Claudius O. Sokenu, Arnold & Porter LLP*
Federal prosecutors show no signs of relenting in their aggressive anti-corruption efforts after extracting a record-breaking $1.8 billion in 2010 from companies and individuals accused of violations of the Foreign Corrupt Practices Act (“FCPA”). The Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) have mobilized the resources needed to fight corruption on a massive scale. Continued industry-wide sweeps and targeting of individuals for criminal prosecution should come as no surprise. Directors, officers, employees, business or joint venture partners, compliance officers, heads of internal audit departments, and others conducting business globally must pay close attention to the important lessons coming out of last year’s record number of enforcement actions.
Coordinated enforcement activity last year against six companies in the oil and gas industry, as well as against Panalpina, a global freight forwarding and logistics company, demonstrated that the government has honed its blueprint for industry-wide investigations. The Panalpina industry sweep, which arose out of alleged illicit payments to customs officials and yielded $236,565,000 in fines and disgorgement, showed that FCPA investigations are now structured to leverage leads learned in one investigation to catch multiple companies throughout an industry. And such leads will be easier for the government to come by, now that the Dodd-Frank Act provides whistleblowers with enormous financial incentives to report suspected FCPA violations. Moreover, FCPA investigations increasingly employ aggressive law enforcement tactics, such as wiretaps and undercover agents, and corporations may barter for leniency by passing along information about their competitors and clients. All signs therefore point to a continued wave of industry-wide sweeps. Current industries under investigation include the medical devices, pharmaceutical, and telecommunications sectors.
In addition to casting industry-wide nets to snare multiple companies, the government is also determined to place more individuals behind bars for bribing foreign officials. Assistant U.S. Attorney General Lanny Breuer has called the “aggressive prosecution of individuals” a cornerstone of the DOJ’s FCPA enforcement policy. The Justice Department frequently seeks harsh prison terms for FCPA violators, and last year it secured the longest FCPA prison term ever imposed, when Charles Jumet was sentenced to 87 months in prison for his role in a conspiracy to violate the FCPA. But most judges have so far been reluctant to hand down such tough punishments, often sentencing FCPA violators to significantly less jail time than what was sought by prosecutors. Yet lawmakers are pressuring the Justice Department to send more violators to jail in conjunction with the large fines levied against companies. As part of the Senate’s 2010 investigation into FCPA enforcement practices, for example, Senator Arlen Specter criticized prosecutors for failing to charge individuals in the record-setting Siemens enforcement action. Given these trends, it seems likely that prosecutors will increasingly target individuals for criminal sanctions, even if the prosecutors must settle for shorter prison terms.
With no end in sight for aggressive FCPA enforcement activity, companies operating globally must therefore be vigilant in implementing and strengthening their anti-corruption programs and in responding effectively when they learn about potential violations.
*Claudius O. Sokenu is a partner in the securities enforcement, litigation, and white-collar practice groups. He is a former senior counsel with the Securities and Exchange Commission, Division of Enforcement, in Washington, D.C., where he was, among other things, a member of the FCPA Working Group. He is resident in the firm’s New York and Washington offices. Mr. Sokenu’s recently authored 2010 FCPA Enforcement Year-End Review.