LONDON (TrustLaw) – The U.S. government’s efforts to crack down on those who pay bribes to foreign officials met setbacks this year following the failure of two high profile criminal prosecutions.
Last month, prosecutors from the Department of Justice (DOJ) moved to dismiss charges against more than a dozen defendants in a major bribery case involving military equipment sales to FBI agents posing as government officials from an African country. In January, another federal judge dismissed without sending to a jury the case against a Texas man accused of authorizing bribes to government officials in Mexico, on behalf of his former employer, a unit of ABB Group.
The other agency tasked with overseeing U.S. anti-corruption efforts is the Securities and Exchange Commission (SEC). Cheryl Scarboro, formerly chief of the SEC’s Foreign Corrupt Practices Act (FCPA) Unit, is seen as one of the architects of the government’s anti-graft enforcement efforts. She is now a partner in the Washington DC office of law firm Simpson Thatcher & Bartlett LLP.
TrustLaw spoke to Scarboro about the future of the FCPA – the U.S.’s much debated anti-corruption law, and the pros and cons of the Dodd-Frank whistleblower provision, which would financially reward people who provide original substantive tips leading to enforcement actions that result in sanctions exceeding $1 million.
Do you think that there has been enough judicial oversight of the FCPA?
There hasn’t been much litigation in this area and so if a particular area of a statute is open to interpretation, then typically the DOJ or the SEC will interpret it themselves and those are in the settled context. I think one recent exception has been in criminal matters where there have been arguments made, particularly in the motion to dismiss context, relating to the definition of a foreign official and what constitutes an instrumentality of a government. I think that’s a helpful exercise so that there is a clearer interpretation of the statute. I think we will continue to see more of that going forward and I think there is some indication that the DOJ is going to put out some more clarification and more guidance itself. But I think that it is correct (to say) that there is very little guidance as it relates to decided court cases in this area and that it leaves certain key areas open to interpretation.
Should the DOJ publicise its declinations (reports of cases they declined to prosecute)?
I think that it would be helpful for there to be more information relating to declinations. For example, the number of declinations in any given year. I think that it would also be helpful to get some of the thinking as it relates to that process. I do understand the flip side of that, certainly having come from the government, which is a concern that by giving the thought process on any particular manner that might be unfairly interpreted as the rules of the road for every corporation or for every individual when the facts may differ significantly from one to the other. So it’s a balancing act. I know that also one issue is not providing so much information that you’ve given (away) the identity of any of these individuals or corporations that have gotten a declination letter and in most cases aren’t interested in the whole world knowing about it.
How do you see the future of FCPA prosecutions, in terms of books and records violations and in terms of bribery?
Well I think that 2010 was a notable year in terms of the number of cases. 2011 was another notable year in terms of the number of trials and the outcomes of those trials. I think there will continue to be a heightened enforcement effort by both agencies (the SEC and DOJ). I believe that they have ramped up their enforcement efforts and their expertise in this area and I expect their work in this area to be fairly robust. I think also there will be more action by regulators in other countries. As it relates to books and records and internal controls, both the SEC and the DOJ can bring cases relating to books and records and internal controls. The DOJ is less likely to do so as it relates to internal controls because of the heightened burden and the scienter requirement. I think that the SEC will continue to bring those cases though and I think that you’ll see quite a few of them come out where they have focused on that even to the exclusion of bringing a substantive bribery charge.
Are you in favour of the Dodd-Frank whistleblower provision?
I find it to be very interesting in particular as it relates to two things. One, the tension between the government’s interest in getting information from as many sources as possible, and the interest that companies have in having robust whistleblowing programmes, so that they can first be aware of these issues and have a crack at resolving them without them necessarily being handed over first to the regulators. It remains to be seen whether this changes the dynamic within companies as it relates to the reporting of wrongdoing and whether people will continue to feel encouraged to go through their own internal mechanisms first.
The second thing is that there is likely to be an impact on FCPA enforcement, in part because of the large potential financial recovery in the cases and also because typically there’s an internal investigation which a lot of people within the company become aware of.
Why does the U.S. often get the biggest share of a global anti-bribery settlement?
Historically, the U.S. has always taken the lead in terms of enforcement of its anti-corruption laws and I think it’s viewed as being more experienced in having done these cases and (being) fairly tough in the sanctions that they impose. Whether they get a larger share or a smaller share is a matter of internal negotiation. It certainly could be based upon how much conduct took place using U.S. interstate commerce versus how much took place in another country. There’s a lot more negotiation than ever before about how those settlements should come out and how the sanctions should be shared. There have been several instances in which the government has taken into account a fine from another country in determining what its own fine should be. I think Akzo Nobel is one that comes to mind in which the Dutch prosecutors had gotten a separate fine and the DOJ took that into account in imposing its own fine. I wouldn’t say that the U.S. has taken the lion’s share. I think, for example, in the Siemens matter the Germany prosecutors had the larger share.