Anti-Corruption 2021

Last Updated December 08, 2020

USA

Law and Practice

Authors



Freshfields Bruckhaus Deringer LLP has a white-collar defence team that is highly skilled in advising cross-border businesses on anti-bribery and corruption risks arising anywhere in the world. The firm's US white-collar partners, most of whom are former federal prosecutors, lead a team with more than 75 US lawyers working in close co-ordination with Freshfields offices in Europe, the Middle East, and Asia. Freshfields helps clients respond to simultaneous inquiries from the US DOJ, the US SEC and CFTC, the UK Serious Fraud Office, and other regulators, in connection with allegations of bribery and corruption. Freshfields lawyers develop multi-pronged defence strategies to navigate the varied expectations of regulators around the globe. The firm regularly conducts international anti-bribery compliance programme reviews and provides due diligence and transactional advice for some of the world’s leading investors, banks, and multinationals. Recent anti-corruption work has included securing the first declination with disgorgement under the DOJ’s Corporate Enforcement Policy.

The United States has ratified the OECD Convention on Combating Bribery of Foreign Public Officials and the UN Convention Against Corruption. The USA 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 (see 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 detailed below.

The FCPA Resource Guide

A joint publication by the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), this document provides an overview of the FCPA and the agencies’ approaches to key questions about the FCPA’s scope and application (eg, successor liability, parent-subsidiary relationships, and individual liability).

In 2020, DOJ issued the first significant revision of the FCPA Resource Guide since it was first published in 2012. The key updates cover:

  • the FCPA’s extraterritorial application (discussed in detail below);
  • the factors US courts may consider in determining whether a non-US person is a “foreign official” for the purposes of the FCPA;
  • recent judicial decisions limiting the SEC’s ability to obtain disgorgement as a remedy for violations of securities law; and
  • emphasising the importance of effective compliance programmes, including:
    1. pre-M&A due diligence; and
    2. robust investigation, analysis, and remediation when misconduct is identified.

The Justice Manual

This document sets out DOJ policy and practice regarding how to charge and prosecute violations of most federal criminal statutes. The Justice Manual is a useful reference for understanding the DOJ’s interpretation of the law and the factors it considers when making decisions regarding (for example) whether to file charges, what penalties to seek, and how to treat co-operating witnesses and defendants.

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 federal corruption statutes in 2020. 

The list below identifies the federal criminal statutes that are frequently used to prosecute bribery and corruption. Individual states may have similar statutes.

