The United States has ratified the OECD Convention on Combating Bribery of Foreign Public Officials and the UN Convention Against Corruption. The US has signed, but not ratified, the Council of Europe Criminal Law Convention on Corruption.
The Foreign Corrupt Practices Act (FCPA) is the main federal legislation relating to foreign bribery.
A variety of domestic statutes (described in detail in 1.1.3 Guidelines for the Interpretation and Enforcement of National Legislation) govern domestic bribery or other corruption involving state or federal government officials and employees. Most of the relevant federal statutes are found in Title 18 of the United States code. Each state has its own criminal laws prohibiting bribery or corruption-related offences. Some local or municipal governments may have anti-corruption or ethics regulations.
The most important federal anti-corruption agencies actively issue and revise public guidance documents, which are important resources but are not legally binding.
The two most relevant sources of guidance are:
The Justice Manual includes a section on the DOJ’s Principles of Federal Prosecution of Business Organizations, which lays out the agency’s approach to investigating and prosecuting corporations. The Principles feature important information about how prosecutors approach businesses that co-operate with federal investigations.
In addition to revisions of official guidance such as the Justice Manual and the FCPA Resource Guide, new enforcement approaches may be announced on an ad hoc basis through memoranda, public statements by agency officials, or other publications. State agencies sometimes take a similar approach.
There have not been significant legislative amendments to the key corruption statutes in 2019.
The list below identifies the federal criminal statutes that are frequently used to prosecute bribery and corruption. Individual states may have similar statutes.
A bribe may be “anything of value” under the FCPA and domestic statutes. “Things of value” have included cash payments, benefits in kind, lavish gifts, excessive hospitality, charitable donations, contracts, or employment relationships.
The receipt of a bribe is an offence for domestic bribery under 18 U.S.C. § 201, but not under the FCPA. The US government has employed other laws (such as money-laundering statutes) to prosecute foreign officials who receive bribes, however.
A bill that would explicitly authorise US prosecutions of foreign officials who accept or demand bribes, called the “Foreign Extortion Prevention Act,” was introduced to Congress in 2019. The bill has not advanced beyond the very early stages of the US legislative process, however, and does not presently have legal effect.
Merely proposing or accepting an improper advantage may constitute an offence. Generally, US anti-corruption statutes do not require that the desired results occur, as long as the perpetrator acted with the requisite intent. Indeed, US authorities often criminally prosecute defendants under broad conspiracy statutes in situations where it would be impossible for the expected results to occur — for example, by using undercover law enforcement agents who are only pretending to be public officials or connected to public officials.
Under domestic bribery laws, federal and state officials, including elected political figures and career employees, are generally restricted in the gifts and hospitality they may receive from sources outside the government. Some officials, such as members of Congress, may be required to disclose the gifts they receive to the public. For federal employees, gifts over USD20 are generally prohibited (and they generally may not accept more than USD50 in a year from a single non-government source). Travel expenses are a separate, complicated area of law and also require an analysis of internal government ethics rules. Whether or not a government employee’s travel may be funded by a non-government source often depends on the purpose of the trip and the specific rules of the agency where they work.
The FCPA does not limit foreign officials’ ability to accept gifts, hospitality, etc, but such expenses can be “things of value” that can give rise to FCPA liability.
The FCPA permits persons subject to its jurisdiction to make “facilitating or expediting payment[s] … the purpose of which is to expedite or to secure the performance of a routine governmental action” by a foreign official. In practice, this exemption is read very narrowly.
The domestic bribery statute does not have an equivalent provision. It is a separate crime to pay a “gratuity,” which is a facilitation payment made on account of an official act but not with an intent to influence it. Courts have held that if an official demands payment to perform a routine duty, a defendant may raise an economic coercion defence to the bribery charge.
Failing to prevent bribery is not a specific offence under US law (and US law generally does not criminalise failures to prevent a crime).
The FCPA Resource Guide advises that state-owned or state-controlled companies may be “instrumentalities,” so that their employees could be considered “foreign officials.” Many factors are relevant in determining whether such a company is an “instrumentality,” including, for example: “the foreign state’s extent of ownership of the entity; the foreign state’s degree of control over the entity (including whether key officers and directors of the entity are, or are appointed by, government officials); the foreign state’s characterisation of the entity and its employees”; “the purpose of the entity’s activities”; “the entity’s obligations and privileges under the foreign state’s law” and “the general perception that the entity is performing official or governmental functions.”
In practice, criminal and civil FCPA charges often involve payments or gifts to employees at state-owned or state-controlled enterprises.
The bribery of foreign public officials is also criminalised. The FCPA prohibits corrupt payments to foreign public officials for the purpose of obtaining or retaining business opportunities. Likewise, foreign bribery may be prosecuted under the Travel Act.
Commercial bribery is primarily regulated by state rather than federal law. For example, New York Penal Law § 180.00 provides that “[a] person is guilty of commercial bribing in the second degree when he confers, or offers or agrees to confer, any benefit upon any employee, agent or fiduciary without the consent of the latter's employer or principal, with intent to influence his conduct in relation to his employer's or principal's affairs.” Because several US states have criminalised commercial bribery, the DOJ has taken the position that violations of such state commercial bribery laws can be predicate offences under the Travel Act.
Federal prosecutors may also charge private bribery or kickback schemes as mail or wire fraud under an “honest services' fraud” theory.
No federal criminal statute uses the term “influence peddling.”
As noted elsewhere, conduct involving improper use of official authority, especially where a private party receives an “undue advantage,” may violate a variety of federal or state laws, including the federal fraud and conflict of interest statutes, abuse-of-power laws, or lobbying regulations.
