hand flipping cube from 2018 to 2019

The More Things Change, The More They Stay the Same

With 2018 officially behind us, Michael Volkov looks at FCPA enforcement in 2018, discussing some of the DOJ’s most notable actions.

Happy New Year!

Another year is in the books for FCPA enforcement and compliance. The headline for this past year (like many other years) is/was – The more things change, the more they stay the same.

FCPA enforcement is bipartisan and immune from political winds. I may live to regret this assertion. Whether the DOJ is under Republican or Democrat control, FCPA enforcement will continue.

The DOJ’s Corporate Enforcement Policy has taken root and is beginning to show results. The number of declinations for this year has increased, although there has been no appreciable increase in declinations with disgorgements.

The numbers tell an interesting story: The Justice Department’s individual prosecutions increased over 2017. The 26 individuals include those charged with FCPA and money-laundering offenses.

The four declinations were issued pursuant to the FCPA Corporate Enforcement Policy, two of which involved disgorgement. Also, the total fines and penalties excluded amounts that were paid or offset by payments to foreign law enforcement agencies. So, for example, for the Petrobras settlement with the DOJ and SEC, a total of $170 million, was included (roughly $85 million each, excluding the discount of the DOJ criminal penalty and the alternative disgorgement to the SEC paid to settle the shareholder class action).

Corporations Individuals Declination Fine/Penalties
DOJ 5 26 4 $950 million
SEC 14 4 NA $380 million
Total 19 30 4 $1.3 billion

Criminal prosecutions of individuals have increased (and will continue to). The recent changes announced concerning Yates Memo compliance will have no impact on the DOJ’s continuing focus on individual prosecutions.

We are continuing to witness the global expansion of coordinated enforcement actions as individual countries join the enforcement fold. This year, France joined the club in a big way, and we can expect more countries to enlist.

Three big cases were brought this year: Petrobras, Panasonic Avionics and Société Générale/Legg Mason.

The Petrobras case was massive in scope and impact, with Brazil taking the bulk of the settlement. Petrobras paid the DOJ and SEC a total of approximately $170 million.

The Panasonic Avionics case was bold in that its president (now, ex-president) orchestrated a massive bribery scheme using C-Suite funds and evading basic financial controls. Panasonic Avionics also tried to shuffle its third parties by enlisting prohibited third-party agents to serve as subagents to approved agents in order to evade due diligence scrutiny.

Société Généralé paid $585 million for FCPA violations (and $275 million in a separate LIBOR matter) involving bribes to Libya’s Gaddafi-era officials. Société Généralé paid half of the penalty to the French banking regulator, Parquet National Financier. Legg Mason, a private equity fund that assisted in the bribery scheme, agreed to pay $64 million in criminal penalties.

Along with the corporate settlements and enforcement actions, the DOJ continued to focus on individual prosecutions. For 2018, the DOJ prosecuted 26 individuals for FCPA and related money-laundering charges. Approximately one-half of the individuals were charged as part of the ongoing PDVSA investigation.

The DOJ continued to fine-tune its corporate enforcement policies. The FCPA Corporate Enforcement Policy has been expanded as non-binding guidance on all criminal prosecutions of corporations. Further, the DOJ has expanded the FCPA Corporate Enforcement Policy to apply to mergers and acquisitions that involve potential FCPA violations.

The DOJ’s Anti-“Piling On” policy and its modifications to the Yates Memorandum will have little discernible impact, since they have been applied in principle prior to the formal announcement of the respective policies.

In the compliance arena, the DOJ and SEC continue to focus on corporate internal controls and adherence to aggressive remediation principles. The DOJ and SEC have identified weaknesses in internal controls in their enforcement actions and held companies to high standards when it comes to following internal controls.

Similarly, the DOJ and SEC have required companies to terminate or discipline senior executives and responsible persons for violations under a broad “knew or should have known” standard as part of remediation requirements. Companies that seek the benefits of the FCPA Corporate Enforcement Policy have to impose rigorous remediation requirements to qualify for a declination with disgorgement resolution.

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.


Michael Volkov

Michael Volkov

Michael-Volkov-leclairryanMichael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services.  He can be reached at [email protected].  His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice.

Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry.Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues.

Michael has assisted clients with design and implementation of compliance programs to reduce risk and respond to global and US enforcement programs.

Michael has built a strong reputation for his practical and comprehensive compliance strategies.Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for 5 years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice.

Michael also has extensive trial experience and has been lead attorney in more than 75 jury trials, including some lasting more than six months. His clients have included corporations, officers, directors and professionals in, internal investigations and criminal and civil trials. He has handled a number of high-profile criminal cases involving a wide‐range of issues, including the FCPA and compliance matters, environmental crimes, and antitrust cartel investigations in countries all around the world.

Representative Engagements

  • Successfully represented three officers of a multinational company in two separate criminal antitrust investigations involving a criminal antitrust investigation in the District of Columbia and the Southern District of New York.
  • Defended pharmaceutical company before the Food and Drug Administration and Senate Finance Committee relating to application for approval of generic drug.
  • Conducted internal investigation which exonerated company against allegations of false statements in submissions to the FDA and against improper conduct alleged by Senate Finance Committee.
  • Represented company before the US State Department on alleged violations of ITAR which lead to voluntary disclosure and imposition of no civil or criminal penalties.
  • Advised several multinational companies on compliance with anti‐corruption laws, and design and implementation of anti‐corruption and anti‐money laundering compliance programs.
  • Advised hospitals, pharmaceutical companies and medical device companies on compliance issues relating to Stark law and Anti‐Kickback law and regulations.
  • Conducted due diligence investigations for large multinational companies for anti‐corruption compliance of: potential third party agents, joint venture partners and acquisition targets in Europe, Africa, Asia and Latin America.
  • Represented individual in white collar fraud case in Alexandria, Virginia and secured dismissal of criminal charges and expungement of criminal record.
  • Represented company before Congress and Executive Branch in effort to modify Justice Department regulations concerning use of federal funds.
  • Advised and assisted World Bank in review of global corruption policies, enforcement programs and corruption investigations and prosecutions.

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