Changing Landscape of International AntiBribery and Corruption Compliance

Changing LandsCape oF internationaL anti-BriBery and Corruption CompLianCe

MODERATOR/PANELIST: MARGARET MOUSOUDAKIS PANELISTS: JOY DOWDLE, SERGIO LEAL, DAVID SEARLE

I. Introduction

There are many ways to bribe, and corruption is prevalent everywhere. The World Bank estimates that 5% of the world economy–over one trillion dollars—is paid in bribes.1 Corruption issues arise in all areas of business. The history of global corruption law actually originated as a result of Watergate.2 When the Watergate investigation was ongoing, Congress was looking into the sources of the money going to the Nixon administration. The hearings revealed that a lot of American corporations had cash flush funds;3 of course, a company needed cash to bribe people. In response, Congress passed the Foreign Corrupt Practices Act (FCPA), which has two sections: the antibribery provisions and the books and records provisions.4 For a long time, the United States was the only nation with this law.5 Scholars of corruption and corporate action find that the books and records provision often gets companies into the most trouble.6 The FCPA anti-bribery provisions prohibit directly or indirectly paying anything of value to a foreign government official7 and additionally require corrupt intent.8 What is difficult to navigate is the definition of “foreign official,” as it is broadly defined under U.S. law. “Foreign officials” may include individuals who work have seen a huge wave of other countries and jurisdictions implementing their own enforcement laws.

for foreign state-owned companies here in the U.S.,9 such as Braskem or SinoPac. The law even extends to family members, and there have been recent enforcement actions, specifically those against J.P. Morgan Chase, for employing the children of government officials.10

Further, FCPA’s “anything of value” language is not limited to cash and may include gifts or travel and expenses.11 Years ago, a rash of cases arose involving companies that paid the travel expenses of government officials, cloaked as “training trips.”12 Other examples include the provision of official consulting contracts, employment or business opportunities, household appliances, and cars.13 Bribes come in every form or fashion.

The books and records provisions require that books and records be accurate with reasonable detail.14 The provisions also require good internal controls.15 Compliance programs are consistently working with control audits and other internal controls in the compliance group. There are of course possible penalties. Companies can be fined up to two million dollars for each violation.16 Individuals may also be sentenced and sent to prison in relation to corporate enforcement actions.17

The U.S. was alone for a long time in this area, and about twenty years later, the rest of the world started to promulgate their own anti-corruption laws.18 The last ten years

II. The Rise of Global Enforcement

The FCPA was originally passed in 1977, but for twenty-plus years, there was very little enforcement.19 That is not to say that there were no enforcement actions brought but surely far fewer by today’s standards.

The rest of the world has acquiesced in terms of enforcing anti-bribery laws. Even in countries that do not have robust anti-corruption enforcement, now far less refusal takes place with regard to recognizing the extraterritorial applications of anticorruption laws from countries like the U.S. and United Kingdom. The international landscape has changed, and there is more international participation and cooperation with enforcement.

Enforcement efforts have increased. In 2007, a large Houston oil field services company, Baker Hughes, paid $44 million in fines and penalties to the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC), which at the time was the largest penalty ever paid for violations of the FCPA.20 Within one year, in 2008, Siemens AG paid twenty times that amount—$800 million just to DOJ.21 Now, in 2019,

there have been several billion dollar plus settlements. The fines paid by Siemens are no longer in the top three, although they remain the fourth largest sum ever paid. Despite international conventions and organizations, such as the Organisation for Economic Cooperation and Development (OECD), working against bribery, many Westernized countries have only just enacted anti-corruption laws within the last decade.

A. Trends in FCPA Enforcement

For the last several years, DOJ and the SEC have brought in combined penalties in the billions of dollars. The U.S. is still the largest enforcer by far. At last count, the U.S. has brought over 75% of all foreign bribery cases. Cynics have said that this statute has become essentially a budget line item for DOJ, thus motivating its enforcement. DOJ has dedicated more and more resources to these cases and grown the number of federal prosecutors solely dedicated to FCPA enforcement. With respect to investigations against individuals, DOJ has been known to use a wide variety of prosecutorial tools, namely subpoenas, search warrants, up to and including wire taps or sting operations.

In terms of the trend towards larger fines and penalties, a brief glimpse at the top ten cases reveals resolutions predominantly occurring with foreign companies, KBR being the only U.S. company remaining on that list.22 Five years ago, that top ten list was comprised of mostly U.S. companies. In fact, many Houston-based companies were on that list. When FCPA enforcement picked up during the 2007 to 2010 timeframe, starting with the case against Baker Hughes, a lot of energy companies in Houston were faced with enforcement actions. Many energy companies operate in corruption-prone countries where they are required to conduct business with state-owned oil companies. With all of the enforcement activity in the energy sector, anti-bribery compliance programs in this space have generally matured. There are less enforcement actions against such companies today.

A further look at the type of companies remaining on the top ten list is instructive. As mentioned, nine of the ten companies are foreign. The jurisdictional nexus or interest that the U.S. may have in bringing some of these actions is questionable. For example, in 2019 an enforcement action was brought against the Russian telecom company Mobile TeleSystems (MTS), which paid about $850 million dollars in bribes to Uzbek government officials in an attempt to make entry into the Uzbekistan telecommunications market.23 Likewise, VEON (formerly VimpelCom)–another company in the top ten list, number five–paid hundreds of millions of dollars for the exact same type of misconduct.24

Many of these foreign companies are publicly traded, which under the SEC books and records provision allows the agency to bring enforcement action against a parent company issuer, even if it was the foreign subsidiary predominantly engaged in the relevant unlawful activities.25

