FCPA: The New SEC and DOJ Enforcement Priority – Part X, Pending Cases and Conclusion
Significant pending cases
There docket for this year contains significant and high profile FCPA cases which are heading for trial. One of these cases is the sixteen-count indictment against U.S. Congressman William Jefferson. U.S. v. Jefferson, 07-00209 (E.D Va. Filed June 4, 2007). The indictment alleges that the Congressman promised to make a $500,000 “front-end payment” to a Nigerian official for regulatory approvals. In addition, the scheme included a “back end payment” of 50% of the joint venture’s profits to he official. The charges include alleged violations of the FCPA anti-bribery provision along with wire fraud, money laundering, obstruction of justice and RICO.
A second significant FCPA case heading toward trial later this year is U.S. v. Smith, No. 07-69 (S.D. Cal. Filed April 25, 2007). Mr. Smith is the co-founder of Pacific Consolidated Ind. The indictment claims that the defendant made more than $300,000 in bribes to an official of the Ministry of Defense for the award of Royal Air Force contracts. The charges include alleged violations of the FCPA anti-bribery provisions, money laundering and tax offenses.
Analysis and Conclusions
A review of the FCPA cases brought over the last year demonstrates that both the SEC and DOJ have reemphasized FCPA enforcement. Last year, there were a record number of cases. The large number of open investigations at year end and the docket of significant cases heading toward trial clearly suggest that this trend will continue.
Key factors to consider in view of the increased emphasis on FCPA enforcement include:
• the expansive view of the statutes used by the SEC and DOJ, including as to the key “obtain/retain business” clause and the “promotional expenses” provisions;
• increased size of the fines being imposed, particularly where there is a prior violation;
• increased emphasis on expansive industry and “other subsidiary” investigations;
• focus on individuals;
• emphasis on due diligence in advance of mergers to identify past violations which may not have been previously discovered;
• inconsistent use of non-prosecution and deferred prosecution agreements;
• impact of prior consent decrees;
• increased use of monitors and undertakings; and
• opportunities for coordinated resolutions among regulators, possibly obtaining “joint” credit.
All of these points suggest that issuers and their officers, directors and general counsels would be well advised to consider: 1) effective compliance procedures consistently applied; 2) periodic education of employees; 3) careful assessment of “country risk” when doing business abroad; and 4) complete due diligence when hiring agents – due diligence which is periodically reviewed and updated.