Leslie Benton, Vice President, Ethisphere
For the last few years, January has been a notable month for FCPA enforcement, and this year appears to be no different. Last week, the DOJ and the SEC announced that Deutsche Bank will pay $130 million to resolve bribery charges related to its attempts to win business in several countries and separate commodities fraud charges. This is the latest case in a busy thirteen months for the US government despite the global pandemic’s disruptions to witness interviews, document collection, and court proceedings, to name but a few of the pandemic’s impacts. While case numbers were slightly lower than in previous years, the sizes of FCPA resolutions once again broke the previous year’s record. Last year saw twelve corporate FCPA enforcement actions, with penalties totaling more than $8 billion paid worldwide, a significant increase from the $2.83 billion paid in 2019.
Landmark Cases of 2020
The year began with a then-record settlement in January when Airbus, the French-headquartered airplane manufacturer, agreed to a global resolution of bribery charges as well as charges related to export controls in the US. In that case, Airbus used third parties to bribe foreign officials and airline executives in more than a dozen countries to obtain lucrative contracts. The company agreed to pay approximately $4 billion in combined penalties to the US, France, and the United Kingdom to resolve eight years of investigation. The FCPA-related penalty was $2.09 billion.
The blockbuster settlement of 2020, however, would come in the second half of the year in the form of a combined $3.3 billion settlement with Goldman Sachs and its Malaysian subsidiary—part of a coordinated resolution with criminal and civil authorities in the US, the UK, Singapore, and other jurisdictions. In that case, Goldman Sachs funneled bribes through a third party to Malaysia and Abu Dhabi officials to secure three valuable contracts, including underwriting billions in bond deals for the Malaysian state-owned investment fund. The settlement included a record $2.3 billion FCPA criminal penalty, a $400 million civil penalty, and $606 million in disgorgement in the US. That settlement is now number one among the top ten FCPA enforcement actions, bumping the 2019 Ericsson settlement to the number two spot, and Goldman Sachs is now the only US company on the top ten list.
Other notable settlements included a $347 million settlement with Novartis and its former Alcon subsidiary, a $123 million settlement with Herbalife Nutrition, a $283 settlement with Brazilian-based J & F Investimentos, S.A., and a $135 million settlement with the Dutch energy company Vitol Trading. Rounding out the list were settlements with Sargeant Marine and Beam Suntory. Separately, the SEC reached four settlements against World Acceptance Corporation (to which the DOJ issued a declination), Alexion Pharmaceuticals, Eni, and Cardinal Health (the smallest settlement of the year at $8.8 million). In a departure from previous years, the DOJ elected not to impose monitors in the corporate enforcement actions.
In terms of enforcement against individuals, six individuals were indicted, six were sentenced, and seven pleaded guilty to FCPA offenses.
Anti-Corruption Enforcement Trends
Global cooperation and coordination have become hallmarks of international anti-corruption cases, as the Airbus and Goldman Sachs settlements clearly illustrate. In December, Acting Assistant Attorney General Brian Rabbitt noted the importance of international cooperation and coordinated enforcement to the DOJ, and we do not expect that to change in the coming years—particularly because it benefits everyone involved.
In addition, 2020 brought recognition of the United States’ efforts to enforce anti-bribery legislation. In its Phase 4 evaluation of US implementation of the OECD Anti-Bribery Convention, the OECD Working Group on Bribery “commended” the United States for “a significant upward trend in [anti-bribery] enforcement” and for “the prominent role it plays globally in combating foreign bribery.”
In some countries, however, enforcement appears to be less robust, despite the international coordination mentioned above. According to a report released in October by Transparency International (TI), active bribery enforcement is on the decline among the world’s largest exporting nations (all signatories to the OECD Anti-Bribery Convention). TI called out Canada, China, Hong Kong, India, Japan, Mexico, the Netherlands, and South Korea as having the worst track records, while Germany, Italy, and Norway also saw significant declines in enforcement. France and Spain were noted as having improved their performance.
Updated DOJ Guidance
Enforcement was not the only thing that kept the DOJ and SEC busy in 2020. In June, the DOJ released a revised version of its guidance to prosecutors, “Evaluation of Corporate Compliance Programs.” Building on the prior version, the June update underscores the need to use lessons learned from the company’s own experience and that of others to assess risk and calibrate programs accordingly, and it places increased emphasis on whether compliance programs are “adequately resourced and empowered to function effectively” and control functions have adequate access to properly monitor and audit the program. The revision also focuses on integrating acquisitions into the acquiring company’s compliance program, including the use of post-acquisition due diligence and audits of the acquired company. Recognizing the increasing importance of ethics and compliance in the merger and acquisition context, Ethisphere and the Business Ethics Leadership Alliance (BELA) have recently published the “M&A Playbook for Ethics and Compliance Leaders.” We hope this publication will be informative to ethics and compliance professionals as they prepare for upcoming M&A activity at their company.
In July, the DOJ and SEC also published the first update to their consolidated FCPA guidance, “A Resource Guide to the U.S. Foreign Corrupt Practices Act.” While the second edition does not break new ground, it does incorporate a number of significant developments since it was originally published in 2012, including more recent case law and guidance such as the DOJ Corporate Enforcement Policy, Piling On Policy, and Monitor Selection Criteria, among others.
Looking ahead, we expect FCPA enforcement to continue and potentially accelerate under the administration of President-elect Biden. As of this writing, he has tapped Merrick Garland to become US Attorney General and has nominated others to fill key Justice Department posts, although we are still awaiting a nominee to lead the Criminal Division, which has authority over FCPA matters.
Anti-corruption historically has been a bipartisan issue. Under both Democratic and Republican administrations for almost two decades now, FCPA enforcement has followed an upward trajectory, and we expect 2021 and beyond to be no different. Following the past pattern of recessions increasing incentives for corrupt behavior, the economic downturn caused by the COVID-19 pandemic may lead to an increase in FCPA and other financial crime-related cases. After the most recent recession, FCPA cases notched up dramatically. In the current climate, as government actors have played a larger role in supply chain and procurement activities and companies are potentially feeling pressure to cut corners, we may see a similar spike in the coming years.
About the Author:
Leslie Benton is a Vice President at Ethisphere, where she engages with global companies on assessing and benchmarking anti-corruption programs and building capabilities across organizations and with third parties. Additionally, she leads the anti-corruption initiatives at the Center for Responsible Enterprise And Trade (CREATe.org); and is one of the ISO 37001 Anti-Bribery Management Systems Standard drafters as a member of the U.S. Technical Advisory Group to the ISO committee developing ISO 37001.