Another factor is the lack of case law in this area. Consequently, DOJ has a reputation for taking aggressive positions when it comes to asserting jurisdiction under the FCPA.26 On the books and records side, as long as the parent company is an issuer, it is easy for either the SEC or DOJ to bring the charges, regardless of any additional jurisdictional nexus with the U.S.27 In the past, DOJ has interpreted the FCPA’s antibribery provisions to grant it jurisdiction over an individual and the parent company, even if it involved a foreign executive in a foreign country bribing a foreign national.28 That proposition was recently challenged in court in line with DOJ’s enforcement trend toward bringing more and more cases against individuals.29 A case in the Second Circuit last year placed limits on DOJ’s assertion of jurisdiction against an individual, a foreign executive, who never entered the U.S. but, as part of the bribery scheme, sent some emails routed through U.S.-based servers.30 The Second Circuit found that DOJ lacked jurisdiction to bring FCPA charges against that individual.31

B. Targeted Industry Focus

Ten years ago the corruption case to discuss was Panalpina, the now infamous customs broker that made improper payments in order to assist clients with clearing oilfield equipment through West African nations.32 The case against Panalpina spawned a series of enforcement actions against its clients for their role in authorizing or failing to stop the improper payments.33

Most of the enforcement actions in the top ten list then were brought jointly by DOJ and SEC. However, of late, there have been more settlements with just the SEC.34 The SEC is limited to civil enforcement power. Generally, it only brings charges under the FCPA’s books and records provisions for accounting or internal controls failures by companies. These cases, if brought by DOJ criminally against an individual or even a company, are generally hard to prove. DOJ must prove knowledge and intent. Conversely, the SEC’s burden in bringing a civil action under books and records provisions is less onerous, as they need

not prove up subjective intent elements. Rather, the SEC may rely upon almost any accounting discrepancy in an issuer’s books and records and focuses on what it believes constitutes an internal controls violation.35 Even if actual bribery did not take place, the SEC can theoretically prove internal controls violations by alleging a failure to properly approve expense reports or a failure to follow a process for approving payments to agents.36

In 2016, another trend in enforcement began involving DOJ’s institution of a pilot program, now a permanent part of FCPA corporate charging policy.37 Essentially, the program allows a company to come forward to DOJ and self-disclose misconduct, along with a representation that it has or will fully remediate, cooperate, and disgorge any illgotten gains as a result of its misconduct.38 If there are no other aggravating factors, then a presumption of what is called a declination remains, such that the company itself will not be charged.39 The pilot program applies only to business entities.40 Individuals may still be prosecuted to the full extent of the law consistent with DOJ policy, which seeks to hold individual wrongdoers accountable.41 Under the pilot program, DOJ started to publicly announce declinations for the first time.

C. DOJ: The Decision to Bring a

Prosecution

The Filip factors—named after former U.S. Deputy Attorney General Mark Filip— in the Justice Manual, guide DOJ prosecutors in arriving at the prosecutorial determination to bring criminal charges against a business entity.42 The Filip factors recognize that when companies are criminally charged there may be collateral effects to innocent shareholders and employees, such as when a company is debarred. The company’s share price will undoubtedly be negatively impacted. On the other hand, individual wrongdoers may go unpunished. The Filip factors thus help guide prosecutors in deciding not only whether to bring criminal charges against a business entity but also where to begin settlement discussions with these same entities. Almost all of these cases are settled out-of-court and utilize different tools to punish, in lieu of non-prosecution, which may carry collateral consequences.43 Many companies strongly prefer to settle and avoid the consequences of a trial, including the public airing of misconduct, the sting of a felony conviction, and severe fines.

Filip factors numbers four, five, six, and seven, allow a company to significantly mitigate the possibility of a criminal charge, despite the severity of underlying misconduct.44 A company cannot really control the outcome once an offense has occurred. In other words, once the bribery offense is investigated, considerations of the seriousness of the violation, the pervasiveness of the wrongdoing, and the history of the company’s conduct are factors out of its control. However, as reflected in the other factors, what the company can do is cooperate with the government, disclose the offense, put in place an effective compliance program, and promptly remediate the effects of the alleged offense, such as terminating the offending employee and implementing more effective standards and controls. If there is one takeaway from the Filip factor analysis, it is that corporate wrongdoers have several options in order to avoid formal criminal charges.

D. Focus on the Individual

Another major trend over the last couple years began when Deputy Attorney General Sally Yates issued a memo in 2015,45 in the aftermath of the financial crisis that affirmed DOJ policy for seeking to hold individual bad actors accountable.46 Following the financial crisis, there was an abundance of public outcry focused on the fact that while several large financial institutions settled for millions, or even billions, of dollars for their role in the crisis, few individuals were prosecuted. .There existed a similar trend with respect to FCPA enforcement. Companies were paying hundreds of millions of dollars in bribes and generally no individuals were criminally charged.

Questions were raised as to whether DOJ should place a higher priority on the prosecution of individuals, recognizing that while companies can be prosecuted, they cannot serve time behind bars. On the other hand, a renewed focus on the prosecution of individuals presented challenges in that the required elements of scienter and intent can be hard to prove, especially against senior corporate executives who are often insulated from front-line decisions. As anyone who has worked on white collar cases knows, often within corporations that commit wrongdoing there is an unethical environment created, not necessarily overtly but perhaps by the leadership at the top, leading lower-level employees to engage in the offending behavior. When the dust settles, those in the C-suite do not find themselves charged because prosecutors realize they will have difficulty providing scienter and intent.

Deputy Attorney General Yates issued a memo that decidedly emphasized the need to pursue charges against individuals when supported by the evidence. Now, in order

to obtain credit for cooperation under the Filip factors, companies must identify all relevant facts regarding individuals who perpetrated the wrongdoing.47 Previously, there was a lack of clarity concerning the amount of disclosure required with respect to individuals. Under the Yates Memo, when resolving an enforcement action against the company, there cannot be any agreement between the government and business entity that involves the government declining to pursue charges against individuals.48

Recently, the Yates Memo approach was scaled back a bit under Deputy Attorney General Rosenstein. Late in 2018, DOJ announced that business entities seeking to cooperate with the government must now only disclose all relevant facts about those individuals who are significantly involved in misconduct.49 In other words, the Yates Memo’s “all or nothing” approach appears to have softened. As a practical matter, a company can still obtain credit for cooperation if it provides the relevant facts about the significant wrongdoers, but it does not necessarily need to provide every investigation report and relevant fact about lower level players.