The FCPA specifically prohibits giving things of value to a foreign official for purposes of “securing any improper advantage” in connection with obtaining or retaining business.
Conduct involving foreign officials may also implicate federal or state laws on fraud, conflicts of interest, or lobbying. Acting on behalf of foreign officials may also violate the US law requiring foreign government agents to register with the federal government.
The FCPA requires “issuers” (generally speaking, entities whose securities are registered with the SEC and/or entities that are required to file periodic reports with the SEC) to keep accurate books and records and to establish and maintain a system of internal controls adequate to ensure that the company’s assets are managed in compliance with management’s instructions. For accounting violations, the SEC may impose civil penalties, seek injunctive relief, enter a cease-and-desist order and require disgorgement of tainted gains. Civil fines may be up to a maximum of USD725,000 or the gross amount of the pecuniary gain per violation. Neither materiality nor knowledge is required to establish civil liability.
The DOJ has authority over criminal accounting violations (ie, where persons “knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record, or account” required to be maintained under the FCPA). Penalties for criminal violations of the FCPA’s accounting provisions are set forth below.
This conduct may be covered by 18 U.S.C. §§ 641 or 654.
This conduct may be covered by the federal conflict-of-interest laws at 18 U.S.C. §§ 207-08.
This conduct may be covered by 18 U.S.C. §§ 641, 654, or 666.
This conduct may be covered by the “honest services” fraud statute or conflict-of-interest rules.
The FCPA and domestic statutes apply to offences committed through an intermediary.
Liability against a principal may arise for payments made by an agent or intermediary if the principal “knew” about misconduct. This includes when the principal was aware of a high probability that the agent was making improper payments, even if the principal did not know about a specific payment or consciously avoided learning about the payment (ie, remained “wilfully blind” to it).
Companies subject to US jurisdiction commonly conduct due diligence on prospective intermediaries to mitigate these risks. “Red flags” in this type of diligence include commission payments to the intermediary in excess of market value; family or other relationships between an agent and a government official; a recommendation of a particular agent by a government official; the absence of defined, legitimate services to be provided by the intermediary; the absence of a written contract with the intermediary; or an agent’s refusal to agree contractually not to pass on any portion of his or her fee to a government official.
Most federal crimes are subject to a five-year statute of limitations. In some circumstances, prosecutors may be legally permitted to charge defendants for conduct that is more than five years old. For example, if the conduct is part of an ongoing scheme or conspiracy, the limitations period begins to run at the end of the scheme. However, as long as one act in furtherance of the conspiracy occurred within the five-year period, a conspiracy charge would still be timely.
State statutes of limitations vary between jurisdictions.
Defendants are often prosecuted in the US even where most of the criminal conduct was committed abroad, but extra-territorial jurisdiction varies from one statute to another.
Non-US conduct may be covered by US law where either the specific statute applies extra-territorially, or there is a US nexus (eg, the scheme involves a US bank account).
US law on extra-territoriality is complex and changes with judicial decisions and legislative action. Different statutes apply outside the US in different ways. US statutes are presumed not to have extra-territorial effect unless they include a “clear indication” to the contrary. Without a “clear indication,” courts examine the statute’s “focus” to determine whether an alleged violation is “domestic.” The law continues to change in this area; some courts have found that domestic conduct is necessary, but not sufficient, to apply US law to claims that mostly arise overseas.
As an initial point, US law applies on US soil — so if individuals are visiting the US (for business or pleasure), they face increased US legal risk over any business they do while on their trip. Secondly, US law often applies to US citizens, permanent residents (ie, “green card” holders), and entities organised under US law anywhere in the world. Non-US transactions could be exposed to US legal risk because some of the personnel are US nationals.
Criminal conduct outside the US could result in FCPA liability under one of four theories: issuer liability, domestic concern liability, liability as an agent of an issuer or domestic concern, and, potentially, conspiracy/accomplice liability.
Issuers are also subject to the FCPA’s accounting provisions everywhere in the world.
Many of the US domestic bribery statutes do not apply extra-territorially — and, as noted above, the presumption is that most US criminal statutes do not apply extra-territorially. For example, courts have ruled that 18 U.S.C. §§ 666, 1341, 1343, and 1346 do not apply extra-territorially.
It is important to note, however, that even if specific statutes are not applied extra-territorially, non-US conduct may fall under the scope of a statute that does, such as the Travel Act or some charges under 18 U.S.C. § 371. For example, a court has ruled that a defendant who allegedly accepted a bribe in Paris violated the Travel Act, regardless of whether 18 U.S.C. § 201 applied extra-territorially.
Moreover, statutes involving domestic bribery — that is, bribes paid to US officials — are likely to have a US nexus. Authorities are more likely to rely on a US nexus for jurisdictional arguments than a potentially complex extra-territoriality theory.
Even US laws that do not have extra-territorial effect may apply in cases involving foreign conduct if certain US connections exist, including emails sent through a US server, telephone calls placed to or from the United States, or US dollar-denominated transactions clearing through US correspondent bank accounts.
Under general principles of US law:
Under the doctrine of respondeat superior, a corporation may be held criminally liable for the acts of its employees, agents, officers, etc, provided that:
Corporate prosecutions are more common for FCPA violations than domestic bribery, but both are possible.
High-level directors, officers, etc, need not be involved for corporate criminal liability to apply. Any employee or third-party contractor can incur liability on behalf of a corporation.
