OECD Report Says FCPA Enforcement to Increase, Include Targeted Sweeps
On October 15, 2010, the Organization for Economic Cooperation and Development’s Working Group on Bribery in International Business Transactions issued its report on the third phase of its evaluation of the U.S. implementation of the OECD Anti-Bribery Convention and related instruments, which included a look at enforcement of the Foreign Corrupt Practices Act2. Highlights of the report include:
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U.S. Has Prosecuted Most Foreign Bribery Cases Among OECD Parties
The U.S. has investigated and prosecuted the most foreign bribery cases among the parties to the OECD Anti-Bribery Convention. From 1998 to September 16, 2010, 50 individuals and 28 companies have been criminally convicted of foreign bribery, while 69 individuals and companies have been held civilly liable for foreign bribery. In addition, 26 companies have been sanctioned (without being convicted) for foreign bribery under non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs). Sanctions have also been imposed for accounting misconduct and money laundering related to foreign bribery.
Investigations Have Resulted in Increasingly Significant Penalties
The U.S. investigations have resulted in increasingly significant penalties. From 1998 to 2003, the maximum monetary sanctions leveled against a company in an FCPA case were $2.5 million. Since then, 23 companies have received monetary sanctions in excess of $10 million. In one case, monetary sanctions totaling $800 million were ordered against a single company. In 2010, an 87-month sentence was imposed against an individual in an FCPA case. Since 2004, over $1 billion in foreign bribery proceeds have been recovered through disgorgement actions.
The Securities and Exchange Commission (SEC) also obtains civil penalties in addition to Department of Justice criminal fines. In the first 9 months of 2010, the SEC obtained over $404 million in disgorgement, interest and civil penalties from thirteen companies and eight individuals.
U.S. Initiatives to Include Targeted and Industry-Wide Sweeps, Etc.
The FCPA enforcement expected to increase in the near future. Presently, the U.S. has more than 150 criminal and 80 civil ongoing FCPA investigations. U.S. authorities recently announced new initiatives including investigations of specific industries (targeted sweeps or industry-wide sweeps) and an increased emphasis of prosecuting natural persons in addition to companies. These efforts will likely lead to more prosecutions and convictions.
Significant Number of Investigations Result from Voluntary Self-Reporting
FCPA cases come to the authorities’ attention through a myriad of means. A significant number (but not the majority) of investigations result from voluntary self-reporting by companies.
Other sources include corporate securities filings; suspicious activity reports from financial institutions; the media, including keyword searches of the Internet; whistleblowers, employees, customers, competitors, and agents; qui tam and civil complaints; referral from other U.S. government agencies, including overseas embassies; international financial institutions such as the World Bank; reports through a hotline email address and website; and information from foreign states, including requests for mutual legal assistance (MLA).
OECD Commends Enforcement Efforts and Existing Laws
In its report, the OECD commended the U.S. for its initiatives and practices, including laws that have strengthened accounting and auditing standards, such as the 2002 Sarbanes-Oxley Act, and the whistleblower protections under the Dodd-Frank Wall Street Reform and Consumer Protection Act (aka financial reform bill) enacted on July 21, 2010.
(See ITT’s Online Archives or 07/22/10 news, 10072230, for BP summary on the enactment of the FCPA whistleblower reward provisions in the financial reform bill. See ITT’s 11/04/10 news, 10110411 for BP summary of SEC’s approval of whistleblower proposed rule.)
OECD Recommends Review of Facilitation Payments, Etc.
The OECD also recommended areas for improvement, including U.S. policies and approaches regarding facilitation payments, suggesting they consider the views of the private sector and civil society.
(In 2009, the OECD recommended, in view of the corrosive effect of small facilitation payments, particularly on sustainable economic development and the rule of law that Member countries should: (i) undertake to periodically review their policies and approach on small facilitation payments in order to effectively combat the phenomenon; and (ii) encourage companies to prohibit or discourage the use of small facilitation payments in internal company controls, ethics and compliance programs or measures, recognizing that such payments are generally illegal in the countries where they are made, and must in all cases be accurately accounted for in such companies’ books and financial records.)
1The OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions.
2The FCPA was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business.
(OECD report, dated 10/15/10)