U.S. Department of Justice (DOJ) Deputy Attorney General Lisa Monaco presented a new policy at a Securities Industry and Financial Markets Association event that requires chief compliance officers (CCO) to certify that compliance programs have been “reasonably designed to prevent anti-corruption violations.”¹ The policy is an outgrowth of a settlement involving US$1 billion in criminal and civil penalties imposed on mining giant, Glencore International AG (Glencore), after it pleaded guilty to bribery and market manipulation charges.² According to Monaco, this new policy is meant to ensure that CCOs stay in the loop on potential company violations and have the necessary resources to prevent financial crime.³ While the expressed intention of this new policy is to empower CCOs, it has raised concerns about potential liability for CCOs.

GLENCORE SETTLEMENT

Glencore is among the largest companies that dominate global trading of oil, fuel, metals, minerals, and food.⁴ In 2018, Glencore was subject to a multi-year investigation by the DOJ for violations of the Foreign Corrupt Practices Act (FCPA) and a commodity price manipulation scheme.⁵ According to admissions and court documents filed in the Southern District of New York, Glencore, acting through its employees and agents, engaged in a scheme for over a decade to pay more than US$100 million to third-party intermediaries in order to secure improper advantages to obtain and retain business with state-owned and state-controlled entities. A significant portion of these payments were used to pay bribes to officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela, and the Democratic Republic of the Congo.⁶ Glencore resolved the government’s investigations by entering into a plea agreement (Plea Agreement)⁷According to the Plea Agreement, Glencore admitted to one count of conspiracy to violate the FCPA.⁸ Shaun Teichner, the general counsel for the company, told a federal judge in New York that Glencore “knowingly and willingly entered into a conspiracy to violate the Foreign Corrupt Practices Act by making payments to corrupt government officials.”⁹

Glencore expects to pay about US$1 billion to U.S. authorities, after accounting for credits and offsets payable to other jurisdictions and agencies, and about US$40 million to Brazil.¹⁰ A related payment by Glencore to the United Kingdom will be finalized after a hearing next month.¹¹

The Plea Agreement requires that Glencore, among other things: (1) implement two independent compliance monitors, one in the United States and one abroad, to prevent the reoccurrence of crimes; (2) retain a compliance monitor for three years; and (3) have its chief executive officer (CEO) and CCO submit a document certifying to the DOJ’s fraud section that the company has met its compliance obligations (the CCO Certification Requirement or the Certification).¹²

WHY THE CCO CERTIFICATION REQUIREMENT HAS RAISED CONCERNS

The CCO Certification Requirement has raised concerns in the compliance space over potential increases in CCO liability.¹³ Specifically, compliance officials worry that this policy transfers corporate liability into potential individual liability for the CCO. The Certification form asks the CEO and CCO to certify that the compliance program has been “reasonably designed” to prevent future anti-corruption violations.¹⁴ Critics worry that these new certifications may discourage CCOs from taking jobs at companies that are or may be parties to agreements with the DOJ.¹⁵

The DOJ stated that liability will depend on the facts and circumstances of the case but that the new policy is not aimed at going after CEOs or CCOs.¹⁶ Assistant Attorney General Kenneth A. Polite Jr. stated, “if there is a knowing misrepresentation on the part of the CEO or CCO, then that could certainly result in some form of personal liability.”¹⁷  Depending on the circumstances, the DOJ may consider it a breach of the corporation’s obligations under the Plea Agreement if there is either a misrepresentation in one of these certifications or a failure to provide the same.¹⁸ Polite added that “the certification memorializes the company’s commitment to take its compliance obligations seriously.”¹⁹

Critics question how realistic the CCO Certification Requirement is for large, multinational companies.²⁰ They also question the due diligence required to actually ensure that compliance programs are “reasonably designed,” especially for companies operating in over 50 countries. Would it be realistic to expect a CCO or CEO to keep tabs on compliance across their company with that level of specificity?²¹

WHAT THE C SUITE AND BOARD SHOULD CONSIDER MOVING FORWARD

The questions to consider are: (1) where will the expressed policy lead? And (2) how do we best prepare for the Certification?

