Jenner Partner Keisha Stanford on FCPA Enforcement

Foreign Corrupt Practices Act (FCPA) criminal enforcement actions were down last year, with the Department of Justice resolving fewer matters in 2023 compared to 2022. The Securities and Exchange Commission (SEC) slightly increased its enforcement actions.

Keisha Stanford
Jenner & Block

Out of the fifteen actions that the Department resolved last year, more than half were enforcement actions brought against individuals as opposed to corporations. 

The Department has publicly expressed its priority of prosecuting individuals, and last year’s enforcement trend is consistent with the Department’s policy updates and announcements. In general, it appears that the Department will continue to hold individuals accountable as the ones perpetrating the wrongdoing. 

Also notable from last year, the Department did not impose more corporate monitorships. Instead, the Department only imposed two new monitorships during the year.

Those are some of the findings of a recent year end review of FCPA enforcement by Jenner & Block. 

The review noted the case of United States v. Coburn, where a federal district court judge held that a company had waived attorney-client privilege when the company’s outside counsel made disclosures to the Department as part of its cooperation with the government. 

After two of the company’s executives were indicted, they subpoenaed the company and requested documents from the outside counsel’s internal investigation. These documents included witness interview summaries and other work product. 

In finding waiver of the attorney privilege, the court noted that the company provided “detailed accounts” of witness interviews to the government, including by the defendants who had subpoenaed the documents from the company. 

“Although the court relied on well-established principles related to attorney-client privilege, the opinion served as another warning about the risks of potentially waiving privilege in connection with efforts to cooperate with the government,” the Jenner review noted.

Keisha Stanford, a partner at Jenner, heads the firm’s Anti-Corruption and FCPA practice. 

“COVID and the pandemic had a very significant impact across all enforcement activity,” Stanford told Corporate Crime Reporter in an interview last month. “You saw a dramatic drop in enforcement activity between 2019 and 2020. Everything went remote. And it took a bit of time for the Department and the Securities and Exchange Commission (SEC) to navigate their investigations when we all effectively were at home. In 2021, you saw the Department starting to figure it out and you saw an uptick.” 

“But many of these cases have a long investigative period. So much of the activity you were seeing in 2018 and 2019 came from investigations started several years before that and were resolved in 2018 and 2019.” 

“Some of the downtick you are seeing now is due to the change in administrations and different priorities. During the Trump administration, you just did not see as much enforcement activity. And that may just mean there were not a lot of cases in the pipeline that were resolving in 2020 and 2021.” 

“You are starting to see the evolution of cases now that may have started at the beginning of the Biden administration. The Biden administration has listed tackling corruption across the globe.”

“You are starting to see some return to a focus on enforcement and enforcement that touches countries all over the world. We will continue to see an increase. But the election could impact enforcement trends.”

We have done a couple of reports on the decline in corporate crime enforcement over recent years. And the downward trend is continuing under Biden.

The pipeline explanation might have explained 2021 and 2022. But it’s still down in 2023. Is there another explanation?

“Some of this might be the message getting across. As I mentioned at the outset, a large chunk of my practice is advising on compliance,” Stanford said. “Companies do understand the repercussions of not having a robust compliance program that prevents corruption and bribery and detects it when it occurs.”

“There are many entities focused on ensuring they are in compliance. They have implemented controls, they have robust policies and they have built out their compliance function. They are cascading these messages down to their employees.” 

“I also think that the international partnerships among enforcement agencies around the world has helped to communicate this message across companies’ operations outside of the United States.” 

“There is a fair amount of cooperation between enforcement agencies. Whereas historically, the Department of Justice was the primary enforcement authority. You are now starting to see other countries engage in enforcement activity in the anti-corruption and anti-bribery space as well.”

There appears to be a large number of foreign based multinationals that get hit with FCPA actions compared to U.S. based multinationals.

Violation Tracker’s Phil Mattera says that even when the Biden Justice Department does bring major corporate crime cases, the majority of them have been against foreign multinationals. 

“If we look at the largest fines and settlements – say, those above $200 million – announced since Biden took office and documented in Violation Tracker, most of them involve foreign companies,” Mattera told us last year. “Aside from BAT, these include Germany’s Allianz, Denmark’s Danske Bank, Switzerland’s Glencore and ABB, Holland’s Stellantis, Sweden’s Ericsson, India’s Sun Pharmaceuticals and the United Kingdom’s Barclays.” 

Is there a bias at play?

“I don’t know whether there is a bias. Some of it may be the result of U.S. companies being subject to U.S. enforcement over a longer period of time. So their compliance programs may be more built out or more robust. Or they may be used to interacting with U.S. regulators.”

“One of the challenges historically has been that the Department of Justice and the SEC have been the primary enforcers regardless of where the corruption occurs. That’s no longer the case. Now, we are seeing enforcement from other countries. Many of the enforcement efforts are now done in partnership.” 

What stood out for you in your report? 

“The ongoing focus of holding individuals accountable. That’s a major priority for the Department. And that carried through into 2023. There is also a strong emphasis on encouraging companies to disclose any misconduct they have learned of.  Some of the changes that you saw in the corporate enforcement program and the revisions to the corporate compliance programs encourage companies to promptly and voluntarily disclose and engage in robust cooperation.”

