By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently working on a book about textile artisans.
Earlier this month, Société Générale agreed to pay $860 million in criminal penalties for bribing Gaddafi-era Libyan officials and manipulating LIBOR, according to a Department of Justice (DoJ) press release. Part of the penalty– $585 million, to be paid in part to the DoJ and in part to French enforcement agency, Parquet National Financier– was levied under the US Foreign Corrupt Practices Act (FCPA) and ranks fifth on the list of penalties assessed in enforcement actions under that statute since its enactment in 1977.
As the WSJ reported:
“Today’s resolution…sends a strong message that transnational corruption and manipulation of our markets will be met with a global and coordinated law-enforcement response,” said John P. Cronan, acting assistant attorney general of the Justice Department’s Criminal Division.
The U.S. and overseas authorities have long worked together in the fight against bribery but the cooperation has gained steam in recent years, said Billy Jacobson, a former assistant chief of Foreign Corrupt Practices Act enforcement in the Justice Department’s Criminal Division who now does white-collar defense work at Orrick, Herrington & Sutcliffe LLP.
FCPA enforcement actions continue, despite comments made by Trump about this “horrible law” during the campaign, as reported by FCPA blog in Jeff Sessions: I’ll enforce the FCPA:
President Trump criticized the FCPA in a 2012 phone-in appearanceon CNBC. The FCPA-related part of the discussion starts at about 14 minutes into the call.
He said the FCPA is a “horrible law and it should be changed.”
“I mean, we’re like the policemen for the world,” Trump said “It’s ridiculous.
Past FCPA Enforcement Trends Continue
Bill Steinman summarized the state of affairs for FCPA enforcement in this FCPA blog post, Bill Steinman: The FCPA is not dead redux:
First, as we’ve seen on FCPA Tracker, 133 public companies report having open FCPA investigations. That is near the largest number of ongoing investigations ever. And that only includes issuers. There are numerous privately-held businesses that have disclosed corruption issues to the DOJ. Simply put, there are a lot of cases out there, and no doubt many of them will result in robust fines and penalties in the not so distant future.
Second, the enforcement agencies themselves have reminded us time and again over the last 16 months that the FCPA remains one of their top priorities. Roughly a year ago, Attorney General Sessions stated in a speech before the Ethics and Compliance Initiative Annual Conference that the DOJ “will continue to strongly enforce the FCPA.”
Deputy AG Rosenstein has spoken repeatedly about the agency’s robust focus on the FCPA, including the DOJ’s ongoing efforts to increase multilateral cooperation. For example, this past November, Rosenstein emphasized that “[t]he FCPA is the law of the land. We will enforce it against both foreign and domestic companies that avail themselves of the privileges of the American marketplace.”
The SEC echoed these sentiments and also indicated a commitment to bringing cases more quickly in a speech by Enforcement Division Co-Director Steven Peikin earlier that same month.
What is the Significance of This Trend?
Well, first and most obviously, it is that FCPA enforcement priorities under Trump’s DoJ has not undergone any rapid course correction, in the way we’ve seen for policies and enforcement at the Environmental Protection Agency (EPA), or the Consumer Financial Protection Bureau (CFPB). Instead, FCPA enforcement parallels the pattern seen in securities enforcement actions (see Trump SEC Fails to Pursue Aggressive Deregulatory Agenda (Albeit from Previous Pathetic Baseline)).
The FCPA pattern skews heavily towards targeting foreign companies, accounting for eight of the top ten penalties levied (see FCPA blog’s roster of those awards here). As Steinmann notes:
[E]nforcement of the FCPA is entirely consistent, in my view, with the administration’s “America First” approach to foreign policy. Just glance at the ten largest FCPA enforcement actions. Eight of the ten are foreign companies. I have no specific knowledge suggesting that FCPA enforcement is used as a trade weapon, or that the DOJ and SEC prioritize enforcement against foreign companies. But the numbers speak for themselves. Indeed, three of the largest settlements from this year — which account for the lion’s share of 2018’s fines and penalties — involved foreign business entities.
I’ll point out that this focus on foreign enforcement targets is not unique to Trump, and that under his predecessor, the DoJ and banking regulators were criticized for focusing unduly on foreign companies rather than on taking on homegrown challenges.
Misplaced Enforcement Priorities: Sleight of Hand
There’s another point I want to raise here: whether continuing the FCPA enforcement trend of Trump’s predecessor is necessarily something to be applauded– a legacy I first discussed in this 2016 post, The Obamamometer’s Toxic Legacy: The Rule of Lawlessness. In that piece I discussed the DoJ’s unwillingness to pursue zealous enforcement strategies against targets such as financial institutions or Big Pharma, while also largely abandoning wholesale enforcement of entire areas of the law, including antitrust and tax.
Instead, major DoJ priorities were insider trading (see The SEC Fiddles While the System Burns: Insider Trading Enforcement As Securities Law Theater), and foreign corruption and bribery. During the previous administration, many white collar defense specialists regarded the DoJ as a bit of a paper tiger– referred to as the Department of Jokes– and lamented a misplaced focus on bribery and foreign corruption– at the expense of more serious violations that occurred closer to home.
In that legacy piece, I quoted a white collar defense specialist:
“We have to act sometimes as shoe salesmen, flogging competence in FCPA violations, that occur in subsidiaries or with foreign suppliers,” says my white collar defense specialist contact. “This work leads us to countries and legal systems we don’t know well, to uncover chickenshit violations that occur far from home.” Far better, he believes, would be for the DoJ to focus on law-breaking that occurs in the United States, as that could be effectively deterred by the agency refocusing its enforcement priorities.
So, the DoJ’s continued willingness under Trump to pursue FCPA investigations should be seen as continuing the previous DoJ trend, focusing on the wrong enforcement priorities, at the expense of more serious transgressions. In other words: more sound and fury, signifying nothing.
Domestic Corrupt Practices Act required.
Wonderful big number fines. To most of us, unimaginably large amounts. Disregarding the issue of just how deterrent these fines really are to giant multinational corporations, where does this money go? Who does the fines funds benefit? Could this be a more sophisticated form of the “Civil Forfeiture” scam? And thus, mainly targeted at overseas firms, the net result being a monetary inflow to America?
America, the crooked cops of the world.
It would be fun to see someone do a reboot of “Bad Lieutenant” and call it “Bad Regulator.” Harvey Keitel would be perfect for the part.
Goes to the MIC /s.
There is a lot of significance: it simply means the empire controls its vassals more directly and harder.
Nothing wrong with that, when seen from the point of the emperor or empire.