CORPORATE CRIME REPORTER
Shearman’s
Danforth Newcomb Present at the Creation of the FCPA
22 Corporate Crime Reporter 10, March 8, 2008
Except for a two year stint in the Army, Danforth Newcomb has been with Shearman
& Sterling ever since he graduated from Columbia Law School in 1968.
One of his specialties throughout the years – the Foreign Corrupt Practices Act (FCPA).
In the early years, he would hear rumors about the Justice Department prosecuting individuals for taking some customer out to lunch.
To disprove the rumors, he started pulling together all of the FCPA cases and tracking the prosecutions and other enforcement actions.
Now, every year, Newcomb and his colleagues at Shearman put out an annual report tracking FCPA investigations and enforcement actions.
In an interview last week, Newcomb said that the current reporting shows that federal investigations of corporations for FCPA violations is at 58.
But despite the spike in investigations, the government still is bringing only a handful of enforcement actions a year.
The report found that enforcement actions are averaging six to eight per year since 2004.
The SEC and Department of Justice are strapped for resources. And its difficult getting the evidence from overseas, Newcomb says.
Nonetheless, Newcomb believes the 58 cases currently under investigation represents just the tip of the iceberg of such cases.
“We primarily determined the number of investigations from looking at SEC filings,” Newcomb told Corporate Crime Reporter. “Those are companies that have publically disclosed that there is some sort of an FCPA investigation. The company may go silent and not tell us whether the investigation has been resolved. And we may continue to report investigations that have been terminated. But we’ve also clearly not included a number of investigations that didn’t make it into the company’s disclosure.”
During the course of the interview, it comes out that Newcomb is a monitor in an FCPA case.
But he won’t say for which company.
“I don’t want to get into the particulars of my case,” Newcomb said. “The point is that it is still developing. And it may well be that my monitorship will become public in due course.”
Shearman & Sterling partner Steve Fishbein is a monitor in the Baker Hughes case.
“The important part of monitorships is that the company is involved in the selection process,” Newcomb said. “Certainly in regard to Steve’s selection as the monitor in Baker Hughes and my own selection, the company and its counsel were very much involved in the selection process. At the same time, so was the government. So, where there is a cooperative mutual selection, there is much less risk that either side will be disappointed.”
When you go in and do the voluntary disclosure, the expectation is that the investigation will be closed, right?
“No,” Newcomb says. “The expectation is that the consequences will be mitigated by your cooperation and voluntary disclosure – and particularly in the situation where it is a voluntary disclosure in the sense that the enforcement agencies know nothing about the matter. The oil for food program is a classic example. The Volcker report on oil for food listed 2,000 or so companies. It’s not quite as much of a voluntary disclosure if after Volcker publishes your involvement, you run down to the Justice Department and say – gee, page 73 was correct.”
Let’s say that the Justice Department and SEC say now to corporate America something similar to what former SEC enforcement chief Stanley Sporkin said many years ago now before the FCPA came into existence – come in and disclose your foreign payments, and we will show you leniency. Would you get the same flood of reporting as we got back then?
“Yes,” Newcomb says. “But people tend to bring in relatively insignificant matters. And sometimes the more fundamental concerns are not discovered or certainly are not talked about. So, I’m not sure an amnesty program – in particular a one shot amnesty program – would be a fundamental structural change which will do anything to advance the ball. The program that the Department of Justice and SEC have been following – of international cooperation and careful prosecution – is probably a better system for deterrence and control. The people who take advantage of amnesty often have lesser problems or matters.”
Are you saying that companies would not disclose major wrongdoing?
“I don’t know that they would,” Newcomb says. “But if you look at the disclosures under then SEC enforcement chief Stanley Sporkin’s program, they were pretty insignificant when compared to the Gulf Oil case and the Lockheed case and the ones that started the ball rolling. Now, if you talk informally with the enforcement folks today, one of their concerns is that a lot of voluntary disclosures are for relatively small issues.”
[See Interview with Danforth Newcomb, 22 Corporate Crime Reporter 10(11), March 10, 2008, print edition only.]
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