Sec Enforcement Actions And Doj Prosecutions

AuthorRobert W. Tarun
ProfessionFormer Executive Assistant U.S. Attorney in Chicago
Pages337-642
CHAPTER 10
SEC Enforcement Actions
and DOJ Prosecutions
Foreign Corrupt Practices Act investigations, prosecutions, and enforcement
actions have increased dramatically over the past decade. The increase is likely
attributable to the Sarbanes-Oxley Act of 2002,1 corporate governance reforms,
increased international cooperation among law enforcement agencies, new for-
eign anticorruption legislation, pressure from the Organisation for Economic
Co-operation and Development (OECD) to legislate and fight corruption, and
a highly committed Fraud Section at the Department of Justice (DOJ) and
FCPA Unit at the Securities and Exchange Commission (SEC) that together are
responsible for and oversee FCPA enforcement nationwide. The Dodd-Frank
whistleblower laws and rules of 20102 are no doubt contributing to more FCPA
enforcement investigations and actions (see chapter 1). This chapter discusses
several of the major trends that have emerged from FCPA U.S. DOJ prosecutions
and SEC enforcement actions, reviews the factors DOJ and SEC attorneys weigh
in prosecutorial and enforcement decisions, lists the stated or implied terms of
FCPA resolutions, summarizes over 155 significant FCPA cases, and then offers
practical guidance on how to interpret reported FCPA prosecution and SEC
enforcement actions.
I. FCPA PROSECUTION AND ENFORCEMENT ACTION
TRENDS AND RELATED DEVELOPMENTS
A. Continuing Large DOJ and SEC Corporate Penalties and Fines
The December 2008 Siemens $1.6 billion antibribery settlement best demon-
strates how massive and serious criminal and civil anticorruption penalties can
be. Shortly after that landmark resolution with the German and U.S. govern-
ments, the DOJ obtained in February 2009 a plea agreement from, and the SEC
a consent decree with, Kellogg, Brown & Root LLC (KBR) that included penalties
and disgorgement totaling $579 million. In calendar year 2010, the DOJ and SEC
obtained record fines, penalties, and disgorgement of profits of approximately
$1.8 billion, including six of the 15 largest FCPA monetary sanctions ever. In
March 2010, BAE Systems plc pled guilty to FCPA-related violations and agreed
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338 CHAPTER 10
to pay a DOJ fine of $400 million and a U.K. fine of $50 million.3 In April 2010,
Daimler AG and three subsidiaries agreed to pay combined fines of $185 mil-
lion; Technip S.A. and Snamprogetti B.V., joint venture partners of KBR, agreed
in June and July, respectively, to pay U.S. corruption-related fines of $365 mil-
lion and $338 million, respectively; and, in November 2010, Panalpina, a global
freight forwarder, agreed to pay corruption-related fines of $70.5 million to
the DOJ and $11.3 million in disgorgement of profits to the SEC, while its oil
and drilling customers—GlobalSantaFe Corporation, Noble Corporation, Pride
International Inc., Royal Dutch Shell plc, Tidewater Marine International Inc.,
and Transocean Inc.—agreed to pay related fines and disgorgement amounts of
over $155 million. In April 2011, JGC Corporation of Japan, the remaining joint
venture partner of KBR not to have settled with the DOJ for the Bonny Island
consortium bribes, and Johnson & Johnson agreed to pay FCPA fines of $218
million and $70 million, respectively. In 2012, Pfizer, a U.S.-based global phar-
maceutical company, and Marubeni, a Japanese trading company charged with
the Bonny Island bribes, entered into $60 million and $54.6 million FCPA settle-
ments, respectively. In 2013, Total S.A., a French oil and gas company, resolved
an FCPA investigation for $398.2 million.
