February has been a big month for U.S. Foreign Corrupt Practices Act (FCPA) enforcement. It started with the U.S. Securities and Exchange Commission (SEC) quietly resolving a string of relatively small matters. Then, at the end of last week, the SEC and U.S. Department of Justice (DOJ) entered into a global resolution with VimpelCom in one of the largest FCPA and international bribery matters ever. As Assistant Attorney General Leslie R. Caldwell announced, the case represents “one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA.” In many ways, this year’s early enforcement activity isn’t surprising, but several key takeaways confirm the importance of anti-bribery and anti-corruption compliance efforts employed by organizations here and abroad.
In the last three weeks, the SEC has resolved five FCPA cases, and DOJ has entered resolutions in two other matters. It has been awhile (if ever) since the U.S. authorities have resolved that many cases in such a short amount of time. There are three important reminders from all of the activity:
1. Individuals face scrutiny from DOJ and the SEC. The issuance of the Yates Memo has certainly brought individual liability front and center for DOJ prosecutions. But it’s important to keep in mind that the SEC is equally interested in pursuing individual liability in FCPA cases. The SEC’s second case this month involved charges against the CEO of LAN Airlines for authorizing a consulting agreement with a third party, under which some money was paid to union officials in Argentina to avoid employee disruptions. The CEO agreed to pay $75,000 and certify compliance with airline policies and procedures in the future. A few weeks later, in connection with the PTC Inc. resolution, the SEC announced it had entered its first ever deferred prosecution agreement (DPA) with an individual in an FCPA matter. The SEC acknowledged that “DPAs facilitate and reward cooperation in SEC investigations by foregoing an enforcement action against an individual who agrees to cooperate fully and truthfully throughout the period of deferred prosecution.” The SEC entered into this DPA with a former employee of the company because of the “significant cooperation” given throughout the SEC’s investigation of PTC.
2. Companies must continue to push for a culture focused on compliance. VimpelCom is one of the largest telecommunication companies in the word, but it suffered from a business culture that failed to adequately fight corruption. In fact, as U.S. Attorney Preet Bharara of the Southern District of New York said in the announcement, the FCPA resolutions with VimpelCom ended charges “against corrupt corporate entities that made bribery a foundation of their business model.” That case involved more than $114 million in bribes paid to a government official in Uzbekistan over a six year period. VimpelCom and its Uzbek subsidiary paid the bribes to a shell company owned by the foreign official, and both companies knowingly concealed the payments in their books and records as consulting payments, equity transactions and reseller transactions. Simply put, this case reminds us that growing businesses cannot ignore ethical behavior and compliance obligations.
3. Multinational investigations are effective in bringing charges under the FCPA and international laws. The investigation against VimpelCom involved coordinated efforts by authorities in 10 countries. It resulted in the company and its subsidiary agreeing to pay approximately $795 million in criminal and civil penalties to U.S. and Dutch authorities. That is one of the largest bribery-related penalties ever. The investigation also resulted in the DOJ bringing two forfeiture actions seeking a total of $850 million in illegal bribes paid to the Uzbek official. The funds are currently located in Swiss bank accounts or are restrained in other accounts throughout Europe. As DOJ stated in the announcement, the actions against VimpelCom “represent [DOJ]’s commitment to both prosecute those who pay bribes and to ensure that the corrupt government officials who receive the bribes cannot use the U.S. financial system to launder their illicit gains.”
The lessons learned from these early enforcement actions are helpful when thinking of this year’s compliance initiatives. If ever in doubt, it seems more important than ever to cultivate a compliance culture that is ingrained in each individual’s decision-making process and business acumen.