Global Anti-Corruption Insights: Winter 2024
Reports of the Foreign Corrupt Practices Act’s demise remain greatly exaggerated. The U.S. Department of Justice and U.S. Securities and Exchange Commission kicked off the new year by announcing, on January 10, a US$220 million settlement with a German company that paid bribes in South Africa and Indonesia to win government contracts.
In 2023, U.S. authorities overall brought roughly the same number of corporate FCPA cases as in 2022. DOJ settled criminal FCPA charges with five companies, while the SEC settled civil FCPA charges with nine (two in parallel with DOJ). The total dollar amount collected from FCPA cases was lower in 2023, however, with the largest settlement being the US$218 million paid by a publicly traded chemicals manufacturer based in the United States. DOJ also issued two official declinations pursuant to its Corporate Enforcement Policy.
According to DOJ, federal prosecutors this past year brought new charges against 10 individuals in FCPA-related cases and continued to pursue others through trials and appeals.
The past year saw new DOJ policies that apply to corporate corruption cases, including policies on voluntary self-disclosures, an M&A safe harbor, and clawbacks of compensation. It also saw legislation come out of Congress to tackle the “demand side” of foreign bribery.
We further observed the continuation of other recent enforcement trends, such as the increasing use of anti-money laundering and sanctions laws to combat corruption around the world.
We cover these stories and other highlights below.
DOJ Continues to Emphasize (Prompt) Voluntary Self-Disclosure
In 2023, DOJ provided additional incentives for voluntary self-disclosure through an updated Corporate Enforcement Policy and new national standards for companies to receive credit in corporate criminal enforcement actions. DOJ continued to emphasize the importance of prompt voluntary self-disclosure of misconduct by announcing a new M&A Safe Harbor Policy, encouraging companies that make corporate acquisitions to quickly identify and disclose issues at the entities they acquire.
Recent enforcement decisions illustrate how DOJ’s voluntary self-disclosure program is working in practice. For example, in November, DOJ declined to prosecute Lifecore Biomedical Inc. for violations of the FCPA after the company self-reported improper payments to obtain a permit in Mexico “within three months of first discovering the possibility of misconduct and hours after an internal investigation confirmed that misconduct had occurred.”
By contrast, DOJ found that Albemarle Corporation’s disclosure to DOJ of bribes paid to government officials in multiple foreign countries was not “reasonably prompt” when the company had “learned of allegations … approximately 16 months before disclosing” and “gathered evidence demonstrating the potential misconduct at least approximately nine months prior to the disclosure.” Although Albermarle did not receive a declination, DOJ still gave “significant weight” to the company’s self-disclosure (as well as cooperation and remediation), determining, in December, that a non-prosecution agreement was the appropriate form of resolution and reducing the criminal fine by 45% off the bottom of the otherwise-applicable U.S. Sentencing Guidelines fine range.1
Interestingly, more than half of corporate FCPA enforcement actions in 2023 appear to have involved voluntary self-disclosures to the government.
DOJ and SEC Build Cases Off WhatsApp Chats and Text Messages Turned Over by Companies
The first FCPA settlement of 2024 — with SAP SE, a publicly traded company based in Germany — was notable not only for the size of the penalty (US$220 million) but also for the evidence the government obtained from the company: WhatsApp chats and text messages. According to the Deferred Prosecution Agreement, the penalty for having paid bribes to win government contracts in Indonesia and South Africa would have been even higher if SAP had not cooperated with the government, including by “imaging the phones of relevant custodians at the beginning of the Company’s internal investigation, thus preserving relevant and highly probative business communications sent on mobile messaging.”
The SEC, in its parallel civil settlement with SAP, specifically pointed to WhatsApp chat transcripts that show an SAP Indonesia account executive writing to intermediaries “Hehehe … This is government bro, to catch a big fish we need to use a large bait (sic),” and discussing cash payments to government officials: “Seventy million, in fifty thousand bills … Bring empty envelope.”
In another FCPA case that the SEC resolved in parallel with DOJ — the US$218 million settlement in September 2023 with Albermarle — the SEC noted that the company’s cooperation included voluntarily turning over text messages, among other relevant electronic documents.
