Global Regulators Cooperating More on Anti-Bribery Enforcement

Foreign governments are increasingly tipping off U.S. regulators about possible bribery and corruption cases.

Companies have long worried about investigations of potential violations of the Foreign Corrupt Practices Act coming from the Securities and Exchange Commission and the Department of Justice. Now enforcement agencies in other countries may be looking over their shoulders too, as international governments are increasingly cooperating on their attempts to root out bribery and corruption.

In separate speeches last month at the International Conference on the FCPA, Andrew Ceresney, co-director of the Securities and Exchange Commission's Enforcement Division, and Deputy Attorney General James Cole stressed that the number of law enforcement partners that the SEC and Department of Justice have around the world continues to grow.

“Over the past five years, we have experienced a transformation in our ability to get meaningful and timely assistance from our international partners,” Ceresney said. Furthermore, the pace and extent of such cooperation with foreign agencies will only continue to grow over the coming years, he said.

The expanded scope of cross-border cooperation in FCPA investigations can be attributed, in part, to the enactment of new anti-corruption laws around the world. Brazil, for example, enacted a new anti-corruption law in August that imposes civil liability on companies that pay bribes to any government official, both domestic and foreign. That law takes effect next month.

Canadian authorities significantly expanded the grounds for criminal liability for companies and their directors, officers, and employees under new amendments to Canada's Corruption of Foreign Public Officials Act. China and Russia have also passed new bribery laws recently.

“As other countries begin to step up their efforts to combat corruption, it makes our job easier,” said Ceresney. “Countries with strong anti-corruption laws are often great partners to us in combating corruption.”

Information-Sharing Practices

The SEC and Justice Department increasingly are receiving cooperation from countries that, until now, have never provided any meaningful assistance. For example, U.S. law enforcement agencies reached their first coordinated enforcement action with French authorities in May that resulted in oil and gas company Total paying $398 million in an FCPA enforcement action for paying bribes to intermediaries of an Iranian government official.

“What is happening with more frequency is that when the United States goes to other countries to get assistance in enforcing the FCPA, other countries are being more cooperative in giving them information that is being held in those countries,” says Peter White, a partner with law firm Schulte Roth & Zabel. Cross-border cooperation effectively has streamlined the way in which U.S. prosecutors conduct FCPA investigations, he says.

Working closely with the U.K. Serious Fraud Office over the past several years, for example, has allowed the SEC and Justice Department “to better leverage resources and coordinate investigations,” said Ceresney. In March 2010, a parallel investigation conducted by U.S. and U.K. authorities resulted in chemical company Innospec paying a $40 million global settlement for violations of the FCPA.

Sharing Enforcement Practices

One innovative way that U.S. prosecutors are succeeding in fostering global information-sharing practices is by “sharing our experience and knowledge with our foreign counterparts,” said Cole. The Justice Department's FCPA Unit, for example, has been conducting training on anti-corruption enforcement in several countries around the world, including Japan, Brazil, and Mexico.

“More countries will prosecute their laws, and that will lead to more collaboration between the U.S. and prosecutors of other countries, and may lead to corporations facing more exposure in more countries.”

—James Tillen,

Vice Chair, International Department,

Miller & Chevalier

“For the first time ever, you have FBI agents going abroad and working with international authorities on anti-bribery cases,” says Joseph Spinelli, managing director in the global investigations and compliance practice at Navigant Consulting and global leader of its anti-bribery and corruption-FCPA segment. Such collaboration on FCPA investigations did not exist just a few years ago to the extent it does now, he says.

Earlier this year, the Justice Department, in conjunction with the SEC and FBI, hosted the first-ever Foreign Bribery and Corruption Training Conference for international law enforcement, which included representatives from over 50 law enforcement and regulatory agencies from 30 different countries. The goal of the training course was “to exchange ideas and best practices on combating foreign corruption,” said Cole.

“The conference strengthened relationships among regulators and informed international officials about the latest developments in investigative techniques and multilateral requests for assistance,” said Ceresney. “The more we can foster this sort of international cooperation, the more we can be successful in prosecuting FCPA cases.”

The OECD Convention on Combating Bribery of Foreign Public Officials has also helped drive increased cooperation, says James Tillen, vice chair of the international department at law firm Miller & Chevalier. “That process has been very helpful in forging connections between prosecutors in different jurisdictions,” he says. “Through that, they establish relationships that make getting information and evidence from different countries much easier.”

While the increased cooperation could increase the number of FCPA prosecutions, it could also cut down on the number of simultaneous investigations by several jurisdictions, which can be a nightmare for companies, says Tillen. In some cases, either one country will take a lead in an anti-corruption case, or take a combined approach.

INTERNATIONAL TRENDS

Below is an excerpt from SEC Co-director of the Enforcement Division Andrew Ceresney's keynote address at the International Conference on the FCPA.

Another important trend in the last 10 years has been the immense growth in focus and legislation on corruption issues around the globe, and the tremendous increase in cooperation that we have received from other governments. Although the SEC and DOJ are at the forefront of this global fight against corruption, we cannot do it alone. There are capable and committed law enforcement partners worldwide, and their numbers are steadily growing. Over the past five years, we have experienced a transformation in our ability to get meaningful and timely assistance from our international partners. And through our collaborative efforts, the world is becoming a smaller place for corrupt actors.

