Foreign Corrupt Practices Act enforcement levels in 2019 so far are largely consistent with recent years, but in terms of penalties, the Securities and Exchange Commission and the Department of Justice may be on track for another record-breaking year.
In the first quarter of 2019 alone, the SEC and DOJ have racked up more than $1.1 billion in total corporate penalties and disgorgement, although the majority of that total is derived from an approximately $850 million settlement with Mobile Telesystems PJSC (MTS).
So far in 2019, the SEC and the DOJ have resolved FCPA-related matters against four companies (three in parallel investigations, one by the SEC only) and eight individuals (two in parallel and six by the DOJ only).
This is slightly ahead of the number of actions concluded as of the end of the first quarter of 2018.
Beyond the numbers, the DOJ continues to emphasize big-ticket corporate settlements and individual prosecutions.
In 2018, all but one of the DOJ’s corporate resolutions dealt with payments to obtain contracts from a foreign government, rather than regulatory or other operational benefits, and that trend has continued in 2019.
For example, the DOJ settled with MTS and Kolorit Dizayn Ink LLC (Kolorit), an affiliated Uzbek company, for conduct related to the payment of bribes to Gulnara Karimova, daughter of the then-president of Uzbekistan, to obtain telecommunications contracts and certain regulatory rights. MTS is the third company to settle FCPA charges arising from bribes paid to Karimova for telecommunications contracts in Uzbekistan, as Vimplecom Ltd. and Telia Co. AB already paid, in the aggregate, more than $1.5 billion to settle similar allegations in 2016 and 2017.
In an early signal of a potential change in enforcement priorities at the SEC, the agency has brought no stand-alone corporate actions in 2019, other than a cease and desist order against Cognizant Technologies Solutions Corp. (Cognizant), which also was subject to a formal declination with disgorgement under the DOJ’s FCPA Corporate Enforcement Policy.
All other 2019 SEC actions have been concluded in parallel with the DOJ.
By contrast, in 2018, the SEC brought 10 stand-alone enforcement actions, and those cases covered a wider array of conduct, including more varied benefits passed to government officials, more diversity in the business advantage obtained from government officials, and accounting charges arising out of commercial bribery.
The SEC settlement with Cognizant arose out of the alleged reimbursement of Indian contractors for bribes to Indian government officials to obtain government construction-related permits and operating licenses for commercial office buildings in India.
The Cognizant resolution reinforces that issuers who self-report in reliance on the DOJ’s FCPA Corporate Enforcement Policy may still face SEC civil penalties and disgorgement in addition to DOJ-ordered disgorgement, similar to Dun & Bradstreet Corp. and Polycom Inc. in 2018, although the DOJ credits SEC disgorgement amounts in such circumstances.
Individual prosecutions are being brought primarily by the DOJ, which continues to use money laundering and conspiracy to commit money laundering to reach foreign government officials who would not otherwise be subject to prosecution under the FCPA.
So far in 2019, the DOJ has filed indictments against two government officials (Karimova and Master Halbert, an aviation official in Micronesia). This continues a trend that escalated in 2018 with the prosecution of current and former officials in the Caribbean and South America, including employees of Petroleos de Venezuela S.A. (PDVSA).
Karimova’s prosecution is particularly noteworthy, as it follows three major corporate settlements with MTS, Telia, and Vimpelcom arising out of bribes paid to her in order to obtain access to the Uzbek telecommunications market.
The DOJ is also increasingly using money laundering charges to reach non-U.S. persons engaged in conduct outside the United States.
For example, in August 2018, the DOJ issued a declination under the FCPA Corporate Enforcement Program against the foreign company Insurance Corporation of Barbados, which paid bribes to the minister of industry in Barbados through a U.S. corporation and bank. In 2019, the DOJ announced prosecutions against two non-U.S. citizens associated with that conduct: Ingrid Innes, a citizen of Canada and resident of Barbados, and Alex Tasker, a citizen and resident in Barbados.
The DOJ did not allege that either defendant engaged in conduct in furtherance of the scheme within the United States. Rather than charging substantive violations of the FCPA, the DOJ charged Innes and Tasker with money laundering and conspiracy to launder money to promote the carrying on of felony violations of the FCPA and the Barbados Prevention of Corruption Act.
The increased use of money laundering statutes likely will continue as a result of a recent Second Circuit ruling in United States v. Hoskins, which limits the DOJ’s use of conspiracy and complicity theories in circumvention of the FCPA’s jurisdictional provisions to reach non-U.S. conduct of non-U.S. defendants working for non-issuer, non-U.S. companies.
Relying in part on Hoskins, a defendant indicted for allegedly participating in the bribery of officials at PDVSA is challenging the DOJ’s ability to charge non-U.S. persons with money laundering offenses based solely on extraterritorial conduct that promotes or conceals an FCPA violation. The decision in that case could further shape the circumstances in which the DOJ can prosecute foreign defendants for bribery-related offenses.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Lucinda Low is a partner in Steptoe & Johnson LLP’s Washington office and co-chairs the firm’s Compliance, Investigations, Trade and Enforcement Department and FCPA/Anti-Corruption practice. Her practice includes representing audit committees, boards of directors, and companies in internal, government, and international financial institution audits, investigations, and enforcement matters involving fraud, bribery, corruption, and other compliance issues.
Brittany Prelogar is a partner in Steptoe’s Washington office and co-chairs the firm’s International Regulation & Compliance and FCPA/Anti-Corruption practices. She conducts investigations and represents clients in matters involving alleged corruption, fraud, and other corporate misconduct, and provides anti-corruption compliance advice to clients across a broad range of industries.
John London, an associate in Steptoe’s Washington office, conducts investigations and assists with enforcement actions related to US and international anti-corruption laws, including the Foreign Corrupt Practices Act, UK Bribery Act, and debarment proceedings before the World Bank and other International Financial Institutions.