Worldwide: Global Anti-Bribery Year-In-Review: 2016 Developments And Predictions For 2017

Foreign Corrupt Practices Act Alert
Last Updated: February 8 2017
Article by WilmerHale

1. Introduction: Enforcement Trends and Priorities

The past year was consequential for FCPA enforcement in numerous respects, including blockbuster penalties, new policy initiatives, and the SEC's first DPA with an individual for FCPA violations. In April 2016, the DOJ's Fraud Section introduced the Foreign Corrupt Practices Act Enforcement Plan and Guidance, which included a one-year pilot program (the "Pilot Program") to encourage voluntary disclosure, extraordinary cooperation and demonstrated remediation in exchange for cooperation credit, a reduction in financial penalties under the US Sentencing Guidelines ("USSG"), and more lenient charges or even a declination. In 2016, the DOJ settled multiple cases consistent with the principles of the Pilot Program, offering discounts ranging between 20 and 50 percent off the bottom of the USSG range and in some cases declining to prosecute, while requiring disgorgement of ill-gotten gains in those cases. The DOJ also made clear its intention to use the Pilot Program as a stick as well as a carrot: it refused to provide full credit under the Pilot Program where, in its view, companies failed to self-disclose, fully cooperate or properly remediate.

Like the DOJ, the SEC focused on cooperation and compliance in 2016, concluding a DPA with an individual, Yu Kai Yuan, a former sales executive at PTC Inc./Parametric Technology (Shanghai) Software Company Ltd. and Parametric Technology (Hong Kong) Ltd. (collectively, "PTC China"), and NPAs with two corporations, Nortek Inc. ("Nortek") and Akamai Technologies, Inc. ("Akamai") based on their voluntary disclosure and extraordinary cooperation. The SEC resolved 24 corporate investigations in 2016, and the DOJ concluded 13. Of these, the enforcement agencies cooperated on 12 parallel resolutions. The SEC also concluded several "package" resolutions, in which they resolved individual and corporate actions in the same proceedings. In general, the SEC maintained its focus on China and renewed its commitment to investigating misconduct in the pharmaceutical and financial services industries. Both the DOJ and the SEC reviewed carefully the corporate relationships with and oversight over third parties and critically examined the robustness and efficacy of corporate compliance programs in detecting and preventing misconduct, including the monitoring of foreign subsidiaries. Where companies failed to maintain sufficient internal controls, the DOJ has become quick to allege criminal internal-controls violations, something the DOJ had only done rarely in prior years. After a decline in recent years of the use of external monitors to oversee post-resolution remediation, 2016 saw a marked uptick in their use.

The DOJ and the SEC both resolved eight actions with individuals in 2016; the DOJ's individual actions were on par with those from 2015 and the SEC's quadrupled (from two in 2015 to eight in 2016). The DOJ's individual actions included cases against James McClung and Richard Hirsch (former senior executives at Louis Berger), whom the DOJ said had provided extraordinary cooperation. It also reached individual resolutions with groups of defendants in the Banco de Desarrollo Económico y Social de Venezuela ("BANDES")/Direct Access Partners ("DAP") and Petroleos de Venezuela ("PDVSA") investigations, notably without the cooperation of, or in connection with, a related charge for the corporations or organizations for which those individuals worked.

Over the course of 2016, almost 30 companies paid about $2.5 billion to resolve FCPA actions, making it the biggest enforcement year in FCPA history in terms of dollars collected. In fact, four of the top ten largest FCPA enforcement actions occurred in 2016: Teva Pharmaceutical Industries Ltd. ("Teva") paid $519 million; Odebrecht S.A. ("Odebrecht")/Braskem S.A. ("Braskem") totaled $419.8 million in penalties; Och-Ziff Capital Management Group ("Och-Ziff") paid $412 million; and VimpelCom Limited's ("VimpelCom") combined penalty was $397.6 million in 2016.

In court, the DOJ did not prevail on its motion to reconsider a district court ruling preventing it from charging Lawrence Hoskins, a former Alstom France executive and UK national, with conspiracy to violate the anti-bribery provisions of the FCPA. The Court found that foreign nationals acting outside the United States could not be held criminally liable under accomplice or aiding and abetting theories if the government lacked jurisdiction on the underlying charge, in this case, alleged violations of the anti-bribery provisions. While the case is currently being appealed and the ultimate outcome is uncertain, the DOJ's loss on this front is likely to translate into an increased reliance on alternative theories to allow it to pursue individual enforcement actions against foreign nationals. The SEC, on the other hand, prevailed in its theory that Magyar Telekom officials could be held civilly liable for accounting violations related to falsified SEC filings that implicated interstate commerce, even if they did not act within US borders.

Finally, a long-running dispute over the nature of disgorgement came to a head in 2016, with the Tenth and Eleventh Circuits disagreeing over whether disgorgement is a penalty such that it is subject to a five-year statute of limitations or an equitable remedy such that it is not. On January 13, 2017, the Supreme Court granted certiorari on the question; argument will be heard this term or next.

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