The DOJ has specifically stated its intention to “prosecute the individuals who commit and profit from corporate malfeasance.”²² Regardless of Monaco’s comments, the Certification appears to create potential for an extension of that policy.

The fact of the policy gives rise to a number of subsidiary questions. Is the Certification, which targets foreign corrupt practices, a harbinger for other such certifications in areas such as health care fraud, defense contractor fraud, money laundering, etc.? And is DOJ gearing toward providing its prosecutors with more tools for individual culpability at the highest corporate levels consistent with its expressed policy?

Moving forward, in-house counsel should work with the CEO and CCO to consider areas of corporate business practices that are specifically subject to compliance programs. They should develop practices including auditing, tracking, training, and reviewing to ensure the programs are “reasonably designed” to prevent future wrongdoing. Further, they should be sure to document their corporate business practices. Obviously, these programs become much more complex when operations include foreign jurisdictions and foreign laws with respect to matters such as privacy and employee rights.

Although this process may not be new to protect corporations from criminal charges, the newly-announced policy will certainly focus the spotlight on CEOs and CCOs in the FCPA context and arguably beyond.

FOOTNOTES

¹ Al Barbarino, DOJ Defends New CCO Certifications Amid Industry Worry, LAW360 (May 26, 2022), https://www.law360.com/whitecollar/articles/1496108/doj-defends-new-cco-….

² Id.

³ Id.

⁴ Chris Strohm, Chris Dolmetsch & Jack Farchy, Glencore Pleads Guilty to Decade of Bribery and Manipulation, BLOOMBERG (May 24, 2022), https://www.bloomberg.com/news/articles/2022-05-24/glencore-to-appear-in-us-uk-courts-over-resolutions-of-probes.

⁵ Id.

⁶ News Release, U.S. Dep’t of Just., Office of Pub. Affs., Glencore Entered Guilty Pleas to Foreign Bribery and Market Manipulation Schemes, (May 24, 2022), https://www.justice.gov/opa/pr/glencore-entered-guilty-pleas-foreign-bribery-and-market-manipulation-schemes.

⁷ Id.

⁸ Id.

⁹ Strohm, supra note 4.

¹⁰ Id.

¹¹ Id.

¹² Id.

¹³ Barbarino, supra note 1.

¹⁴ Id.

¹⁵ Id.

¹⁶ Id.

¹⁷ Id.

¹⁸ Id.

¹⁹ Id.

²⁰ Id.

²¹ Id.

²² News Release, U.S. Dep’t of Just., Attorney General Merrick B. Garland Delivers Remarks Announcing Glencore Guilty Pleas in Connection with Foreign Bribery and Market Manipulation Schemes (May 24, 2022), https://www.justice.gov/opa/speech/attorney-general-merrick-b-garland-delivers-remarks-announcing-glencore-guilty-pleas.

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• The Foreign Corrupt Practices Act (“FCPA”) prohibits companies from bribing foreign officials in an effort to obtain or retain business, and it requires that companies maintain adequate books, records, and internal controls to prevent unlawful payments.
• The FCPA was passed in response to an increase in global corruption costs.
• Implementing an effective FCPA compliance program can benefit companies financially and socially, and it can help companies seize opportunities for business expansion.
• In drafted and implemented appropriately, an FCPA compliance program will: serve as an invaluable tool against corruption, promote ethical conduct within the company, reduce the societal costs of corruption, and foster business expansion domestically and globally.
• Company leaders should consider hiring experienced legal counsel to provide advice and representation regarding FCPA compliance.

What is the Foreign Corrupt Practices Act?

Enacted in 1977, the Foreign Corrupt Practices Act (“FCPA”) is a federal law that prohibits bribery of foreign officials in an effort to obtain or retain business. It also requires companies to maintain adequate books, records, and internal controls in their accounting practices to prevent and detect unlawful transactions.

Congress passed the FCPA in response to growing concerns about corruption in the global economy. The FCPA includes provisions for both civil and criminal enforcement; and, over the past several decades, FCPA enforcement proceedings have resulted in billions of dollars in penalties, disgorgement orders, and other sanctions issued against companies accused of engaging in corrupt transactions with government entities.

What are the Risks of FCPA Non-Compliance?