“In the past, the maximum fine reduction that was available was fifty percent. Now you can get up to a seventy-five percent reduction off the fine for the low end of the Sentencing Guidelines. The Department and the SEC are trying to use the carrot and stick approach. They are making the carrot much more attractive for companies to voluntarily self-disclose when they learn of wrongdoing and to engage in significant efforts to help the government bring actions against individuals who were engaged in the wrongdoing.”

“The other side of that is that we are seeing some risk to companies with respect to privilege waivers in connection with that cooperation. There are many factors that go into a company’s decision to cooperate and how they make those disclosures in connection with the cooperation to earn that credit.”

“There are increased risks to potentially waiving attorney client privilege in connection with those communications with the government. As we saw in the Coburn case, two individuals pressed for the release of arguably privileged information. But that information had been shared with the government in connection with the company’s cooperation with the government’s investigation.”

“So while the Department is putting forward incentives to companies to encourage voluntary disclosure and robust cooperation, we find that companies have to be careful in how they do that to ensure that they are not unintentionally waiving attorney client privilege and limiting exposure to a subject matter waiver with respect to the conduct at issue.”

In your report, you say that the Department of Justice will not require a guilty plea absent multiple or particularly egregious aggravating circumstances. 

Let’s look at the corporate crime resolutions as a continuum from declination to declination with disgorgement to non prosecution agreement to deferred prosecution agreement to guilty plea. Over the years, the trend has been moving from the guilty plea side to the declination side. 

Is that trend going to continue?

“I think so. The carrot aspects of the Department’s corporate enforcement program does encourage companies to develop strong compliance programs and internal controls so that they can identify issues before the Department learns about it on its own.”

“In that regard, you are seeing much stronger compliance programs and independent compliance functions than you have seen in the past.” 

“But many of the other carrots encourage companies to go to the Department when they learn of wrongdoing so that they can benefit from the upsides of disclosing to avoid a guilty plea down the road.”

“Where possible, companies are electing to voluntarily self-disclose, which makes guilty pleas less likely.”

We are hearing from corporate defense counsel — your colleagues — that in recent years, companies are less inclined to self-disclose because of the outcomes. Are you hearing that also?

“There is still a fair amount of uncertainty in the policy and the benefits that will inure to the companies, particularly on the fine front, if they voluntarily self disclose. Companies still struggle with weighing the costs and benefits to voluntary self disclosure. That is part of what’s driving the Department in making these refinements to its policy.”

“For example, when they announced the pilot program on clawbacks, there was a lot of pushback from companies that the Department didn’t appreciate the international aspects of company operations that often make it difficult to clawback compensation from individuals. It depends on the law of the country that the individuals are in or even in the United States, the state that they reside in. There are states that would prohibit a company from clawing back that compensation.” 

“If it is the company’s view that the only way to receive any benefit is to try and claw back compensation that they are not legally allowed to claw back or that they are going to spend a large amount of money trying to get it back and still be unsuccessful and those efforts are not going to inure to the company’s benefit, then there is going to be resistance.”

“This year, you’ve seen a much more holistic way of talking about compensation related provisions. So you see talk about withholding bonuses, or where there is credit given even if there is some effort made to claw back the funds, even if the company is not successful.”

“You are seeing a refinement of Department policy in response to feedback from the corporate community – feedback that some of this is too opaque or it’s too difficult to navigate. If the benefits are not clear to a corporation, it’s not going to have the effect that the Department ultimately desires.”

Your report finds that last year there were only two corporate monitorships. There has been a decline over the years in corporate monitorships. You report that the Department will not seek to impose a monitor if the company demonstrates it has implemented and tested an effective compliance program.

Let’s say a company is being investigated, does not have an effective compliance program, but after learning of the investigation, implements one, does that meet the policy guidelines?

“I don’t think so,” Stanford said. “There is an emphasis on whether that program has been tested and has proven through that testing to be effective. You have seen instances in which the company during the course of its investigation may build out a compliance program, but there is some skepticism on the part of the Department as to whether that program is just a paper policy, or whether in practice it is calibrated to the company’s business risk.” 

“The Department has made it clear that it’s not enough to implement a compliance program. The Department wants to see that that program has been tested and has been proven to work.”

Is it your experience that when these cases are settled, no matter how they are discovered, that they are made public?

“Whether or not the Department publicizes the settlement hinges on their ability to articulate the basis for the resolution and whether or not it serves as an example of the type of behavior that the Department is trying to encourage.” 

“Historically, we didn’t learn about declinations. It has only been in the last couple of years where there has been some effort by the Department to provide additional information about the circumstances under which the Department has decided not to prosecute a company in the anti-corruption space.”

“In response to feedback to the corporate community, the Department is giving additional information to companies about the types of factors the Department considers when it declines to prosecute. Some of that calculus in determining whether they are going to make a public statement has to do with whether or not there is the ability to educate the corporate community on the type of behavior the Department is trying to encourage.”

[For the complete q/a format Interview with Keisha Stanford, see 38 Corporate Crime Reporter 8(12), February 19, 2024, print edition only.] 

Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress