In the third year of the Trump Administration, the biggest Foreign Corrupt Practices Act ("FCPA") headlines were record corporate fines and penalties, and a banner year of individual FCPA enforcement highlighted by three DOJ trial victories. The DOJ clarified aspects of its FCPA corporate enforcement policy and provided additional guidance regarding effective corporate ethics and compliance programs. Abroad, the DOJ and SEC continued to coordinate with foreign authorities, publicly acknowledging cooperation from 26 countries and territories.
This past year demonstrated that the DOJ's and SEC's FCPA corporate and individual enforcement is not waning and is instead reaching new heights, in close coordination with anticorruption authorities around the globe. This White Paper examines the key enforcement highlights of 2019.
There were five key highlights from 2019 Foreign Corrupt Practices Act ("FCPA") enforcement.
- It was a record year for corporate FCPA settlements. In 2019, the U.S. Department of Justice ("DOJ") and the U.S. Securities and Exchange Commission ("SEC") resolved 14 corporate FCPA cases and collected—after accounting for various credits or deductions for related foreign enforcement actions—a record $2.65 billion in fines, penalties, disgorgement, and interest. Meanwhile, the DOJ continued to issue corporate declinations under the 2017 FCPA Corporate Enforcement Policy, which incentivizes companies to self-disclose, cooperate, remediate, and pay any applicable disgorgement by offering the possibility of a declination.
- The DOJ also had a record year of individual FCPA enforcement. In cases against individuals, the DOJ announced a total of 25 FCPA-related indictments and pleas (up from 19 in 2018), and obtained convictions in three out of four FCPA trials. Overall, individual enforcement under the Trump Administration continues to be higher than under the Obama Administration, demonstrating the DOJ's renewed focus on prosecuting individuals.
- Following the DOJ's recent pattern of increasing transparency so that the business community can better understand the government's enforcement expectations, the DOJ provided additional guidance on the FCPA Corporate Enforcement Policy, expectations for effective corporate ethics and compliance programs, and requirements for "inability to pay" claims.
- Meanwhile, the SEC's corporate and individual FCPA enforcement likewise increased.
- 2019 saw an uptick in international cooperation and coordination among the DOJ and SEC and their counterparts in other countries. Specifically, recent developments in Brazil—including continued cooperation with the DOJ and SEC on three significant FCPA resolutions in 2019, new political leadership, and changes in local anticorruption enforcement—are noteworthy for multinational companies with operations in the country.
RECORD YEAR OF CORPORATE FCPA SETTLEMENTS
DOJ and SEC Collected a Record of $2.65 Billion in Corporate FCPA Fines and Penalties
The biggest FCPA story of 2019 was a new record of corporate fines and penalties. The dollar value of FCPA settlements soared to $2.65 billion, more than two-and-a-half times the $1.03 billion collected in 2018, and surpassed the previous record of $2.43 billion set in 2016, the last full year of the Obama Administration. To date, the Trump Administration's DOJ and SEC have entered into 35 corporate FCPA resolutions and collected more than $4.5 billion in fines and penalties.
Two resolutions, with Telefonaktiebolaget LM Ericsson ("Ericsson") and Mobile TeleSystems PJSC ("MTS"), comprised approximately 70% of the total amount, and respectively rank as the first and second largest FCPA resolutions in history. This is similar to prior years, where two corporate resolutions comprised more than a majority of the total resolution amount.
Chart 1: Amount of DOJ and SEC FCPA Corporate Fines and Penalties and Number of DOJ and SEC FCPA Corporate Resolutions, 2010–2019
|Year||Total Corporate FCPA Fines and Penalties||Total Corporate FCPA Resolutions|
|2017||$1.13B ($0.86B under the Trump Administration)||11 (5 under the Trump Administration)|
Chart 2: DOJ and SEC Corporate FCPA Resolutions, 2016–2019
|Corporate FCPA Actions||2016||2017||2018||2019|
Ericsson Entered into the Largest FCPA Settlement in History
In the largest corporate FCPA settlement in history, Sweden-based telecommunications company Ericsson agreed to pay $1.06 billion in combined penalties, disgorgement, and interest to resolve the DOJ's and SEC's investigations into Ericsson's conduct in six countries around the world.1 As part of the settlement, Ericsson entered into a deferred prosecution agreement ("DPA"), and its wholly-owned subsidiary, Ericsson Egypt Ltd, pleaded guilty to one count of violating the FCPA's books and records provisions.2 The SEC's complaint alleged that Ericsson violated the FCPA's antibribery, internal controls, and books and records provisions.3 Ericsson agreed to retain an independent monitor for a period of three years.4
According to admissions from its DPA, Ericsson used third-party agents and consultants to make millions of dollars in improper payments to government officials and to manage off-the-books funds in China, Djibouti, Indonesia, Kuwait, and Vietnam between 2000 and 2016.5 These agents were often engaged through sham contracts and paid pursuant to false invoices.6 The payments to such agents were improperly accounted for in Ericsson's books and records.7 The SEC's complaint alleged that between 2011 and 2017, Ericsson paid $62 million in bribes through third parties to government officials in Djibouti, Saudi Arabia, and China and realized approximately $427 million in profits.8 To date, no individuals have been charged in connection with this conduct.