The DOJ also cited WhatsApp chats in its December Deferred Prosecution Agreement with Freepoint Commodities LLC, a commodities trading company that paid US$98 million to resolve an investigation involving a corrupt scheme to pay bribes to Brazilian government officials.
The resolution of these FCPA cases involving incriminating chats and texts follow the DOJ’s release, in March 2023, of updated guidance on the evaluation of corporate compliance programs. That guidance now states: “In evaluating a corporation’s policies and mechanisms for identifying, reporting, investigating, and remediating potential misconduct and violations of law, prosecutors should consider a corporation’s policies and procedures governing the use of devices, communications platforms, and messaging applications, including ephemeral messaging applications.”
New Legislation and Existing Money Laundering Statutes Enable Prosecution of Foreign Officials for Bribery
On December 22, 2023, President Biden signed into law the Foreign Extortion Prevention Act (FEPA). The FEPA makes it a crime for “any foreign official or person selected to be a foreign official to corruptly demand, seek, receive, accept, or agree to receive or accept, directly or indirectly, anything of value” from a U.S. person or company.
This bipartisan legislation — part of the National Defense Authorization Act of FY24 — extends the federal domestic bribery statute (18 U.S.C. § 201) to foreign officials and complements the FCPA. While the FCPA targets the “supply side” of foreign bribery (e.g., offering and paying bribes), it does not apply to the “demand side” (e.g., demanding and receiving bribes). The FEPA helps fill that gap.
The FEPA represents more of an evolution than revolution in statutory authority to hold foreign officials accountable for corruption. Even though corrupt foreign officials cannot be prosecuted under the FCPA, they have been charged with and convicted of money laundering offenses in U.S. courts.
For example, in early 2023 the former president of the Venezuelan Supreme Court was indicted in Miami on U.S. money laundering charges related to his alleged acceptance of bribes to favorably resolve cases. In December, on the same day as the FEPA’s enactment, DOJ unsealed a five-count indictment against a Honduran government official, as well as two Americans, for their alleged role in a bribery scheme involving contracts to provide uniforms and other goods to the Honduran National Police. All three men were charged with conspiracy to commit money laundering, while the two Americans were charged under the FCPA.
As we reported earlier this year, individuals have received lengthy prison sentences for money laundering convictions that concern bribery schemes: The former National Treasurer of Venezuela and her husband were each sentenced to 15 years in prison after being convicted of money laundering in Florida. And a former Goldman Sachs Managing Director was sentenced in the Southern District of New York to 10 years in prison after a jury found him guilty of money laundering and conspiracy to violate the FCPA.
Foreign Corrupt Practices Act Applies to More Than Just Foreign Corruption: Companies and Individuals Found Liable Under FCPA for Bribery of Illinois State Government Officials
On September 28, 2023, the SEC charged Exelon Corporation, its subsidiary Commonwealth Energy (ComEd), and ComEd’s former CEO with violations of the FCPA’s accounting provisions along with securities fraud. The charges concern efforts to influence and reward the former Speaker of the Illinois House of Representatives for helping pass legislation favorable to ComEd, an electric utility company. The charges do not involve any alleged corruption of foreign officials, only corruption of Illinois state officials.
To resolve the corporate enforcement action through an administrative proceeding, Exelon agreed to pay a US$46.2 million civil penalty. The civil charges against ComEd’s former CEO are pending in federal court in Illinois.
This SEC case, filed under the FCPA and other securities laws, follows a May 2, 2023 jury verdict that four former ComEd executives and associates were guilty of criminal conspiracy, bribery, and FCPA violations related to the same political corruption scheme. The indictment alleged that the defendants (1) conspired “knowingly and willfully to circumvent a system of internal accounting controls and to falsify any book, record, and account of Exelon and ComEd, in violation of” the FCPA accounting provisions that are applicable to public companies and people working on their behalf and (2) “knowingly and willfully falsified and caused to be falsified certain ComEd and Exelon books, records, and accounts, so that those books, records, and accounts did not in reasonable detail, accurately and fairly reflect the transactions and dispositions of ComEd’s and Exelon’s assets,” also in violation of the FCPA’s accounting provisions.2
These cases serve as a reminder that public companies and individuals working on their behalf may be liable under the FCPA’s accounting provisions, even in the absence of any “foreign corrupt practices.” Indeed, the SEC routinely charges companies and individuals with violations of the FCPA’s accounting provisions in cases involving no allegations of bribery at all (foreign or domestic).3 The ComEd cases also serve as a general reminder of the risks associated with payments to lobbyists and consultants who are closely connected with elected officials and their family members.