In 2014, Alcoa, a U.S.-based global provider of aluminum and fabricated alu-
minum, resolved its FCPA investigation with combined penalties of $354 mil-
lion. In 2014, Marubeni Corporation, a major Japanese trading company, became
a second FCPA offender for bribes to high-ranking government officials in Indo-
nesia and paid an $88 million DOJ fine. In 2014, Hewlett-Packard resolved FCPA
allegations in Russia, Mexico, and Poland and agreed to pay DOJ and SEC fines
exceeding $108 million. In December 2014, the DOJ and SEC resolved FCPA alle-
gations with Avon Products, and the global beauty products company agreed to
pay fines totaling $135 million. Finally, in December 2014, the DOJ filed charges
against Alstom SA and three subsidiaries, and the global power industry con-
glomerate agreed to pay a $772 million fine. FCPA fines and penalties in 2014
exceeded $1.4 billion, surpassed only by the record year 2010, whose combined
fines exceeded $1.5 billon.
In early December 2014, Assistant Attorney General Leslie R. Caldwell, at the
launch of the OECD Foreign Bribery Report in Paris, reported that since 2009,
the DOJ has resolved FCPA-related criminal cases against more than 50 com-
panies with penalties and forfeitures of approximately $3 billion, and during
the same period, the SEC resolved civil actions against more than 65 compa-
nies, resulting in total combined FCPA penalties and forfeitures by the DOJ and
SEC of approximately $4.5 billion.4 With the announcement of the Alstom FCPA
charges in late December, 2014,5 which resulted in a $772 million criminal pen-
alty, the DOJ FCPA penalties now exceed $3.7 billion, and combined DOJ and
SEC FCPA penalties exceed $5 billion.
The table depicts the 15 largest FCPA penalties by amount and year, dem-
onstrating that FCPA enforcement remains strong and a clear DOJ and SEC
priority.
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SEC Enforcement Actions and DOJ Prosecutions 339
Largest FCPA Penalties
Company Year Amount (millions) Country
1. Siemens 2008 $800.0 Germany
2. Alstom 2014 $772.2 France
3. KBR 2009 $579.0 United States
4. BAE 2010 $400.0 United Kingdom
5. Total 2013 $398.2 France
6. Snamprogetti/ENI 2010 $365.0 Holland/Italy
7. Alcoa 2014 $384.0 United States
8. Technip 2010 $338.0 France
9. JGC 2011 $218.8 Japan
10. Daimler 2010 $185.0 Germany
11. Alcatel-Lucent 2010 $137.0 France
12. Avon 2014 $135.0 United States
13. Hewlett-Packard 2014 $108.0 United States
14. Magyar/Telekon 2011 $95.0 Hungary/Germany
15. Marubeni 2014 $85.0 Japan
Five of the 15 largest FCPA penalties ever were obtained in 2010, two in 2011,
one in 2013, and five in 2014. Eleven of the top 15 have involved non-U.S. compa-
nies. In light of the above well-publicized megafines and the related investigative
and defense costs, many boards of directors, general counsel, and FCPA counsel6
question whether the benefits of voluntary disclosure and cooperation outweigh
many of the negotiated criminal penalties that in many instances remain within
the United States Sentencing Guidelines (USSG) range or are at least close to the
USSG minimum fine. The DOJ has increasingly explained its USSG fine calculus
in its FCPA resolution court filings and in 2012 along with the SEC published the
helpful Resource Guide to the U.S. Foreign Corrupt Practices Act.7 The DOJ and SEC
have a wide variety of resolutions available, including plea agreements, deferred
prosecution agreements (DPAs), nonprosecution agreements (NPAs), declinations,
civil injunctive actions and remedies, and civil administrative actions and remedies.
The Resource Guide provides six anonymous examples of past declinations by the
DOJ and SEC. Most of the declinations involved small bribe amounts or attempted
bribes. Based on this recent guidance, it is unlikely that any public company dis-
covering multicountry bribery conduct or a substantial bribery payment in one
foreign country will obtain a declination.
B. The SEC’s Aggressive Pursuit of Disgorgement of Profits
For public companies, the SEC, especially through disgorgement of profits, can quickly
eviscerate the credit the DOJ has extended to companies for voluntary disclosure and
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