The first half of 2014 has seen several important developments in the enforcement of the Foreign Corrupt Practices Act (“FCPA”) as well as other anti-corruption laws worldwide. The FCPA has been in existence for more than 35 years, but the enforcement of its provisions continues to evolve in an ever-global economy. As other nations continue to ramp up the enforcement of their own anti corruption statutes, it will be more important than ever for companies doing business internationally to ensure that they are in compliance with all relevant laws, not just the FCPA. Domestically, the number of investigations undertaken by the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) this year is on pace with that of 2013, a year which saw one of the highest total dollar amounts ever for companies settling FCPA enforcement actions.
The most significant FCPA development in 2014 comes from an 11th Circuit case, U.S. v. Esquenazi. The anti-bribery and books and records provisions of the FCPA prohibit payments made to corruptly influence any foreign official, including “any officer or employee of a foreign government, or any department, agency, or instrumentality thereof,” and inaccurate entries in a company’s records to conceal the true nature of such payments. The Esquenazi case is significant because it is one of the first attempts by a court to define the “instrumentality” portion of those provisions. The 11th Circuit settled on a broad interpretation in which an instrumentality is any “entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.” The court further elaborated on its definition and listed several factors which are relevant to its instrumentality analysis. How this decision affects the enforcement actions of the SEC and the DOJ will surely be an important development for the second half of 2014 and beyond.
With regard to settlements, we were once again reminded of the importance of cooperation with the SEC and DOJ and the effect it can have on penalties. DOJ and SEC settlements for FCPA violations with Alcoa and Hewlett-Packard, both credited for their voluntary disclosures and cooperation with DOJ and SEC investigations, resulted in fines well below the U.S. Sentencing Guidelines. Conversely, Marubeni Corporation agreed to pay a penalty of $88 million, at the middle of the range of the applicable Sentencing Guideline, after the company “refused to cooperate with the government’s investigation,” according to a DOJ press release. This disparity provides yet another reminder of the benefits that diligent monitoring, disclosures and cooperation can provide for companies under investigation for potential FCPA violations.
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