The last point regarding the focus on individuals concerns the pilot program and how it became permanent. The verdict is still somewhat out on whether the availability of the pilot program incentivized companies to self-disclose in cases where they otherwise would not have. The government, by some accounts, is spending significantly more time processing self-disclosures, rather than pursuing original cases. Some argue that the increased number of self-disclosures are “easy pickings” for DOJ, and, by that logic, companies should think long and hard before self-disclosing.

DOJ may also, under a process called “deconfliction”, require companies that selfdisclose and seek cooperation credit to delay interviewing potential witnesses.50 In other words, DOJ can dictate to the company how to conduct its internal investigation, even to the extent of prohibiting in-house lawyers from conducting interviews of company employees so that government agents can have the first opportunity. Needless to say, the possibility of a deconfliction order from DOJ may deter many companies from considering self-disclosure. The recent guidance relaxing the Yates Memo’s requirements now specifies that deconfliction is no longer a condition of obtaining cooperation credit.

III. International Antibribery and Corruption Prosecution Trends

Ever since DOJ began prosecuting under the FCPA in the late 1990s and early 2000s, enforcement actions have effectively printed money for the U.S. Treasury. Additionally, there is a growing need of both FBI agents and prosecutors at the SEC and DOJ. Professionals on this path usually serve in one of these government units and then are recruited by big law firms; this revolving door presents a challenge for attorneys dealing with these units. One consequence for compliance attorneys is the need to reeducate prosecutors with each new matter as it comes up. Be that as it may, this area of the practice is continuing to grow.

It is interesting to think about the FCPA as one of the most politically neutral acts in the United States—neutral inasmuch as, politically, it has broad appeal, especially to conservatives. On the campaign trail, President Trump talked about how the FCPA was the worst thing Congress could ever do to American companies.51 Nevertheless, the Trump administration has turned up its efforts to prosecute foreign companies.52 From a conservative perspective, the U.S. can use this statute for various reasons: to protect its markets or bring violators, such as Nigeria, to heel, especially with respect to Houston companies; to leverage U.S. steel demand in Vietnam’s construction industry and curb its producers’ bad behavior; or to leverage U.S. pharmaceuticals demand in Latin America so that they will start regulating their doctors.

For pharmacies, or any other health field in jurisdictions where health care is highly regulated or involves a state-funded entity, doctors count as foreign government officials.53 Thus, an eighteen-year-old sales rep in China giving a doctor a ten-dollar Big Mac in violation of the pharma code and regulations in Shanghai can be found to violate FCPA.

Many conservatives love the FCPA, taking the view that it levels the playing field. The more liberal community tends to treat it as an opportunity to eliminate global corruption and hold U.S. capitalism to a higher ethical standard. The FCPA has not aligned with the political bend and continues to be an area that grows and generates tremendous revenue.

In the 1990s, there was no foreign component to compliance or prosecution practices. Practitioners were always dealing with the U.S. government. At the most, when working with foreign governments, DOJ would provide thanks to foreign governments for any contributions their

officials had provided when negotiating settlement papers.

This practice has changed, and a lot of it came about with the Siemens AG case. The Munich prosecutor did some of the initial raids, and the U.S. government adamantly insisted Siemens have an independent monitor for many years after the resolution of that case. Siemens is a traditional German company, so they would not engage a monitor. They were incensed already over the jurisdiction and unwilling to submit to ongoing U.S. involvement. After some back and forth, the resolution was ultimately structured with German native Theo Waigel, former Finance Minister of Germany and the self-proclaimed father of the Euro. Siemens agreed to engage a U.S. practitioner, F. Joseph Warin, who provided independent counsel to Waigel as monitor.54

Early on in the 2000s, U.S. prosecution resolutions saw a shift from language providing for thanks to foreign governments to language commemorating joint efforts in each resolution. Then, there were resolutions, or stand-alone actions, brought by governments against foreign companies. GlaxoSmithKline (GSK) is one of the most noted, and certainly one of the biggest fines, ever solicited independently by the U.S. against a foreign company.55 In China, there were several British citizens who were arrested. That case put the fear of the statute, not just our FCPA, but the fear of global enforcement in the heart of many multinationals. There was a huge concern after GSK about whether to send non-Chinese executives to China, whether to send employees with a separate laptop, how to protect employees sent to jail, and how to get them out.

The amount of independent actions has increased, with some jurisdictions providing snide comments along the lines of giving thanks to the U.S. for its helpful information. There has definitely been a shift as more and more global enforcement efforts transform from cooperation towards independent stand-alone action.

Korea took a stance on corruption in the pharmaceutical industry, arresting several physicians and barring Novartis from engaging in sales and marketing in Korea, which has led to an industry sweep in life sciences.56 Novartis had allegedly paid doctors, who would count as foreign officials in that country, to essentially talk to one another as physicians. The idea was that doctors promote to one another in violation of local health care code and receive something of value for nothing other than the hope that Novartis would get more doctors to prescribe its products.