The U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) are the primary agencies tasked with enforcing the FCPA. These agencies take allegations of FCPA violations very seriously, motivated in large part by the damage that bribery and corruption of foreign officials can cause to the interests of the United States. Prosecutions under the FCPA have increased in recent years, with both companies and individuals being targeted.

Due to the risk of federal prosecution, companies that do business with foreign entities must implement compliance programs that are specifically designed to prevent, detect and allow for appropriate response to transactions that may run afoul of the FCPA. In addition to helping to prevent and remedy FCPA violations, adopting a robust compliance program also demonstrates intent to follow the law and can create a positive view of your company in the eyes of federal authorities.

“Implementing an effective FCPA compliance program serves a number of important purposes. Not only can companies mitigate the risk of their employees engaging in corrupt practices, but they can also discourage corrupt conduct by other entities and demonstrate to federal authorities that they are committed to complying with the law.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

If your company is targeted by the DOJ or SEC for a suspected FCPA violation, it will be important to engage federal defense counsel promptly. Having counsel available to represent your company during an FCPA investigation is crucial for protecting your company and its owners, executives, and personal against civil or criminal prosecution.

Why Should Companies Implement FCPA Compliance Programs?

Here are 10 of the most important reasons why companies that do business with foreign entities need to adopt comprehensive and custom-tailored FCPA compliance programs:

1. The FCPA is an invaluable tool in the federal government’s fight against foreign corruption.
   • The FCPA is a massive piece of legislation that is designed to allow the DOJ and SEC to effectively combat corruption and bribery involving foreign officials. Ultimately, enforcement of the FCPA is intended to eliminate the costs of foreign corruption to the United States.
   • An effective and robust FCPA compliance program promotes these objectives while also protecting companies and individuals against civil liability and criminal prosecution.
2. Anti-corruption laws like the FCPA promote ethical conduct.
   • Companies that have comprehensive policies against bribery and corruption send a strong message to other companies and foreign officials that they are committed to aiding in the federal government’s fight against corruption.
   • Foreign officials are less likely to ask for bribes from companies that promote an anti-corruption corporate environment through their compliance policies and procedures.
   • Compliance with anti-corruption laws promotes positive morale among company personnel who feel the pride of working for a company that is committed to transparency and ethical conduct.
3. The FCPA allows companies to develop strong internal controls and avoid a slippery slope toward an unethical culture.
   • Companies that regularly utilize bribes in their business operations are likely to eventually encounter multiple problems, both in the U.S. and abroad.
   • Once a foreign official knows that a company is willing to pay bribes, that foreign official will request larger bribe amounts. In order to continue business operations in the relevant jurisdiction, company personnel may continue to accept the foreign official’s terms and pay larger bribes.
   • If left unchecked, corrupt practices can become so prevalent that they create enormous liability exposure for the company.
   • Maintaining a focus on FCPA compliance allows companies to develop effective internal controls that promote efficiency in their business operations.
4. The FCPA reduces the societal costs of corruption.
   • Corruption increases costs to society. This includes political, social, economic, and governmental costs resulting from unethical business conduct.
   • By adopting and enforcing strong FCPA compliance programs, companies can help reduce these costs.
5. The FCPA reduces the internal business costs of corruption.
   • Corporate success depends on certainty, predictability, and accountability. An environment where corruption is rampant costs companies time and money, and it can lead to disruptions in the continuity of their business operations.
   • FCPA compliance instills predictability in investments, business transactions, and dealings with foreign officials.
6. Corruption and bribery create an unfair business environment.
   • Companies are more likely to be successful in an environment that emphasizes fair competition, and in which all competitors sell their products and services based on differentiation, pricing, and efficiency.
   • Corruption and bribery allow for unfair results in the marketplace. For instance, companies that utilize bribes can achieve increased sales and increased market share despite offering an inferior product at an uncompetitive price.
7. The penalties under the FCPA encourage compliance and accurate reporting.
   • The penalties imposed under the FCPA incentivize the disclosure and reporting of statutory violations. These penalties include fines, imprisonment, disgorgement, restitution, and debarment.
   • Whistleblowers can receive between 10% and 30% of amounts the federal government recovers in FCPA enforcement litigation, and this provides a strong incentive to report violations as well.
   • The risk of significant penalties is an important factor for companies to consider when deciding how much time, effort, and money to invest in constructing an FCPA compliance program.
8. Anti-corruption laws foster business expansion and stability both domestically and globally.
   • For companies that plan to expand domestically or internationally, success depends on the existence of a competitive environment in which companies compete fairly based on product differentiation, price, and other market factors.
   • Fair competition and growth opportunities are hampered when competitors can simply bribe their way to success. Therefore, FCPA enforcement is essential to maintaining fair competition.
   • DOJ and SEC investigations can severely disrupt efforts to maintain stability and predictability, and they can lead to significant financial and reputational harm.
9. Corruption leads to human rights abuses.
   • Companies that regularly utilize corruption and bribery to achieve their business goals often resort to other illegal practices as well. This includes forced labor and child labor.
   • These types of human rights abuses are commonplace in countries where corruption and bribery are widespread.
   • To reduce the risk of these human rights abuses, it is crucial for company personnel to be educated on the potentially disastrous consequences of corruption and bribery.
   • Developing a robust compliance policy is the best way to educate personnel, reduce the risks of corruption and bribery, and eliminate the human rights abuses associated with these risks.
10. The FCPA encourages open communication between companies and their legal counsel.
    • With regard to FCPA compliance, it is a legal counsel’s job to represent the best interests of the company and help the company foster an environment of ethical conduct. Achieving these objectives requires open and honest communication between the company and legal counsel.
    • Due to the severe sanctions imposed under the FCPA, companies are incentivized to hire counsel to advise them with regard to compliance and to adopt and implement effective FCPA compliance programs.

