2011 DOJ Enforcement Of The FCPA – Year In Review

This article originally appeared on Professor Koehler’s FCPA Professor website (www.fcpaprofessor.com) and is reprinted with his permission.

Yesterday, I highlighted various aspects of the SEC’s enforcement of the FCPA in 2011. Today, I highlight certain facts and figures from the DOJ’s FCPA enforcement program in 2011.

In 2011, the DOJ brought 11 corporate FCPA enforcement actions (this includes the enforcement action against Cinergy Telecommunications that remains pending).

[In 2010, the DOJ brought 16 corporate FCPA enforcement actions (in addition to the BAE enforcement action that was related to the FCPA, but did not involve FCPA charges and the Lindsey Manufacturing enforcement action that began in 2010 and resulted in the convictions being vacated and the indictment dismissed in 2011 due to prosecutorial misconduct - see here)]

In the 11 corporate DOJ FCPA enforcement actions from 2011, the DOJ collected approximately $355 million in criminal fines.  Including the $149 million forfeiture in the Jeffrey Tesler individual enforcement action which resulted in a plea agreement in 2011 (see here), the DOJ’s FCPA enforcement program in 2011 took in approximately $504 million.  Approximately $432 million (86%) of the $504 million was in three enforcement actions (JGC Corp., Magyar Telekom / Deutsche Telekom, and Tesler).  Approximately $458 million of the $504 million (91%) collected by the DOJ was in enforcement actions against foreign companies (JGC Corp., Magyar Telekom / Deutsche Telekom, Tenaris, and Bridgestone) or foreign nationals (Tesler).

[In 2010, the DOJ collected approximately $870 million in criminal fines in the 16 corporate FCPA enforcement actions ($1.27 billion by including the $400 million BAE enforcement action)].

Tack on the SEC’s collections in 2011 corporate FCPA enforcement actions of approximately $148 million and the overall corporate FCPA fine, penalty and disgorgement amount from 2011 is approximately $503 million  - approximately $652 million including Tesler.

[In 2010, corporate fines, penalties and disgorgement in DOJ/SEC enforcement actions was approximately $1.8 billion (including the BAE enforcement action)]

DOJ FCPA enforcement in 2011 was both large (JGC Corp. – $219 million) and small (Comverse Technologies – $1.2 million; Aon - $1.8 million).  Three FCPA enforcement actions in 2011 were DOJ only (JGC Corp., Bridgestone, and Cinergy Telecommunications).

In all six corporate FCPA enforcement actions where an analysis was possible, the DOJ agreed to a criminal fine below the minimum range suggested by the sentencing guidelines.  In these six actions, the average was approximately 28% below the minimum guidelines range and the distribution range was 55% below the minimum guidelines range (Bridgestone) and 18% below the minimum guidelines range (Magyar Telekom).  There were no corporate FCPA enforcement action in 2011 in which the company paid a criminal fine within the guidelines range.

[Note: Why are only six of the 11 enforcement actions included in the above analysis? Four corporate enforcement actions involved an NPA and the DOJ  does not set forth a guidelines range in the agreement or related documents and one enforcement action (Cinergy Telecommunications) remains pending].

[In 2010, the average was approximately 25% below the minimum guidelines range and the distribution range was 55% below the minimum guidelines range (Pride International) and 5% below the minimum guidelines range (Panalpina).  The only two corporate FCPA enforcement actions from 2010 where the company paid a criminal fine within the guidelines range were Alliance One (the company voluntarily disclosed and receive a non-prosecution agreement) and Alcatel-Lucent.]

doj fcpa enforcement action in 2011

How many corporate FCPA enforcement actions involved related individual prosecutions of company employees by the DOJ (recognizing that such prosecutions may be forthcoming in the future)?  Of the 11 corporate DOJ enforcement actions or indictments, 8 of the 11 enforcement actions (73%) have not involved thus far any DOJ prosecutions of company employees.  2011 corporate FCPA enforcement actions that have resulted in criminal charges against company employees are Armor Holdings (Richard Bistrong), Bridgestone (Misao Hioki) and Cinergy Telecommunications (Washington Cruz and Amadeus Richers).

[In 2010, 12 of the 17 corporate FCPA enforcement actions (70%) did not involve, and have not yet involved, DOJ prosecutions of company employees.]

