Spotlight on Foreign Corruption Enforcement in 2016

WomanPresenter2016 will be a defining year for the U.S. Justice Department’s foreign corruption enforcement, experts say, as the pressure will be on for rubber to meet the road after major resources and attention were devoted to a unit that had few victories in 2015.

The Foreign Corrupt Practices Act Unit is adding 10 new staff members, and Justice Department leaders say they are working on making FCPA prosecutions more transparent while adding they are going after “high impact” cases. At the same time, enforcement was dramatically down in 2015 in the number of actions and total penalties. Officials confirmed a policy change was under discussion that could create specific rewards for companies reporting violations and cooperating with the government and announced a renewed focus on prosecuting individuals. In another sign that changes are afoot, this was the first year since 2005 that the Justice Department didn’t issue a FCPA opinion procedure release that gives insight into how the government approaches investigations.

All eyes are on FCPA unit head Patrick Stokes to deliver the whopper cases that are in the works according to press reports and experts. “The biggest trend I look for is how DOJ will re-enter the FCPA enforcement scene,” said James Koukios from law firm Morrison Foerster, a former assistant chief in the FCPA unit. “I expect DOJ corporate cases to be fewer but larger and to emphasize that the company failed to self-report, failed to fully cooperate, or a combination.” “I expect that the SEC will continue to bring corporate enforcement actions that are not accompanied by a parallel DOJ action, such as we saw happen repeatedly.” Mr. Koukios said. SEC filings and reports suggest Vimpelcom Ltd.VIP -0.76% could be near to settling an FCPA case with the U.S. government in the first months of the New Year, which will probably include a major fine. That big case, and another just getting going involving Venezuela’s state oil company can’t come soon enough for a unit that has had more resources but delivered a fraction of the cases than in years past. “When you have a unit the size it is now and you only bring a handful of cases, you kind of wonder what’s coming.” said Kathleen Hamann from White & Case law firm, a former member of the FCPA unit. “I think there is pressure to justify the resources by bringing the cases.”

Defense lawyers have expressed concern about the Justice Department re-calibrating its approach to cases, saying its new approach incentivizing total cooperation could set too high of a bar to meet. Defense lawyers say they will be closely monitoring the department in 2016 to figure out exactly how much the corporate cooperation process will be changing. “These pressures that may be limiting voluntary disclosures instead of encouraging them,” Ms. Hamann said. In 2015 the Justice Department took the unusual step of adding a compliance expert to the agency from the private sector. Hui Chen is billed as being more attuned to the corporate compliance culture and her new role may shake up the compliance systems, experts say. It’s still unclear exactly how the compliance expert will factor into the settlement process, but Christopher Grippa, a managing director at professional services firm Alvarez & Marsal, said the role may promote an existing trend of more compliance cooperation between businesses. “I expect to see more focus that organizations are benchmarking to their peers,” Mr. Grippa said about companies looking to stay apace with competitors in having the top compliance systems. Having someone who is in touch with the compliance systems norms in an industry may encourage even more adoption of those technologies, Mr. Grippa said. The Justice Department and SEC “will use their internal expertise to pressure-test companies’ self-proclaimed ‘enhanced’ compliance programs,” said FCPA expert Nathaniel Edmonds from Paul Hastings about his expectations for 2016 in light of the new compliance expert. “I expect that DOJ and SEC will publicly highlight what meets their heightened expectations and what fails and is merely a ‘paper program.’”