  • The Foreign Corrupt Practices Act is codified at 15 U.S.C. Sections 78dd-1 et seq. The statute prohibits “corruptly” giving “anything of value” to “foreign official[s]” or political party members for the purpose of:
    1. influencing the foreign official’s acts or decisions;
    2. inducing the foreign official to act contrary to their lawful duty;
    3. securing “any improper advantage”; or
    4. inducing the foreign official to influence a foreign government “in order to assist... in obtaining or retaining business for or with, or directing business to, any person.”
  • The general prohibition on bribing US officials is codified at 18 U.S.C. Section 201(b). This statute prohibits “corruptly” giving or receiving (or offering, demanding, etc) anything of value in return for an official act or omission by a public official. This law also prohibits exchanging things of value for an act of fraud by the public official (or for the public official’s assistance in a fraud).
  • The “gratuities” law, codified at 18 U.S.C. Section 201(c), prohibits giving “anything of value” to a current, former, or future public official “because of any official act” (unless such an act is provided for by law). This statute is broader than the “bribes” law at 18 U.S.C. Section 201(b) because it does not require “corrupt” intent or an explicit quid pro quo.
  • 18 U.S.C. Sections 207-08, the federal criminal conflict of interest statutes, restrict the conduct of federal officers and employees during and after their federal service. In general, federal officials must not engage in official acts that could affect their personal financial interests (or those of their family members, their future employers, or certain affiliated organisations). These offences are strict liability, although wilful violations expose an official to more severe penalties.
  • 18 U.S.C. Sections 641, 654, and 666 broadly prohibit theft, wrongful conversion, embezzlement, or bribery involving federal property or programmes funded by federal money. Generally speaking, the acts must be committed “knowingly” or with a “corrupt intent” for criminal liability to apply.
  • Federal fraud statutes, especially the mail and wire fraud statutes at 18 U.S.C. Sections 1341 and 1343, are frequently used in corruption prosecutions. 18 U.S.C. Section 1346 authorises prosecutors to file charges under these statutes based on an “honest services” theory — ie, that a corrupt official deprived the government of its intangible right to his or her uncompromised judgment, discretion, etc (ie, their “honest services”). These charges require a specific intent to deprive the government of honest services, property, etc.
  • Other federal statutes are often also used to charge conduct related to a bribery scheme, although they are not specifically related to corruption. For example, prosecutors may charge corrupt officials (or their co-conspirators) with:
    1. extortion (18 U.S.C. Section 1951) for obtaining property (eg, a bribe) “under color of official right”;
    2. travelling in interstate or foreign commerce (or sending interstate emails, phone calls, etc) to “promote” or “carry on” unlawful activity, including violations of state bribery laws (18 U.S.C. Section 1952, also called the “Travel Act”); or
    3. money laundering (18 U.S.C. Sections 1956-57) for monetary transactions involving the bribe funds or the proceeds of a bribery scheme.Conspiring to violate any of these statutes, or aiding and abetting violations, may be separately charged under 18 U.S.C. Sections 2, 371, and/or 1961-68.

Bribery

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. Section 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 remains in the 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.

Hospitality, travel, gifts and promotions

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.

Gratuities

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).

FCPA

The FCPA defines the term “foreign official” as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organisation, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organisation.”

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 “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.

Domestic statutes

18 U.S.C. Section 201 defines “public official” as a “Member of Congress, Delegate, or Resident Commissioner, either before or after such official has qualified, or an officer or employee or person acting for or on behalf of the United States or any department, agency or branch of Government thereof, including the District of Columbia, in any official function, under or by authority of any such department, agency, or branch of Government, or a juror.” State statutes feature similar definitions.

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 Section 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 USD963,837 for a corporation or USD192,768 for an individual, 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.

Numerous federal statutes cover public officials’ conduct. For example, prosecutors may charge corrupt public officials for conduct related to:

  • theft, wrongful conversion, embezzlement, or bribery related to or involving federal property or federally funded programmes (18 U.S.C. Sections 641, 654, and 666);
  • conflicts of interest, generally caused by federal officials engaging in official acts that could affect their personal financial interests (or those of their family members, their future employers, or certain affiliated organisations (18 U.S.C. Sections 207–08); and
  • acting with the specific intent to deprive the government of its intangible right “honest services”, such as the public official’s uncompromised judgment, discretion, etc (18 U.S.C. Section 1346).

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 their fee to a government official.

Most federal crimes are subject to a five-year statute of limitations, although criminal violations of the FCPA’s accounting provisions are subject to a six-year limitations period. In some circumstances, prosecutors may be legally permitted to charge defendants for conduct that pre-dates the limitations period. 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 USA even where most of the criminal conduct was committed abroad, but extraterritorial jurisdiction varies from one statute to another. 

Non-US conduct may be covered by US law where either the specific statute applies extraterritorially, or there is a US nexus (eg, the scheme involves a US bank account). 

Extraterritoriality

US law on extraterritoriality is complex and changes with judicial decisions and legislative action. Different statutes apply outside the USA in different ways. US statutes are presumed not to have extraterritorial 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.

FCPA

Criminal conduct outside the USA 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

If a legal entity is an issuer of registered US securities (regardless of where the entity is headquartered), the entity may be held liable for violations of the FCPA’s anti-bribery provisions committed anywhere in the world, provided that there is a connection to the USA (eg, an email that touches the USA). If an issuer is organised under US laws, the entity may be held liable for FCPA violations, irrespective of any other connection to the US. 

