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July 16 — The Department of Justice and the Securities Exchange Commission are taking different approaches to anti-corruption enforcement, and the result so far this year is an uptick in corporate resolutions by the SEC and a drop-off by the DOJ compared to last year, according to Davis Polk & Wardwell LLP attorneys.
Speakers at a July 15 webcast said that at the midway point of 2015, the SEC has reached four corporate resolutions, compared to only one by the DOJ. And while the number of SEC resolutions is on track to outnumber the total in 2014 (seven) the number of DOJ resolutions is on pace to drop from last year (also seven), said Avi Gesser, a partner with Davis Polk.
“We are seeing indications that the DOJ has become more circumspect in its approach on certain anti-corruption issues, while the SEC appears to be aggressively pursing anti-corruption enforcement in ways that are worth paying attention to moving forward,” said Angela T. Burgess, a partner with Davis Polk.
The drop-off in resolutions is part of the DOJ coming through on its promises, said Neil H. MacBride, a partner with Davis Polk.
He said this trend is a follow-up to what the DOJ leadership has been saying in recent months, including recent remarks by Leslie Caldwell, the assistant attorney general who heads the DOJ's Criminal Division, suggesting that the agency is moving away from non-prosecution agreements and deferred prosecution agreements, and adopting a more “binary approach” of either prosecutions or declinations.
“We are seeing that [Caldwell's] statements are actually being reflected in the year to date declination data,” MacBride said.
While the DOJ seems to be fulfilling its promise to decline to bring actions where there has been extraordinary cooperation and other circumstances, the SEC is seemingly becoming more active in enforcing anti-corruption laws, Gesser said.
In agreement, Linda Chatman Thomsen, a partner at Davis Polk and former director of the SEC's Enforcement Division, said that in the first half of this year, the SEC has continued to expand its penalty approaches in anti-corruption enforcement, citing a February agreement between the agency and Goodyear Tire & Rubber Co., in which the company agreed to pay more than $16 million to settle Foreign Corrupt Practices Act allegations.
She added that the Goodyear settlement is part of a continuing trend where the agency is taking creative approaches to enforcing anti-corruption provisions of the FCPA, observing that last year the agency charged two parent corporations under the Act's ant-bribery provision for activities carried out by subsidiaries without the parents' knowledge.
Despite their different approaches to anti-corruption enforcement, both agencies continue to emphasize the importance of cooperation.
“In the coming months we can continue to expect the SEC and DOJ to beat the drum about the need for companies to cooperate,” MacBride said.
For the DOJ, cooperation is one of the factors the agency will examine before deciding to bring an action, he said, adding that this is one of two factors within the company's control.
MacBride added that the DOJ is stressing that it is not enough to comply with production and compulsory process, but views cooperation sort of in the way drug and organized crime prosecutors did in the past: they expect companies to bring forward culpable individuals.
Burgess observed that the SEC similarly continues to cite cooperation and self-disclosure as key factors in their resolution decisions, and such efforts have led to companies receiving reduced penalties.
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