Business Crimes Hotline

DISTRICT OF COLUMBIA

DOJ and SEC Release Combined FCPA Guidance

On Nov. 14, the Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) published their combined, 120-page FCPA guidance, titled “A Resource Guide to the U.S. Foreign Corrupt Practices Act.” While the guide is non-binding upon the government, it is an unprecedented effort by the DOJ and SEC to provide further insight into current government enforcement perspectives, and it represents a considerable expansion upon previous efforts, including the DOJ's Layperson's Guide to the FCPA.

While the guidance does not include many bright-line rules for companies to apply to their existing compliance programs, it does include a host of hypothetical scenarios discussing many of the most common FCPA “red flags,” as well as anonymous examples of matters that have been declined for enforcement by the government. Further, the guide devotes a significant amount of time to discussing successor liability and M&A due diligence, areas that can be particularly thorny for companies. The discussion includes a section entitled “Practical Tips to Reduce FCPA Risk in Mergers and Acquisitions,” and contains several examples of declined enforcement matters that may be helpful for companies seeking to benchmark their efforts.

Specifically with regard to compliance programs, the guide emphasizes that programs must be risk-based and that the government will give “meaningful credit” to companies that implement and maintain such programs, despite infractions in low-risk areas. In reinforcing this point, the guide cites the April 2012 declination received by Morgan Stanley, where the government chose to proceed only against a rogue employee, based in part on the company's robust internal controls and compliance program. Further, the guide provides insight into how compliance programs are viewed and evaluated by the DOJ and SEC, noting that “DOJ and SEC have no formulaic requirements regarding compliance programs. Rather, they employ a common-sense and pragmatic approach to evaluating compliance programs, making inquiries related to three basic questions:

1. Is the company's compliance program well designed?
2. Is it being applied in good faith?
3. Does it work?”

Finally, practitioners and companies were provided with another helpful data point in the guide that provides perspective on recent enforcement efforts, specifically that “in the past two years alone, the Department of Justice has declined several dozen cases against companies where potential FCPA violations were alleged.”

TEXAS

Pride International Earns First-Ever Early Termination of FCPA
Deferred Prosecution Agreement

On Nov. 5, Judge Lynn N. Hughes of the United States District Court for the Southern District of Texas, Houston Division, issued an Order dismissing the then-pending Criminal Information against Pride International, Inc. (Pride), based upon the government's unopposed Motion requesting the same. The Information, which included multiple FCPA charges, was originally filed against the offshore drilling company on Nov. 4, 2010, in connection with the DOJ and SEC investigation into logistics provider Panalpina. It included alleged bribery of government officials in multiple countries. Pride's French subsidiary was also charged at that time and, as part of a settlement, Pride paid a total of $56.1 million in fines, disgorgement and pre-judgment interest to the DOJ and SEC and agreed to enter into a three-year Deferred Prosecution Agreement (DPA).

While Pride was only two years into its three-year DPA, the latter provided for early termination, “in the event that the Department finds ' that there exists a change in circumstances sufficient to eliminate the need for the corporate compliance reporting obligation.” In its motion, the government noted Pride's compliance undertakings during the course of the DPA, including the fact that the company had “reduc[ed] its reliance on third-party business partners,” along with “subjecting third-party business partners to appropriate due diligence requirements pertaining to the retention and oversight of agents and business partners.”

Further, the government stated that, “[p]rior to its entry into the DPA with the Department, Pride voluntarily initiated a comprehensive anti-bribery compliance review of its business operations in certain high-risk countries; reported its findings to the Department; and undertook, of its own accord, remedial measures, including enhancement of its FCPA compliance program and a review of its internal controls, policies and procedures regarding compliance with the FCPA.”

Pride was subsequently acquired by Ensco plc (Ensco) in May 2011, and the company's business units were integrated into Ensco's compliance structure.

Based on all of the foregoing reasons, the government stated in its Motion that continuing the DPA was “no longer warranted.” The government also moved to terminate the unsupervised probation of Pride's French subsidiary on the same day.