Including Washington Cruz and Amadeus Richers (a German citizen) mentioned above, the DOJ brought 10  individual FCPA enforcement actions in 2011.   In December, in connection with the 2008 Siemens enforcement action, the DOJ brought criminal charges against:  Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Stephan Signer, Eberhard Reichert, Carlos Sergi and Miguel Czysch.  All of these individuals are foreign nationals.  Thus, 90% of the DOJ’s individual enforcement actions in 2011 were against foreign nationals.  As noted in yesterday’s SEC year in review post, all 12 of the individuals the SEC charged with FCPA violations in 2011 were foreign nationals (in a few cases, dual citizens of a foreign country and the U.S.).

What about non-prosecution and deferred prosecutions vs. old fashioned law enforcement (i.e., if a company committed a crime the DOJ charged it and if the company did not commit a crime the DOJ did not charge it)?  In 2011, 9 of the 11 corporate FCPA enforcement actions (82%) were resolved via non-prosecution agreements (Comverse Technologies, Tenaris, Armor Holdings, and Aon) or deferred prosecution agreements (Maxwell Technologies, Tyson Foods, JGC Corp., and Johnson & Johnson).  The Magyar Telekom / Deutsche Telekom enforcement action involved both a non-prosecution agreement (Deutsche Telekom) and a deferred prosecution agreement (Magyar Telekom).  The two corporate FCPA enforcement from 2011 that involved an indictment or plea to criminal charges were Bridgestone and Cinergy Telecommunications.

[In 2010, 15 of the 16 (94%) corporate FCPA enforcement actions involved NPAs (4) or DPAs (11)].

As Gibson Dunn highlighted in this recent report, FCPA enforcement actions comprised approximately 40% of the DOJ’s 26 NPAs or DPAs in 2011. [In 2010, FCPA enforcement actions comprised approximately 50% of all DOJ NPA or DPA agreements]. Among the criticisms noted in the Gibson Dunn report of NPAs / DPAs is that “from a company’s perspective, the threat of indictment can force a company to agree to a DPA or NPA based on the government’s perception of alleged misconduct even under novel, expansive, or unlitigated theories of liability.”

In yesterday’s SEC year in review post, I noted that 90% of the $148 million the SEC collected in 2011 corporate FCPA enforcement actions was the result of volunatary disclosures or other instances of public disclosure – not original investigations by the SEC.

What does this number look like for DOJ FCPA enforcement actions in 2011?  Of the $504 million in criminal fines collected by the DOJ in FCPA enforcement actions, $502 million (99%) appear to be result of voluntary disclosures or other instances of public disclosure such as previous foreign law enforcement investigations.  The only exception would appear to be Aon ($1.8 million).

[In 2010, 97% of DOJ criminal fines would appear to fit this description].

fcpa enforcement actions

This remainder of this post provides an overview of corporate DOJ FCPA enforcement in 2011.

Maxwell Technologies (Jan. 31)

Charges: FCPA anti-bribery violations and knowingly violating the FCPA’s books and records provisions.

Resolution Vehicle: Criminal information resolved through a DPA (three year term).

Guidelines Range: $10.5 million to $21 million.

Penalty: $8 million (25% below the minimum amount suggested by the guidelines).

Disclosure: Yes, voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Tyson Foods (Feb. 10)

Charges: Conspiracy to violate the FCPA’s anti-bribery and books and records provisions; FCPA anti-bribery and books and records violations.

Resolution Vehicle: Criminal information resolved through a DPA (two year term).

Guidelines Range: $5.04 to $10.08 million.

Penalty: $4 million (approximately 20% below the minimum amount suggested by the guidelines)

Disclosure: Yes, voluntary disclosure.

Monitor: No.

Individuals Charged: No.

JGC of Japan (April 6)

Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and aiding and abetting FCPA anti-bribery violations.

Resolution Vehicle: Criminal charges resolved through a deferred-prosecution agreement – term two years.

Guidelines Range: $312.6 million to $625.2 million

Penalty: $218.8 million (30% below the minimum amount suggested by the guidelines).

Disclosure: Yes, based on a previous foreign law enforcement investigation.

Monitor: Yes.

Individuals Charged: No.

fcpa enforcementComverse Technology (April 7)

Charges: None – although the non-prosecution agreement refers to a “knowing violation of the books and records provisions of the FCPA.”

