Enforcement of the US Foreign Corrupt Practices Act (FCPA) has been down but not out this year in a world beset by the COVID-19 pandemic. While the pace of prosecutions against individuals seems to have slowed in recent months, both the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have continued bringing significant enforcement actions against companies for violating the FCPA. This enforcement activity reflects a persistent focus on corruption in high-risk industries including healthcare, defense contracting, energy, and financial services.
Meanwhile, the DOJ Criminal Division and SEC Enforcement Division just this week released the Second Edition of their "Resource Guide to the U.S. Foreign Corrupt Practices Act," which was originally published in 2012. And last month the DOJ Criminal Division updated its guidance on "Evaluation of Corporate Compliance Programs."
FCPA Enforcement Against Companies
The DOJ has announced two corporate criminal FCPA settlements this year, including the largest-ever settlement of a foreign bribery case. First, on January 31, 2020, aircraft provider Airbus SE agreed to pay combined global penalties of over $3.9 billion to resolve foreign bribery charges with the United States, United Kingdom, and its home country of France, as well as to resolve violations of US export control laws. As part of its deferred prosecution agreement with the DOJ, Airbus admitted to engaging in a years-long scheme to offer and pay bribes to win business in China and other countries from both privately owned state-owned and -controlled entities.1
Second, on June 25, 2020, Switzerland-based pharmaceutical company Novartis AG, its Greek subsidiary, and a former subsidiary by the name of Alcon Pte Lte agreed to pay over $345 million to resolve a criminal FCPA investigation by the DOJ and a parallel civil FCPA investigation by the SEC.2 The companies admitted to engaging in schemes to make improper payments or to provide travel benefits to public and private healthcare providers in South Korea, Vietnam, and Greece in exchange for prescribing or using Novartis or Alcon products.3 Both the Airbus and Novartis cases involved corrupt payments made through third-parties—a common risk area for companies doing business with government officials.
For its part, the SEC also settled civil FCPA cases in February with Ohio-based pharmaceutical company Cardinal Health, Inc., for $8.8 million;4 in April with Italian oil-and-gas company Eni S.p.A., whose American Depository Receipts are listed on the New York Stock Exchange, for $24.5 million;5 and, most recently, on July 2, with Connecticut-based Alexion Pharmaceuticals, Inc. for $21.4 million.6 Each of these civil cases was resolved through administrative proceedings, with the company neither admitting nor denying the SEC's findings.
FCPA Enforcement Against Individuals
On February 18, the DOJ announced new FCPA, money laundering, and conspiracy charges against two former executives of an Alstom S.A. subsidiary and a former executive of Marubeni Corporation in connection with a long-running investigation into bribery of politicians and state electricity company officials in Indonesia. The DOJ alleges that Reza Moenaf, Eko Sulianto, and Junji Kusunoki retained two "consultants" purportedly to provide legitimate consulting services on a power-services project but, in reality, hired them for the primary purpose of paying bribes to win a lucrative government contract.7
Less than two weeks later, however, the DOJ experienced a setback in a related case, when a US District Court Judge in Connecticut overturned a jury's finding that Lawrence Hoskins, a former Alstom executive in Europe, had violated the FCPA while acting as an "agent" of Alstom's US subsidiary.8 The decision, which is currently on appeal, adds to the small field of FCPA jurisprudence and reinforces the limitations of the DOJ's jurisdictional reach over foreign nationals and entities. For more analysis of the Hoskins decision and what it means to be an agent of a multinational company, see District Court Limits Reach of the FCPA and Sheds Light on What It Means to Be an Agent of a US Subsidiary.
The DOJ suffered another setback in court on March 11, 2020, when a federal judge in Maryland tossed the FCPA conspiracy and Travel Act convictions after trial of Joseph Baptiste, a retired US Army colonel and Maryland dentist, and Richard Boncy, a lawyer and dual citizen of Haiti and the United States, based on ineffective assistance of counsel.9
Meanwhile, DOJ prosecutions relating to corruption at Venezuela's state-owned oil company, Petróleos de Venezuela, S.A. (PDVSA), have continued this year, with an individual pleading guilty to an FCPA conspiracy charge in a Texas federal courts in February,10 and new criminal charges filed against four other individuals in a Florida federal court in March.11
Since March, however, the DOJ has not announced any new criminal charges against individuals or taken any individuals to trial in an FCPA-related case—presumably due, in part, to the COVID-19 pandemic, which has shuttered many courthouses around the country.