Finally, a subsidiary’s criminal conduct may be imputed to its parent corporation, if the subsidiary is the parent’s agent. To make this determination, US authorities evaluate whether the parent controls the subsidiary, including through knowing about and/or directing the subsidiary’s actions.
Parallel Individual and Corporate Liability
While no individual need be convicted in order for a company to face liability, DOJ policy emphasises individual accountability. Authorities often look favourably on co-operating companies that identify key individuals involved in misconduct, and may consider such efforts when assessing a company’s co-operation (and any related reduction in penalties).
When one company merges with or acquires another, the successor generally assumes the predecessor’s liabilities under US law, including criminal liabilities. Prosecutors and regulators, however, sometimes decline to act against companies that conducted comprehensive pre-acquisition due diligence and voluntarily disclosed and remediated any potentially problematic conduct identified during the diligence.
The DOJ has held successor companies liable for the acts of predecessor companies following mergers and acquisitions when the misconduct continued after the transaction, however. Authorities may still take action against the predecessor (if they would have had jurisdiction over it), but the FCPA Resource Guide emphasises the value in a company with a robust compliance programme acquiring a company without one. The DOJ has stated that it will treat fairly companies that conduct post-transaction diligence, report and remediate any potential misconduct, and co-operate with follow-up DOJ investigations.
The FCPA includes two affirmative defences to anti-bribery charges, codified at 15 U.S.C. § 78dd-1(c). First, there is a defence if the payment, offer, etc “was lawful under the written laws and regulations of the…[relevant foreign] country.” The second defence provides that “reasonable and bona fide expenditures, such as travel and lodging expenses…was directly related to the promotion, demonstration, or explanation of products or services; or the execution or performance of a contract” with a foreign government.
In practice, defendants also commonly claim that they lacked the requisite intent to commit a corruption crime, that the conduct did not involve an “official act” by a government official, or that there was no quid pro quo in which a benefit was offered in exchange for an official act.
The FCPA does not recognise a formal defence based on adequate procedures, but, as a practical matter, prosecutors take the adequacy of compliance controls into account when making charging decisions.
As with the defences themselves, exceptions to US criminal defences generally arise from common law, rather than specific statutory provisions. For example, a person may not be able to rely on an “advice-of-counsel” defence where the advice was obtained in bad faith (eg, they withheld key facts from outside counsel).
In general, there are no statutory de minimis exceptions for violations of US criminal laws (although, as previously noted, US laws permit certain de minimis gifts for government officials). Because of US authorities’ considerable prosecutorial discretion, however, enforcement may be less likely where only de minimis amounts are involved. As noted above, small payments related to routine government actions may fall within the FCPA’s narrow exception for so-called “facilitation payments.”
The key US anti-bribery and anti-corruption laws do not exempt any industry or sector.
A potential defendant’s industry or sector may informally be factored into decisions about how the government resolves a potential violation, however. For example, government authorities may be willing to consider how to investigate defence companies without publicising sensitive national security information.
The Justice Manual and the US Sentencing Guidelines (USSG), a set of advisory rules designed to inform judges’ discretion when imposing criminal sentences, both encourage companies to self-disclose voluntarily misconduct that they identify to the appropriate US authorities by offering “credit” for such co-operation. Co-operation credit is a key aspect of US criminal and regulatory defence, and it often features prominently in authorities’ decisions about whether (and what type) of action to bring, as well as providing a basis for reductions in penalties and other negative consequences of enforcement actions.
In addition to the USSG, both the Justice Manual and the FCPA Resource Guide discuss self-reporting and co-operating with law enforcement, and the DOJ has provided guidance on the types of factors it considers in assessing a company’s compliance programme when investigating a corporate entity (the “US Compliance Guidance”). The DOJ is not legally obliged to follow the US Compliance Guidance, which is similarly not binding on other US government authorities. Even so, the DOJ and others generally take these factors (or similar ones) into account.
The DOJ takes a functional approach to the US Compliance Guidance — the agency does not simply verify whether a compliance programme includes certain components (eg, a whistle-blower programme). Instead, the US Compliance Guidance emphasises that the DOJ will make an individualised assessment of a company’s compliance programme based on that company’s particular risk profile and specific context. Indeed, the US Compliance Guidance notes that there is no “rigid formula” for assessing compliance programmes and that the topics it addresses are not exhaustive.
While recognising that a compliance programme must be tailored to a company’s particular risk profile, the Compliance Guidance identifies best practices that are common to effective compliance programmes. These practices include:
The Justice Manual also includes the FCPA Corporate Enforcement Policy (the CEP). The CEP establishes a rebuttable presumption that the DOJ will decline to prosecute a company for FCPA violations if the company (i) voluntarily self-discloses misconduct, (ii) fully co-operates with the DOJ’s investigation, and (iii) takes timely and appropriate remedial action. The CEP provides insight into how the DOJ assesses compliance and remediation and potential penalty reductions for co-operating companies that do not qualify for a declination. Recent DOJ actions indicate that it will apply the approach to leniency set out in the CEP to other kinds of misconduct, beyond FCPA violations.
In 2019, the DOJ revised the CEP to reflect changes in DOJ policy and practice, including the following points:
Violating the FCPA’s substantive anti-bribery provisions may result in up to five years’ imprisonment and/or a fine of up to USD250,000 for each offence committed by an individual. Corporations may be punished by fines up to USD2,000,000 per violation.
