DOJ Touts Reenergized Enforcement Efforts

The worldwide recession in corporate prosecutions, ushered in during the Trump administration, appears to be coming to an end. Despite a slow start by the Biden administration’s prosecutors, Department of Justice officials appear poised for an increase in enforcement of the Foreign Corruption Practices Act in 2023. Any increase may mean a financial gain for DOJ’s foreign prosecution partners who increasingly have assisted the U.S. in enforcement of bribery laws.

Any coming increase in FCPA prosecutions would be following an initial—and surprising—slowdown. In 2021 and 2022, Biden’s DOJ resolved a meager total of only eleven corporate and individual FCPA enforcement actions. From 2017 through 2020 during the Trump administration, however, DOJ resolved a total of 83 corporate and individual FCPA enforcement actions, averaging 22 resolutions each of those years. This Trump-era average marked a 50% decrease in resolutions compared to the preceding eight years. The juxtaposition of the Trump and Biden numbers is intriguing given that the Trump-era DOJ reinforced speculation of a relatively hands-off approach to corporate prosecution. The Biden administration, conversely, promised “vigorously” to enforce the FCPA in the White House’s first-ever “United States Strategy on Countering Corruption,” which details government-wide initiatives to investigate and prosecute domestic and international corruption. What, then, explains the discrepancy between the Trump administration’s and Biden administration’s purported enforcement priorities and their respective numbers of FCPA resolutions?

“Don’t read too much into the numbers,” said David Last, the chief of DOJ’s FCPA Unit, at a recent conference on international white-collar crime hosted by the New York City Bar Association and the International Bar Association on November 29, 2022. He predicted “a lot more” enforcement activity in the upcoming year. Richard Donoghue, a former U.S. Attorney for the Eastern District of New York, who also formerly served as the acting United States deputy attorney general, said at the same conference that the recent decline in resolutions was “cyclical” and that “when resolutions decline, that probably means those teams are working on new cases.” Current DOJ officials appear to agree that the number of resolutions during the first two years of the Biden administration do not tell the whole story. Glenn Leon, the chief of DOJ’s Fraud Section, expressed a quality-over-quantity view at a recent FCPA conference in Washington, D.C. on November 30, 2022: “We look not only at the numbers but are we doing the right cases, are we bringing the right results, are we having the right impact? And by that measure, I would say yes.” Nicole M. Argentieri, the acting principal deputy assistant attorney general, attributed the government’s slow start to the challenges caused by the pandemic. “It bears stating the obvious—to make foreign corruption cases, you kind of have to be able to go where the work is, something we were unable to do for some time,” said Argentieri.

How will the Biden administration pick up the pace? Recent remarks from administration officials as well as recent administration actions point to three tools that could lead to a coming uptick in FCPA cases. First, the Biden administration increasingly could rely on international cooperation to accelerate FCPA prosecutions going forward. Such cooperation can be driven by the millions of dollars paid out to cooperating countries in connection with DOJ’s coordinated resolutions. Second, DOJ officials already signaled a reenergized focus on FCPA prosecutions by emphasizing the benefits of voluntary self-disclosure of FCPA violations and the risks of not disclosing. Third, DOJ officials recently have highlighted the need for companies’ compliance programs to cover employee usage of personal devices and third-party messaging applications with ephemeral messaging—a sign that DOJ could take more aggressive steps toward gathering evidence in FCPA cases. With the FCPA cops back on the beat, despite the initial low numbers, signs are that the Biden administration’s promise may be on the verge of being kept.

The More The Merrier—International Cooperation As The New Norm?

One key feature of any coming wave of FCPA cases likely will be international cooperation. This year, DOJ had four corporate resolutions and one declination with disgorgement—all featuring the cooperation of foreign law enforcement authorities. In their remarks, Leon and Argentieri highlighted how the corporate resolutions DOJ achieved in 2022—relating to mining giant Glencore, Brazilian airline GOL Linhas Aéreas Inteligentes, and waste management company Stericycle—utilized cooperation from their international law enforcement counterparts, spanned different industries, and involved over $1 billion in penalties. Leon mentioned that at least two additional corporate FCPA resolutions are expected to occur in the coming weeks, while Argentieri indicated that “there will be several more resolutions announced in the coming months.”

True to their word, later that same week, on December 2, 2022, DOJ announced a corporate FCPA resolution with Swiss technology company ABB, where the company agreed to pay over $315 million in penalties to resolve an investigation stemming from the bribery of a high-ranking official at South Africa’s state-owned energy company. DOJ noted that the ABB resolution was “coordinated with prosecutorial authorities in South Africa and Switzerland, as well as the [Securities and Exchange Commission].”

DOJ’s cooperation with international law enforcement authorities also facilitated its individual enforcement actions this year. During her public remarks at a FCPA conference in Washington, D.C. on December 1, 2022, Argentieri highlighted the charges brought against two former senior officials in Ecuador and Bolivia for alleged bribery-related money laundering; three businessmen relating to an alleged bribery and money laundering scheme involving a state insurance company in Ecuador; two former Venezuelan prosecutors for allegedly agreeing to receive $1 million in bribes not to prosecute a corrupt contractor; and two former coal company executives relating to an alleged bribery scheme in Egypt. This year also marked the April conviction of Roger Ng, a former Goldman Sachs managing director, on FCPA and money laundering charges for his participation in the 1MDB bribery scheme after a complex and lengthy trial. Ng’s conviction follows the resolution of a corporate case against Goldman Sachs in 2020—another instance of a DOJ resolution coordinated with foreign law enforcement authorities.