SEC Enforcement of FCPA Against Corporations Continues, With No Enforcement Against Individuals in 2023
In 2023, the SEC announced nine corporate settlements of civil FCPA enforcement actions relating to foreign corruption, two more than in 2022 and four more than in 2021.
The SEC resolved all nine of these corporate enforcement actions through administrative proceedings rather than in court. Two of the nine were accompanied by parallel DOJ enforcement. Interestingly, it has been over two years since the SEC last charged an individual with violating the FCPA.
In the second half of 2023, the SEC entered into the following corporate settlements:
- The Albermarle Corporation case, involving agents paying bribes over an eight year period to obtain sales of catalysts to both public-sector and private-sector oil refineries across Asia (US$103.6 million settlement)
- The Clear Channel Outdoor Holdings case, involving a majority-owned affiliate’s bribery of Chinese government officials to obtain advertising contracts (US$26.1 million settlement)
- The 3M Company’s case, involving its Chinese subsidiary’s arrangement of events and conferences as a pretext to provide overseas travel and entertainment (US$6.5 million settlement)
- The Grupo Aval/Corficolombiana case, involving its former president and joint venture partner paying government officials to secure an extension on a highway infrastructure project in Columbia (US$40 million settlement)4
For a discussion of the other settlements from earlier in 2023, see the previous edition of our newsletter.
DOJ Issues Two Opinion Procedure Releases on Travel and Entertainment for Foreign Officials
In 2023, DOJ issued two opinion procedure releases under the FCPA, offering guidance on how organizations can lawfully cover travel and entertainment expenses for foreign officials. This was the first time since 2014 that DOJ issued multiple opinion procedure releases in the same year.
The first opinion concerned a U.S. adoption service provider’s proposed payment for a foreign government official to travel to the United States to visit families that have adopted children from the foreign country. DOJ found that the proposed expenses did not reflect corrupt intent insofar as it was the foreign government that selected the official; the trip was for post-adoption supervision; no cash was being given; the official was provided with economy travel, mid-range accommodations, and only modest recreation; the payments were made directly to the service providers; and the organization making the payments did not have any non-routine business pending with the foreign government.
The second opinion stemmed from a U.S. company’s proposed payment of stipends to foreign officials attending certain training events in accordance with U.S. government contract task orders. DOJ found that the proposed payments did not reflect corrupt intent and did not appear to be for the purpose of helping the U.S. company obtain or retain business, but rather involved training that was “both called-for and ultimately delivered by agencies and/or personnel of the United States Government.”
For compliance tips related to travel, entertainment, and gifts, please refer to our Critical Compliance series.
U.S. Government Continues to Impose Sanctions Linked to Corruption
In the second half of 2023, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) imposed economic sanctions on individuals linked to corruption in Guatemala, Afghanistan, Serbia, the Western Balkans, and Lebanon. In addition, the National Defense Authorization Act for Fiscal Year 2024 includes a provision that contemplates the imposition of sanctions on those involved in corruption related to Russia’s Nord Stream 2 pipeline and requires the Secretary of State to submit a report listing “all foreign persons that have engaged in significant corruption in relation to the planning, construction, or operation of the Nord Stream 2 pipeline.”
Over the past year, DOJ officials have emphasized criminal enforcement of sanctions laws, describing sanctions as the “new FCPA” and a national security imperative. We anticipate that DOJ and other agencies, such as OFAC, will continue to focus on sanctions enforcement in 2024.
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For updates on the enforcement of anti-corruption laws and other economic crime matters in the United Kingdom, please see the most recent report from our UK Economic Crime Group.
© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.
When ComEd settled with the DOJ for US$200 million back in 2020, it agreed to the filing of a one-count criminal information charging the company with bribery under 18 U.S.C. § 666.
See, e.g., In re Brooge Energy Ltd., File No. 3-21816 (Dec. 22, 2023) (accounting and offering fraud case in which public company that owns and operates an oil storage facility in the United Arab Emirates was found to have committed not only securities fraud but also violations of the FCPA’s books and records and internal controls provisions).