Wilful violations of the accounting provisions may result in criminal fines of up to USD25,000,000 for a legal entity. Individuals may be required to pay fines up to USD5,000,000 and/or serve as many as 20 years in prison. Moreover, the DOJ is authorised to seek a fine of up to twice the benefit that the defendant obtained by making the corrupt payment(s), which often represents a far greater amount than the maximum fines noted above.
Defendants may be required to pay civil monetary penalties of USD10,000 for each violation of the anti-bribery provisions, whether by an individual or legal person. The DOJ and the SEC may also seek civil disgorgement penalties for books and records' violations.
Penalties for violating domestic bribery or fraud laws vary by jurisdiction.
For example, violations of the federal mail or wire fraud statutes may result in fines and up to 20 years’ imprisonment (or 30 years’ imprisonment, if the violation involved a financial institution or presidentially declared emergencies). The maximum penalty for violating 18 U.S.C. § 201(b) is 15 years in prison and/or substantial monetary fines; 18 U.S.C. § 201(c) has a maximum prison sentence of two years and/or fines.
Aside from imprisonment and monetary fines/penalties, an anti-corruption investigation (or even allegations that a company has violated bribery or corruption laws) could lead to several collateral consequences that could prove extremely damaging to a business or individual. Such an investigation could lead to debarment from contracting with the US government or international financial institutions, loss of important regulatory statuses under US law, and/or termination of commercial relationships.
As noted above, the Justice Manual, FCPA Resource Guide, and other publications provide important guidance on how agencies assess penalties.
The US Sentencing Commission guidelines (USSG) review a number of factors that may warrant enhanced or mitigated sentences. For example, the greater the monetary loss caused by a corrupt scheme, the more severe the recommended sentence will be. Generally speaking, bribery and other white-collar crimes do not have mandatory minimum sentences, but repeated offences would be more severely punished.
The USSG permit courts to reduce criminal penalties where a company has an effective compliance programme; the DOJ often uses the USSG as a baseline to assess penalties in corporate resolutions. Chapter 8 of the USSG provides guidelines for sentencing organisations that have been convicted of a crime. This chapter establishes the elements of an “effective compliance programme”; companies with such programmes may be eligible for substantial reductions from the sentence that the USSG would otherwise recommend.
The national legislation does not establish an affirmative duty to prevent corruption (although, as noted elsewhere, US “issuers” are required to maintain an adequate system of internal controls and accurate books and records).
In general, there is no such duty in US law. Depending on the specifics of a particular violation, however, US individuals and/or companies may be exposed to liability for failing to disclose the violations (eg, if a violation exposes a US securities issuer to “material” risks, the issuer may face civil or criminal liability for failing to disclose the risk to its shareholders).
As discussed elsewhere, disclosure and co-operation with a subsequent government investigation often helps a company or individual reduce a potential penalty.
The United States has an extensive body of law regarding whistle-blowing. Broadly speaking, US law generally protects whistle-blowers from retaliatory action taken against them for reporting their reasonable belief of a possible violation of many federal or state laws, including violations of federal securities or commodities laws or other types of covered violations. The scope of protected whistle-blower activity varies depending on the setting and US jurisdiction.
For example, the Sarbanes-Oxley Act (SOX) protects employees of publicly traded companies and their affiliates from retaliation for reporting alleged mail, wire, bank or securities fraud and related violations.
Standard components of a whistle-blower protection claim include allegations that:
The details of a permissible whistle-blower protection claim (such as the statute of limitations) vary from one statute to another. For example, SOX requires an employee to file a written complaint within 180 days after an alleged retaliation, while the Dodd-Frank Act permits claims for up to ten years.
The SEC and CFTC have programmes to pay monetary awards to whistle-blowers who voluntarily provide original information about a violation of relevant laws (including bribery or corruption-related offences) that leads to a successful enforcement action. Whistle-blowers may be entitled to an award if the agency recovers a monetary sanction over USD1,000,000. The SEC and CFTC are required to give all entitled whistle-blowers an award of at least 10% and as much as 30% of the penalties collected in the enforcement action.
Likewise, a whistle-blower who files a civil action under the False Claims Act or similar state laws alleging false representations in connection with a government-funded programme may be entitled to receive a substantial award based on the damages suffered by the relevant government agency. These suits may involve corruption-related allegations (eg, that a government contract was awarded based on a false representation that the contractor was not affiliated with any public officials). The state or federal government generally has the option to intervene in these actions, but the suits may proceed to judgment without any such intervention. There is an active plaintiffs’ bar in the United States dedicated to bringing these actions.
Under some regimes, covered entities must adopt whistle-blowing procedures. For example, SOX requires companies to establish policies for the receipt, retention and treatment of complaints about the company’s accounting, internal accounting controls or auditing matters. For risk-management purposes, many businesses formalise and document internal compliance with the various whistle-blower protection requirements.
The list below details the key statutory whistle-blowing provisions at the federal level, along with citations.
For further detail, the websites for the SEC and CFTC whistle-blower programmes are: https://www.sec.gov/whistleblower (SEC) and https://www.whistleblower.gov/ (CFTC).
There is no US federal government agency tasked exclusively with enforcing anti-bribery and anti-corruption laws, although a variety of federal agencies share authority over various aspects of US anti-corruption issues.
State and local governments may have specific anti-bribery and anti-corruption agencies, although most state anti-corruption efforts reflect the federal approach, with criminal enforcement given to prosecutors and broader oversight and/or civil enforcement powers granted to state ethics agencies, inspectors general, election regulators, etc.
There are multiple anti-bribery and anti-corruption enforcement bodies in the US.
