Deal Diary

On November 29, 2017, Deputy Attorney General Rod Rosenstein announced the addition of an FCPA Corporate Enforcement Policy to the U.S. Attorneys’ Manual (USAM). The Policy largely codifies upon the Department of Justice’s (DOJ) 2016 FCPA Pilot Program, but makes some modifications.

This week we highlight NYU's SEC Enforcement Activity against Public Companies and Their Subsidiaries - Midyear FY 2016 Update. NYU Pollack Center for Law & Business and Cornerstone Research analyzed data in the Securities Enforcement Empirical Database (SEED). The report contains key findings for the number of filings, the classification of allegations, the enforcement venue, the timing of settlement and monetary settlements for a research sample of 364 public company defendants. The research concludes that the SEC has rapidly increased filings against public companies within the U.S. and their subsidiaries during the period from fiscal year 2010 and the first half of fiscal year 2016.

On April 3, 2016, it became public that an anonymous source had leaked 11 million confidential documents, known as the “Panama Papers,” belonging to the Panama-headquartered international law firm Mossack Fonseca. As more of the Panama Papers become public over the coming months, they will raise a host of issues for parties identified in the papers, as well as the business partners, customers, suppliers and other entities connected to those parties. This alert summarizes key legal issues for consideration as companies attempt to understand, assess and mitigate the potential impact and exposure of the Panama Papers on their business.

In a busy week for the Serious Fraud Office (SFO), the United Kingdom’s antibribery prosecutor, it has announced its first-ever deferred prosecution agreement (DPA) for bribery offences and the first guilty plea under the U.K. Bribery Act (UKBA). Both matters involved the application of the much heralded, but still infrequently enforced, corporate offense of failure to prevent bribery by associated persons, under Section 7 of the UKBA.

A U.K.-government-commissioned survey of 500 businesses known as “small and medium sized enterprises” (SMEs) in the United Kingdom released in July 2015 found that more than one-third of the businesses had never heard of the country’s principal international anticorruption law. Commissioned by the U.K.’s Ministry of Justice (MOJ) and Department for Business, Innovation and Skills in January 2014, the survey evaluated the business awareness of, compliance with and overall impact of the U.K. Bribery Act of 2010 (“Bribery Act”), the country’s antiforeign bribery statute that went into effect on July 1, 2011. 

On March 18, 2015, nearly two years after the enactment of Brazil’s 2013 Clean Companies Act (CCA), Law No. 12,846, Brazilian President Dilma Rousseff issued Decree No. 8,420 (the “Decree”) implementing the CCA. This week, an English language translation of the Decree was made available, warranting a reminder that companies and individuals doing business in Brazil must ensure their compliance with Brazil’s anticorruption legislation.

Most agree that the CCA is largely in conformance with the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act (“Bribery Act”) and other international anticorruption regimes. The CCA prohibits entities from providing, or attempting to provide, anything of value to Brazilian public officials or foreign public officials (where conduct in furtherance of bribery occurs within Brazil). Like the U.S. and U.K. anticorruption laws, this gives the CCA certain extraterritorial application. One key difference from the FCPA and the U.K. Bribery Act, however, is that the CCA imposes strict liability. The CCA does not require a showing of corrupt intent, which is required to show criminal liability under the FCPA. It also does not require that the bribe benefit the company, which is a required element of a corporate offense under the U.K. Bribery Act.

The prosecution of corporations always makes good headlines. But the emerging trends in these corporate prosecutions tend to be at the margins and therefore less reported—prosecutors commit to sustained and vigorous enforcement of white collar criminals; defense attorneys push back that sentences are overly harsh and that innocent conduct is increasingly characterized as fraud. These messages all played out among the largest annual gathering of lawyers focusing on white collar crime, the ABA White Collar Institute in New Orleans, Louisiana, earlier this month.

The Foreign Corrupt Practices Act (FCPA) was front and center at the conference, as it has been for the last decade. But at least three relatively new messages were included in the discussion.

Directors should make sure that their companies maintain robust compliance programs and disclosure controls and procedures, as the SEC has stepped up its enforcement efforts with a goal of pursuing all types of violations of the federal securities laws. SEC Chair Mary Jo White has vowed to pursue even the smallest infractions, basing the SEC’s “broken windows” enforcement policy on the theory that “minor violations that are overlooked or ignored can feed bigger ones, and, perhaps more importantly, can foster a culture where laws are increasingly treated as toothless guidelines.”ⁱ And just over a year into her tenure, she has done just that, with the SEC filing a record 755 enforcement actions in 2014.ⁱⁱ

These enforcement actions span the securities industry and include several first-ever cases. Among other things, the SEC continued its aggressive cross-border anti-corruption enforcement in 2014, filing significant actions against several companies under the Foreign Corrupt Practices Act (FCPA), and obtaining the highest-ever FCPA penalties against individuals. Signaling that “even the smallest infraction” will be pursued, the SEC recently brought enforcement actions against 34 individuals and companies for failure to promptly report their securities holdings and transactions as required under Section 13(d) or (g) and Section 16 of the Securities Exchange Act of 1934, and against 10 micro-cap companies for failing to file required Form 8-Ks disclosing certain financing agreements and unregistered stock sales.