Issuers are also subject to the FCPA’s accounting provisions everywhere in the world.

Domestic concerns

US domestic concerns (ie, US nationals and businesses incorporated under US law or headquartered in the USA and their employees, agents, etc) are required to comply with the FCPA’s anti-bribery provisions, regardless of where their operations may be located. Such entities may be held liable for violations of the FCPA outside the USA.

Agent liability

A person or legal entity acting as an agent of an issuer or domestic concern can face FCPA liability for engaging in conduct in furtherance of an improper payment, even when the issuer/domestic concern did not expressly direct or authorise the improper payment. This type of liability may apply without regard to where the improper payments were made if the conduct involves a US person or there is a connection to the USA. 

Conspiracy and accomplice liability

If a non-US company acts in concert with another company or person, and jurisdiction can be established for that company or person (eg, because they are a domestic concern), it is possible that the non-US company could be held liable for either conspiring with or aiding and abetting the US person or legal entity that is directly subject to the FCPA, or wilfully causing the US person or legal entity to violate the FCPA. As with direct liability for issuers and domestic concerns, this type of liability may apply without regard to where any improper payments were made, as long as the co-conspirator is organised under the laws of the USA or any state in the USA, or there is a connection to the USA.

The United States Court of Appeals for the Second Circuit, however, recently ruled that a non-resident foreign national may not be charged with conspiracy to violate the FCPA or with aiding and abetting an FCPA violation unless the foreign national acted as an agent of an “issuer” or a “domestic concern”, or was physically present in the United States. The Second Circuit is only one of 11 intermediate federal appellate courts in the USA, however, and other courts may decide the issue differently. Indeed, the 2020 revisions to the FCPA Resource Guide note that a federal district court in Illinois has rejected the Second Circuit’s reasoning, holding that a non-US person could be liable for aiding and abetting an FCPA violation, even where they are not directly subject to the FCPA themselves.

Domestic statutes

As noted, US courts presume that most US criminal statutes do not apply extraterritorially. For example, courts have ruled that 18 U.S.C. Sections 666, 1341, 1343, and 1346 do not apply extraterritorially. 

It is important to note, however, that even if specific statutes are not applied extraterritorially, 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. Section 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. Section 201 applied extraterritorially. 

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 extraterritoriality theory.

US Nexus

Even US laws that do not have extraterritorial 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:

  • corporations may be held criminally liable, including for violations of the FCPA or domestic bribery statutes;
  • individuals and corporations may be held liable for the same offence; and
  • successor entities may be held liable for offences by the target entity prior to the merger or acquisition.

Corporate Liability

Under the doctrine of respondeat superior, a corporation may be held criminally liable for the acts of its employees, agents, officers, etc, provided that:

  • those acts were undertaken within the scope of their employment (even if such actions were against corporate policy); and
  • they were intended, at least in part, to benefit the corporation. 

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).

Successor Liability

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. Section 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.” A recent case, discussed in the 2020 revisions to the FCPA Resource Guide, held that this defence only applies where the payment is affirmatively authorised by local law (ie, the defence does not apply where the payment is simply not prohibited by local law).

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 and SEC enforcement attorneys may 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, 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 misconduct 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.

The Justice Manual and Compliance Guidance

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:

  • a commitment from senior management to a “culture of compliance”;
  • a clearly articulated policy against corruption and a code of conduct;
  • the assignment of responsibility for oversight and implementation of the anti-bribery and corruption compliance programme to a senior executive with appropriate experience, sufficient autonomy from management, and resources to ensure the programme is implemented effectively;
  • assessing the risks faced by the company so that the company can take a risk-based approach in designing and implementing its anti-bribery and corruption compliance programme.
  • providing training and continuing advice regarding anti-bribery and corruption risks and policies, including for third parties, as appropriate;
  • a mechanism for confidential reporting and a process for investigating allegations of misconduct;
  • holding those responsible for misconduct accountable, including disciplining supervisors for failures in oversight;
  • conducting diligence on third parties; and
  • periodically testing and reviewing the anti-bribery and corruption compliance programme.