Brazil has continued to be a tremendous hotspot. From construction to pharma to oil and gas, Brazil continues to be an economically enticing market for a variety of industries. Its consolidated population, ready availability of natural resources, and vast opportunities for economic investment present the perfect storm for potential corruption. Petrobras has consistently been at the heart of publicized corruption scandals, for example the Lava Jato scandal–or Operation Car Wash. Petrobras, a giant in the construction as well as the oil and gas industries, is a state-owned entity (SOE), that has been involved in a web of corruption schemes.57

Continued globalization of industries, companies, economic forums, financial platforms, and technology is making it such that regulators and enforcement authorities can work hand-in-glove as one unit. DOJ openly works with the Ministério Público Federal (MPF), its criminal counterpart in Brazil, on a daily basis. A dedicated DOJMPF task force works together to attack corruption.58

A breakdown of the corporate structures of the companies involved in courruption cases is instructive. The Brazilian government was the majority shareholder, by direct and indirect ownership, of Petrobas. Together, Odebregt and Petrobas effectively controlled Braskrem.59 These companies were involved in a rampant bribery scheme to obtain construction contracts around the world, resulting in one of the largest resolutions ever seen at $3.5 billion.60 Unsurprisingly, adequate ongoing monitoring continues to pose challenges. Kinks on the back end of the resolutions themselves present an additional problem. For instance, with Braskem, the global resolution entailed separate resolution papers from the U.S., Brazil, and Switzerland, each containing different legal requirements.61

For example, both the U.S. and Brazil resolutions each have their own monitors. However, their respective mandates define privilege quite differently; some of the work of the monitors are not privileged, but the companies do not have to waive privilege. The problem is that there is not a common definition of privilege between Brazil and the United States.62 There is interesting development to come as the SEC handles these global resolutions and determines how regulators will cooperate to reach agreement or harmonize some of those discrepancies of international standards across the core areas.

Many of these corruption issues can arise

through third parties. This occurs particularly in the oil and gas industry as that industry involves an enormous amount of risk. As compliance programs have developed, there has been a tremendous amount of change in the way that third-party relationships are structured with their management and the way third parties are paid. For instance, twenty years ago, an oil and gas company could easily enter and develop a field in Nigeria with a local agent. The agent would ensure that the six-hundred thousand dollara-day rate rig did not have any trouble in customs, and the agent would also ensure that the rig would get set up, along with the warehouse for the tubulars. The agent would help facilitate transport of the supplies for the warehouse to avoid downtime during development. For these services, the agent would be paid X thousands of dollars a month and have a success fee based on the ability to deliver on time without delays. Rates were inflated, as the law developed and investigations began to happen.

Since then, companies have improved and obtained services from these foreign agents with due diligence. Companies should ask the right questions about third parties: who are they, what are their qualifications, who are they connected to, and does that qualify them as a former government official? This approach provides more transparency to contractual obligations, more detail in the contracts concerning duties and prohibited conduct, and more requirements around invoicing. Instead of just getting a forservices-rendered invoice from a consultant, now there is a detailed breakdown of performance, time spent, meetings attended, and expenses incurred. It is no longer just bills and expenses but actually all receipts and statements.

For example, Rolls-Royce had a similar issue with commission payments going to individuals not authorized in the agent transaction. The company did not know who the individuals were or what their role was. It turned out that the company had bribed a bunch of Kazakhstan officials.63

The stakes in these corruption cases are high, especially in oil and gas where there is a rig sitting in a foreign jurisdiction, or a warehouse that refuses to release the mud and tubulars that a company owns, or there are crews sitting off the coast of Angola and the customs brokerage there will not issue any visas for those workers.64 It is high stakes. Companies have huge sums tied up, having employees on a day rate, or another service company may have contracts with service penalties for late delivery. Meanwhile, there is a foreign official on the other side that only makes $3,000 a year. The risk is tremendous and the transactional cost of the bribe is extraordinarily small in most cases. The challenge for pharmaceutical companies like Pfizer, Merck, or Johnson & Johnson, is that of facing five to fifteen thousand opportunities to bribe in a day.

For oil and gas, the company has so much at stake and it costs so little to get some job done. How do companies combat or stop employees from handing over a twenty dollar bill in order to get, for example, the necessary visas? The law does not have any de minimis exception. Looking at most of the security statutes, that is the case. A bribe is a bribe, whether it is 50 cents or five million dollars.

IV. Consequences of AntiBribery Prosecutions

The repercussions of corruption cases are not limited to fines and penalties. What happens next can be a monitorship, an extrajudicial program carrying reporting obligations, similar to a probation officer. The monitor is neither a friend nor a foe. The company negotiates a list of people to DOJ. DOJ may or may not select someone off the list, reserving the option to name an outsider, despite such list. Being under a monitorship is not a desirable position, particularly in consideration of the charges and associated costs, and in addition, the reputational damage. The company faces damage not just on developing business ventures but also in terms of recruiting and maintaining employees.

Bilfinger SE represents a special case presently involving an extended, deferred prosecution agreement.65 Monitorships are scary–usually, the compliance professional’s role is to alleviate fear and educate the business leaders on what is important. Significant concerns include determination of a jurisdictional nexus test, which may be tenuous depending on the context of the business venture. For example, the Bilfinger-Willbros Group joint venture in Nigeria attempted to build a natural gas facility.66 Willbros was involved in a bribery scheme with Nigerian government officials. At the time the bribes were taking place in Nigeria, Bilfinger was in Germany with no real connection to the U.S. A Bilfinger representative took a flight from Frankfurt to Houston and spent the day there for a meeting with executives from Willbros.

During the meeting, a conversation arose, not necessarily describing bribery but instead describing the situation in Nigeria. The fact that the Bilfinger official was in the U.S. for that reason, for one day, was sufficient for DOJ to claim a jurisdictional nexus.

At first, a fair amount of conflict accompanied DOJ’s Bilfinger monitorship as the Germans were incredulous. Much like David Hasselhoff, Bilfinger was a prominent German fixture and relatively unknown in the U.S. Perhaps a result of this stature, the company was the third ever certified in Germany under a monitorship.