Effective FCPA Compliance Programs Help Companies Avoid Costs, Loss of Business Opportunities, and Federal Liability

Working with legal counsel to develop robust FCPA compliance policies and procedures can help prevent company personnel from offering bribes and engaging in other corrupt practices while also encouraging the internal disclosure of suspected violations. Failing to maintain adequate internal controls and foster a culture of compliance can be detrimental to a company’s operations, and FCPA violations can lead to civil or criminal prosecution at the federal level. As a result, all companies that do business with foreign entities would be well-advised to work with legal counsel to develop comprehensive FCPA compliance policies and procedures.

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The U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) recently published an updated guide to the Foreign Corrupt Practices Act (FCPA), a key resource for corporate whistleblowers around the world.

The FCPA is a U.S. law that prohibits the payment of anything of value to foreign government officials in order to obtain a business advantage. The FCPA also requires publicly traded corporations to make and keep books and records that accurately reflect transactions of the corporation to ensure that no bribes were paid.

This singular law is extremely important to global corporate accountability because it ensures that U.S. companies can be held accountable for corrupt actions abroad. Additionally, because this law is a part of the Dodd-Frank Act, whistleblowers from around the world may anonymously and confidentially report such corruption to the SEC and receive an award for successful tips. The U.S. government has successfully prosecuted many foreign corporations under the FCPA and has issued millions of dollars in rewards to both U.S. and non-U.S. whistleblowers.

This new guide adheres to this standard by providing significant, easy to follow information on the scope of the FCPA, potential consequences for FCPA violations, and whistleblower protections. In this new edition, the DOJ and SEC expand their guidance on a number of issues citing new cases and the new DOJ FCPA Corporate Enforcement Policy, which all anticorruption advocates, including potential whistleblowers, and corporate compliance professionals should review and understand.

The complete list of topics on which updated definitions and guidance is provided is as follows:

• Intermediaries

• Gifts as bribes

• Instrumentalities of foreign governments

• Third party payments

• The “local law defense”

• Successor liability for corporations

• Conspiracy liability

• Applicable statutes of limitations

• Criminal liability for accounting violations

• Factors that the Justice Department considers in determining how to resolve a corporate criminal case

• DOJ FCPA Corporate Enforcement Policy (a new official DOJ policy), including examples of when the DOJ will decline to prosecute

• How corporate and individual cooperation is evaluated

• Components of an effective compliance program

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Last week, the Department of Justice (DOJ) announced the largest deferred prosecution agreement for violations of the Arms Export Control Act (AECA), International Traffic in Arms Regulations (ITAR), and Foreign Corrupt Practices Act (FCPA) in history. Airbus SE, a French aircraft company, agreed to pay over a combined $3.9 billion to the DOJ as well as authorities in France and the UK for foreign corruption and bribery charges. The penalty is the largest of its sort and is the result of anti-fraud efforts across the three countries.

