from 10 to 20
The “Yates memo” promised more prosecution of individual offenders.

13. Then 2016 was a record year DOJ brought 21 FCPA enforcement actions
SEC brought 32 enforcement actions
many more significant FCPA enforcement actions, including five with corporate financial penalties eclipsing the $100 million mark.
4 of the largest 10 FCPA cases (fines and penalties) were brought in 2016
Fines and penalties totaled $2.43 billion

14. Top Ten Enforcement Actions
No.
Company
Total Resolution
DOJ Component
SEC Component
Date 1
Siemens AG
$800,000,000
$450,000,000
$350,000,000
12/15/2008 2
Alstom S.A.
$772,290,000 --
12/22/2014 3
KBR/Halliburton
$579,000,000
$402,000,000
$177,000,000
02/11/2009 4
Teva
$519,000,000
$283,000,000
$236,000,000
12/22/2016 5
Braskem/Odebrecht
$419,800,000
$354,800,000
$65,000,000
12/21/2016 6
Och-Ziff
$412,000,000
$213,000,000
$199,000,000
09/29/2016 7
BAE Systems*
$400,000,000
02/04/2010 8
Total S.A.
$398,200,000
$245,200,000
$153,000,000
05/29/2013 9
VimpelCom
$397,600,000
$230,100,000
$167,500,000
02/18/2016 10
Alcoa
$384,000,000
$223,000,000
$161,000,000
01/09/2014

15. # of FCPA Enforcement Actions Per Year

16. Five trends from 2016
Increased multi-jurisdictional anti- corruption enforcement
Early returns on DOJ's Yates Memo; FCPA Pilot Program
The FCPA strikes back; many big cases
It's still China, China, China but don't forget about Latin America; and Africa.

17. Cooperation with DOJ is important
The DOJ has continued to emphasize the importance of corporate compliance and cooperation with FCPA investigators. Former Assistant AG Leslie Caldwell signaled in 2016 that corporate cooperation should include identification of culpable individuals.
Ms. Caldwell explained that: “for a company to receive full cooperation credit, it must uncover misconduct, identify the responsible individuals, and fully disclose the facts to the department.”

18. Another top federal prosecutor said: “We would like corporations to cooperate. We will ensure that there are appropriate incentives for corporations to do so. But if there is no cooperation, we will continue to investigate and prosecute the old-fashioned way. And companies will face the consequences.”
Whether through plea agreements, deferred prosecution agreements (DPAs), or NPAs (Non- Prosecution Agreements, the DOJ continues to play the role of quasi-regulator by imposing reforms, compliance controls, and behavioral changes.

19. Important FCPA Trends Executives will be increasingly targeted
The DOJ has stated that it intends to aggressively charge individuals — U.S. and foreign residents alike — with FCPA violations.
On September 9, 2015, U.S. Deputy Attorney General Sally Yates issued a memo to all federal prosecutors announcing a policy of holding individual corporate officers accountable in investigations of corporate misconduct.
Sally Yates
Former Deputy AG

20. The Yates Memorandum
In order to receive full cooperation “credit” the firm must:
Identify all individuals involved in the wrongdoing
Provide “all relevant facts” about the misconduct
Both civil and criminal investigations will focus on individuals from the beginning
no corporate resolution will provide protection from criminal or civil liability for any individuals
Corporate cases should not be resolved without a clear plan to resolve related individual cases

21. The Pilot Program
6 months after the Yates Memo, the DOJ issued its “FCPA Enforcement Plan and Guidance”
Allows fine reductions beyond what is available under the U.S. Sentencing Guidelines
Companies must disclose all relevant facts about individuals
Must disgorge all profits from that venture
The largest reductions (up to 50%) only available to companies that self-disclose possible FCPA violations; fully cooperate with investigators, and implement timely and appropriate remediation

22. What will the Trump Administration Do with FCPA?
Attorney General Jeff Sessions has said that the FCPA and other “white collar” laws will be fully enforced
The new head of DOJ’s fraud division, Trevor McFadden has called the FCPA “an important tool in the fight against corruption”
President Trump, however, has previously been critical of the FCPA, calling it a “horrible law” that stifles American business, and that “it puts us at a huge disadvantage.”

23. International Developments
OECD Anti-Bribery Convention
Signed in 1999 by the 30 member nations, who pledged to enact anti-bribery laws in their nations
OECD Convention now has 43 members, and all now make bribery a crime
Together the OECD countries:
Cover 50% of world exports
Are home to 95% of the largest commercial enterprises
And home to 100% of largest 100 financial enterprises

24. More on OECD Since the Convention was enacted:
397 individuals and 133 companies have been sanctioned in 17 nations
Some 302 investigations are ongoing
115 individuals and are subject to ongoing prosecution in 11 nations
But 24 countries have yet to conclude a foreign bribery enforcement action

25. International Developments
Team 1 Team 2 Team 3 Team 4 Team 5

26. Who is a “Foreign Official” under the FCPA?
One of the key and controversial legal issues in FCPA enforcement
The FCPA defines “foreign official” to include, among others, “any officer or employee of a foreign government or any department, agency, or instrumentality thereof.”
In many nations, the government is the owner (SOEs) or part owner of many business firms—is every employee of an SOE, or affiliated organization a “government official?” DOJ says “yes, perhaps so”
Some commentators have argued that the DOJ position goes beyond the FCPA law.

27. The Leading case
In Esquenazi v United States, (2014) The 11th U.S. Circuit Court of Appeals gave its stamp of approval to the DOJ’s broad interpretation of “foreign official.” The case involved convictions under FCPA for efforts to bribe officials at Telecommunications D’Haiti.
The court held that an “instrumentality” of a foreign government is any “entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.”
Thus the court concluded that an employee of the partially state-owned telecommunications company (Haiti Telco) was a “foreign official” for FCPA purposes, when Esquenazi offered him bribes.

28. More on Esquenazi
The court stated that determining whether a state-owned or state-controlled enterprise is an “instrumentality” of a foreign government such that its employees are “foreign officials,” requires a fact-based analysis in each case.
The Eleventh Circuit held that important questions include (1) who runs the company, (2) who appoints the executives, and (3) where the company’s profits end up, among others.
In this case, Haiti Telco was 97% owned by the Haitian government, who appointed its executives and kept the profits. Although not designated as a government entity by statute, the company had always been considered to be part of the “public administration” in Haiti.

29. Total Value of Corporate FCPA Monetary Resolutions (2008 – 2016)

30. Major FCPA cases Siemens—(2008)
The biggest total settlement ever (as yet)
Huge bribery operation; a key executive administered an annual bribery budget of $40-50 million for many years; Siemens paid $800 million penalty to U.S; another $800 million to German authorities

31. More on Siemens
Siemens paid $20 million to senior government officials in Israel to win power plant contracts
Paid $5 million to the son of the Bangladesh Prime minister to win a mobile phone contract
Paid $12.7 million in bribes to senior officials in Nigeria to obtain contracts
A Siemens subsidiary paid $40 million to Argentine officials to win a $1 billion contract to produce national identity cards

32. Major FCPA cases VimpelCom—(2016)
Agree to pay $795 million to resolve Dutch and U.S. charges of bribery; $175.5 M to SEC, $230 M to DOJ and $397.5 M to Netherlands
U.S. DOJ also filed forfeiture action seeking to recover $850 million in corrupt proceeds
VimpelCom’s subsidiary Unitel admitted making bribery payments of $114 million to Uzbek officials
Also entered into DPA; promised rigorous new internal controls, and more

33. Odebrecht and Braskem-2016
Brazilian construction company (Odebrecht) and its petrochemical subsidiary (Braskem)
The companies reached a settlement in Dec with Brazil, Switzerland and U.S. authorities to pay as much as $3.5 billion total fines and penalties in “Operation Car Wash” case
Odebrecht’s department of “Structured Operations” paid bribes of at least $788 million to government officials in at least 12 countries around the world in connection with 100 public works projects

34. Since the establishment of Structured Operations, Odebrecht had paid money to elect a half-dozen presidents in Latin America; buy the friendship of heads of state in Angola, Peru, and Venezuela; and pay off hundreds of legislators from Panama to Argentina.
We covered more on this case in our group reports

35. Teva Pharmaceutical Industries-2016
The world's largest manufacturer of generic pharmaceutical products
agreed in Dec to pay more than $519 million to resolve FCPA charges with DOJ and the SEC
Charged with making corrupt payments between 2002 and 2012 to high-ranking ministry of health officials in Russia and Ukraine to influence the approval of drug registrations
Also paid state-employed physicians in Mexico to influence the prescription of products. 

36. More on Teva
Teva entered into a deferred prosecution agreement due to FCPA anti-bribery and internal controls violations
Teva’s Russian subsidiary pleaded guilty to conspiracy to violate the FCPA's anti-bribery provision
Combined criminal penalty of $ million.
Teva also agreed to disgorge more than $236 million in profits and prejudgment interest to the SEC to resolve charges of FCPA anti-bribery, books-and- records, and internal controls violations.  Teva also will retain a corporate compliance monitor with a three-year term.. 

37. Och-Ziff Capital Management Group LLC-2016
New York hedge fund agreed to pay $412 million to resolve FCPA charges with DOJ and the SEC arising from alleged corrupt payments to advance investment opportunities in Africa,
Och-Ziff entered into a three-year deferred prosecution agreement due to FCPA anti-bribery, books-and-records, and internal controls violations
Its subsidiary focused on African investments pled guilty to conspiracy to violate the FCPA's anti-bribery provisions

38. More on Och-Ziff
Together the entities paid a criminal penalty of $ million.
SEC charges included allegations of FCPA anti- bribery and accounting violations
Och-Ziff agreed to disgorge $ million in profits and prejudgment interest to resolve SEC charges—and agreed to retain a corporate compliance monitor for a three-year term.

39. Other Major FCPA Cases Alcoa World Alumina—(2015)
Settled FCPA allegations for $384 million; would have been much more without its cooperation with DOJ; Alcoa Australia paid millions to bribe officials in Bahrain, using a middleman to “facilitate” sales who also created shell companies

40. One More Major FCPA Case
Alstom—(2014)
Settled FCPA charges by paying $772 million; Alstom and its subsidiaries paid approximately $75 million in consultancy fees to third parties to secure approximately $4 billion worth of projects in the Bahamas, Egypt, Indonesia, Saudi Arabia, and Taiwan that netted the company $296 million in profits

41. FCPA Websites FCPA Stanford Statistical Analytics
 US SEC Guide to the FCPA
 The Yates Memo
 The FCPA Professor