The Foreign Corrupt Practices Act (FCPA) . . . Is the U.S. Government Relaxing Its Hold?
On November 14, 2012 the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) released “A Resource Guide to the U.S. Foreign Corrupt Practices Act” (FCPA). This 120-page guide provides an analysis of the FCPA and details the SEC and DOJ’s approach to FCPA enforcement.
It is fair to say, up until the release of this guide FCPA enforcement has been heavy-handed. Some might add: Its enforcement has been uneven – with some companies becoming the focus of intense scrutiny, while others were ignored.
The SEC and DOJ hope to alleviate these past fears:
This guide provides helpful information to enterprises of all sizes, from small businesses doing their first transactions abroad to multi-national corporations with subsidiaries around the world. The guide addresses a wide variety of topics. [It]takes a multi-faceted approach toward setting forth the statute’s requirements and providing insights into SEC and DOJ enforcement practices. It uses hypotheticals, examples of enforcement actions and matters that the SEC and DOJ have declined to pursue, and summaries of applicable case law and DOJ opinion releases.
It is important to note the underlined portion of the statement – “. . . have declined to pursue” in particular.
It is well known the FCPA is a heavyweight sword and it has been administered as such in the past. But are the SEC and DOJ now easing up, being more open about the cases they are declining?
Robert Khuzami, Director of the SEC’s Division of Enforcement, explains:
Investors must have faith that the economic performance of public companies reflect lawful considerations of markets, price and product rather than a mirage resulting from bribery and corruption. This guide will protect investors by assisting businesses in preventing such unlawful behavior, thus avoiding FCPA violations in the first place, which is in the interest of law enforcement and business alike.
It would appear, to the average reader, Mr. Khuzami is suggesting more self-compliance (like commonsense self-restraint) should be exercised within the private sector – without the looming oversight of the SEC and DOJ. It also suggests the business playing field will be more level (as perceived by the SEC and DOJ.)
Ultimately, is this an SEC/DOJ face lift? Is it just good PR, that these agencies want to lose the appearance of being private business adversaries – and now want to be known as private business facilitators?
Is this because of the cumulative (perhaps overwhelming) rise in FCPA reporting and enforcement? (Insiders remark that government agencies are being flooded with reports, that the system is becoming glutted.)
Maybe it is a signal the federal government is seeking a wider, more global, economic base. Or that it is being finally forced to relax, to be less obsessively diligent, in order to maintain foreign economic markets and thresholds.
Whatever the cause-and-effect (maybe a combination of all the above) the DOJ/SEC’s posture has tilted. It simply might boil down to a government’s stark, commonsense realization: “Honey” is a better economic environment than “vinegar.”
(And with the current financial mess in Washington still in the balance, who knows if that also had a possible influence.)
However, if one thinks the government is giving free rein to overseas business ventures, Assistant Attorney General Lanny A. Breuer of the DOJ’s Criminal Division tersely reminds:
The fight against corruption is a . . . priority of the U.S. FCPA enforcement is critical to protecting the integrity of markets for American companies doing business abroad, and we will continue to make clear that bribing foreign officials is not an acceptable shortcut. The guide is an important illustration of our transparency and a useful reference for companies and individuals who wish to act responsibly and in compliance with the law.
So is the DOJ and SEC relaxing, or just being overwhelmed? No one can argue that the expanding global economy is the present and future of the U.S.
Maybe it is practicality. No agency, no matter how powerful, can be everywhere all at once. Private companies, across broad fields of business, constantly fix compliance problems (e.g., in a target company already acquired or being acquired) virtually every day – without the assistance of the U.S. government. That’s a day-to-day business fact.
And this is good practice all around. It allows an acquiring company to proceed with its acquisition by raising the standard of compliance in a target company. It provides both with a better rating or profile. It permits the federal government to deploy its thinly-stretched enforcement resources to where they are needed most. In the end, why should private companies draw undue, unnecessary attention?
Again, this points to a possible shift in federal government thinking and DOJ/SEC FCPA enforcement. It also suggests a possible governmental rethink of a lower, level playing field internationally. (One frequent past complaint regarding FCPA enforcement specifically was the unequal – some would say unfair – standard American companies were being held to. Or, to simplify: Well-behaved children don‘t need an overbearing governmental parent.)
With the steady rise in FCPA field enforcement – and the number of matters brought to court – one wonders: On a practical level, is this perceived easement a result of overkill in the U.S. court system, or simply overkill in FCPA enforcement itself?
But despite all these appearances, a law firm understandably is still very cautious when advising a private company about self-reporting to the government. Given particular circumstances, it may advise a company to not. In general, an experienced firm believes most companies can handle compliance problems properly and thoroughly – without additional disclosure and government involvement.
This stance may be akin to the present experience and action regarding insider trading, and its information and disclosure: Companies are better suited, prepared and equipped to police themselves, rather than involve government agencies.
The Blanch Law Firm realizes the FCPA is still a slippery slope. White collar crime, or the mere suggestion of it, is always a potential “next door neighbor” when speaking of the FCPA. Our expert staff of FCPA-experienced attorneys can negotiate this most difficult economic terrain.
— Stephen Heath-Jones