2013 Year-End FCPA Update
from Gibson Dunn
The FCPA’s anti-bribery provisions make it illegal to corruptly offer or provide money or anything of value to officials of foreign governments or foreign political parties with the intent to obtain or retain business. The anti-bribery provisions apply to “issuers,” “domestic concerns,” and “agents” acting on behalf of issuers and domestic concerns, as well as to “any person” who violates the FCPA while in the territory of the United States. The term “issuer” covers any business entity that is registered under 15 U.S.C. § 78l or that is required to file reports under 15 U.S.C. § 78o(d). In this context, foreign companies whose American Depository Receipts (“ADRs”) are listed on U.S. exchanges are “issuers” for purposes of this statute. The term “domestic concern” is even broader and includes any U.S. citizen, national, or resident, as well as any business entity that is organized under the laws of a U.S. state or that has its principal place of business in the United States.
As a complement to the anti-bribery provisions, the FCPA’s books-and-records provision requires issuers to make and keep accurate books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the issuer’s transactions and disposition of assets. Further, the FCPA’s internal controls provision requires that issuers devise and maintain reasonable internal accounting controls aimed at preventing and detecting FCPA violations. Regulators frequently invoke these latter two sections&;collectively known as the accounting provisions—when they cannot establish the elements for an anti-bribery prosecution or as a mechanism for compromise in settlement negotiations. Because there is no requirement that a false record or deficient control be linked to an improper payment, even a payment that does not constitute a violation of the anti-bribery provisions can lead to prosecution under the accounting provisions if inaccurately recorded or attributable to an internal controls deficiency.
2013 FCPA ENFORCEMENT TRENDS
In each of our year-end FCPA updates, we seek not only to report on the year’s FCPA enforcement actions but also to identify and synthesize the trends that stem from these actions. In 2013, five key enforcement trends stand out from the rest.
1. The Growing Cost of Corporate FCPA Resolutions
An unmistakable characteristic of the year in FCPA enforcement is that the market rate for resolving a corporate FCPA enforcement action spiked precipitously in 2013. The average closing price for a corporate FCPA resolution, inclusive of DOJ and SEC fines, penalties, disgorgement, and prejudgment interest, was more than $80 million in 2013. That is a nearly fourfold increase over 2012. And looking at the horizon of cases to come while speaking at the 2013 American Conference Institute FCPA Conference (“ACI FCPA Conference”), DOJ’s FCPA Unit Chief said that he expects DOJ to bring more “top 10 quality type cases” in 2014.
Two of the nine corporate FCPA resolutions of 2013—Total, S.A. and Weatherford International Ltd.—joined the infamous “FCPA Top 10” list. The particulars of French oil and gas company Total’s $398.2 million settlement for alleged corruption in Iran are catalogued in our 2013 Mid-Year FCPA Update. With respect to Weatherford, DOJ and the SEC announced a joint FCPA resolution with the Swiss oil services firm on November 26, 2013. According to the charging documents, between 2002 and 2011 Weatherford, through its subsidiaries and third-party representatives, made corrupt payments to obtain or retain business in six foreign countries—Albania, Algeria, Angola, Congo, Iraq, and another, unnamed Middle Eastern country.
To resolve the charges, Weatherford entered into a deferred prosecution agreement (“DPA”) with DOJ for a single alleged violation of the internal controls provision. Simultaneously, a Bermudan subsidiary pleaded guilty to one count of violating the FCPA’s anti-bribery provision and the parent company consented to the filing of a civil complaint by the SEC alleging violations of the anti-bribery, books-and-records, and internal controls provisions. Weatherford agreed to pay $87,178,256 to resolve the criminal FCPA charges, $65,612,360 to resolve the civil FCPA charges, and agreed to retain an independent compliance monitor for at least an 18-month term.
The Weatherford FCPA settlement was coordinated with export sanctions enforcement actions by the U.S. Attorney’s Office for the Southern District of Texas, Department of Commerce, and Office of Foreign Assets Control. Together, the export sanctions settlements allege that Weatherford and its subsidiaries violated the Trading With the Enemy Act, International Emergency Economic Powers Act, and Export Administration Regulations in connection with sales to Cuba, Iran, Mexico, Syria, and Venezuela. The sanctions side of the coordinated resolution resulted in a separate parent company DPA, two more subsidiary guilty pleas, $50 million in criminal fines, and a $50 million administrative penalty. Gibson Dunn represented Weatherford in both the FCPA and sanctions settlements.
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