Of note, the DOJ credited Ericsson for only partial cooperation and remediation because—among other reasons—it did not self-report the misconduct and did not fully remediate.9 The DOJ credited the company for "conducting a thorough internal investigation," making foreign employees available to the DOJ, and disclosing additional conduct.10
Unlike Sweden-based Telia's FCPA resolution with the DOJ and SEC in 2017, there was no concurrent resolution with Swedish authorities. However, a week after Ericsson reached its resolution with the DOJ and SEC, Sweden's National Anti-Corruption Unit announced that it had begun investigating Ericsson for possible bribery in April.11 The DOJ acknowledged the assistance of Swedish authorities in its resolution.12
MTS Entered into the Second Largest FCPA Resolution
Russia's largest mobile telecommunications company, MTS, agreed to pay $850 million in penalties to the DOJ and SEC following a bribery scheme related to the Uzbek telecommunications industry.13 MTS's settlement did not include disgorgement because the company did not profit from its misconduct.14 MTS also agreed to the imposition of a compliance monitor for three years.15 In announcing this resolution, the DOJ and SEC acknowledged cooperation from 16 countries and territories around the world.16
MTS entered into a DPA with the DOJ, and Kolorit Dizayn Ink LLC ("Kolorit," MTS's wholly-owned Uzbek subsidiary) pleaded guilty to violating the FCPA's antibribery and books and records provisions.17 According to admissions in the DPA, MTS and Kolorit paid more than $420 million in bribes to Gulnara Karimova—a former Uzbek government official and daughter of a former president of Uzbekistan—to gain traction in the Uzbek telecommunications market.18 Among other misconduct referenced in the DPA, MTS and Kolorit knowingly directed the corrupt payments to shell companies owned by Karimova, and she, in turn, laundered the money using U.S. banks.19
In March, the DOJ unsealed charges it filed against Karimova and Bekhzod Akhmedov, a former Uzbek telecommunications executive.20 The DOJ charged Karimova with money laundering violations and Akhmedov with one count of conspiracy to violate the FCPA and two counts of violating the FCPA.21 According to the indictment, Akhmedov allegedly helped MTS, Telia, and VimpelCom pay Karimova more than $865 million in bribes—nearly 2% of Uzbekistan's gross domestic product— to enter the Uzbek telecommunications market.22 Karimova was arrested by Ukrainian authorities in March for violating the terms of her house arrest for fraud and money laundering.23 Uzbek prosecutors said they aim to seize more than $1.5 billion in foreign assets held by Karimova, including luxury properties.24
MTS did not receive voluntary self-disclosure credit or full credit for cooperation and remediation.25 Among other factors militating against full credit, MTS "significantly delayed production of certain relevant materials," declined to "support interviews with current employees during certain periods of the investigation," and meted out inadequate discipline to culpable employees.26 The DPA further noted that MTS "had inadequate anticorruption controls" and compliance programs during the relevant period, but it also stated that the company had committed to strengthening its compliance program and auditing procedures.27
This matter is the third enforcement action against international telecoms based on bribery schemes related to the Uzbek telecommunications market, all involving Karimova. The DOJ and SEC previously entered resolutions with Netherlands-based VimpelCom (now VEON) and Sweden-based Telia, respectively the seventh and tenth largest FCPA resolutions in history. The three resolutions resulted in a total of $2.65 billion in global fines and disgorgement, half of which went to the DOJ and SEC.