The DOJ is the most prominent criminal authority. The DOJ generally prosecutes all federal crimes, including violations of the FCPA and domestic anti-bribery statutes. State prosecutors or attorneys general may also have authority to prosecute criminal violations of state anti-bribery or anti-corruption laws.
The SEC, which is generally charged with administering federal securities laws, civilly enforces violations of the FCPA involving US securities issuers.
In March 2019, the CFTC (the federal commodities regulator) claimed authority to take civil enforcement actions based on foreign corruption impacting US commodities markets and entities trading on those markets. The CFTC’s “Advisory on Self Reporting and Cooperation for [Commodity Exchange Act] Violations Involving Foreign Corrupt Practices” takes the position that the CFTC’s jurisdiction extends over individuals and entities that may not be required to register with the CFTC, but whose corrupt conduct affects commodities markets. The CFTC expressed that self-reporting misconduct (in addition to co-operation and remediation) could result in significantly more favourable results for companies.
Domestic anti-bribery and anti-corruption laws are civilly administered by a wide variety of agencies and authorities. For example, at the federal level, the Department of Justice’s civil division may civilly enforce aspects of federal ethics laws (eg, the Ethics in Government Act). The Office of Special Counsel and the Office of Government Ethics, as well as agency- or branch-specific ethics bodies, also play a role in formulating, administering, and enforcing anti-corruption laws and regulations. Generally speaking, states have similar bodies that govern state government functions.
There are other civil enforcement agencies that, although not specifically charged with enforcing anti-corruption or anti-bribery laws, have authority over related areas of law that anti-corruption practitioners may wish to note. For example, the Federal Election Commission pursues civil penalties against corporations that donate to political campaigns in violation of federal campaign finance laws.
In light of this complex enforcement landscape, Deputy Attorney General Rod Rosenstein announced the DOJ’s “piling on” policy on 9 May 2018. The policy instructs DOJ employees to co-ordinate with one another and with other domestic and foreign regulators when penalising on a company to avoid “a risk of repeated punishments that may exceed what is necessary to rectify the harm and deter future violations.”
The process of self-disclosure and/or applying for co-operation credit is likely to be highly fact-specific and varies from one agency to another. Reporting violations of the FCPA to the DOJ or SEC, for example, may involve a written or oral outreach to the relevant personnel at DOJ or SEC Enforcement Division following an internal investigation. Ongoing co-operation may require providing documents or witnesses to the enforcement agency, making presentations to the enforcement agency, and providing estimates of the scheme’s impact (eg, the company’s gains or losses arising from a corruption scheme).
As discussed above, US authorities have extensive discretion to grant defendants credit for self-reporting and other forms of co-operation, up to and including declining to bring enforcement actions entirely.
US enforcement agencies also have discretion to resolve violations of law through negotiated agreements. These agreements account for the vast majority of criminal resolutions in the United States. By some accounts, over 95% of US criminal cases are resolved by plea agreements, and the proportion is likely even higher for actions against corporate defendants. There are three main types of negotiated agreements: non-prosecution agreements (NPAs); deferred prosecution agreements (DPAs); and plea or settlement agreements, each of which is described below.
State and federal criminal prosecutors all have the authority to enter into plea agreements. DPAs and NPAs are available at the federal level and may be available in some states, depending on local laws and the powers of the relevant agency. Regardless of the precise form, negotiated resolutions are extremely common in most, if not all, US enforcement contexts. Negotiated resolutions (especially corporate resolutions) often include features such as: a fixed term of years during which the defendant must comply with the terms of the agreement or risk the government pursuing a formal action; monetary penalties; obligations to cease ongoing violations, remediate harm caused to victims, and improve internal processes to prevent future violations; reporting requirements (eg, the company must report any violations of law or the negotiated resolution directly to the enforcement agency); and, often, compliance monitors, who are appointed as neutral third parties to oversee the defendant’s compliance with the law and the agreement, report to the government on the defendant’s activities, and review and audit the defendant’s activities.
Plea agreements are used in criminal cases and require the defendant to acknowledge guilt. Pleas must be approved by a judge and result in the entry of a conviction against the defendant. In practice, courts rarely modify or reject plea agreements proposed by the parties, but it is possible for them to do so.
Civil regulators like the SEC use settlement agreements to the same effect. A settlement agreement does not necessarily require an admission of liability or wrongdoing (although the regulator may demand one). Nor does a settlement agreement necessarily need to be approved by a court or automatically result in the entry of a judgment against the defendant in the same way that a plea agreement results in a conviction.
See 1.3.2 Geographical Reach of Applicable Legislation. US enforcement agencies’ jurisdiction generally reaches as far as the statutes they enforce. Civil regulators’ subject-matter jurisdiction is generally more circumscribed than that of criminal authorities. For example, the SEC can only take civil enforcement actions based on conduct affecting US securities issuers or their personnel, the CFTC can only civilly enforce laws relating to US commodities markets, and the DOJ can enforce criminal violations affecting either securities or commodities markets.
Ng Lap Seng: this prosecution involved a Chinese billionaire and real estate developer who was convicted at trial of FCPA and other related charges. The facts underlying his conviction involved a scheme to bribe officials at the United Nations in exchange for support for constructing a conference centre in Macau.
This case was significant because it draws a sharp distinction between the FCPA and US domestic bribery laws. As previously noted, 18 U.S.C. § 201 prohibits public officials from “receiv[ing] or accept[ing] anything of value” in exchange for being “influenced in the performance of any official act.” A 2016 US Supreme Court decision ruled that an “official act” must be a specific, focused, and formal exercise of government authority; simply speaking to another official or setting up a meeting did not fit the definition of an “official act.”
