‘Significant Resolutions’ Of Foreign Bribery Cases Expected This Year

The surprising (and disappointing) drop in US Foreign Corrupt Practices Act enforcement actions last year should not lead to the conclusion that there has been a corresponding decrease in bribery of foreign officials by corporations.

If anything, based on the flood of whistleblower submissions in 2021 alleging FCPA violations, bribery of foreign officials and corruption have gotten worse.

So it was encouraging when a top US Department of Justice official last month said, “I would expect to see some significant resolutions in the next year.”

As reported by the Wall Street Journal, Nicholas McQuaid, principal deputy of the department’s criminal division, said at a conference, “I wouldn’t over read or really read much into the numbers of prosecutions in a given year.”

FCPA enforcement activity in 2021 was the lowest in a decade, according to Stanford Law School’s FCPA Clearinghouse. It tallied just 18 FCPA enforcement actions by DOJ and the US Securities and Exchange Commission, which was half the 10-year average, and found that only three companies disclosed new investigations by US regulators in their 2021 SEC filings.

The FCPA Clearinghouse said US sanctions in FCPA cases in 2021 totaled just under $360 million – the third lowest in a decade and a 94% drop from sanctions imposed in 2020.

The largest portion of sanctions levied last year was due to the $299 million Credit Suisse Group AG paid as part of a settlement with US and UK authorities. Regulators alleged that two bond offerings and a syndicated loan were used to perpetrate a hidden debt scheme by state-owned entities in Mozambique. The proceeds also allegedly were used to pay kickbacks to former Credit Suisse investment bankers and their intermediaries, and to bribe corrupt Mozambique government officials.

Part of the reduced enforcement activity in 2021 could be due to the transition to a new administration and the need to recalibrate enforcement priorities set under the Trump administration, which openly disdained the FCPA. Trump called the FCPA “ridiculous” and “a horrible law” before he ran for president, and his attorney general, Jeff Sessions, bemoaned, “You just simply can’t have a situation in which your competitors pay bribes and you don’t.”

However, six of the Top 10 settlements that involved FCPA charges came during the Trump years – at least some due to investigations that were opened during the previous administration. This includes the record-setting $3.3 billion in penalties DOJ and the SEC imposed on Goldman Sachs Group Inc. and a Malaysian subsidiary in December 2020 for bribing high-ranking government officials in Malaysia and the Emirate of Abu Dhabi to obtain underwriting and other business from 1MDB, a Malaysian state-owned and state-controlled fund. (DOJ said it would credit $1.6 billion of the penalty back to Goldman, in consideration of additional fines by other countries and regulators.)

Six months after taking office, President Biden delivered strong words about the US commitment to fight corruption, calling it “a risk to our national security.” He directed his national security team to develop a comprehensive strategy that would, among other goals, more effectively combat illicit finance and better hold corrupt actors accountable.

This was followed in October by a speech on corporate crime enforcement by Deputy Attorney General Lisa Monaco that got a lot of attention. She promised that DOJ was taking certain actions “to strengthen the way we respond to corporate crime” as well as making “additional changes to help further invigorate the department’s efforts to combat corporate crime.”

In December, the White House announced a “US strategy on countering corruption.” This included launching a new initiative to engage partner countries on detecting and disrupting foreign bribery and persuading US and international companies to adopt and enforce anti-corruption compliance programs.

Just as encouraging as the Biden administration’s commitment to fighting foreign bribery and corruption is the increase in whistleblowers reporting violations of the FCPA. Enforcement of anti-bribery and anti-corruption laws depend heavily on whistleblowers and the high-quality, inside information that only they can bring.

In fiscal year 2021, the SEC received 258 whistleblower submissions alleging bribery and corruption violations – a 25% jump over each of the previous three years under the Trump administration and the most since fiscal year 2016, when there also were 258 reports of FCPA violations.

The record-setting whistleblower awards issued in the past 16 months by the Commodity Futures Trading Commission and the SEC – nearly $200 million and $114 million, respectively – encouraged a flood of whistleblowers last year.

The Biden administration says all the right things about fighting foreign bribery and corruption. Now it needs to put those words into concrete actions.