Chart 3: FCPA Corporate Enforcement Actions, 2019
|Company||Date||DOJ ($M)||SEC ($M)||Total ($M)|
|1.||Cognizant Technology Solutions Corp. (Technology: U.S.)||Feb. 15||Declination28||$25.2||$25.229|
|2.||Mobile TeleSystems PJSC (Telecom: Russia)||Mar. 6||$750.0||$100.0||$850.0|
|3.||Fresenius Medical Care AG & Co. (Healthcare: Germany)||Mar. 29||$84.7||$147.0||$231.7|
|4.||Telefônica Brasil SA (Telecom: Brazil)||May 9||-||$4.1||$4.1|
|5.||Walmart Inc. (Retail: U.S.)||June 20||$138.0||$144.7||$282.7|
|6.||TechnipFMC plc (Oil and Gas: Brazil)||June 25||$81.9||$5.1||$87.030|
|7.||Microsoft Corp. (Software: U.S.)||July 22||$8.8||$16.5||$25.3|
|8.||Deutsche Bank AG (Financial Services: Germany)||Aug. 22||-||$16.2||$16.2|
|9.||Juniper Networks, Inc. (Technology: U.S.)||Aug. 29||Closed Without Taking Action31||$11.7||$11.7|
|10.||Quad / Graphics, Inc. (Technology: U.S.)||Sept. 26||Declination||$9.9||$9.9|
|11.||Westport Fuels Systems, Inc. (Energy: Canada)||Sept. 27||-||$4.0||$4.0|
|12.||Barclays PLC (Financial Services: U.K.)||Sept. 27||-||$6.3||$6.3|
|13.||Samsung Heavy Industries Company Ltd. (Engineering: South Korea)||Nov. 22||$37.7||-||$37.732|
|14.||Ericsson (Telecom: Sweden)||Dec. 6||$520.7||$539.9||$1,060.6|
1. A concurrent DOJ and SEC corporate FCPA resolution is counted as one total corporate FCPA enforcement action.
3. Complaint, SEC v. Telefonaktiebolaget Lm Ericsson (S.D.N.Y. Dec. 6, 2019).
4. DPA, Ericsson (Nov. 26, 2019).
8. Complaint, SEC v. Telefonaktiebolaget Lm Ericsson (S.D.N.Y. Dec. 6, 2019).
9. DPA, Ericsson (Nov. 26, 2019).
11. Will Barbieri and Sam Fry, "Sweden Investigates Ericsson Over Bribery," Global Investigations Review (Dec. 13, 2019).
12. Press Release, DOJ, "Ericsson Agrees To Pay More Than $1 Billion To Resolve Foreign Corrupt Practices Act Case," (Dec. 6, 2019).
14. Clara Hudson, "FCPA Unit Chief Defends DOJ's Business-Friendly Approach," Global Investigations Review (May 15, 2019).
18. DPA, MTS (Feb. 22, 2019).
20. Indictment, U.S. v. Gulnara Karimova and Bekhzod Akhmedov, 19-CR-00167-JPO (S.D.N.Y. Mar. 6, 2019).
23. "Karimova Back to Prison in Uzbekistan, indicted in US," Eurasianet (Mar. 7, 2019).
24. "Former Uzbek First Daughter Taken From Jail in Ambulance: Lawyer," Reuters (July 18, 2019).
25. DPA, MTS (Feb. 22, 2019).
28. Cognizant paid an additional $2.97M in disgorgement to the DOJ in connection with the DOJ declination. Letter from DOJ, Criminal Division to Cognizant's Counsel (Feb. 13, 2019). The DOJ imposed disgorgement in the amount of $19.37M and agreed to credit the $16M in disgorgement that Cognizant paid to the SEC. Id.
29. Additionally, the DOJ indicted and the SEC charged two former senior executives. Adam Dobrik, "Former Cognizant Execs Attack DOJ's FCPA Charges," Global Investigations Review (Nov. 18, 2019). The SEC also settled with one additional individual. Id.
30. Technip separately paid $214M in penalties to Brazilian authorities for a $296M global resolution. DPA, TechnFMC Plc (June 25, 2019).
31. In February 2018, Juniper Networks publicly disclosed that the DOJ had closed its FCPA investigation "without taking any action against the Company." Form 8-K, Juniper Networks, Inc. (Feb. 9, 2018). Juniper stated that the DOJ acknowledged the Company's cooperation in the investigation. Id. At the time of the disclosure, the SEC's investigation was ongoing. Id.
32. DPA, Samsung Heavy Industries Company (Nov. 22, 2019).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.