Siemens took its monitorship obligations seriously. Siemens represents the gold standard, for lack of a better term, for corporate rehabilitation. The company was in a great deal of trouble.67 However, Siemens has since helped others through developing and selling their own third-party diligence tools.68 Bilfinger, on the other hand, did not take its monitorship obligations seriously. The monitorship process does impact the entire organization; any time the monitor needs access, the board of directors, and everyone in between, must get involved to further due diligence requirements. Bilfinger brushed these obligations off and failed to grant access requested by the monitors. Consequently, the company appointed a new board to take action against the previous board for one hundred and fifty million euros, alleging failure to meet fiduciary obligations.69 Based on Bilfinger’s inability to certify compliance with the obligations in its 2013 agreement, DOJ decided the company warranted a two-year extension of the monitorship.70 This sort of upheaval creates turbulence in organizations and results in an abundance of management turnover, up to and including the highest levels in the C-suite and board of directors in order to effectuate needed cultural change.

Compliance professionals work with and educate company employees, teaching them right from wrong in terms of compliance norms. Often, they have challenging roles, playing the diplomat tasked with convincing others to get on board with the organization’s renewed objectives. These are the stakes with respect to Bilfinger specifically and more generally for companies dealing with these consequences. Thus, the role of compliance in organizations is, at its root, a leadership role for attorneys. To succeed, compliance counsel must possess an understanding of both the business and, more importantly, the people.

Once a monitor has access, the process involves pulling executives out from different business units or divisions and conducting two hour, in some cases, seven hour interviews. Bilfinger’s monitor was unique in this sense, understandably upset about the poor treatment he endured for the initial three year period despite new approaches instituted by each successive board.71 Companies may find it useful to understand a monitor’s philosophy early on as this is who they will be required to answer to.

Another example—Layne Christensen’s investigation for bribes in Central Africa—is instructive.72 During those investigations, an aggressive SEC lawyer disagreed with the compliance team about the narrative. That SEC lawyer was later recruited by a large firm, became a partner, and was succeeded in the investigation. The new SEC lawyer had a completely different philosophy, more aligned with the compliance team’s version of the narrative. The process ended up more favorably to Layne Christensen than it would have had that original SEC lawyer stayed on, which is representative of the consequences of shifting personalities in enforcement.

When dealing with a monitor at a company undergoing a monitorship, there will be cynicism from employees of the company because of how highly paid these monitors are. Monitors charge legal fees, and have their own teams of people. Traditionally, the monitorship team is run by a major lawyer—Uber has Eric Holder, for example.73

Monitorships are in the mainstream and the spotlight. But they are facing pushback, finally, from DOJ which is limiting monitorships because of complaints from other lawyers working with the monitors. These monitors have a lot of power without accountability. There is an issue with scope creep—monitors going outside of their designated roles. The original focus by the monitor is supposed to be the bribery issue in Nigeria, and all of a sudden, they are going to find other things. The process is arduous. Companies have to hold on and brace themselves during monitorships as a lot can come up. Compliance lawyers like to ask questions that they already know the answer to but, with these sorts of reviews, that is not the case. When the Bilfinger monitorship began, the focus was Nigeria, but the process began to expand to address findings in Vietnam and Brazil. This is a reality for large companies doing business in challenging areas of the globe.

Companies must meet their reporting obligations;74 failure to satisfactorily report constitutes the majority of enforcement actions. Essentially, compliance professionals must go to the SEC in Washington, D.C.,

pitch the compliance program, and provide support through lawyers and accountants for all claims. Additionally, company executives are recommended or compelled to attend.

Most entities that end up with a monitor have either a deferred prosecution agreement or a plea. With that document there are a number of attachments. Attachment A is usually facts, and Attachment B is usually a breakdown or calculation of the fines and penalties levied against the company. Attachment C includes the infamous compliance undertakings. Before DOJ guidance came out,75 Attachment C listed the obligations the company would have to undertake. Before the greater guidance, Attachment C would go element by element through corporate compliance obligations, specific to the company. Each citation would be granular and provide whether the company would have a hotline, an investigations process, expense reimbursement, etc.

Finally, there is Attachment D, which is the monitor’s undertaking, reciting the monitor’s obligations during the course of the monitorship. Attachment D is always informed by the company’s circumstances with respect to the violation and any ensuing conduct that may or may not run against the company. The monitor is theoretically there because the government does not trust the company’s ability to make the attachment state happen. Usually the monitor is mandated oversight of the company’s rehabilitation, developing and maintaining the core attachment elements, and reporting back to the government. Usually, where there are extensions of monitorships or repeat monitorships, the monitor refuses to certify, gives limited certification, or states in the deferred prosecution agreement that there is little confidence that the company has dealt with all of its obligations.

For a while there were not as many selfmonitorships with self-reporting obligations, such as Pfizer or Johnson & Johnson, but it was on the companies to go back and report.76 More recently with global resolutions, companies such as Odebrecht, Panasonic, Embraer, and Braskem all have independent monitors. There is more variation in the compliance and monitor undertakings. This is credited to good defense lawyers who are happy to engage a monitor but not allow them to run amok over a global organization. They have found a way to limit the scope of what the monitor is doing at the organization.

Stryker, for example, had a resolution related to the books and records violations and instead of getting the standard Attachment C - Attachment D three year monitorship, it got an eighteen month monitorship targeted to the particular controls that were at issue in the resolution.77 The wording in the negotiations is important. The deferred prosecution or plea agreement usually requires that the company create a compliance program that “reasonably detects” corruption.78 “Reasonably detects” is important as compared to other phrases, such as “ensures”, which creates a higher standard. Wording of the resolution affects how a company goes about implementing a compliance program.

How monitorships play out depends on the negotiation process leading up to the monitorship. A lot is at stake, and the professional compliance counsel must facilitate a stronger position for the client in these difficult situations.

