Revisiting The Corporate Top-10 FCPA Enforcement Actions

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top10We all like organized lists.  Short and sweet is easier to understand and ignore nuances.  Even in our FCPA world, we track settlements by a top-10 lost.  The concept of a top-10 predated David Letterman’s top-10 lists, and even radio show top-100 countdowns and other fun listings.

The top-10 list of FCPA settlements seems a little antiquated these days.  When the Siemens settlement was announced in 2008, we were all “surprised” by the size of the total settlement that was well above $1 billion.

Little did everyone know, but the $800 million price tag on the Siemens settlement would soon be eclipsed by Justice Department settlements in other enforcement arenas – False Claims Act, AML/Sanctions, and Financial Fraud, with JP Morgan reaching $13 billion.

Siemens now appears at the top of the FCPA list with far less fanfare and regard than five years ago.

At the same time, DOJ and the SEC have ratcheted up average FCPA settlements in the last few years.  They have done so with some regard for proportionality.  If a major drug company engaged in off-label marketing earns billions of dollars through illegal marketing efforts, they have been forced to pay significant civil and criminal penalties over a billion dollars.

In the case of bribery, the calculation of illegal benefits to the company from bribery is sometimes more difficult to measure.  It is a part of the overall sentencing guidelines calculation and is usually estimated by the size of a contract or the benefit of a scheme.

In the next year or so, depending on the timing of any upcoming settlements, the Siemens settlement will be eclipsed.  Part of this phenomenon will reflect the relative culpability of misconduct and part will reflect the overall increase in penalties reached in government enforcement actions.top102

The two most significant candidates for exceeding the Siemens case are Alstom and Wal-Mart.

The Alstom case could be complicated significantly by the two possible suitors who want to purchase part or all of Alstom.  Talk about walking into a legal hornet’s nest.  One thing is clear is that, aside from corruption problems, Alstom is in big financial trouble.  That is why there are companies all around seeking to acquire Alstom at a firesale price.

The problem with the Alstom acquisition solution will be the resolution of successor liability issues under the FCPA.  Again, Alstom may be able to extract itself from under this issue, but the successor will have to pay a pretty penny for the ability to acquire Alstom.  As a result, the government is likely to seek a huge penalty for such a resolution, far eclipsing the $800 million in Siemens.

The Wal-Mart case, because of its notoriety and its pervasive conduct in Mexico and possibly other countries, will exceed $1 billion in the ultimate settlement.  DOJ and the SEC know that everyone is watching this case, and they cannot afford to give Wal-Mart any kind of break.

top103Wal-Mart has become emblematic of the new-FCPA enforcement era, and DOJ and SEC have to confirm that era with a huge penalty and possibly individual prosecutions, depending on the facts.

How this will all shake out will be interesting to follow.  Corporate liability and huge fines are here to stay no matter what anyone may think about the FCPA enforcement program.  The top-10 list will soon be transformed into yet another iteration of “top-10.”

Topics:  Anti-Money Laundering, Bank Secrecy Act, Compliance, DOJ, Enforcement Actions, False Claims Act, FCPA, Financial Crimes, Fraud, SEC

Published In: General Business Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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