DISTRICT OF COLUMBIA

DOJ and SEC Release Combined FCPA Guidance

On Nov. 14, the Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) published their combined, 120-page FCPA guidance, titled “A Resource Guide to the U.S. Foreign Corrupt Practices Act.” While the guide is non-binding upon the government, it is an unprecedented effort by the DOJ and SEC to provide further insight into current government enforcement perspectives, and it represents a considerable expansion upon previous efforts, including the DOJ's Layperson's Guide to the FCPA.

While the guidance does not include many bright-line rules for companies to apply to their existing compliance programs, it does include a host of hypothetical scenarios discussing many of the most common FCPA “red flags,” as well as anonymous examples of matters that have been declined for enforcement by the government. Further, the guide devotes a significant amount of time to discussing successor liability and M&A due diligence, areas that can be particularly thorny for companies. The discussion includes a section entitled “Practical Tips to Reduce FCPA Risk in Mergers and Acquisitions,” and contains several examples of declined enforcement matters that may be helpful for companies seeking to benchmark their efforts.

Specifically with regard to compliance programs, the guide emphasizes that programs must be risk-based and that the government will give “meaningful credit” to companies that implement and maintain such programs, despite infractions in low-risk areas. In reinforcing this point, the guide cites the April 2012 declination received by Morgan Stanley, where the government chose to proceed only against a rogue employee, based in part on the company's robust internal controls and compliance program. Further, the guide provides insight into how compliance programs are viewed and evaluated by the DOJ and SEC, noting that “DOJ and SEC have no formulaic requirements regarding compliance programs. Rather, they employ a common-sense and pragmatic approach to evaluating compliance programs, making inquiries related to three basic questions:

1. Is the company's compliance program well designed?
2. Is it being applied in good faith?
3. Does it work?”

Finally, practitioners and companies were provided with another helpful data point in the guide that provides perspective on recent enforcement efforts, specifically that “in the past two years alone, the Department of Justice has declined several dozen cases against companies where potential FCPA violations were alleged.”

TEXAS

Pride International Earns First-Ever Early Termination of FCPA
Deferred Prosecution Agreement

On Nov. 5, Judge Lynn N. Hughes of the United States District Court for the Southern District of Texas, Houston Division, issued an Order dismissing the then-pending Criminal Information against Pride International, Inc. (Pride), based upon the government's unopposed Motion requesting the same. The Information, which included multiple FCPA charges, was originally filed against the offshore drilling company on Nov. 4, 2010, in connection with the DOJ and SEC investigation into logistics provider Panalpina. It included alleged bribery of government officials in multiple countries. Pride's French subsidiary was also charged at that time and, as part of a settlement, Pride paid a total of $56.1 million in fines, disgorgement and pre-judgment interest to the DOJ and SEC and agreed to enter into a three-year Deferred Prosecution Agreement (DPA).

While Pride was only two years into its three-year DPA, the latter provided for early termination, “in the event that the Department finds ' that there exists a change in circumstances sufficient to eliminate the need for the corporate compliance reporting obligation.” In its motion, the government noted Pride's compliance undertakings during the course of the DPA, including the fact that the company had “reduc[ed] its reliance on third-party business partners,” along with “subjecting third-party business partners to appropriate due diligence requirements pertaining to the retention and oversight of agents and business partners.”

Further, the government stated that, “[p]rior to its entry into the DPA with the Department, Pride voluntarily initiated a comprehensive anti-bribery compliance review of its business operations in certain high-risk countries; reported its findings to the Department; and undertook, of its own accord, remedial measures, including enhancement of its FCPA compliance program and a review of its internal controls, policies and procedures regarding compliance with the FCPA.”

Pride was subsequently acquired by Ensco plc (Ensco) in May 2011, and the company's business units were integrated into Ensco's compliance structure.

Based on all of the foregoing reasons, the government stated in its Motion that continuing the DPA was “no longer warranted.” The government also moved to terminate the unsupervised probation of Pride's French subsidiary on the same day.