IV. Conclusion

In sum, anti-bribery and corruption law continues to trend toward cooperative enforcement. FCPA, the first law of its kind, continues to be a useful and apolitical tool for U.S. law enforcement to curb nefarious influence and exhibits cognizance of the borderless nature of bribery and corruption. For bad actors subject to its provisions, the question is not “if” but “when” and also perhaps, “where”. Prosecutors, domestic and abroad, are more inclined to compromise with corporations that boast compliance regimes with adequate internal controls. Counsel should advise corporate clients to institute such programs in advance. Clients resistant to implementing these initiatives could otherwise find themselves culpable and consequently forced to undertake this process, instead on terms stipulated by the U.S. government.

1. OECD, CleanGovBiz: Integrity in Practice, 1 (2014). 2. See Lowell Bergman & Oriana Zill de Granados, Black Money, Frontline, (Apr. 7, 2009), https:// www.pbs.org/wgbh/pages/frontline/ blackmoney/etc/script.html. 3. Id. 4. 15 U.S.C. § 78dd-1, § 78m (2000). 5. Bergman & Zill de Granados, supra note 2. 6. See Press Release, Dow Jones, Dow Jones Survey: Confusion About Anti-Corruption Laws Leads Companies to Abandon Expansion Initiatives (Dec. 9, 2009), http://fis. dowjones.com/risk/09survey.html. 7. 15 U.S.C. § 78dd-1. 8. Id. 9. Id. 10. See Press Release, U.S. Sec. & Exchange Comm’n, JPMorgan Chase Paying $264 Million to Settle FCPA Charges (Nov. 17, 2016), https://www.sec.gov/news/ pressrelease/2016-241.html. 11. Id. 12. Press Release, Dept. Just., Lucent Technologies Inc. Agrees to Pay $1 Million Fine to Resolve FCPA Allegations (Dec. 21, 2007), https://www.justice.gov/archive/ opa/pr/2007/December/07_ crm_1028.html; Press Release, U.S. Sec. & Exchange Comm’n, IBM to Pay $10 Million in Settled FCPA Enforcement Action (Mar. 18, 2011), https://www.sec.gov/ litigation/litreleases/2011/lr21889. htm. 13. Plea Agreement, U.S. v. Avon Products (China) Co. Ltd., Cr. No. 00828 (GBD) (S.D.N.Y Dec. 14, 2014); Press Release, Dept. Just., Daimler AG and Three Subsidiaries Resolve Foreign Corrupt Practices Act Investigation and Agree to Pay $93.6 Million in Criminal Penalties (Apr. 1, 2010); Press Release, Dept. Just., JPMorgan’s Investment Bank in Hong Kong Agrees to Pay $72 Million Penalty for Corrupt Hiring Scheme in China (Nov. 17, 2016); Press Release, Dept. Just., Tyson Foods Inc. Agrees to Pay $4 Million Criminal Penalty to Resolve Foreign Bribery Allegations (Feb. 10, 2011). 14. 15 U.S.C. § 78m. 15. Id. 16. 15 U.S.C. § 78dd-2(g)(1)(A). 17. 15 U.S.C. § 78dd-2(g)(2)(A), 78dd3(e)(2)(A), 78ff(c)(2)(A); 18 U.S.C. § 3571(b)(3), (e) (fine provision that supersedes FCPA-specific fine provisions). 18. Bergman & Zill de Granados, supra note 2. 19. Rachel Brewster, Enforcing the FCPA:

International Resonance and Domestic

Strategy, 103 Va. L. Rev. 1611, 1611 (2017) (noting how the United States “only weakly enforced the FCPA” during the 1980s and 1990s). 20. Press Release, U.S. Sec. & Exchange Comm’n, SEC Charges Baker Hughes with Foreign Bribery and with Violating 2001 Comm’n Cease-and-Desist Order (Apr. 26, 2007), https://www.sec.gov/news/ press/2007/2007-77.htm. 21. Press Release, U.S. Dep’t. of Just., Former Siemens Executive Pleas Guilty to Role in $100 Million Foreign Bribery Scheme, (Mar. 15, 2018), https://www.justice.gov/opa/ pr/former-siemens-executive-pleadsguilty-role-100-million-foreignbribery-scheme. [hereinafter Siemens Bribery Press Release]. 22. Richard L. Cassin, Counsel to the FCPA Top Ten, The FCPA Blog (March 12, 2019 at 9:18 AM), http://www.fcpablog.com/ blog/2019/3/12/counsel-to-thefcpa-top-ten-march-2019.html [https://perma.cc/CER4-RLL6]. 23. Press Release, U.S. Dep’t. Just., Mobile Telesystems PSJC and Its Uzbek Subsidiary Enter into Resolutions of $850 Million with the Dep’t of Just. for Paying Bribes in Uzbekistan, (Mar. 7, 2019), https://www.justice.gov/opa/pr/ mobile-telesystems-pjsc-and-itsuzbek-subsidiary-enter-resolutions850-million-department. 24. OECD, Resolving Foreign Bribery Cases with Non-Trial Resolutions: Settlements and Non-Trial Agreements by Parties to the Anti-Bribery Convention, 219 (2019). 25. See § 13(b)(6) of the Exchange Act, 15 U.S.C. § 78m(b) (6) (providing that where an issuer “holds 50 per centum or less of the voting power with respect to a domestic or foreign firm,” the issuer must “proceed in good faith to use its influence, to the extent reasonable under the issuer’s circumstances, to cause such domestic or foreign firm to devise and maintain a system of internal accounting controls consistent with [Section 13(b)(2)] . . . . ”). 26. Amy Deen Westbrook, Enthusiastic

Enforcement, Informal Legislation:

