Penalties for Noncompliance Remain Severe
Attorney General Jeff Sessions has identified enforcing the Foreign Corrupt Practices Act as a high priority for the Trump administration in its ongoing efforts to combat corporate misconduct. News of this, along with other statements by officials within the Department of Justice, came as a relief to FCPA advocates given President Trump’s previous comments disparaging the Act. Whistleblowers can also breathe a sigh of relief, as they may qualify for substantial awards under the Act for providing information to the SEC.
Attorney General Jeff Sessions recently affirmed the administration’s commitment to enforce the Foreign Corrupt Practices Act (FCPA), the anti-bribery law that President Donald Trump had once ridiculed as a “horrible law” before he ran for office. On April 24, Sessions addressed attendees at the Ethics and Compliance Initiative Annual Conference, who internally monitor corporate misconduct. He assured them that the Department of Justice (DOJ) will continue to hold individuals accountable for corporate misconduct and reward companies that self-report misconduct and take meaningful steps to remedy issues internally.
About the FCPA
Enacted in 1977, the FCPA, 15 U.S.C. §§ 78dd-1 makes it unlawful for all United States companies or individuals to pay bribes to foreign officials to assist in obtaining or retaining business. The law also requires covered companies that have securities listed in the U.S. to maintain records that accurately and fairly reflect the transactions of the company and maintain an adequate system of internal accounting controls. These requirements provide the government with a reasonable assurance that management has authorized any executed transactions. The FCPA, therefore, impacts every U.S. corporation doing business outside the United States. The DOJ and the U.S. Securities and Exchange Commission (SEC) are jointly responsible for enforcing the FCPA. While the agencies have not always vigorously enforced the law, since 2005, its enforcement has become an increasingly important factor for companies making business decisions abroad, given the substantial penalties under the statute.
Trump’s Views on the FCPA
FCPA advocates became concerned about the Trump administration’s commitment to prosecutions under the law due to Trump’s comments in 2012 that the FCPA is a “horrible law” and “the world is laughing at us” because of the U.S.’s enforcement. Trump made this comment as a business leader, arguing that the law put his and other companies at a competitive disadvantage abroad. Given these statements, many were heartened when Trevor McFadden, the Criminal Division’s Acting Principal Deputy Assistant Attorney General, spoke out on April 18, 2017 in favor of FCPA enforcement, stating that DOJ “prosecutions are intended to level the playing field for honest businesses.” Attorney General Sessions’ announcement that the government will continue to enforce the law came as a further relief to advocates and to whistleblowers. In explaining the administration’s position, Sessions stated, “Our department wants to create an even playing field for law-abiding companies. We will continue to strongly enforce the FCPA and other anti-corruption laws. Companies should succeed because they provide superior products and services, not because they have paid off the right people.”
SOX and Dodd-Frank
In addition to rewarding whistleblowers who report securities violations within the United States, the Sarbanes-Oxley Act and the Dodd-Frank Act also require the SEC to reward whistleblowers who voluntarily provide information regarding bribes paid to foreign officials. The Dodd-Frank Act awards whistleblowers 10 to 30 percent of any monetary recovery of over $1 million that the SEC obtains from an offending party through enforcement actions. The SEC brought nine FCPA enforcement actions in 2015 and obtained the second-largest civil penalty in an SEC settlement for FCPA offenses. The SEC’s robust enforcement efforts incentivize whistleblowers to come forward and cooperate with the SEC and DOJ. As stated by the SEC itself in its Resource Guide to the FCPA, “Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal.”
Penalties Under the FCPA
Penalties under the FCPA can be significant. The government may bring civil enforcement actions against companies that issue securities and their officers, directors, employees, stockholders and agents for violations of the anti-bribery or accounting provisions of the FCPA. Individuals that have committed violations of the FCPA may face up to 20 years in prison for some violations, and companies and individuals may have to disgorge their ill-gotten gains plus pay prejudgment interest and substantial civil penalties.