Seng sought to extend that defendant-friendly definition of an “official act” to the FCPA. The Second Circuit Court of Appeals rejected his attempt. The court found instead that the FCPA contemplates a broader set of benefits that, when exchanged for “anything of value,” may give rise to criminal liability.
Sons and Daughters: over the last several years, multiple international financial institutions have paid substantial FCPA penalties to the SEC and other US authorities based on the hiring practices of the banks’ non-US units (largely in the Asia-Pacific region). Banks were hiring interns and full-time employees based on their connections to government officials or key clients; these candidates were often unqualified.
Varsity Blues: in one of the most high-profile criminal cases of the past year, dozens of parents and employees at prominent US universities were charged with honest services fraud for a commercial bribery scheme. In a scheme orchestrated by a Massachusetts-based educational consultant, the parents conspired to bribe college admissions officials, inflate students’ scores on entrance exams, and otherwise fraudulently ensured that their children would be admitted to the schools.
The 2018 annual report of the DOJ’s Fraud Section states that the FCPA Unit charged 31 individuals with FCPA violations in 2018, 18 of whom pleaded guilty; in the same year, the Fraud Section filed six corporate criminal enforcement actions, resulting in nearly USD600,000,000 in fines, penalties, and forfeiture.
FCPA resolutions have included some of the biggest monetary penalties in US criminal or regulatory history. Many penalties have reached into the hundreds of millions of dollars.
Individuals, too, can pay a substantial price for violating bribery or corruption statutes, either in terms of monetary fines or prison time. Defendants are routinely sentenced to years in prison for violating US laws against bribery or corruption schemes; typical prison terms are often less than ten years, but may be longer. For example, telecommunications executive Joel Esquenazi was sentenced to 15 years in prison for his involvement in a Haitian bribery scheme that violated the FCPA.
Anti-bribery and corruption enforcement in the US is routinely subject to assessment by the US government itself, as well as civil society organisations and international institutions. A 2012 OECD follow-up to its 2010 report, for example, characterised US anti-bribery enforcement as “robust…producing significant fines, disgorgements, and other financial penalties against corporations.”
More recently, a 2018 Transparency International report included the US as one of only seven major exporting countries (among the 44 nations evaluated) that have active or moderate law enforcement resources committed to investigating and prosecuting bribery of foreign public officials. The report identified a number of strengths, including active enforcement, transparent data about the enforcement, and public guidelines for seeking leniency. The Transparency International report noted that the FCPA’s recognition of “facilitation payments” is the chief inadequacy in US anti-corruption law (the report noted “no significant inadequacies in the US legal framework”). The report’s recommendations included:
Corruption is a very high-profile issue in the US. As a result, many state and federal bodies are considering proposals to fill perceived gaps in US anti-corruption law. Given the unpredictable nature of US politics and the number of agencies with jurisdiction, it is difficult to predict whether any of these proposals are likely to be successful. For example, it is unclear whether the draft Foreign Extortion Prevention Act will have the Congressional support it needs to become law.
As a general matter, there do not appear to be any other pending bills before Congress (or publicly announced rule changes at the DOJ) that would likely substantially alter the scope or practice of current federal anti-corruption laws.
The American vision of truly global enforcement of anti-corruption laws has come into sharper focus in the last few years. Corporations and their personnel operating in the current competitive global environment should take note of the large number of follow-on prosecutions following US convictions. 2019 has witnessed yet another increase in independent anti-corruption investigations by non-US enforcement authorities and continued growth in anti-corruption laws around the world. While the American authorities have long pressed for such global enforcement, the US Justice Department (DOJ) and the Securities and Exchange Commission (SEC) now face real competition in the quest to stamp out corruption and to fill their treasuries while doing it. Corporations and their counsel must recognise the increased legal risk these developments bring and prepare for an increase in scrutiny from all directions.
When the United States was the primary leader in the fight against corruption, the decision on what to do in the wake of serious bribery allegations was fairly linear: investigate, disclose, remediate and settle. But now corporations faced with such allegations have a complex web of risk analysis to consider: which anti-corruption laws apply, what is the nationality of the alleged offenders, where did the conduct occur, what rights do the witnesses have in their jurisdictions, what obligations does the corporation have, how is the relevant data regulated, what is the risk of either follow-on or joint prosecutions, who is the primary regulator and, often the most difficult question, should the company self-disclose. Governments worldwide are more eager than ever to get their bite at the lucrative penalty apple and less willing to step aside and allow the US government to take the lead.
The proliferation of non-US prosecutions and anti-bribery laws commends caution, deliberate investigations, and thoughtful consideration before the traditional disclosure, designed to appeal only to the United States. And above all, this complex enforcement environment should lead all businesses engaged in cross-border business to avoid these difficult challenges in the first place by proactively spending more time, effort and resources on robust anti-corruption compliance.
Notable Examples of Follow-on Prosecutions
The massive settlement payments traditionally made under the US Foreign Corrupt Practices Act (FCPA) — which are on track to be the third-highest in history in 2019 — have increasingly prompted non-US authorities to open independent or parallel investigations. Perhaps one of the first examples of follow-on prosecutions resulted from an FCPA settlement involving a French telecommunications company. In January 2010, the company paid USD10 million to settle charges that it paid kickbacks to government officials within the Costa Rican government. Honduras’ Special Prosecutor's Office Against Corruption later opened an investigation into these allegations but closed it without bringing charges. In December 2010, the company paid USD137.4 million to the DOJ and the SEC to settle FCPA violations arising from improper payments in Costa Rica, Honduras, Malaysia and Taiwan. Two days later, after the settlement and the company’s admissions were published by the US government, the Special Prosecutor's Office in Honduras reopened its investigation.
