One of my favorite “Seinfeld” episodes is when Jerry and George go to NBC to pitch their new television show which is about “nothing.” There are some parallels to this posting. FCPA settlements have dwindled during 2012.
Even if I try to stretch some of the “important” cases such as Pfizer or Morgan Stanley, the fact is that FCPA enforcement has been slowing down. There are lots of potential causes of this reduction, and I have written about that before. (Here).
For the FCPA Paparazzi, 2012 was an FCPA bust. I am sure we will see plenty of client alerts with highlights of an aggressive enforcement year, but let’s be honest – 2010 was the best year DOJ had in FCPA enforcement. As they say in the wine business, 2011 and 2012 were not good years.
In keeping true to past traditions, I am still going to come up with a list but in fairness, number 1 on the list has to be the reduction in FCPA cases.
1. FCPA Enforcement Falls Off a Cliff – The numbers do not lie. FCPA settlements were significantly down this year, with no major blockbuster cases. Total fines fell to around $250 million. FCPA enforcement is still a risk. The government is continuing to search for new investigations and enforcement actions. Some of the slowdown can be attributed to investigation of some big cases – Alstom, Avon, Wal-Mart and Weatherford. If that is the explanation, then I expect that 2013 could be a return to 2010 enforcement levels.
2. The FCPA Guidance – The Justice Department and the SEC fended off FCPA reform efforts by promising to provide guidance on the FCPA. The US Chamber of Commerce and Congress had to give DOJ and the SEC time. The New York Times reporting on FCPA enforcement and compliance, along with the promised guidance, eventually killed FCPA reform for the foreseeable future.
The FCPA Guidance turned out to be a very helpful document. Of course, the usual naysayers will line up to criticize the government but the document provides guidance on a number of key areas, and gives great insight into how DOJ and the SEC exercise their discretion when investigating and resolving cases.
3. Promises of Bigger Cases to Come – The reduction in FCPA settlements does not mean that FCPA enforcement is more lax. To the contrary, public disclosures and newspaper reporting have highlighted ongoing investigations, some of which are close to resolution and some of which are in early to mid-stages of investigation. Aside from these obvious cases, what has happened to the 2010 financial inquiry launched by the SEC? What has happened to the movie studio inquiry in China? I expect that some of the big cases will be settled early in 2013 and next steps may be taken in some of the big ongoing investigations.
4. Pfizer and Morgan Stanley – In a 2010-type year, we would have spent less time on the Pfizer and Morgan Stanley cases. But in this tough time of reduced enforcement actions, it is worth taking a moment to write about each.
Pfizer is an important case because it includes new specific compliance requirements on a company, particularly in the area of proactive auditing of high-risk countries. The Justice Department and the SEC imposed more stringent overall compliance requirements on Pfizer, with specific requirements relating to its global operations and compliance program, including a centralized internal investigations unit and compliance office. These specific requirements are likely to turn into “minimum” requirements for “effective” compliance programs for global companies of comparable size.
Contrary to many commentators, I have never thought the Morgan Stanley case was as significant as others have written. It is a case which is limited by its facts to the actions of a “rogue” employee. But precedent is precedent, and sometimes it can morph into something stronger. DOJ and the SEC have set a precedent and the FCPA bar will quickly cite it in any circumstance they can when trying to secure a declination.
5. Individual Prosecutions – “Wherefore Art Thou?” The FCPA Paparazzi has been “calling out” (like Juliet) for additional individual criminal FCPA prosecutions. Unfortunately, there have been none. Instead, the government has taken the step of charging more individuals with civil FCPA violations. Given the reduced evidentiary burden, the government’s action appears to be well informed. However, as some of the more significant prosecutions are settled, such as Avon, and others, there may be more pressure on DOJ to resume filing criminal charges against individuals involved in FCPA bribery schemes.