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:

  • voluntarily self-discloses misconduct;
  • fully co-operates with the DOJ’s investigation; and
  • 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.

CEP Revisions

In 2019, the DOJ revised the CEP to reflect changes in DOJ policy and practice, including the following points.

  • Successor liability: a “comment” in the CEP states that, where a buyer “uncovers misconduct through thorough and timely due diligence” or via post-acquisition efforts and voluntarily self-discloses and remediates the misconduct, “there will be a presumption of a declination in accordance with and subject to the other requirements of this Policy”.
  • Business records: to receive full remediation credit, a company must demonstrate that it “[a]ppropriate[ly]” retains “business records”, even if the company does not specifically prohibit employees from using instant messaging platforms or other communications technologies that may be periodically erased.
  • Individual accountability: to receive credit for voluntarily self-disclosing misconduct, a company must disclose "all relevant facts known to it at the time of the disclosure" relating to "any individuals substantially involved in or responsible for the misconduct at issue". These changes recognise that companies may not know every detail about all individuals involved in misconduct at the time of a voluntary self-disclosure.

FCPA

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 of 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 of 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.

Domestic Bribery

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 in some circumstances). The maximum penalty for violating 18 U.S.C. Section 201(b) is 15 years in prison and/or substantial monetary fines; 18 U.S.C. Section 201(c) has a maximum prison sentence of two years and/or fines.

Collateral Consequences

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:

  • a covered individual engaged in protected whistle-blower activity (eg, reporting or assisting in the reporting of a covered violation);
  • a covered entity had knowledge that the individual engaged in such activity;
  • retaliation against the individual was motivated, at least in part, by the protected activity;
  • the individual faced some sort of adverse action (eg, discharge, workplace discipline) or suffered an injury actionable under state tort or contract law (including threats and harassment); and
  • the individual would not have been subject to an adverse action in the absence of the protected whistle-blower conduct.

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 million. 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.

  • Sarbanes-Oxley (SOX) Act (principally 18 U.S.C. Section 1514).
  • Dodd-Frank Wall Street Reform and Consumer Protection Act (7 U.S.C. Section 26).
  • SEC Whistleblower Statute (15 U.S.C. Section 78u-6).
  • SEC Whistleblower Rules (17 C.F.R. Section 240.21F).
  • CFTC Whistleblower Rules (17 C.F.R. Section 165 et seq).
  • Federal False Claims Act (31 U.S.C. Sections 3729–3733).

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 and 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 DOJ’s “piling on” policy, announced in May 2018, instructs DOJ employees to co-ordinate with one another and with other domestic and foreign authorities to avoid “a risk of repeated punishments that may exceed what is necessary to rectify the harm and deter future violations”.

The SEC, which is generally charged with administering federal securities laws, civilly enforces violations of the FCPA involving US securities issuers. The CFTC (the federal commodities regulator) has also claimed authority to take civil enforcement actions based on foreign corruption impacting US commodities markets and entities trading on those markets.

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.

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. There are three main types of negotiated agreements: non-prosecution agreements (NPAs), deferred prosecution agreements (DPAs), and plea or settlement agreements.

  • NPAs: in NPAs, the agency agrees not to prosecute on the condition that the individual or company will co-operate with the agency in its investigations of other individuals or entities and abide by other conditions (fines, monitorships, etc).
  • DPAs: the agency defers filing charges, sometimes indefinitely, based on the defendant’s compliance with certain conditions. Importantly, neither DPAs nor NPAs require a defendant to admit wrongdoing. This can be an important point, as it may affect a defendant’s potential civil liability to private parties.
  • Plea/settlement agreements: the agency files charges and reaches an agreement with the defendant to end the enforcement action after it has already begun. As part of these agreements, the agency may agree to dismiss one or more of the charges, which often reduces the penalty the defendant will face. 

