FCPA Enforcement May Signal Split in SEC-DOJ Focus

By Che Odom

Jan. 7 — The Department of Justice and the Securities and Exchange Commission may be diverging on Foreign Corrupt Practices Act enforcement, with one agency focusing more on individual wrongdoers and the other on corporations, attorneys suggest.

As evidence of the differing focus, they point to the number of FCPA enforcement actions and resolutions reached by the two agencies last year.

The attorneys also say the divergence may be related to the memorandum released earlier this year by Deputy Attorney General Sally Quillian Yates spelling out the DOJ's emphasis on individual culpability (30 CCW 304, 10/7/15).

However, they warned that companies should view the agencies' enforcement practices in the long term and continue to expect DOJ attention.

According to a Jan. 4 report by Gibson, Dunn & Crutcher LLP, 80 percent of the DOJ's FCPA enforcement efforts in 2015 targeted individuals, and the department brought no cases against a corporation without also prosecuting an officer associated with that company.

In that year, the DOJ also reported a lower number of resolutions with FCPA defendants. Davis Polk & Wardwell LLP attorneys said during a Jan. 6 webinar that the FCPA statistics may be a result of the department's focus on prosecuting individuals, who are more likely to put up a vehement defense.

Number of Resolutions

Last year, the two agencies reached resolutions with defendants in 11 FCPA cases, involving approximately $140 million in penalties and disgorgement, said Angela Burgess—a litigator representing white-collar defendants and a partner in Davis Polk's New York office—at the webinar.

Of those resolutions, nine were reached by the SEC while two were reached by the DOJ, she said. In contrast, the SEC and the DOJ each reported seven resolutions in 2014.

The two agencies reported no overlap in resolutions with corporate defendants, Burgess continued. The only overlap was in an enforcement action against an individual officer of SAP International Inc., she said.

While it may be easy to overstate the importance of the numbers, “maybe we are already seeing the impact of the DOJ's focus on individuals,” Burgess said. “The truth is that the DOJ faces more significant hurdles in proving criminal violations” of the FCPA by individuals than the SEC faces in bringing civil charges against a company.

‘Broken Windows’ Policy

Davis Polk partner Linda Chatman Thomsen, a litigator in the firm's Washington office and former director of the SEC's Division of Enforcement, suggested that the SEC's higher numbers may be due to its “broken windows” policy, in which the commission pursues what some may consider minor violations.

The DOJ increasingly does not take that approach, she said during the Davis Polk webinar. “Rather, they are pursuing high-impact cases, including cases against individuals,” she said, adding that both agencies will be acutely focused on corruption matters in the coming year (30 CCW 353, 11/25/15).

Difference in Enforcement Actions

Meanwhile, Gibson Dunn reported that the DOJ and the SEC each brought 10 enforcement actions under the FCPA in 2015, down from a combined 26 enforcement actions in 2014 and 27 in 2013.

Gibson Dunn partner F. Joseph Warin, who worked on the report, warned that the “year-over-year statistics cannot be analyzed in a silo but rather must be examined over the long term.”

Though the DOJ may be focusing more on individuals, the 2015 statistics do not “demonstrate any lack of zeal” in prosecuting corporations, Warin told Bloomberg BNA in a Jan. 7 interview. He added that he expects the department to bring significant cases against corporations this year.

The Yates memo refined the approach that “career prosecutors have followed for decades—to pursue the evidence against both individuals and corporations,” Warin said.

To contact the reporter on this story: Che Odom in Washington at codom@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

For More Information

The Gibson Dunn report is available at http://www.gibsondunn.com/publications/Pages/2015-Year-End-FCPA-Update.aspx.