Airbus engaged in corruption for several years, offering bribes to foreign officials and misreporting to authorities to conceal the bribes. These violations of the Arms Export Control, International Traffic in Arms, and FCPA encompass activities in the United States, UK, France, and China. The crimes also include corruption in defense contracts.

According to a DOJ Press Release, Airbus will pay $527 million to the United States for the company’s violations of the International Traffic in Arms and Foreign Corrupt Practices Acts. In this case, Airbus self-reported and voluntarily cooperated with law enforcement after uncovering violations in an internal audit. It is possible an internal report initiated the audit. Cooperation and remedial measures by Airbus were taken into consideration in the settlement terms of the deferred prosecution agreement and benefitted Airbus.

International whistleblowers are crucial to the detection of large-scale corruption and fraud around the world. The SEC and DOJ rely on individuals who decide to anonymously and confidentially blow the whistle on violations of the FCPA. The FCPA allows for foreign nationals to file whistleblower claims in the US and receive an award between 10 and 30 percent of the total amount recovered by the government if a successful enforcement action follows their disclosures.

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The normalization of relations between the United States and Cuba offers potential lucrative business opportunities for companies that are prepared to meet Cuba’s unique corruption risks. On December 17, 2014, President Barack Obama and Cuban President Raul Castro announced the restoration of full diplomatic relations between the United States and Cuba; an act which President Obama stated was aimed at ending “an outdated approach that for decades has failed to advance our interests” and that would instead begin to “normalize relations between our two countries.” In furtherance of that goal, on January 16, 2015, the U.S. Government eased travel restrictions between the U.S. and Cuba and, perhaps more importantly, reduced certain obstacles that prevented American companies from doing business on the island. For example, U.S. businesses will be allowed to provide financing to Cuban small businesses and sell communications devices, software, and hardware services among other things. Indeed, American companies in the aviation, telecommunications, or financial industries stand to gain a substantial foothold in a burgeoning new – and potentially lucrative – Cuban market.

Before diving in head first, however, American companies must recognize and prepare for the significant Foreign Corrupt Practices Act (“FCPA”) risks inherent in doing business in Cuba. But first, a quick refresher on the FCPA. Generally speaking, the FCPA prohibits bribing foreign officials for the purpose of obtaining or retaining business. The term “foreign official” is broadly defined and includes, among other things: (i) officers or employees of a foreign government or any department, agency, or instrumentality thereof; or (ii) anyone acting in an official capacity for or on behalf of said foreign government or any department, agency, or instrumentality thereof.

Doing business in Cuba presents a host of unique FCPA risks, three of which are particularly worth highlighting. First, while the Cuban government has taken steps to permit its citizens to open small businesses, the vast majority of Cuba’s economy remains government-owned and controlled. Former economist for the International Monetary Fund, Ernesto Hernandez-Cata, estimated that the Cuban government, directly and through state-owned businesses, accounts for more than 75% of Cuba’s total economic activity.  Essentially, the state is involved in virtually all of the island’s major businesses, including services typically run by the private sector in the U.S. In other words, American companies will almost certainly deal with foreign officials when doing business in Cuba.

Second, Cuban government officials are notoriously undercompensated. On average, government officials earn between $20 and $40 per month while, in some cases, being tasked with administering Cuba’s multi-million dollar business ventures. Unsurprisingly, low wages and extensive state involvement in business matters have incentivized some Cuban officials to solicit bribes (and, occasionally, have tempted foreign companies to offer them). For example, in September 2014, Cy Tokmakjian, Claudio Vetere, and Marco Puche, executives at Tokmakjian Group, a Concord, Ontario, Canada-based company,  were convicted of using bribery and other means to avoid paying taxes. They received sentences of 15, 12, and 8 years respectively as part of President Raul Castro’s crack down on graft and other forms of corruption. Tokmakjian, Vetere, and Puche may not be subject to the FCPA, but similar payments by American companies in Cuba would likely expose the companies and employees to FCPA liability.