On the civil side, the SEC has charged just one individual this year with violating the FCPA. In April, the SEC filed a complaint in US District Court for the Eastern District of New York against a former financial services executive for allegedly arranging for his firm's client "to funnel at least $2.5 million to a Ghana-based intermediary to pay illicit bribes to Ghanaian government officials in order to gain their approval of an electrical power plant project."12
The US Supreme Court's June 22 decision in Liu et al. v. SEC, which did not involve the FCPA, may nonetheless have significance for FCPA enforcement actions moving forward.. In Liu, the Supreme Court upheld—but also limited—the SEC's authority to obtain disgorgement, holding that that disgorgement constitutes proper equitable relief rather than an improper penalty, provided that the amount disgorged does not exceed the wrongdoer's net profits, among other things. Accordingly, we expect that the calculation of net profits to be an increasingly important factor in negotiating resolutions of FCPA enforcement actions brought by the SEC. For more analysis of the Liu decision, see Supreme Court Upholds—but Also Limits—SEC Disgorgement Authority.
DOJ and SEC Publish Second Edition of FCPA Resource Guide
On July 3, 2020, the DOJ Criminal Division and SEC Enforcement Division updated their 100-plus page Resource Guide to the US Foreign Corrupt Practices Act, which was originally published in 2012. As explained in the forward to this Second Edition:
Although many aspects of the Guide continue to hold true today, the last eight years have also brought new cases, new law, and new policies. The Second Edition of the Guide reflects these updates, including new case law on the definition of the term "foreign official" under the FCPA, the jurisdictional reach of the FCPA, and the FCPA's foreign written laws affirmative defense. It addresses certain legal standards, including the mens rea requirement and statute of limitations for criminal violations of the accounting provisions. It reflects updated data, statistics, and case examples. And it summarizes new policies applicable to the FCPA that have been announced in the DOJ's and SEC's continuing efforts to provide increased transparency, including the DOJ's FCPA Corporate Enforcement Policy, Selection of Monitors in Criminal Division Matters, Coordination of Corporate Resolution Penalties (or Anti-Piling On Policy), and the Criminal Division's Evaluation of Corporate Compliance Programs.13
Updated DOJ Guidance on Evaluation of Corporate Compliance Programs Provides Additional Detail
On June 1, 2020, the DOJ Criminal Division published updates to its guidance on the factors that federal prosecutors should consider when assessing the effectiveness of corporate compliance programs for the purposes of charging decisions, sentencing recommendations, and determining reporting and monitoring requirements as part of a corporate resolution.14 The new version primarily makes clarifications and adds technical guidance to the "Evaluation of Corporate Compliance Programs" guidance document that DOJ released in April 2019. This latest version continues to reflect the fact-specific compliance program analysis familiar to experienced defense counsel and compliance officers, but several revisions are noteworthy, including the emphasis on continuous program improvement guided by proactive risk assessment, the emphasis on data-driven decision-making and testing, the additional guidance on dealing with third parties, and the recognition of foreign law. For more analysis, see Updated DOJ Guidance on Evaluation of Corporate Compliance Programs Provides Additional Detail to the Existing Framework for Program Assessment.
Footnotes
1 DOJ, Airbus Agrees to Pay over $3.9 Billion in Global Penalties to Resolve Foreign Bribery and ITAR Case (Jan. 31, 2020).
2 DOJ, U.S. Attorney's Office District of New Jersey, Novartis AG and Subsidiaries to Pay $345 Million to Resolve Foreign Corrupt Practices Act Cases (June 25, 2020).
3 SEC, SEC Charges Novartis AG with FCPA Violations (June 25, 2020).
4 SEC, SEC Charges Cardinal Health With FCPA Violations (Feb. 28, 2020). 8
5 SEC, SEC Charges Eni S.p.A. with FCPA Violations (Apr. 17, 2020).
6 SEC, SEC Charges Alexion Pharmaceuticals With FCPA Violations (July 2, 2020).
7 DOJ, FormerAlstom Executives and Marubeni Executive Charged with Bribing Indonesian Officials (Feb. 28, 2020).
8 United States v. Hoskins, No. 3:12-cr-238, 2020 WL 914302 (D. Conn. Feb. 26, 2020).
9 Memorandum and Order, United States v. Baptiste, 17-cr-10305 (D. Mass Mar. 11, 2020).
10 Plea, United States v. Tulio Anibal Farias-Perez, No: 20-CR-00089 (S.D. Tex. Feb. 7, 2020).
11 See United States v. Leonardo Santilli, No: 20-MJ-02459-LFL (S.D. Fla. March 20, 2020); United States v. Carlos Enrique Urbano Fermin, No: 20-CR-20163-RNS (S.D. Fla. March 20, 2020); United States v. Edoardo Orsoni, No: 19-CR-20725-MGC (S.D. Fla. Nov. 4, 2019) (announced March 12, 2020); United States v. Lennys Rangel, 19-CR-20726-JEM (S.D. Fla. Nov. 4, 2019) (announced March 11, 2020).
12 SEC, SEC Charges Former Financial Services Executive With FCPA Violations (Apr. 13, 2020).
13 DOJ Criminal Division and SEC Enforcement Division, A Resource Guide to the U.S. Foreign Corrupt Practices Act, Second Edition (updated July 2020). d
14 DOJ Criminal Division, Evaluation of Corporate Compliance Programs (updated June 2020).
Originally published by Arnold & Porter Kaye Scholer, July 2020
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