Given this track record of success, cooperation and collaboration with foreign enforcement authorities likely will remain a feature of future FCPA resolutions. To facilitate international cooperation in FCPA prosecutions, DOJ seeks to ensure that the foreign countries affected by public corruption and related crimes are well compensated for their efforts. Specifically, DOJ may apportion a certain amount of the company’s penalty to the countries involved in a coordinated investigation and resolution or credit the foreign governments’ financial recoveries against theirs. For instance, in the Stericycle resolution, DOJ agreed to credit up to one-third of the $52.5 million U.S. criminal penalty against fines the company will pay to Brazilian authorities in a related proceeding. Similarly, in the Glencore resolution, DOJ agreed to credit over $256 million in payments the company will make to the U.K. and Switzerland. The October 2020 Goldman Sachs resolution related to the 1MDB scandal resulted in repatriation of over $1 billion of misappropriated funds to Malaysia. Argentieri stated that such payments “help solidify our relationships with key law enforcement partners.”

Incentivizing Carrots, Not Sticks

Second, another sign of a coming increase in FCPA cases is a new policy that encourages self-disclosure. In September 2022, Deputy Attorney General Lisa Monaco announced a number of new DOJ policies on corporate criminal enforcement. The so-called “Monaco Memo” covers a range of subjects, such as instructing prosecutors to “ensure individual and corporate accountability” by evaluating factors that include a corporate entities’ prior misconduct, a corporation’s voluntary self-disclosure and cooperation, the effectiveness of compliance programs, and the appropriate use of monitors. Argentieri’s recent remarks at the FCPA conference in Washington, D.C. provided some additional color on the Monaco Memo’s policy pronouncements.

The “carrots” for companies to encourage voluntary self-disclosure of FCPA violations are enticing: the chance to avoid indictment or a guilty plea. One instance of a company choosing the carrot resulted in DOJ’s decision to not prosecute FCPA violations by Jardine Lloyd Thompson Group Holdings (JLT) after the insurer allegedly paid approximately $3.2 million in bribes to government officials in Ecuador from 2014-2016. “After fully cooperating with the investigation, making enhancements to its compliance program to reduce the risk that the misconduct would recur, and agreeing to return the ill-gotten gains from the scheme, the department issued a declination letter to JLT,” said Argentieri. She pointed out that although the company avoided prosecution, five JLT employees were prosecuted for crimes related to the alleged misconduct. “The message here is clear. Do not wait for us to call you. By then, it’s too late,” said Argentieri. “A company that voluntarily self-discloses will see a lot of upside, while a company that decides to white-knuckle it through is taking on a lot of downside risk.” All in all, DOJ wants to make the “carrots” and “sticks” surrounding voluntary self-disclosure clearer and more predicable for companies going forward. Consider yourself warned.

Preserve All Communications—Or Else

A third feature to watch for in upcoming cases is an ever more aggressive approach by DOJ and the SEC toward gathering digital evidence. Companies may face consequences if their compliance programs fail to cover employee usage of personal devices and third-party messaging applications that feature ephemeral messaging. In October 2022, the SEC opened a broad industry-wide inquiry into how banks track their employees’ use of personal devices and third-party messaging platforms. DOJ’s current FCPA corporate enforcement policy prohibits “the improper destruction or deletion of business records” and requires “implementing appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms” for companies to receive full credit for timely and appropriate remediation. Some businesses allow their employees to use personal cell phones and third-party applications to conduct company business, including third-party applications that feature ephemeral messaging, in which messages disappear and are not saved. Such communications pose “significant challenges for companies’ abilities to ensure they have a well-functioning compliance program and ability to access such communications when necessary,” said Argentieri.

Reading between the lines, DOJ appears to view employees’ communications via personal devices and third-party messaging applications as important sources of information in FCPA investigations. In turn, DOJ expects companies to take some kind of action to ensure the preservation and collection of such communications, but the precise type and degree of any such action remains unclear. Consequently, DOJ is examining the need for additional guidance to account for new technology, the lack of uniformity of retention requirements across industries, and privacy implications in various jurisdictions. Argentieri acknowledged that transparency is key in this area: “We understand that the department must be clear and predictable about our expectations and our policies so that you can provide the best advice to your clients and so that they can make tough choices about how to set priorities and where to direct resources.” Considering the increased focus on this policy point, companies should ensure that their compliance programs cover employee usage of personal devices and third-party messaging applications before it’s too late.

Going Forward—Picking Up The Pace?

Do not expect a lull in FCPA enforcement in 2023. The Biden administration and DOJ officials continue to reiterate their commitment to FCPA enforcement, unlike the preceding administration, despite the small number of resolutions this year. Although the pandemic and the prior administration’s priorities may have slowed down DOJ’s FCPA enforcement efforts of late, it certainly did not prevent the government from coordinating significant prosecutions and resolutions with foreign law enforcement authorities that have resulted in substantial benefits to the cooperating countries. DOJ’s collaboration with foreign law enforcement in future FCPA cases could become more commonplace, as other countries seek to reap the rewards of coordinated investigations and resolutions. Additionally, the DOJ officials’ recent public statements emphasizing voluntary self-disclosure of FCPA violations and the need for companies to maintain their employees’ digital communications suggest that DOJ’s future investigations will be looking at these areas with increased scrutiny going forward. Construing the few FCPA resolutions over the last two years as indicative of the Biden-era DOJ having a lackadaisical approach to FCPA would be premature. Rather, the issuance of the Monaco Memo and the DOJ officials’ recent public statements touting their enforcement efforts this year could well be harbingers that the new year will see an uptick in FCPA enforcement.

To read more from Robert Anello, please visit www.maglaw.com.

Michael D. Manzo, an associate at the firm, assisted in the preparation of this blog.