Third, and finally, Cuba suffers from a widespread lack of transparency. The 2015 Transparency International Corruption Perceptions Index ranked Cuba 56^th out of 168 countries surveyed, tied with Ghana.  American companies may find themselves in the dark with respect to Cuban regulations and procurement practices. As a result, companies may not be aware of inconsistent and/or improper application of Cuban regulations. Worse still, American companies may be unaware of the true purposes for certain payments. For example, a company may be informed that a particular payment is required to obtain a specific license but find out that the money was directed to a foreign official.

Note that the FCPA does have a knowledge requirement; however, knowledge may be demonstrated by establishing awareness of a high probability of impropriety, unless the person actually believed that there was nothing improper in that instance. See 15 U.S.C. § 78dd-1(f)(2). The “high probability” standard was intended to ensure that the FCPA’s “knowledge” requirement included instances of “conscious disregard” and “willful blindness.” H.R. Rep. No. 100-576, at 919 (1988) (citing United States v. Bright, 517 F.2d 584 (2d Cir. 1975)); see also United States v. Kozeny, No. 09-cr-4704, 2011 WL 6184494 (2d Cir. Dec. 14, 2011). Furthermore, the vast majority of FCPA cases settle before trial which means that there is little case law that speaks specifically to the FCPA’s scienter requirement. As a result, the DOJ and SEC have broad discretion to attempt to settle cases based on facts that may be out of tune with a strict interpretation of the FCPA’s scienter requirement.

At a minimum, reducing FCPA risks in any foreign country requires that companies take a few basic, but important, steps: conduct a risk assessment of the country, the industry, and the market; use the assessment to prepare a potent anti-bribery policy aimed at both prevention and remediation; implement the policy and disseminate it to all employees; adequately train employees and company agents; and modify the policy when necessary to ensure adequate protection in a changing market.

More specifically, doing business in Cuba – a market with which few American companies are deeply familiar – requires a thorough risk assessment. The quality of the analysis can mean the difference between a deficient anti-bribery policy and one that adequately shields the company from risk exposure. Accordingly, American companies should seek the advice of counsel before, during, and after the assessment. Counsel with experience in dealing with FCPA issues will be well-equipped to make sure the risk analysis is efficient, comprehensive, and targeted. This information will prove invaluable when designing an anti-bribery policy. Furthermore, experienced counsel can assist in implementing the policy, modifying the policy to ensure ongoing effectiveness, and representing the company should any FCPA-related issues arise.

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The conduct of your employees can implicate statutes other than the familiar federal and state fair employment laws, and an unwary employer can find itself subject to stiff fines and unwelcomed publicity by ignoring its compliance obligations under those statutes. For example, does your company conduct business abroad, and, if so, are you familiar with the Foreign Corrupt Practices Act (“FCPA”)? If you are an entity traded on an American exchange, incorporated under the laws of the United States, or acting while in the territory of the United States, or you are an individual who is an officer, director, employee, agent, or shareholder of such a company, are a citizen of the United States, or are a person acting in the United States, you are subject to liability under the FCPA. The FCPA prohibits giving or attempting to give anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business. The phrase “anything of value” has a very broad definition and includes even charitable contributions or gifts to family members of foreign officials, and bribes come in all shapes and sizes, often making them difficult to detect.

In recent years, the Securities and Exchange Commission(“SEC”) and Department of Justice (“DOJ”) have increased their focus on FCPA compliance, including securing a record $772 million fine against one company last year. Those agencies have also been increasingly targeting (or, at least, stated their intentions to increasingly target) individual actors, in addition to the increased enforcement against companies. This means that you and your employees are at risk under the FCPA in the event of a suspected or actual violation.