A more recent example involves an Israeli pharmaceutical company. On 22 December 2016, the DOJ and the SEC announced that the company would pay almost USD520 million in connection with bribery schemes in Russia, Ukraine and Mexico. Just five days after the settlement and facts admitted by the company were published, the Russia General Prosecutor’s Office announced it would open an investigation into the company. In February 2017, it was announced that Israeli authorities were investigating the same conduct at issue in the US settlement. On 15 January 2018, the Israeli Justice Ministry announced that the company had conditionally agreed to pay USD22 million in penalties to resolve bribery allegations in Russia, Ukraine and Mexico.
Perhaps the most well-known recent example of cross-border parallel prosecutions involved what was one of the largest construction and engineering firms in South America. On 21 December 2016, the company reached what they hoped would be a global settlement of bribery charges with American, Brazilian and Swiss prosecutors for a combined USD3.5 billion for a bribery scheme in 12 countries. But at the time of the announcement of the settlement, Argentina and Peru had already opened probes into the company's construction contracts for suspected kickbacks to foreign officials.
The settlement announcement prompted still more follow-on prosecutions, with Ecuador, Colombia, the Dominican Republic, Panama and Guatemala opening investigations, and in some cases, independently settling charges. Despite the firm's effort to reach a global settlement — or perhaps because of it — the massive number of the follow-on prosecutions led to financial disaster for the company. In the summer of 2019, the company filed for bankruptcy in both Brazil and the US. Adding to its woes, despite paying approximately USD184 million in fines to settle charges in the Dominican Republic in 2017, that case may now be re-opened because the company failed to pay an additional USD32 million instalment required by the settlement, in September 2019.
It is not just the seasoned US enforcement regime that can lead to follow-on prosecutions. Non-US bribery settlements have also created havoc in their wake. For example, in 2013, Chinese authorities charged a British pharmaceutical company for paying bribes to publicly employed doctors in exchange for selecting that company’s products. A Chinese court found the company guilty in 2014 and fined it USD489 million. After its own investigation in the wake of the Chinese settlement, in September 2016, the SEC imposed a civil penalty of USD20 million on the company for exactly the same conduct. In other jurisdictions where the company operates, criminal authorities opened bribery investigations into the company. Both Poland and Romania opened subsequent investigations into the allegations, with Polish authorities later charging 13 individuals for related conduct in Poland in connection with their probe. The UK Serious Fraud Office also opened an investigation that was closed in September 2019 without any action.
The recent bribery inquiry involving a Dutch offshore services company is another instance where a non-US bribery settlement prompted a US follow-on prosecution. In 2014, the company paid USD240 million to settle a Dutch investigation into improper payments made to officials in Angola, Brazil and Equatorial Guinea. In 2017, the company paid an additional USD238 million to settle with the DOJ FCPA violations in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq. In 2018, the company paid USD189 million to Brazilian authorities to settle corruption charges.
These cases are only some of the more notable examples in recent years; many others have involved follow-on prosecutions. Nonetheless, they undoubtedly show that counsel must factor into their risk calculus the very real potential for follow-on prosecutions. In addition, this aggressive multi-national enforcement changes the calculus when serious allegations of bribery come to light; careful thought must be given before following the traditional path of disclosure long advocated for by the American DOJ and the SEC.
Increase in Global Anti-corruption Laws
In recent years, many countries have either passed new anti-corruption legislation or aggressively enhanced existing laws. Over time, countries have approached public corruption with different tools. For example, many target the bribe-taker (public official), while others target the bribe-giver, whether individual or corporate. These developments complicate the evaluation of risk and risk mitigation when doing business across national boundaries.
India, for instance, passed a significant amendment to its Prevention of Corruption Act in 2018, which expanded liability for those who pay bribes and public bribery against companies. Before this law, India’s anti-bribery law only applied to public servants who accepted bribes. The amendment goes to the heart of the problem by establishing a new offence for those who engage in bribery of a public servant to perform a public duty improperly. The amendment also incorporates a new bribery offence for a “commercial organisation,” aiming the power of the law directly at corporations. This offence renders any “commercial organisation” liable “if any person associated with the commercial organisation gives or promises to give any undue advantage to a public servant” intending to obtain or retain business or advantage in the conduct of business for that commercial organisation.
Notably, however, the amendment also adopted new defences for bribery. It recognised a defence for the provider of an undue advantage if that person (i) was “compelled” to give an “undue advantage” and (ii) reports the acceptance of the undue advantage to a law enforcement authority or investigating agency within seven days of the act. In addition, the new Indian law mirrors the UK Bribery Act by incorporating a defence for a “commercial organisation” charged with bribery if it can prove it had “adequate procedures” in compliance with any such guidelines as may have been prescribed to prevent persons associated with it from undertaking such conduct.
Italy also expanded liability in passing its “bribe-destroyer” law in January 2019. This law increased penalties for individuals and companies in relation to certain acts of bribery. It also broadened the definition of a “foreign public official” to include officials within a public international organisation; members of international parliamentary assemblies, international or supranational organisations; and officials and judges of international courts. However, it also adopted a new benefit for co-operation— allowing companies that committed certain bribery offences to limit disqualifying sanctions to a maximum of two years, provided the company, before the first decision or judgment, actively collaborates to avoid further consequences of the offence and voluntarily discloses information that helps obtain evidence of the crime or identifying other offenders, or that ensures the resulting profits are seized.
