Enforcement of the Foreign Corrupt Practices Act (FCPA) remained a high priority for the Department of Justice and the Securities and Exchange Commission in 2016, resulting in record-setting enforcement numbers. The U.S. government added four new entries on its all-time top-ten FCPA enforcement list and received approximately $1.8 billion in monetary settlements, besting the prior record of $1.6 billion set in 2014.
Two large settlements in 2016 reveal that foreign enforcement of anti-corruption laws is growing and is unlikely to slow down. The following 2016 FCPA settlements, which involve a Dutch company and two Brazilian companies, demonstrate that other countries are serious about enforcing FCPA-like anti-bribery laws.
In early 2016, VimpelCom, a Dutch telecommunications company, entered into a $397.6 million settlement with the U.S. government – a $230.1 million criminal penalty and a deferred prosecution agreement (DPA) with DOJ and $167.5 in disgorgement and interest to the SEC – for allegedly paying more than $114 million in bribes in an effort to obtain telecommunications business in Uzbekistan. Yet, that was only half of the penalty. The Holland-based company paid approximately the same amount to Dutch authorities for the same conduct. The Dutch Public Prosecution Service stated that it started an investigation in 2014 and searched VimpelCom’s headquarters. It emphasized that: “Corruption is combatted internationally. This international approach signifies that corruption is not tolerated and that high penalties will be imposed.” Moreover, Assistant Attorney General Leslie Caldwell noted that this case was “one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA.” Thus, this resolution points toward the kind of international investigation we can expect to see continuing in the future.
More recently, in December, enforcement authorities in three different countries announced a massive enforcement action for a bribery and bid-rigging scheme that began as early as 2001 against Odebrecht S.A., a Brazil-based global construction company, and Braskem S.A., a Brazil-based global petrochemical company “effectively controlled” by Odebrecht. The two companies agreed to pay a combined total penalty of at least $3.5 billion to Brazil, Switzerland and the U.S. Most of the penalty (70 to 80%) will be paid to Brazilian enforcers, with Switzerland and the U.S. splitting the remainder. The payment to U.S. authorities is estimated to be $420 million.
This settlement arose out of the Brazilian investigation, known as Operation Carwash, of the oil giant Petrobras. The Brazilian Federal Prosecution Service noted the “coordinated investigation work” of the three countries in bringing about the settlement. The Swiss Office of Attorney General noted in its press release that it “has been conducting around 60 criminal investigations into the international corruption affair involving the Brazilian semi-state-owned corporation Petrobras.” An FBI Assistant Director stated: “Our commitment to work alongside our foreign partners to root out corruption across the globe is unwavering and we thank our Brazilian and Swiss partners for their tireless work in this effort.”
We finally note another large settlement with Teva Pharmaceutical, an Israel-based drug-maker. Although Teva’s announced settlement is only with U.S. enforcers (a total of $519 million to the DOJ and the SEC, including a subsidiary pleading guilty), there are indications that Israel is moving forward with enforcing its own foreign bribery law. Israel recently announced its first plea agreement with a company for a violation of that law and its detention of an Israeli businessman in connection with a global investigation of bribery in the mining industry in Africa. Thus, Israel is added to the list of countries with active enforcement in this area.
The effect of the incoming President and his new Administration on 2016’s record-setting U.S. FCPA enforcement pace can be debated. President-elect Trump previously remarked in a 2012 CNBC interview that the FCPA is a “horrible law” that “should be changed” because it disadvantaged U.S. businesses — a statement that has led many to believe there will be a sharp reduction in enforcement cases after those in the pipeline currently reach resolution. Yet, a simple glance at the current top ten U.S. FCPA enforcement cases demonstrates that there are only three “U.S.” businesses on the list and seven “foreign” businesses (five European, one Asian and one Middle Eastern). Thus, it is not clear that U.S. businesses are disadvantaged as compared to their foreign competitors. In addition, the call for less enforcement of anti-corruption laws will likely be unpopular – both with the Congress and with popular opinion –even if it is seen as benefitting business. The U.S., having led the anti-corruption fight for close to 40 years, will likely find it hard to step down from that particular soapbox.
Irrespective of the new Administration’s enforcement objectives, the settlements discussed above show that international enforcement of foreign anti-bribery laws is likely to increase, keeping anti-corruption compliance on the front burner of any U.S. company doing business overseas.