A robust FCPA compliance program can be a strong defense or prevention against FCPA issues. Compliance programs should be individually and narrowly developed and tailored to a company’s needs and risks. While there is no guaranteed checklist for an effective compliance program given the unique nature of companies, some hallmarks of an effective FCPA compliance program are:

• A commitment from senior management and a clearly articulated policy against corruption;

• Well-established and -disseminated codes of conduct and compliance policies and procedures;

• Sufficient oversight, autonomy, authority, and resources for the program;

• Risk assessment, resource allocation, and due diligence proportional to the type of activity or business opportunity, the particular country and industry sector, potential business partners, level and amount of government involvement, governing regulation and oversight of the activity, and exposure to customs and immigration in conducting the business;

• Training and continuing advice throughout the company that clearly communicates, in the local language where appropriate, the policies and procedures, case studies, and practical advice for real-life scenarios individuals will encounter in their specific roles;

• Disciplinary measures that are well publicized and clearly applicable to all levels of the organization;

• Effective due diligence, review, and monitoring of transactions and dealings with third parties and vendors, as they are among the most common means through which violations take place;

• Mechanisms that facilitate and encourage confidential reporting, such as hotlines or ombudspersons, and that properly document and evaluate actual and possible FCPA issues; and

• Periodic testing, review, audit, and analysis of the effectiveness of the program to ensure it is the best program in place for your organization.

However, as employers with strong anti-discrimination and anti-harassment policies know, even the best written and most well-intentioned policies cannot guarantee insulation from liability or from investigation by the government of suspected/potential violations. In the event a company discovers a violation by its employees, the DOJ and SEC encourage self-reporting and cooperation by entities and individuals, and cooperation can facilitate and expedite any potential investigation by government authorities and possibly result in non-prosecution agreements and reduced penalties.

Conversely, failing to disclose known violations can result in harsher penalties, thus providing incentive to identify and self-report violations. For its part, the government has created incentives to increase the chances that if a company will not report violations, its employees will. The Dodd-Frank Act established a whistleblower program that rewards whistleblowers between 10-30% of total recovery when the recovery exceeds $1 million, giving financial incentive for individual employees to come forward with reports of FCPA violations. Another important consideration when developing FCPA compliance measures and programs is to ensure that the compliance program is independent of and given due weight in relation to business decisions. All too often, FCPA issues are not timely discovered when compliance programs are not properly implemented because of a perceived business cost, and companies and employees face crippling fines and punishment as a result.

In any event, companies that are navigating these waters would be wise to consult with experienced legal counsel familiar with the FCPA and the government agencies charged with its enforcement, both when developing any compliance program and when dealing with a suspected violation.

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On the eve of a trial which was scheduled to begin this week, the Securities and Exchange Commission settled a civil Foreign Corrupt Practices Act (FCPA) case it brought against two former oil services executives. The case was an outgrowth of anindustry-wide investigation the SEC had initially commenced beginning in 2010.

In February 2012, the SEC filed a complaint against Mark A. Jackson, who was the former CEO and CFO of Noble Corporation, and James J. Ruehlen, former Director and Division Manager of Noble’s Nigerian subsidiary, alleging that they authorized the payment of bribes to customs officials to process false paperwork that purported to show the export and re-import of oil rigs, which was necessary under the requirements of Nigerian law. In fact, the rigs had never been moved. The SEC alleged that the scheme was part of a design to save Noble from losing business and incurring costs associated with exporting rigs from Nigeria and re-importing them under new permits. The complaint asserted violations of the anti-bribery and books and records provisions of the FCPA. The complaint also detailed the fact that Jackson had refused to cooperate during Noble’s internal investigation of the matter and had asserted his Fifth Amendment rights and refused to testify during the SEC investigation.

The settlement with Jackson and Ruehlen was the last in a lengthy saga of FCPA actions against Noble and its former employees. Noble was initially charged with FCPA violations in a civil action in 2010. The company settled, agreeing to pay more than $8 million in fees. The SEC filed charges against Jackson and Ruehlen in 2012 following the corporate settlement and also filed charges against Thomas F. O’Rourke, the former controller and head of internal audit at Noble. O’Rourke quickly settled and agreed to pay a penalty.

Despite pursuing the action for more than two years and alleging serious wrongdoing by the defendants, including responsibility for an extensive bribery scheme, the SEC agreed to settle with Jackson and Ruehlen just two days before their trial was to commence with an injunction against violating the books and records provision of the FCPA. Although Noble had settled its own case for a hefty penalty, neither Jackson nor Ruehlen were required to pay a fine, concede a violation of the bribery provisions of the FCPA nor agree to restrictions on employment.

SEC v. Jackson et al., No. 4:12-c-00563 (S.D. Tex. Jul. 7, 2014).  

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