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Department of Justice Announces "New Era" of FCPA Enforcement in 2010, Increases Actions by Record 85%

    Client Alerts
  • February 09, 2011

This past November, to a crowd of practitioners in the Foreign Corrupt Practices Act ("FCPA"), Assistant Attorney General Lanny A. Breuer articulated what the Department of Justice's recent actions had already made clear:

[O]ur FCPA enforcement is stronger than it's ever been - and getting stronger.... I am aware that, for some of you, as we have become more aggressive, you have become more worried. On one hand, I want to tell you this afternoon that you are right to be more concerned. As our track record over the last year makes clear, we are in a new era of FCPA enforcement; and we are here to stay. On the other hand, I want to impress upon you that you should not wait in worry for us to come knocking on your door. There are many steps that you can be taking that would put your organization in a better position for the day we do come knocking, or that could prevent us from coming at all.

Breuer's comments underscore two themes in FCPA enforcement that have been reverberating through boardrooms the past few years, although never as loudly as in 2010: 1) the Department of Justice ("DOJ") is increasingly bolstering its FCPA Unit and resources, resulting in exponentially more investigations, prosecutions, criminal fines and prison sentences; and 2) the single biggest measure a company can take to mitigate against FCPA liability is to implement an effective anti-corruption compliance program.

Strength in numbers: Bolstered DOJ team shows commitment to aggressive enforcement

In the past year, DOJ enhanced its FCPA Unit by overhauling its leadership and appointing several distinguished federal prosecutors to high-level posts. It also expanded the Unit's manpower, with over a dozen prosecutors now dedicated solely to FCPA enforcement.  Unsurprisingly, these increases had an immediate and substantial impact, as 2010 witnessed a record seventy-four combined DOJ and SEC actions - surpassing the 2009 figure by a staggering 85%. Monetary fines exceeded $1.8 billion, also a new record. In fact, of the top ten largest FCPA settlements in history, eight of them were reached in 2010.

Although numerous prosecutorial trends emerged from such aggressive enforcement, several stand out:

  1. Targeting entire industries: "[W]e are increasingly able to take an industry-wide approach to our FCPA investigations," Breuer explained, "because one way in which corporations obtain credit for their cooperation is by providing us with information about their competitors and their clients." The November settlements against Panalpina World Transport, a global freight forwarder, and a number of oil service firms are a testament to this approach; DOJ initiated that investigation based on information provided by Panalpina's customers.
  2. Seeking jail sentences for individuals: DOJ has made clear that it views the prosecution of corporate executives and other individuals as a powerful deterrent to FCPA violations. Never was this more clear than last January, when DOJ, in close coordination with the FBI, arrested twenty-two individuals following an elaborate undercover sting operation. In addition to that prosecution - the single largest in FCPA history - DOJ also secured the longest prison sentence for an individual: seven years and three months for a Virginia businessman who had bribed Panamanian officials to secure maritime contracts.
  3. Partnering with foreign authorities: 2010 saw DOJ joining forces with its foreign counterparts (most notably the United Kingdom's Serious Fraud Office) to yield multiple guilty pleas and over $400 million in criminal fines. In addition to the UK, DOJ has begun working alongside anti-corruption authorities in Germany, France, Costa Rica and other nations, many of who have enacted their own anti-corruption legislation that is patterned after the FCPA.

Compliance programs: A must for companies operating abroad

As recent enforcement actions have shown, the FCPA's broad statutory and jurisdictional reach can ensnare any company operating overseas, regardless of size. Consequently, and despite its "new era" of aggressive FCPA enforcement, DOJ has repeatedly urged all such companies to implement an anti-corruption compliance program. Such a program, Breuer explained, "will not only help to prevent misconduct from occurring, but it will also improve your position with [DOJ] in any eventual investigation."

While the specific parameters of compliance programs can, and should, vary based on the scope of the company's foreign operations, all such programs must exhibit some measure of:

  1. Corporate oversight, enforcement and periodic review of a company-wide anti-corruption policy
  2. Procedures for vetting potential foreign third-party business partners (manufacturers, agents, consultants, vendors, etc.)
  3. Procedures and controls governing payments to foreign third-parties and government officials (especially those for gifts, meals and other hospitalities)
  4. Mechanisms for personnel to report potential violations of the anti-corruption policy
  5. Periodic training for all personnel and foreign third parties, who must certify compliance with the anti-corruption policy.

Parker Poe's Government Investigations/White Collar Defense team has substantial experience not only creating and implementing anti-corruption compliance programs for clients operating around the globe, but also interfacing with federal authorities to facilitate successful resolutions to FCPA investigations.

For more information, please contact Richard S. Glaser or Eric H. Cottrell.