SUMMARY AND ANALYSIS

The combination of resolved actions, ongoing criminal and regulatory investigations, guidance issued by regulatory authorities, and other developments discussed below underscore a number of important themes of which companies should be aware in conducting their operations, designing and implementing their compliance programs, considering whether to enter into potential transactions or to affiliate with an international agent, intermediary or joint venture partner, and dealing with government agencies. These themes take the form of both enforcement trends and practice lessons.

Enforcement Trends

  • The New Era of Global Anti-Corruption Enforcement: On November 19, 2014, U.S. Assistant Attorney General Leslie R. Caldwell stated that "the global trend against foreign corruption continues to face many challenges, but the tide has turned." Indeed, the combined effect of enforcement actions, investigations, and legislative initiatives around the world, in what shaped up to be a watershed year of 2014, suggests that rigorous enforcement has established a firm foothold on the global stage, and there are no indications that such efforts will subside any time soon.

    • Continuing and Increased Enforcement of Anti-Corruption Laws: The United States remains the global pace-setter in establishing a vigorous anti-corruption enforcement posture, with penalties of over $1.4 billion imposed in 2014 alone (more than the previous three years combined). But there has also been a combined and notable increase in global enforcement actions. In addition to China and Brazil, discussed in further detail as part of this year's Focus Issue (see below), many other countries have ramped up their anti-corruption enforcement efforts. The Netherlands — which an OECD Working Group had criticized as recently as December 2012 regarding "serious concerns" about the country's enforcement efforts — settled charges in 2014 with SBM Offshore and KPMG, and joined other regulators in launching an investigation into VimpelCom Ltd and TeliaSonera AB. Similarly, Norwegian authorities fined Yara International $48.5 million and raided the offices of Kongsberg Gruppen.
    • Large Corporate Penalties: Five years after the U.S. Department of Justice ("DOJ") and Securities Exchange Commission ("SEC") leveled fines of $800 million against Siemens, enforcement agencies worldwide sent a stunning reminder in 2014 that they will impose behemoth fines when they believe it necessary and appropriate. The DOJ alone imposed criminal fines of $772 million against Alstom in December 2014. The DOJ and SEC also settled charges with Alcoa and Total in 2014 and 2013, respectively, that each included combined criminal fines, disgorgement, and civil penalties of nearly $400 million.

      Other countries have now demonstrated a similar appetite for massive penalties: a Chinese court sentenced GlaxoSmithKline in September 2014 to pay a fine of over $484 million after it was found guilty of bribery, and SBM Offshore Group agreed to pay $240 million in fines and disgorgement in a settlement with the Dutch Prosecutor's Office in November 2014.
    • Prosecution of Individuals: The United States has continued to prosecute both U.S. and non-U.S. citizens for FCPA and related violations, including through negotiated pleas. In the last two years alone, the DOJ and SEC have announced enforcement actions against twenty-two different individuals. Particular highlights in this regard have been the prosecutions against (i) three former executives of PetroTiger Ltd. who were arrested in late 2013 and early 2014 in connection with an alleged scheme to bribe an official of Colombia's majority state-owned company, Ecopetrol; (ii) former executives of Alstom, three of whom have pleaded guilty and await sentencing; (iii) five former executives of the now-bankrupt Direct Access Partners, who have all pleaded guilty to criminal counts of violating or conspiring to violate the FCPA and the Travel Act in connection with improper payments to Venezuelan state banking officials; (iv) a Venezuelan government official who allegedly received improper payments from the Direct Access Partners executives, and who pleaded guilty to violating and conspiring to violate the Travel Act in connection with that conduct; (v) Frederic Cilins, a French citizen who was sentenced to twenty-four months in prison on July 25, 2014 for obstructing the DOJ's investigation into BSG Resources, a mining company that won extraction rights in the Republic of Guinea; (vi) influential Ukrainian businessman Dmitry Firtash (who was arrested in Austria in March 2014 on charges that he orchestrated an international conspiracy to pay bribes to government officials in India) and five alleged co-conspirators; and (vii) former BizJet executive Bernd Kowalewski, who was arrested in Amsterdam and extradited to the United States, where he pleaded guilty to violating and conspiring to violate the FCPA.

      The United States, however, was not alone in its prosecution of individuals. In the United Kingdom, the Serious Fraud Office ("SFO") successfully prosecuted four former Innospec executives. Former CFO and CEO Paul Jennings and former business director David Turner both pleaded guilty to corruption-related charges. A Crown Court convicted former CEO Dennis Kerrison and former regional sales director Miltiades Papachristos in June 2014 and sentenced them to prison terms of three years and eighteen months, respectively. The convictions of Kerrison and Papachristos were upheld in September 2014 by a U.K. appellate court, which condemned their "prolonged, cynical and serious corruption of public officials in a foreign country."

      As discussed further in our Focus Issues below, Brazil and China have both pursued individual convictions with particular rigor as well. In China, five former GlaxoSmithKline executives (including one U.K. citizen) were convicted of bribery and received suspended prison sentences of two to four years. The country's Operation Fox Hunt — a campaign to capture the high-level "tigers" and low-level "flies" who have accepted bribes — resulted in the arrest or surrender of nearly 680 officials by the end of 2014. More generally, state reports indicate that more than 53,000 officials were under investigation in China in the last year alone. In Brazil, as part of the ever-expanding Operation Car Wash, dozens of government officials and employees of various contracting companies have been arrested on suspicion of corruption in connection with dealings with the country's state-owned oil and gas company, Petrobras.

      Other countries have also aggressively investigated and prosecuted individuals for corruption offenses. In February 2014, for example, an Omani court sentenced the former CEO of Oman Oil Company to a 23-year prison term for accepting bribes from South Korean oil company LGI in connection with awarding contracts for the construction of an aromatics plant. The Vice-CEO of LGI and the individual who organized the scheme were both sentenced to ten years as well.

      Together, these prosecutions have demonstrated that individuals will increasingly be held personally responsible for acts of corruption, either by enforcement agencies or within the corporations for which they work. The increasing rate at which individuals have been prosecuted and the possibility of severe punishments effectively challenge any notion that engaging in corruption and the potential penalties thereof are merely economic costs that can be calculated into a model and economically rationalized.
    • Coordinated Enforcement Efforts: To a greater extent than ever, international regulators are cooperating in their anti-corruption enforcement efforts. The DOJ and SEC continue to rely upon and provide assistance to non-U.S. enforcement agencies in their efforts to tackle complex bribery investigations. In 2014, the SEC made more than 900 requests for international assistance and responded to more than 500 requests from non-U.S. enforcement agencies. In its April 2014 press release announcing the enforcement action against Hewlett-Packard, for example, the DOJ stated that it had received the support of the German Public Prosecutor's Office in Dresden, as well as the Anti-Corruption Bureau and Appellate Prosecutor's Office in Poland and its other law enforcement partners in Hungary, Italy, Lithuania, Latvia, Mexico, Spain, and the United Kingdom.

      In addition to cooperating on specific cases, international regulators have also begun sharing information and providing training on law enforcement techniques. In 2013, the SEC, DOJ, and FBI hosted the first-ever "Foreign Bribery and Corruption Training Conference" for law enforcement officials from over 30 different countries. Following the success of that conference, the SEC, DOJ, and FBI hosted another week-long training course in late 2014 on combatting corruption that was attended by prosecutors, investigators, regulators, and judges from over 50 countries, multi-development banks, and international organizations.
    • Coordinated Relief: The DOJ has long suggested that it would restrain its own enforcement efforts against non-U.S. companies if those entities were prosecuted instead by their home countries. Consistent with that approach, the DOJ informed SBM Offshore in November 2014 that it had closed its investigation of that company following the announcement that SBM Offshore had agreed to pay $240 million to settle the charges with the Dutch authorities. Although the United States did pursue its prosecution against Alstom, the DOJ relied for the first time on monitorship activities being carried out pursuant to a negotiated resolution with the World Bank's Integrity Vice Presidency. Specifically, in the December 2014 plea agreement, the DOJ stated that it would not require Alstom to retain a corporate monitor so long as the Integrity Compliance Office of the World Bank certified that Alstom had satisfied the Bank's monitoring requirements.

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