Roger Hamilton-Martin from WWL’s sister publication GIR Just Anti-Corruption investigates the recent glut in FCPA settlements with the US government.
In the short window between the election of Donald Trump in November 2016 and his inauguration in January, the US government resolved an unusually large number of Foreign Corrupt Practices Act cases in quick succession. After Trump’s election, five companies resolved FCPA charges with the US government before the year was finished, and six more in 2017 pre-inauguration.
Lawyers told Just Anti-Corruption that both the government and companies had good reasons to complete settlements before the new administration, but uncertainty weighed heavily on the companies under investigation.
“The idea that the timing of all of these resolutions taking place between 8 November and 20 January was just a coincidence seems to strain credulity,” said former fraud section FCPA unit assistant chief Jason Jones, who joined King & Spalding as a partner in January 2015.
“Given the alternative between securing a settlement that the parties felt was reasonable and fair on the one hand, or waiting to see what might happen under a brand new administration on the other hand, the parties may have (understandably) chosen certainty,” Jones said.
In the two months between election and inauguration, the authorities agreed 11 corporate resolutions, the same number of settlements as in 2015. And in the three days between 20 and 22 December, the Justice Department settled at least US$4.27 billion worth of FCPA enforcement actions.
“Each of these companies wanted a deal on the table and a settlement, rather than the uncertainty of a new approach to an FCPA resolution under a new attorney general,” Jacob Frenkel, a partner at Dickinson Wright, said. “The government’s leverage is always the potential for an indictment… the potential for unacceptable terms [to the company] advanced these investigations to settlement.”
However, some lawyers suggested that prosecutors who are serving during a transition have an interest in sealing their legacy, and would have been keen to finish investigations before a change in leadership at the Justice Department, and possibly a change in approach towards FCPA prosecutions.
Timothy Belevetz, a partner at Holland & Knight and former assistant US attorney, told Just Anti-Corruption that prosecutors were facing “some uncertainty” about the next administration’s priorities. “A defendant who senses urgency can use it to its advantage by extracting concessions from the government it might not otherwise be able to obtain,” he said.
Negative remarks about the FCPA by Trump, and his pick for SEC chair – Jay Clayton – has led to speculation about foreign bribery enforcement tapering off in the new administration. The nominee Attorney General, Jeff Sessions, however, has promised to enforce the FCPA “based on the facts and circumstances of each case.”
A few of the recent FCPA settlements have shown signs of the rush to get them completed before 20 January.
On 20 December, Rolls-Royce signed a deferred prosecution agreement with the Justice Department, filed under seal in the US District Court for the Southern District of Ohio. The settlement, including a combined US, UK and Brazilian penalty of US$800 million, was only revealed in January once an English court signed off on the Serious Fraud Office’s agreement with the company. In court documents, the British judge overseeing the case, Sir Brian Leveson, wrote that the UK side of the deal had to be expedited due to the change in US administration. He added that the rushed nature of the resolution “should not be taken as a precedent” and “follows only from the extremely limited time available to deal with the matter.”
Meanwhile, on 21 December, Brazilian construction company Odebrecht and its affiliate, Braskem agreed to pay a combined total of at least US$3.5 billion to authorities in the US, Brazil and Switzerland to settle foreign bribery charges. The resolution set a new record in global anti-corruption enforcement. Odebrecht agreed with the government that, if it could, it would pay up to US$4.5 billion. The Justice Department has said that an analysis will be conducted in March to determine the penalty.
“It’s rare for a corporate resolution like this be filed while the key element of the penalty is still open,” Timothy Belevetz said. “I suspect the Justice Department was eager to get the guilty plea entered before the administration turned over.”
Belevetz added that rushing the resolution through in this case could “only inure to the defendant’s benefit in terms of concessions from the government.”
The rush ended when the DOJ announced on the eve of the inauguration, late on 19 January, a non-prosecuion agreement with Las Vegas Sands, a casino company.
In addition to announcing 11 corporate resolutions between November and January, US authorities also revealed FCPA cases against a number of individuals, including six guilty pleas in a Mexican aviation bribery scheme.
The pre-inauguration rush of corporate resolutions extended wider than just the FCPA, as the authorities scrambled to close cases. The Obama administration settled its case with Credit Suisse Group for US$5.3 billion over the Swiss bank’s business in mortgage-backed securities before the 2008 financial crisis. In the final week before the inauguration, the US government reached settlements worth around US$20 billion.
Some companies were, however, willing to take the risk of a change in approach under a new administration, after failing to resolve their cases before the inauguration. Wal-Mart was one such case. According to reports, it was unwilling to concede to the Obama administration’s terms if it risked losing lucrative government contracts regarding a food stamp programme. Wal-Mart is in negotiation with authorities over a five-year foreign bribery probe including the company’s operations in Mexico, Brazil, India and China.
When Trump called the FCPA a “horrible” law, he did so during a 2012 discussion about the foreign bribery investigation into Wal-Mart.
*Mahmoud Thiam was charged with two counts of money laundering. He pleaded not guilty in January 2017. Samuel Mebiame was charged with FCPA violations on 16 August 2016 and pleaded guilty in federal court on 9 December 2016.
Ng and Yin were originally charged in October 2015 with bribery, money laundering and conspiracy. In November 2016, the Justice Department filed a superseding indictment with both conspiracy and direct foreign bribery charges. Ng pleaded not guilty to the superseding indictment.
Bahn and Ban were charged with FCPA violations in January 2016. Bahn and Harris were charged with wire fraud, both pleading not guilty. Woo was charged separately with one count of conspiracy to violate the FCPA, and has yet to be arraigned.