Dual Enforcement of the FCPA

Foreign Corrupt Practices Act , SEC Whistleblower Program

Enforcement of the Foreign Corrupt Practices Act is carried out by two agencies: the Department of Justice, and the Securities Exchange Commission. Though each agency is granted jurisdiction over different types of violations and different classes of persons and corporations, in practice the two agencies typically work in cooperation to further the interests of the government and make the strongest case possible. Since FCPA violations usually result in monetary settlements rather than criminal convictions, the cooperation between DOJ and SEC helps them negotiate larger settlements.

Because of the FCPA’s provisions on proper accounting, violators who attempt to disavow knowledge that nebulous “consulting fees” were diverted to bribes can still be held liable for not meeting accounting standards. Thus in trying to lessen their guilt for the bribery provisions, violators often dig themselves into a hole with the accounting provision of the statute. The SEC investigators, therefore, by no means play second fiddle to the DOJ’s prosecutors. Many FCPA violators wind up settling jointly and simultaneously with both the DOJ and the SEC, showing that in many cases the level of cooperation is quite deep.

Per the law, the Department of Justice is responsible for the criminal and civil enforcement of the anti- bribery provisions, as well as willful violations of the accounting provisions. The law grants DOJ FCPA authority over issuers, officers, directors, employees, and agents or stockholders acting on the issuers behalf. DOJ also has authority over “domestic concerns” which include U.S. citizens, nationals, residents, U.S. businesses and certain foreign persons and businesses that violate the FCPA while in the territory of the United States. There is a specific FCPA unit within the Fraud section of the DOJ’s Criminal Division. Thus the number of DOJ personnel with authority to make decisions on FCPA enforcement is a relatively small one, but their jurisdiction is quite wide-ranging. In a broad sense, the DOJ’s job relative to the FCPA is to punish any individual or corporation that commits acts of bribery because they are breaking US law.

The FCPA grants the SEC authority to bring civil charges for violations of the anti-bribery provisions and accounting provisions. Its jurisdiction is more limited than the DOJ’s and covers the following: issuers, officers, directors, employees, and agents or stockholders acting on the issuers’ behalf. In recent years, the SEC has shown willingness to be more liberal with their interpretation of what constitutes an “agent” of an issuer. Civil cases do not carry the threat of prison time, but the burden of proof is lower than in a criminal case. In a broad sense, the SEC’s job relative to the FCPA is to ensure fair play between various issuers (publicly traded companies) and their shareholders. Because markets rely on truthful accounting by companies, improperly accounting for bribes hurts shareholders and competitors, and the SEC can intervene with civil fines as a corrective action.

Obviously the jurisdictions of the two agencies can overlap, especially since the DOJ is granted such broad discretion. In general though, the DOJ handles criminal and civil penalties related to the actual act of bribery, while the SEC handles civil enforcement of violations of the FCPA’s accounting provisions. The SEC also may take the lead in civil enforcement of the bribery provisions when the case involves the issuing or trading of securities or defrauding of shareholders. As an example, the SEC was the sole actor in a 2006 settlement with Tyco International, primarily for cooking their books to inflate their income thus deceiving shareholders, as well as committing acts of bribery in Brazil. So the major offense was a securities issue unrelated to the FCPA, and therefore the SEC handled it and used its FCPA authority as a tack-on charge. By contrast, in 2012 Tyco was investigated specifically for allegations of bribery in multiple foreign countries. The SEC and DOJ worked jointly and arrived at a $26 settlement split evenly- $13 million to the DOJ for criminal penalties (and an agreement not to prosecute individuals) related to acts of bribery, and $13 million to the SEC for accounting violations designed to disguise the payments of those bribes.

Unfortunately for FCPA violators, cooperation between the two agencies seems to be the norm rather than the exception. The DOJ generally wields the biggest stick, as prosecutors have the power to actually throw violators behind bars, but the SEC is a powerful ally as they have expanded authority over accounting provisions and significant manpower for this specific task.

Whistleblower Justice Network Can Help You

Whistleblower Justice Network partners with whistleblowers worldwide to expose worldwide bribery schemes that violate the Foreign Corrupt Practices Act. Utilizing the SEC Whistleblower Program, we aid whistleblowers in bringing corporations that expand their business interests through bribery to justice.

If you have meaningful information regarding corporate bribery that you believe is in violation of the FCPA, Whistleblower Justice Network can help. Working alongside world-class legal counsel, we will ensure you are protected to the fullest extent of the law and that you receive credit for the information you bring to the U.S. government. Partnering with whistleblowers is all we do. Visit us at www.whistleblowerjustice.net, or call us at 844-WJN-4ALL, to learn if we can help you.