The Unruly Expansion of the Foreign

Corrupt Practices Act, 45 Ga. L. Rev. 489, 550–53 (2011). 27. See, e.g., P. Can Co. v. Hewes, 95 F.2d 42, 45–46 (9th Cir. 1938); United States v. Nynex Corp., 788 F. Supp. 16, 18 n.3 (D.D.C. 1992);

see also U.S Dep’t. Just. & U.S. Sec. & Exchange Comm’n, A Resource Guide to the U.S. Foreign Corrupt Practices Act 20 (2012), https://www.sec.gov/spotlight/fcpa/ fcpa-resource-guide.pdf (“DOJ and SEC evaluate the parent’s control— including the parent’s knowledge and direction of the subsidiary’s actions, both generally and in the context of the specific transaction—when evaluating whether a subsidiary is an agent of the parent.”) [hereinafter Resource Guide]. 28. See United States v. Hoskins, 902 F.3d 69, 72 (2d Cir. 2018) (“The government alleges that several parts of the [bribery] scheme occurred within the United States . . . [a] consultant kept a bank account in Maryland . . . several executives held meetings within the United States regarding the bribery scheme and discussed the projects by phone and email while present on American soil.”); see also Chevron Corp. v. Donzinger, 974 F. Supp. 2d 362 (S.D.N.Y. 2014). 29. See United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018). 30. Id. at 72. 31. Id. at 98. 32. Complaint, SEC v. Panalpina, Inc., Civ. Action No. 4:10-cv-4334 (S.D. Tex. Nov. 4, 2010), https://www. sec.gov/litigation/complaints/2010/ comp21727.pdf [https://perma. cc/6DFK-6E26]. 33. Press Release, U.S. Sec. & Exchange Comm’n, SEC Charges Seven Oil Services and Freight Forwarding Companies for Widespread Bribery of Customs Officials (Nov. 4, 2010), https://www.sec.gov/news/ press/2010/2010-214.htm. 34. Cassin, supra note 22. 35. See 17 C.F.R. § 240.13a–15; Auer v. Robbins, 519 U.S. 452 (1997) (holding that agencies are granted great deference in interpreting their own regulation). 36. See SEC v. Jackson, 908 F. Supp. 2d 834, 839–40 (S.D. Tex. 2012); SEC v. Goldstone, 952 F. Supp. 2d 1060, 1136, 1258 (D.N.M. 2013). 37. Memorandum from Andrew Weissman, Chief, Fraud Sec. Crim. Div., U.S Dep’t Just., Fraud Sec.’s Foreign Corrupt Practices Act Enforcement Plan & Guidance (Apr. 5, 2016), https://www.justice.gov/ archives/opa/blog-entry/file/838386/ download [https://perma.cc/VF95AZZS]. 38. Id. at 2. 39. See id. at 9. 40. See id. at 3. 41. Memorandum from Sally Quillian Yates, Deputy Att’y General to Dep’t of Just. Staff, Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015), www.justice.gov/dag/ file/769036/download. 42. See U.S. Dep’t Just., JM 9-28.000, Principles of Federal Prosecution of Business Organizations, https://www. justice.gov/jm/jm-9-28000principles-federal-prosecutionbusiness-organizations. 43. U.S. Dep’t Just., JM 9-28.1100, Collateral Consequences, https://www.justice.gov/jm/ jm-9-28000-principles-federalprosecution-business-organizations. 44. See Principles of Federal Prosecution of Business Organizations, supra note 42. 45. See Memorandum from Sally Quillian Yates, supra note 41. 46. Testimony from Lanny A. Breuer, Assistant Attorney Gen., Crim. Div. at the U.S. Dep’t of Just. to the Financial Crisis Inquiry Division (Jan. 14, 2010), https:// www.justice.gov/sites/default/ files/testimonies/witnesses/ attachments/2010/01/14/201001-14-crm-breuer-financial-crisis. pdf. 47. U.S. Dep’t Just., JM 9-28.700, The Value of Cooperation (Nov. 2018), https://www.justice. gov/jm/jm-9-28000-principlesfederal-prosecution-businessorganizations#9-28.700. 48. Memorandum from Sally Quillian Yates, supra note 41. 49. Carlos R. Rainer, DOJ Policy

Changes Regarding Cooperation of Business Entities and Pursuit of

Individual Defendants, Norton Rose Fulbright (Feb. 2019), https://www.nortonrosefulbright. com/en-us/knowledge/ publications/6c8b3f6a/importantchanges-announced-to-doj-policyregarding-cooperation-of-businessentities [https://perma.cc/P79X98NX]. 50. Lanny A. Breuer & Mark T. Finucane,

DOJ ‘Deconfliction’ Requests:

Considerations and Concerns, Law360 (Mar. 1, 2017, 1:52 PM), https://www.cov.com/-/media/files/ corporate/publications/2017/03/ doj_deconfliction_requests_ considerations_and_concerns.pdf [https://perma.cc/ZC7X-KKWY]. 51. Shawn M. Wright, FCPA Enforcement under the Trump Administration: No

“Piling On,” But Otherwise Business as Usual, Blank Rome (Sept. 2018), https://www.blankrome.com/

end notes

publications/fcpa-enforcementunder-trump-administration-nopiling-otherwise-business-usual [https://perma.cc/S2B4-MYRD]. 52. Id. 53. David W. Simon, FCPA FAQs, Foley (OCT. 4, 2019), https:// www.foley.com/files/uploads/ FCPA_FAQs-English.pdf [https:// perma.cc/B4PA-4MST]. 54. Letter from Steven A. Tyrrell et al., U.S. Dep’t Just., to Scott W. Muller & Angela T. Burgess, Davis Polk & Wardwell 10 (Dec. 15, 2008), https://www. justice.gov/sites/default/files/ opa/legacy/2008/12/15/siemens. pdf; see F. Joseph Warin et al.,

