Today I conclude my series on the Rolls-Royce global anti-corruption enforcement action by taking a look what it all means going forward. The resolution is more than simply the stunning fines and penalties of £671 million (more than $800 million) and three agreements: Deferred Prosecution Agreement (UK DPA); a criminal penalty under a DPA (US DPA) with the US Department of Justice (DOJ) and a criminal penalty under a leniency agreement with the Ministério Público Federal (MPF). This case continues the trend established in 2016 for not only global cooperation in anti-corruption investigations abut also global enforcement.
This case brings up the need to now look at anti-corruption enforcement at a level broader than simply a US-centric Foreign Corrupt Practices Act (FCPA) outlook but truly across the globe. To that end, I debut today the Global Anti-Corruption Enforcement Top Ten Settlements which includes enforcement actions from around the global.
Top Ten International Anti-Corruption Enforcement Actions
- Odebrecht/Braskem – $4.5bn-US, Switzerland and Brazil
- Siemens – $1.6bn-in Germany and US
- Rolls-Royce – $800MM in the UK, US and Brazil
- VimpelCom – $795MM in US and The Netherlands
- Alstom – $772MM in US
- Halliburton – $604MM in US and Nigeria
- Teva Pharmaceutical – $519MM in US
- GlaxoSmithKline – $498MM in China
- Och-Ziff – $412MM in US
- BAE – $400MM in US
The first thing that should jump out at the reader is that three of the top four resolutions have occurred in the past 12 months: VimpelCom in February 2016 and Odebrecht and Rolls-Royce, both in December 2016. The next clear trend is the uptick in fines over the past several years. While Siemens and Halliburton are from the past decade, the remainder of the matters are all from this decade. Indeed, half of all the cases from the top 10 have been announced in the past 12 months. This is clearly the demonstration of what Kara Brockmeyer, Chief, FCPA Unit at US Securities & Exchange Commission, has called “going global” in anti-corruption enforcement. If you had her other phrase of “one pie” for fines and penalties, you clearly see regulatory thinking and international businesses must be ready to respond to this global cooperation, not just in investigatory cooperation but also in enforcement.
This will put much more pressure on companies around the issue of self-disclosure. As Brockmeyer made clear, in her ACI 2016 National FCPA Conference remarks, for the Securities and Exchange Commission (SEC) to give credit for fines and penalties in other countries, a party must self-disclose to the SEC (and presumably to the DOJ) and cooperate fully throughout the investigation. This puts much more pressure on a company to take internal reports seriously and perform thorough investigations. One only need to consider GlaxoSmithKline plc (GSK) and their inept response to substantive whistleblower allegations of corruption in their Chinese business unit. GSK apparently put more time into trying to determine the identity of the whistleblower than in any detailed investigation of the claims brought forward.
Another key point from the Rolls-Royce resolution is that it confirms not only the providence of the UK Bribery Act but should also put to rest all those (UK Prime Minister Theresa May I hope you are reading this) who wanted to eviscerate the UK Serious Fraud Office (SFO). The work of the SFO can only be called a first rate example of what a committed agency, with limited funds and resources, can accomplish. SFO Director David Green and his entire team earned a well-deserved tip of the cap for this resolution. Bill Waite, writing in a FCPA Blog post entitled “Rolls-Royce is the tipping point for UK anti-bribery enforcement”, reported that Green had told him “there were deferred prosecution agreements (DPAs) in negotiation which were of “an entirely different magnitude” to SFO v Standard Bank plc and SFO v XYZ Ltd and that they would demonstrate the agency’s ability, intent and effectiveness. Rolls-Royce is the first of those DPAs and marks the tipping point for anti-bribery enforcement in the UK.”” I agree.
The process also confirms not only the importance of DPAs to prosecutors but also to companies and wider societal interests. Waite laid out how the UK DPA process protects all of these interests. He noted, “in identifying the features that justified both the DPA and the sanction, Sir Brian Leveson removed doubt or ambiguity over the circumstance in which a DPA would be sanctioned by the court…The English position enshrines open justice and requires sanction by the court. In the absence of guidance it was difficult for corporations to measure the risk that the court may refuse a DPA. This judgment provides guidance from the President of the Queen’s Bench Division to all judges. As a consequence, corporations can be more confident about how they will be treated if they choose to disclose to the SFO.”
It fell to the Editorial Column of the Financial Times (FT), in a piece entitled “The Rolls-Royce scandal has not run its course”, to lay out why a DPA is such a useful societal tool. They wrote, “The key arguments against prosecution, then, are that it would cause excessive economic damage, and that a settlement could by itself provide sufficient deterrent to future crimes. On the first point, Rolls is an important company for Britain and the world. To permanently weaken or destroy it would have serious economic consequences for innocent people and reduce competition in already concentrated markets. And a conviction could well prove fatal to Rolls by making it illegal for key clients in the UK and US to contract with it. On the second point, half a billion pounds in fines will not be dismissed as a cost of business at a company that has been generating $1bn-$2bn dollars in cash flow a year.” In other words, DPAs will remain as they are both a powerful and useful tool.
Finally, for the compliance practitioner is the sum of these messages. Global enforcement is here to stay, no matter who sits in the White House or how much it is believed corruption is simply a part of doing business in locales across the globe. The price for such myopic thinking will be an enforcement action somewhere in globe. If an allegation of corruption is made, either through an anonymous source or through monitoring or auditing, it must be aggressively investigated and remediated. If it turns out the conduct is not simply a one-off or is in any way systemic, you will need to seriously consider how many regulatory bodies to self-disclose to going forward. The only response should be to actually be doing compliance by not simply putting a best practices compliance program in place but operationalizing it into the fabric of your company.
That may be the final and most important lesson for you from Rolls-Royce.
Rolls-Royce confirms anti-corruption enforcement has gone international. As a CCO, be ready.Click to tweet
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© Thomas R. Fox, 2017