December 31, 2009
Billy Jacobson, VP, Co-General Counsel and Chief Compliance Officer at Weatherford International, contributed this year-in-review piece highlighting the five most significant developments in the anti-bribery world this year. We thank Billy and wish everyone a happy, peaceful and rewarding 2010.
No. 1: Individual Prosecutions
By a considerable margin, the top anti-corruption story of 2009 is the U.S. DOJ’s focus on individual prosecutions. I’ve been calling 2009, in the parlance of the United Nations, the “Year of the Individual.” The first FCPA trials since 2004 highlighted this trend with all three trials this year resulting in convictions on FCPA charges for the four indictees: William Jefferson, Frederic Bourke and Gerald and Patricia Green. And, 4 others were convicted of FCPA charges this year via plea agreement. In addition, by my count (with the help of the TRACE Compendium), an astounding 20 individuals were indicted in 2009.
Corporate compliance officers know that nothing gets their business-unit colleagues’ attention quicker than the sight of executives behind bars. The DOJ and the FBI know this as well and have provided compliance professionals with plenty of cautionary tales this year.
No. 2: The UK Wakes Up
Beginning in the Fall of 2008, the UK began to awaken from its anti-corruption slumber by bringing cases against Balfour Beatty and employees of CBRN. In 2009, the positive trend continued with cases brought against Aon and Johnson & Mabey by the UK Financial Services Agency and the Serious Fraud Office, respectively.
More important than any one case, however, is the anti-bribery bill introduced to Parliament in early-2009. This legislation aims to consolidate and strengthen the UK’s current and oft-criticized panoply of anti-bribery laws. One of the more interesting features of the bill pending before Parliament is the imposition of corporate criminal liability only in the face of negligence by a corporation. Should this bill pass into law, UK companies would be daft (as they say) to fail to implement best-in-class compliance programs as such programs could well get the corporates (as they also say) a free pass from criminal liability.
In light of such progress, it is almost unfair to mention the lack of a resolution to the BAE case on either side of the Atlantic. Therefore, I won’t mention it. Not a word.
No. 3: Control Person Liability
With its case against officers of Nature’s Sunshine Products, Inc. (NSP), the SEC broke a bit of new ground by charging “control person” liability for books and records and internal controls violations. Section 20(a) of the Securities Exchange Act of 1934 essentially provides that any person who controls another that violates the act may be jointly and severally liable along with the violator. The SEC alleged that two NSP officers had the responsibility to oversee the conduct at issue, including the books and records and internal controls of the business and so held the officers liable under Section 20(a) without alleging that the officers themselves had personal knowledge of the FCPA violations.
It remains to be seen whether the SEC will use this theory in future cases and if so, how often, but the potential reach of 20(a) liability quite significant and is yet another wake-up call to any companies that have not yet instituted robust internal controls. Additionally, anytime one of the enforcement agencies gets at all creative in imposing liability upon corporate officers it is worth noting.
No. 4: The Munich Prosecutors’ Christmas Special
In December 2008, the Munich Public Prosecutors Office and the DOJ brought us the landmark Siemens prosecution. Any thoughts that the good folks in Munich would rest on their laurels were dispelled just a few weeks ago with their prosecution of the MAN Group for corrupt activities involving more than €50M in suspicious payments in several countries. The MAN Group was fined more than €150M and paid an additional €20M to settle unpaid taxes.
The Germans -- or at least those in Munich – have now made it clear that they are taking their corporate corruption laws seriously. And so, the pendulum continues to swing in the right direction with countries other than the U.S. continuing to crack down on foreign bribery. It will likely be some time before any country can match the record of the U.S. in this area, but there is more reason than ever to believe that the mythical “level playing field” for U.S businesses will one day be a reality.
No. 5: The OECD’s Statement on Facilitating Payments
In 2009, the OECD’s Working Group on Bribery considered amending the OECD’s anti-corruption convention to eliminate the allowance of facilitating payments. The odds were against the working group recommending that the convention be altered to prohibit such payments, but the fact that the group was giving the issue consideration and providing a forum for such discussion was, in and of itself, progress. In the end, the OECD recognized the “corrosive effect of small facilitation payments” while recommending that member countries “encourage companies to prohibit or discourage” their use.
Many companies have begun to ban facilitating payments within their own organizations and are, somewhat paradoxically, ahead of the U.S. government and the OECD on this issue. While the OECD working group did not correct this situation, it did make an important statement about the corrosive effects of such payments. The working group’s recommendation makes my list of Top 5 for 2009 not so much for the impact it had this year, but because of the effect I think it will have in years to come as the movement to ban facilitating payments grows stronger.