enforcement; the increased scrutiny of the FCPA andFCPA enforcement; and events related to the FCPA aswell as other anti-corruption laws and initiatives.
Very Proﬁtable Year.
How big was FCPA enforcementin 2010? Big$1.4 billion big, which was the amount of combined fines and penalties in FCPA enforcement ac-tions. Both the Justice Department and the Securitiesand Exchange Commission brought approximately 20corporate enforcement actions, with DOJ assessing ap-proximately $870 million in criminal fines and the SECassessing approximately $530 million in civil penaltiesand disgorgement.
FCPA enforcement has become soprominent for DOJ that 50 percent of the total amountof fines and penalties secured by DOJ’s Criminal Divi-sion in 2010 were in FCPA enforcement actions.
AsDOJ’s former assistant chief for FCPA enforcementcandidly stated, ‘‘The government sees a profitable pro-gram, and it’s going to ride that horse until it can’t rideit anymore.’’
So big was FCPA enforcement in 2010 that eight of the top 10 enforcement actions of all time occurred dur-ing the year.
In comparison, in 2000 there was oneFCPA enforcement actionby the SECand the totalpenalty amount was $300,000. The past decade has thuswitnessed a remarkable transformationnot as to theFCPA itself (which has not changed since 1998), but asto FCPA enforcement and theories of prosecution.Much of the magnitude of FCPA enforcement in 2010was a function of foreign companies (with shares listedon U.S. exchanges or otherwise allegedly subject to theFCPA based on various jurisdictional theories) engag-ing in conduct in apparent violation of the FCPA. Infact, approximately 90 percent of 2010 FCPA fines andpenalties were paid by foreign companies. For instance,the five largest FCPA enforcement actions in 2010 wereall against foreign companies:
Snamprogetti Netherlands BV ($365 million incombined fines and penalties) (5 WCR 498, 7/16/10);
Technip SA ($338 million) (5 WCR 467, 7/2/10);
Daimler AG ($185 million) (5 WCR 205, 3/26/10);
Alcatel-Lucent SA ($137 million) (5 WCR 925,12/31/10); and
Panalpina Inc. ($81.8 million) (5 WCR 802,11/19/10).These enforcement actions were largely based onconduct that occurred nearly a decade agoa timewhen compliance norms and expectations (particularlyin non-U.S. companies) were not nearly what they aretoday.
The trend of foreign companies com-prising a large percentage of FCPA enforcement actionsis likely to continue, albeit perhaps not at the 2010 level.Certain of the medical device and pharmaceutical com-panies that have disclosed FCPA issues are foreigncompanies, and there is an increasing trend of China-based companies issuing shares on U.S. exchanges,thus making those companies subject to the FCPA.Not only was FCPA enforcement big in 2010, but sotoo were the reported fees companies paid in connec-tion with FCPA inquiries and investigations. Avon Prod-ucts has not yet settled an FCPA enforcement action,yet the company has disclosed that its professionalcosts in connection with its internal inquiry and investi-gation of conduct in China and other countries is near$100 million.
On a much smalleryet stillmeaningfulscale, in August 2009 Team Inc. disclosedthat an internal investigation conducted by FCPA coun-sel found evidence suggesting payments totaling$50,000 over a five-year period in its Trinidad branch (abranch representing approximately one-half of 1 per-cent of the company’s overall revenue) may have vio-lated the FCPA.
In October, the company disclosedthat its total professional costs associated with the in-vestigation have risen to approximately $3.2 million.
These two examples of pre-enforcement action profes-sional fees raise the question of whether FCPA inquir-ies and investigations (even as to conduct limited inscope) legitimately result in extensive professional feesor whether, in the name of cooperation, FCPA inquiriesand internal investigations have turned into a boon-doggle for many involved.Big describes not only corporate FCPA enforcementin 2010 but individual FCPA enforcement as well. Whilethe enforcement agencies’ FCPA programs remainlargely corporate enforcement programs, 2010 did wit-ness the largest-ever coordinated individual enforce-ment action in the FCPA’s history as 22 ‘‘executives andemployees of companies in the military and law en-forcement products industry’’ were charged with en-gaging in a scheme to ‘‘pay bribes to the minister of de-fense for a country in Africa.’’
The FCPA sting enforce-ment action was not only big but bold and bizarre aswell. As to bold, the enforcement action was not thefirst time DOJ had used undercover tactics in an FCPA enforcement action, but the Africa sting case was cer-tainly the most dramatic, with nearly all of the defen-dants being arrested while attending a trade show inLas Vegas after months of surveillance and monitoringby the FBI. As to bizarre, Richard Bistrong, a personwho had already pleaded guilty to separate FCPA viola-tions, assisted the FBI in concocting a scheme in whichFBI agents posed as representatives of an imaginaryGabonese minister of defense whom the defendants al-legedly intended to influence with improper payments.The past year also witnessed a big individual sen-tence, the longest in the FCPA’s history. While a cleartrend emerged in 2010 of sentencing judges signifi-cantly rejecting DOJ sentencing recommendations in
DOJ’s figure does not include the $400 million fine paid byBAE Systems Plc (a non-FCPA enforcement action), and theSEC figure does not include the $50 million the commission as-sessed, but waived, against Innospec based on its claimed in-ability to pay.
DOJ press release,
Department of Justice Secures MoreThan $2 Billion in Judgments and Settlements as a Result of Enforcement Actions Led by the Criminal Division
Here Come the Payoff Police
,American Lawyer (May 17, 2010) (quoting William Jacobson).
Recent Cases, Foreign Companies Domi-nate New Top Ten
(Jan. 5, 2011). This ranking includes theBAE enforcement action.
Avon Products Inc., Form 10-Q filing (Oct. 28, 2010).
Team Inc. Form 8-K filing (Aug. 4, 2009).
Team Inc. Form 10-Q filing (Oct. 8, 2010).
5 WCR 62 (1/29/10); DOJ press release,
Twenty-TwoExecutives and Employees of Military and Law EnforcementProducts Companies Charged in Foreign Bribery Scheme
2011 BY THE BUREAU OF NATIONAL AFFAIRS, INC. WCR ISSN 1559-3185