In particular, many of our foreign counterparts have taken important steps this year to strengthen their own anticorruption laws and step up their enforcement efforts. For example, Brazil passed the “Clean Company Law,” an anticorruption law that, for the first time, imposes criminal liability on companies that pay bribes to foreign government officials. More expansive in its reach than the FCPA, this new law forbids all companies that operate in Brazil from paying bribes to any government official, whether domestic or foreign. In the U.K., the Serious Fraud Office announced its first prosecution case under the Bribery Act. In Canada, the government enacted amendments strengthening the Corruption of Foreign Public Officials Act and prevailed in its first litigated case against an individual for violating this law. And recently, Latvia became the newest country to join the OECD Working Group on Bribery.

As other countries begin to step up their efforts to combat corruption, it makes our job easier. Countries with strong anti-corruption laws are often great partners to us in combatting corruption. Scrutiny from the local government, in addition to us, will often be a strong deterrent to bribery. More and more, our investigations are conducted in parallel with a foreign government.

Obviously, evidence in many FCPA cases resides in foreign countries and in many instances, it is only with the assistance of local authorities that we are able to obtain evidence necessary for us to prove FCPA violations. We are having greater success working with the international community to receive documents and other types of foreign assistance. For example, over the past several years, we have worked closely with the United Kingdom Serious Fraud Office, which has allowed us to better leverage resources and coordinate investigations. Through this relationship, we conducted a parallel investigation of Innospec Ltd., which led to a $40 million global settlement in March 2010, and we coordinated the investigation of Johnson & Johnson, which resulted in a $70 million settlement with U.S. authorities in April 2011. Similarly, just this year, the SEC and DOJ announced the first coordinated action by French and U.S. authorities in the Total case.

In fact, earlier this year, the SEC, in conjunction with the DOJ and FBI, hosted the first-ever Foreign Bribery and Corruption Training Conference for international law enforcement, which included representatives from over 50 law enforcement and regulatory agencies from 30 different countries. The Conference strengthened relationships among regulators and informed international officials about the latest developments in investigative techniques and multilateral requests for assistance. The more we can foster this sort of international cooperation, the more we can be successful in prosecuting FCPA cases.

I am encouraged by such close collaboration and fully expect the pace and extent of our cooperation with foreign agencies to grow over the coming years. Indeed, only recently, I have been involved in a case in which we are receiving cooperation from a country that has never before provided any meaningful assistance. This sort of progress gives me confidence that the future is even brighter.

Source: SEC.

The trouble is that U.S. prosecutors don't have those close-knit relationships with every country, Tillen adds, so it could result in follow-on enforcement actions arising out of an initial pleading. “That's happened quite a few times with the Nigerian government seeking penalties and fines from companies after settling with the United States for activity that occurred in Nigeria,” he says.

China, where many companies get tripped up for violating the FCPA, is another country that presents unique compliance risks for U.S. companies, especially since China has expressed its intent to step up enforcement efforts, says Tillen. “Those developments could prove significant for U.S. companies that are subject to both FCPA and Chinese law when they're facing prosecutions in both countries,” he says. The United States doesn't have that same history of collaboration with China as it does with the OECD countries, “so that's something to watch,” he says.

Proactive Measures

In response to this increased global cooperation in anti-corruption investigations, multinational companies have begun to reevaluate the way they assess their global risks. The way multinational companies used to perform risk assessments would be to identify their highest risk countries and then formulate anti-corruption policies and procedures around that assessment.

“Now, more so than ever before, they have to do a global risk assessment in all the various jurisdictions throughout the world where they're conducting business, or having third-party intermediaries conducting business,” says Spinelli.

George Terwilliger, a partner with law firm Morgan Lewis, says he is observing a similar change in approach. “Most large companies with well-developed compliance programs are now looking to understand what their obligations are to comply with anti-corruption laws in the countries in which they operate,” he says. They're seeking to better understand not only the laws themselves, but also the enforcement environment in order to better structure their compliance programs accordingly, he says.

For a multinational company to resolve a cross-border bribery investigation as efficiently as possible, the first step is to identify the lead agency, says White. “Sometimes you have multiple sovereignties going after the same investigative information at the same time,” he says. “To deal with that responsibly, you have to be responsive to all of them.”

“There is not a simple way through that process,” White adds. “The only thing you can do is to keep close track of who needs what, and try to satisfy and cooperate with all those domestic agencies.”

Tillen says that requires a high level of coordination among legal teams in multiple jurisdictions to ensure that all factors are taken into account on how to conduct the investigation and how to negotiate with authorities to resolve it.

Even where many countries are not actually engaging in enforcement actions of any substance, increased monitoring activities alone have succeeded in “shaming countries into action, and that likely will continue,” says Tillen. “More countries will prosecute their laws, and that will lead to more collaboration between the U.S. and prosecutors of other countries, and may lead to corporations facing more exposure in more countries.”