Other countries, like Russia, have passed laws providing prosecutors with new tools to combat corruption. Russia’s new law, passed in April 2018, permits Russian courts to freeze the assets of companies under investigation for corruption up to the maximum amount of any potential fine. The law also provided companies with a new defence to bribery if they (i) assist in detecting or investigating the bribe or (ii) prove that the bribe had been extorted.
Increase in International Co-operation
Increased co-operation adds another dimension to cross-border cases. New mechanisms have been added to heighten co-operation. Some of these measures are more informal, such as the DOJ embedding prosecutors from its Criminal Division in London to co-operate with UK’s Financial Conduct Authority (FCA) and Serious Fraud Office (SFO). Other countries have also sought to mirror American-style deferred prosecution agreements (DPAs). In 2014, the UK passed legislation authorising DPAs and the SFO entered its first DPA with a British bank, involving violation of the Bribery Act in 2015. The SFO has secured a handful of DPAs since. Canada adopted the use of DPAs in 2017. The spread of the use of DPAs is likely to correspond with increased co-operation with US authorities as foreign governments seek to emulate the US model of enforcement.
Other mechanisms include tangible changes to legal processes. For instance, in 2018, the US passed the Clarifying Lawful Overseas Use of Data Act (CLOUD Act), which gave prosecutors new information-sharing tools. One of these tools included the creation of a framework for an executive agreement between the US and a foreign government, which allows US authorities to access data stored in the foreign countries and vice versa. Under these agreements, a provider subject to the jurisdiction of a country with which the US has entered an executive agreement could be served with an order requesting customer data and the provider would be compelled to disclose the data, even if the data was stored in the United States. These new arrangements provide prosecutors with an alternative process for collecting evidence to Mutual Legal Assistance Treaties, which have been criticised as cumbersome and slow.
The US has moved swiftly to set up these executive agreements. The US and UK recently entered into one such agreement that will allow American and British law enforcement agencies, with appropriate authorisation, to demand electronic data regarding a range of serious crimes, including terrorism, child sexual abuse and cybercrime, directly from tech companies based in the other country, without legal barriers. The US also recently announced entering formal negotiations for executive agreements with Australia and the EU.
This increase in co-operation has notably manifested in the past few years in global settlements where US authorities are settling bribery charges with companies or entities simultaneously with other foreign authorities. Settlements with a Brazilian oil and gas company, a French investment bank and Singaporean offshore and marine infrastructure business are a few examples of global settlements being settled simultaneously.
Voluntary Disclosure: to Disclose or not - that is the Question
A voluntary disclosure to any one authority can result in significant ramifications. A company’s decision to disclose or not should involve a thorough analysis of the advantages and disadvantages. The risk of follow-on prosecutions and fighting legal actions in multiple jurisdictions should be carefully considered when conducting this analysis. Currently, the DOJ and the SEC do not provide for any express or formal “credit” or more leniency when a voluntary disclosure is made involving conduct in a foreign jurisdiction, though they have occasionally agreed to divide penalties with other jurisdictions.
Moreover, traditional practice and American jurisprudence does not often lead to any recognition of double or multiple jeopardy. The likelihood of multiple, overlapping penalties and collateral consequences should be recognised before any self-disclosure is made, whatever the local benefit advanced by the relevant authority. The legal fees, penalty costs and reputational harm associated with a follow-on prosecution can be daunting and are almost guaranteed, given the long-standing practice adopted by the DOJ and the SEC to demand admissions of criminal conduct, the underlying facts and the publication of these admissions, even in the case of a non-prosecution, in the settlement documents.
In short, a decision to disclose to the US is a decision to disclose to the world. And more often than not, the worldwide disclosure is made in words drafted by prosecutors in a manner that frequently highlights wrongdoing aggressively while ignoring mitigation. Such a description is sure to attract the attention of other enforcement agencies and the media. And their first impression is hard to revise.
The analysis, then, is no longer linear. But the first step remains clear: investigate thoroughly. Understand what happened, where it happened and who was involved. Then determine which agencies have jurisdiction and consider the cost and benefits of a single disclosure, a joint disclosure or a staged disclosure. These questions will be highly fact- and law-specific, but looking forward and understanding the global and overlapping interests of the enforcement authorities can provide key guidance.
Of course, always critical is to stop any identified misconduct, to discipline or remove wrongdoers and to enhance the compliance system. Enforcement agencies could open their own inquiry at any point. Critical to a successful resolution is the ability to demonstrate absolutely no tolerance for corrupt behaviour and a commitment to compliance and remediation.
Anti-corruption enforcement is now a truly global affair. The laws continue to proliferate and enforcement is no longer driven solely by the United States. This reinforces the need to build and maintain a strong compliance system, to investigate promptly allegations of corruption and to mitigate thoroughly any identified misconduct. That has not changed.
The question of disclosure is far more complicated, however. The old advice to disclose allegations early to US enforcement authorities is complicated by the success of other jurisdictions in the fight against corruption. Understanding fully what transpired before disclosure is now more important than ever, and disclosure is no longer a foregone conclusion.
Thus, a prompt and deep investigation remains the right approach. A clear understanding of the events, the actors, and where the conduct occurred may actually lead to new and effective ways to use the global competition over enforcement as a means to resolve matters locally and to encourage a return to respect for long-held judicial notions such as the avoidance of double jeopardy and the unfair imposition of multiple punishments for the same conduct.