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 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.

Landmark Investigations and Decisions

Goldman Sachs 

Goldman Sachs paid USD2.9 billion to the DOJ and the SEC arising from its involvement in the 1Malaysia Development Berhad bribery scandal. In addition to the monetary payments, the matter involves a three-year DPA for the Goldman Sachs Group and a guilty plea for Goldman Sachs’ Malaysian subsidiary. One official referred to this resolution as “the largest ever penalty paid to US authorities in an FCPA case”. The DOJ and the SEC worked with other US authorities (including independent enforcement actions by federal and state banking regulators) and international authorities in the UK, Singapore, Switzerland, Luxembourg and Malaysia.

Airbus

In January 2020, Airbus SE paid USD3.9 billion in penalties to US, UK, and French authorities to resolve investigations into violations of foreign bribery and export controls laws. The DOJ called the matter “the largest global foreign bribery resolution to date”, demonstrating the DOJ’s ability to work closely with agencies outside the USA to pursue misconduct that may violate several countries’ anti-bribery laws.

Ericsson

Swedish telecommunications firm Ericsson paid over USD1 billion to resolve FCPA investigations by the DOJ and the SEC. The resolution included a three-year DPA for Ericsson; an Ericsson subsidiary also pled guilty to one count of conspiracy to violate the FCPA. Public statements indicate that the underlying conduct lasted approximately 17 years and involved millions of dollars in bribes paid to state-owned telecommunications companies and other forms of misconduct.

Hoskins

In a landmark decision in 2018, the Second Circuit held that former Alstom executive Lawrence Hoskins (a UK national formally employed by a British Alstom entity and working for a French subsidiary of Alstom) could not be convicted for violating the FCPA based on conspiracy or aiding and abetting theories but could be liable if he acted as an agent of a US domestic concern. The case proceeded to trial, where a jury convicted him of violating the FCPA. In February 2020, however, a US District Judge granted Hoskins’ motion for acquittal, concluding that he had not acted as an agent of Alstom’s US subsidiary after a highly fact-specific analysis of whether the US entity had authority to (i) direct his activities; or (ii) assess and/or terminate his employment. The court upheld Mr Hoskins’ conviction on related money-laundering counts, sentencing him to 15 months in prison and a USD30,000 fine.

Coburn & Schwartz

A federal district court determined that individual communications, not corrupt payments or quid pro quo agreements, are the appropriate “unit of prosecution” under the FCPA (ie, a defendant may be charged with a separate count of violating the FCPA for each email/communication sent in furtherance of a corrupt scheme).

Domestic Corruption Statutes

There have also been a few high-profile developments involving domestic corruption statutes, including:

  • a Supreme Court opinion in the “Bridgegate” case, concluding that state officials who made a regulatory decision for a political purpose could not be prosecuted for violating 18 U.S.C. Section 666 or 1343 unless they had actually converted federal government property or defrauded the federal government;
  • DOJ investigations of sitting members of Congress for violating a law prohibiting certain federal officials from trading in securities on the basis of non-public information for personal benefit; and
  • federal prosecutions of individuals and entities in wide-ranging alleged corruption of state-level officials in Illinois and Ohio.

The 2019 annual report of the DOJ’s Fraud Section states that the FCPA Unit charged 34 individuals in 2019,30 of whom were convicted by guilty plea or after trial; in the same year, the FCPA Unit at the Fraud Section filed seven corporate criminal enforcement actions, involving the imposition of more than USD3.2 million 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 monetary fine or serve prison sentences for bribery or corruption schemes. Typical prison terms for these crimes are often less than ten years, but have ranged as high as 15 years for an FCPA violation and longer for domestic statutes.