Somebody’s Watching me: FCPA

Monitorships and How They Can

Work Better, 13 U. Pa. J. Bus. L. 321 n.* (2011). 55. Press Release, Off. Pub. Aff., GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data (July 2, 2012) (on file with the United States Department of Justice). 56. News Alert, Ropes & Gray South Korea Fines Prominent Pharmaceutical Manufacturer in Latest Anti-Corruption Enforcement Efforts, (May 1, 2017) [https://perma.cc/VS3PF54U]. 57. Paulo Sotero,The Petrobras Scandal, Encyclopedia Britannica, https://www.britannica.com/ event/Petrobras-scandal (last visisted Jan. 22, 2020). 58. Press Release, E.D. of N.Y., U.S. Att’y’s Off., TechnipFMC PLC and U.S.-Based Subsidiary Agree to Pay Over $296 Million in Global Criminal Fines to Resolve Foreign Bribery Case (June 25, 2019) (on file with the United States Department of Justice). 59. See Plea Agreement, U.S. v. Odebrecht s.a., Cr. No. 16-643 (RJD) (E.D.N.Y. Dec. 21, 2016) [https://perma.cc/6PZL-MNJG] (“Odebrecht S.A. owned 50.11% of the voting shares and 38.1% of the total share capital of Braskem and effectively controlled the company . . . Petrobras . . . owned 36.1% of the shares of Braskem . . . [t]he Brazilian government directly owned approximately 50.3% of Petrobras’s common shares with voting rights, while an additional 10% of the corporation’s shares were controlled by the Brazilian Development Bank and Brazil’s Sovereign Wealth Fund.”). 60. Press Release, Off. of Pub. Aff., Odebrecht and Braskem Plead Guilty and Agree to Pay at Least $3.5 Billion in Global Penalties to Resolve Largest Foreign Bribery Case in History (Dec. 21, 2016) (on file with the United States Department of Justice). 61. Id.; see also Plea Agreement, U.S. v. Braskem S.A., Cr. No. 16644 (RJD) (E.D.N.Y. Dec. 21, 2016) [https://perma.cc/KV6HLCKF]; see also Plea Agreement Odebrecht, supra note 59, at 19; see also Press Release, Off. Att’y Gen. of Switz., Petrobras – Odebrecht Affair: The Office of the Attorney General of Switzerland Convicts Brazilian Companies and Demands Payment of Over CHF 200 Million (Dec. 21, 2016) [https://perma.cc/Y8XYUBGT] (detailing the “summary penalty order” provided for by the Office of the Attorney General of Switzerland, assessing CHF 200 million); Press Release, Ministerio Publico Federal, Brazilian Federal Prosecution Service (MPF) Enters into Leniency Agreements with ODEBRECHT and BRASKEM (Dec. 1, 2016) [https://perma.cc/ E5VZ-8GXQ] (detailing the MPF leniency agreement and assessing BRL 8,512,000,000.00). 62. Compare USAM § 9-28.710 (2008), https://www.justice. gov/jm/jm-9-28000-principlesfederal-prosecution-businessorganizations#9-28.710, with WIPO, Confidentiality of Communications between Clients and their Patent Advisors (Date Unknown). See also Plea Agreement at 8-9, U.S. v. WMT Brasilia S.a.r.l. No. 1:19-cr00192-LO (E.D. Va. June 6, 2019) [https://perma.cc/97EZ-E9JM]. 63. See Press Release, Off. Pub. Aff., Rolls-Royce plc Agrees to Pay $170 Million Criminal Penalty to Resolve Foreign Corrupt Practices Act Case (Jan. 17, 2017) (on file with the United States Department of Justice). 64. See, e.g., Complaint, SEC v. Baker Hughes Inc., Civ. Action No. H-07-1408 (S.D. Tex. Apr. 26, 2007) [https://perma.cc/EEH6Z3P7]. 65. Deferred Prosecution Agreement, U.S. v. Bilfinger SE, No. 4:13-cr00745 (S.D. Tex. Dec 9, 2013) [https://perma.cc/TA8M-X38U] (original DPA). 66. Pleadings at 3, U.S. v. Bilfinger SE, No. 4:13-CR-745 (S.D. Tex. Dec 9, 2013) [https://perma.cc/83FA9EAD] (citing DOJ pleadings). 67. See Siemens Bribery Press Release, supra note 21. 68. See Compliance – Collective

Action, Siemens, https://new. siemens.com/global/en/company/ sustainability/compliance/ collective-actionhtml#Siemen sIntegrityInitiative (last visited Oct. 17, 2019) [https://perma.cc/ E9FZ-QY7K]. 69. See Bilfinger SE, Annual Report 2018 at 20-21 (2019). 70. Extended Deferred Prosecution Agreement at 3-4, U.S. v. Bilfinger SE, No. 4:13-cr-745 (S.D. Tex. Sept. 23, 2016) [https://perma. cc/6NES-CUNE] (extended DPA). 71. See Five Years Later, Bilfinger

Emerges from DPA – Transparency

Nil, FCPA Professor (Dec. 12, 2018), http://fcpaprofessor.com/ five-years-later-bilfinger-emergesdpa-transparency-nil/ [https:// perma.cc/7SWC-SND9]. 72. Layne Christensen Co., Exchange Act Release No. 73437, 2014 WL 5423780, at *9 (Oct. 27, 2014) [https://perma.cc/M66C-44UK]. 73. Covington Recommendations

Re: Uber, Stanford, https:// conferences.law.stanford.edu/ vcs2019/wp-content/uploads/ sites/63/2018/10/001-CovingtonRecommendations-re-Uber.pdf [https://perma.cc/Q7CY-RH2S]. 74. Resource Guide, supra note 27, at 41–2. 75. Resource Guide, supra note 27, at 52, 63, 71. 76. See generally Press Release, Dept. Just., Re: Walmart Inc. C-1 (June 20, 2019) (on file with the United States Department of Justice), https://www.justice.gov/opa/pressrelease/file/1175791/download [https://perma.cc/E5YK-DCYC]; see also Resource Guide, supra note 27, at 54–5. 77. Stryker Corp., Exchange Act Release No. 84308, 2018 WL 4678504, at *9 (Sept. 28, 2018) [https://perma.cc/XWV2-62ZA]. 78. See Resource Guide, supra note 27, at 56, 74.