Resolution Vehicle: non-prosecution agreement – term two years.

Guidelines Range: Not set forth in the NPA.

Penalty: $1.2 million.

Disclosure: Yes, voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Johnson & Johnson (April 8)

Charges: FCPA anti-bribery violations and conspiracy to violate the FCPA’s anti-bribery and books and record provisions.

Resolution Vehicle: Criminal information resolved through a deferred prosecution agreement (three year term).

Guidelines Range: $28.5 million to $57 million.

Penalty: $21.4 million (25% below the minimum amount suggested by the guidelines).

Disclosure: Yes, voluntary disclosure (however Iraq Oil for Food conduct was not voluntarily disclosed).

Monitor: No.

Individuals Charged: None by U.S. authorities (Robert Dougall (a former DePuy executive) previously plead guilty to a U.K. SFO enforcement action – see here).

Tenaris (May 17)

Charges: None, although the non-prosecution agreement refers to “knowing violations of the FCPA’s anti-bribery and books and records provisions.”

Resolution Vehicle: NPA – term two years.

Guidelines Range: Not set forth in the NPA.

Penalty: $3.5 million.

Disclosure: Yes, voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Cinergy Telecommunications (July 12)

Charges:  conspiracy to violate the FCPA and to commit wire fraud; FCPA anti-bribery violations; conspiracy to commit money laundering; and money laundering.

Resolution Vehicle:  N/A

Guidelines Range:  N/A

Disclosure:  No.

Monitor:  N/A

Individuals Charged:  Yes.

Armor Holdings (July 13)

Charges:  None

Resolution Vehicle:  Non-Prosecution Agreement – term two years.

Guidelines Range: Not set forth in the NPA.

Penalty: $10.3 million

Disclosure: Yes, voluntary disclosure.

Monitor: No (although Armor Holdings is now part of BAE and falls under the monitorship in the BAE FCPA-related enforcement action).

Individuals Charged: Yes.

Bridgestone (Sept. 15)

Charges: Conspiracy to violate the FCPA’s anti-bribery provisions (and conspiracy to violate the Sherman Act).

Resolution Vehicle:  Criminal information resolved via a plea agreement.

Guidelines Range:  For the FCPA conduct, the guidelines range (see here) was approximately $40 million – $80 million.

Penalty: $28 million (it would appear that approximately 80% of this figure – approximately $22 million was based on the FCPA conduct)

Disclosure: Yes, voluntary disclosure.

Monitor: No.

Individuals Charged:  Yes.

Aon Corp. (Dec. 20)

See here for the prior post.

Charges: N/A although the NPA refers to Aon’s knowing violation of the anti-bribery, books and records, and internal controls provisions.

Resolution Vehicle:  NPA – term two years.

Guidelines Range:  Not set forth in the NPA.

Penalty: $1.8 million.

Disclosure: Aon’s SEC filings stated that  ”following inquiries from regulators, the Company commenced an internal review of its corporate compliance with certain U.S. and non-U.S. anti-corruption laws, including the U.S. Foreign Corrupt Practices Act.”

Monitor: No.

Individuals Charged:  No.

Magyar Telekom / Deutsche Telekom (Dec. 29)

Charges:  Magyar Telekom – FCPA anti-bribery and books and records charges; Deutsche Telekom – N/A

Resolution Vehicle:  Magyar Telekom – DPA – term two years; Deutsche Telekom – NPA - term two years.

Guidelines Range:  Magyar Telekom – $72.5 million – $145 million; Deutsche Telekom – not set forth in the NPA.

Penalty:  Magyar Telekom – $59.6 million (18% below the minimum Guidelines range); Deutsche Telekom – $4.4 million

Disclosure:  Yes, voluntary disclosure.

Monitor:  No.

Individuals Charged:  No.

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mike-koehlerAbout the Author

Mike Koehler is an assistant professor of business law at Butler University and is an expert FCPA columnist for Corporate Compliance Insights. He is a leading expert on FCPA and other anti-corruption laws and initiatives. Professor Koehler has testified before Congress on FCPA, and he is also frequently speaks about such topics before business and academic audiences.

One Comment

  1. June 16, 2012

    What is the disposition of the 150 open FCPA investigations reported at mid-year 2011? Thanks!