Anti-bribery and corruption enforcement in the USA is routinely subject to assessment by the US government itself, as well as civil society organisations and international institutions.

OECD Evaluation

In November 2020, the OECD released an updated evaluation of US anti-bribery and corruption enforcement – the first such update since 2012. The OECD generally commended the USA's anti-bribery and corruption programmes, noting its ability to “conclude foreign bribery matters comprehensively with effective, proportionate, and dissuasive sanctions, while also providing legal certainty to the companies involved”, but also included a few potential future improvements.

Among the USA’s strengths, the OECD stated that US enforcement authorities have increasingly addressed the “demand side” of bribery by charging foreign public officials and their associates with money laundering or other offences when they use US financial institutions in corrupt schemes or otherwise fall under US jurisdiction. The OECD positively noted other policies and trends in anti-bribery prevention and enforcement, including:

  • US commitment to co-ordinating multi-jurisdictional investigations with agencies in other countries;
  • the enhanced transparency embodied in US agencies’ decisions to publish non-trial resolution agreements, releasing fact patterns that pertain to such resolutions, and detailing reasons for choosing a certain type of resolution; and
  • training US government personnel stationed overseas regarding potential bribery risks, including facilitation payments.

While the OECD’s report is largely positive, it nonetheless provided recommendations in three key areas.

  • Detection of foreign bribery – the OECD recommended that the USA:
    1. report on the sources of allegations leading to foreign bribery investigations; and
    2. enhance protections for whistle-blowers.
  • Investigation and prosecution of foreign bribery – the OECD recommended that the DOJ and SEC continue to harmonise their enforcement approaches and review the effectiveness of the DOJ’s Corporate Enforcement Policy.
  • Sanctions – the OECD recommended that the USA collect data on debarment in foreign bribery cases and encourage public contracting authorities responsible for those granting arms export licences to implement reviews of debarment lists of multilateral financial institutions.

The European Court of Human Rights and GRECO

In 2019, the Council of Europe Directorate General Human Rights and Rule of Law Corruption – Group of States Against Corruption (GRECO) and the Committee of Experts of the Follow-Up Mechanism on the Implementation of the Inter-American Convention Against Corruption (MESICIC) issued reports assessing anti-corruption laws and practices in the USA. Each report noted areas where the USA had made progress since previous evaluations but identified additional points for improvement. For example, the GRECO report recommended increasing the power of Congressional ethics bodies and the MESICIC report recommended establishing a mechanism to protect federal employee whistle-blowers who report acts of corruption involving classified information. The USA had until 30 September 2020 to respond to the GRECO report.

US government authorities frequently consider anti-corruption reforms, although it is difficult to predict whether any of these proposals are likely to be successful. That said, it is unlikely that any such proposals would substantially alter the scope or practice of federal anti-corruption laws. 

Freshfields Bruckhaus Deringer LLP

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Eric.Bruce@Freshfields.com www.Freshfields.com
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Freshfields Bruckhaus Deringer LLP has a white-collar defence team that is highly skilled in advising cross-border businesses on anti-bribery and corruption risks arising anywhere in the world. The firm's US white-collar partners, most of whom are former federal prosecutors, lead a team with more than 75 US lawyers working in close co-ordination with Freshfields offices in Europe, the Middle East, and Asia. Freshfields helps clients respond to simultaneous inquiries from the US DOJ, the US SEC and CFTC, the UK Serious Fraud Office, and other regulators, in connection with allegations of bribery and corruption. Freshfields lawyers develop multi-pronged defence strategies to navigate the varied expectations of regulators around the globe. The firm regularly conducts international anti-bribery compliance programme reviews and provides due diligence and transactional advice for some of the world’s leading investors, banks, and multinationals. Recent anti-corruption work has included securing the first declination with disgorgement under the DOJ’s Corporate Enforcement Policy.

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