This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.
This year, FCPA enforcement authorities have brought only eight resolved enforcement actions, the lowest mid-year total in a decade. Why the slowdown? Does it represent a fundamental shift in FCPA enforcement? Miller & Chevalier’s FCPA Summer Review 2015 suggests that the answer is no, and explains why.
The report cites an increase in the number of known declinations. These are instances in which the DOJ or SEC chose to close an FCPA investigation without pursuing enforcement regardless of the agency’s reason for doing so.
“To date we have identified nine declinations in the first half of 2015, a tally that already approaches the total number of known declinations for 2014 and is on pace to match or exceed every other year on record except 2013. These numbers are likely to further increase, given the typical lag time of several months or more that we encounter in identifying declinations, since companies generally announce the closure of investigations in their quarterly securities filings or annual reports (assuming they choose to disclose them at all).
FCPA-related declinations we have identified since our Spring FCPA Review 2015 include:
- Gold Fields Ltd.: On June 22, 2015, South African mining company Gold Fields announced that the SEC had ended its investigation into whether the company bribed South African officials to obtain a mining license for the South Deep gold mine. The company did not disclose any rationale for the SEC’s declination, but did advise that the SEC’s notice was issued under federal guidelines stipulating that the notice “must in no way be construed as indicating the party has been exonerated or that no action may ultimately result….”
- Net 1 UEPS Technologies, Inc.: On June 8, 2015, South African payment processing company Net 1 UEPS Technologies (“Net 1″) announced that it received a letter from the SEC advising the company that the Commission had declined to prosecute the company following an investigation into whether Net 1 made improper payments to win a contract with South Africa’s Social Security Agency. According to Net 1, corresponding investigations by the DOJ and South African authorities remain open.
- Hyperdynamics Corp.: On May 22, 2015, Hyperdynamics Corp. released a letter it had received a day earlier from the DOJ, announcing the closing of its investigation of the Houston-based oil and gas company for possible FCPA violations. The letter to Hyperdynamics’ counsel states, in part: “On behalf of your client, you have provided certain information to the Department and have described the results of the Company’s internal investigation into this matter. As you know, the Department values cooperation with investigations, such as shown here.”
- BHP Billiton Ltd.: On May 20, 2015, BHP Billiton announced the DOJ had closed its investigation into the company for potential FCPA violations without bringing an enforcement action. The investigation “related primarily to previously terminated minerals exploration and development efforts as well as hospitality provided by the Company at the 2008 Beijing Olympic Games.” Although the company did not specify why the DOJ closed its investigation, the declination was announced in conjunction with the company’s $25 million civil settlement with the SEC.
Why the uptick in declinations? What should companies take from this development? Namely, that the DOJ and SEC are rewarding voluntary disclosure and cooperation
“While the DOJ and SEC generally do not publicly acknowledge these declination decisions, we have noticed an increase in the number of companies disclosing such decisions that quote the DOJ as crediting their voluntary disclosures of potential FCPA violations, cooperation, internal investigations and/or remediation efforts. Thus far in 2015, every company announcing a declination by the DOJ has cited the agency’s consideration of at least one if not several of these factors. Interestingly, however, we do not typically see companies incorporating such references in the context of SEC declinations.”
The DOJ’s frequent inclusion of a rationale in the private correspondence it sends to companies informing them of its declination decisions appears to be part of a coordinated effort by the agency to highlight the benefits of self-reporting and cooperation in the face of possible FCPA violations. For example, at a New York University Law Conference on April 17, 2015, AAG Caldwell noted that the DOJ does not want companies to take its word that declinations are increasing, “[w]e want you to be able to see that there actually are more declinations.” And at the Compliance Week Conference in Washington, D.C., on May 19, 2015, Caldwell again stated that “if a company chooses to cooperate with the government in its investigation — particularly at an early stage — the company likely will receive significant credit for such efforts when the government is contemplating what prosecutorial action to take.” Caldwell further noted that, “[i]n conducting an investigation, determining whether to bring charges and negotiating plea or other agreements, federal prosecutors take into account, among other factors, the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents.”
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Matteson Ellis serves as Special Counsel to the FCPA and International Anti-Corruption practice group of Miller & Chevalier in Washington, DC. He is also founder and principal of Matteson Ellis Law PLLC, a law firm focusing on FCPA compliance and enforcement. He has extensive experience in a broad range of international anti-corruption areas. Previously, he worked with the anti-corruption and anti-fraud investigations and sanctions proceedings unit at The World Bank.
Mr. Ellis has helped build compliance programs associated with some of the largest FCPA settlements to date; performed internal investigations in more than 20 countries throughout the Americas, Asia, Europe and Africa considered “high corruption risk” by international monitoring organizations; investigated fraud and corruption and supported administrative sanctions and debarment proceedings for The World Bank and The Inter-American Development Bank; and is fluent in Spanish and Portuguese.
Mr. Ellis focuses particularly on the Americas, having spent several years in the region working for a Fortune 50 multinational corporation and a government ethics watchdog group. He regularly speaks on corruption matters throughout the region and is editor of the FCPAméricas Blog.
He has worked with every facet of FCPA enforcement and compliance, including legal analysis, internal investigations, third party due diligence, transactional due diligence, anti-corruption policy drafting, compliance training, compliance audits, corruption risk assessments, voluntary disclosures to the U.S. government and resolutions with the U.S. government. He has conducted anti-corruption enforcement and compliance work in the following sectors: agriculture, construction, defense, energy/oil and gas, engineering, financial services, medical devices, mining, pharmaceuticals, gaming, roads/infrastructure and technology.
Mr. Ellis received his law degree, cum laude, from Georgetown University Law Center, his masters in foreign affairs from Georgetown’s School of Foreign Service, and his B.A. from Dartmouth College. He co-founded and serves as chairman of the board of 
