One of the most dramatic and important developments in US law enforcement over the past decade has been the rise of investigations and enforcement actions by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) for violations of the Foreign Corrupt Practices Act (FCPA). Consequences to corporations for alleged violations of the FCPA have similarly escalated; in addition to disgorgement of profits, the US government has extracted unprecedentedly high penalties from FCPA violators in recent years. Indeed, the 10 highest-cost FCPA enforcement actions – all of which were resolved within the past six years – settled for amounts ranging from $152.6m (Weatherford International, in 2013) to $800m (Siemens, in 2008 – the oldest action on the list, and still the most costly). These settlements exclude, of course, the costs of lengthy internal investigations and corporate compliance measures (commonly in the tens of millions), and the loss of goodwill that results from the public airing that inevitably accompanies allegations of corporate corruption.

This flurry of enforcement activity has wrought drastic change on the compliance landscape for transnational corporations, which devote significant resources to promoting FCPA compliance among their thousands of employees and contractors operating in international fora. In particular, internal compliance, reporting and mitigation systems have grown significantly more robust in past years as companies seek to prevent corrupt practices and – when issues of noncompliance arise – to ferret them out and terminate them. Even so, the lack of binding guidelines for framing compliance programs and the lack of assurances that robust programs will reliably mitigate the DOJ’s decisions to bring criminal charges leave corporations in a state of uncertainty: despite pouring millions into meaningful compliance regimes and sincere efforts to comply with the law, corporations are no more certain than they were 30 years ago that the actions of one, or a few, rogue employees will not bring debilitating criminal liability upon an entire entity.

Jul-Sep 2014 issue

Gibson, Dunn & Crutcher LLP