The Foreign Corrupt Practices Act (“FCPA”)1 is a U.S. law prohibiting all “issuers” – U.S. and foreign public companies listed on stock exchanges in the United States, or that are required to file periodic reports with the SEC – from making or promising to make corrupt payments to non-U.S. government officials to obtain or retain business, and requiring all issuers to maintain accurate books and records and reasonable internal controls. The SEC is responsible for civil enforcement of the FCPA over issuers and anyone acting on their behalf, with potential penalties in the millions of dollars.
In recently naming Charles E. Cain as Chief of the SEC’s specialized FCPA Unit, elevating him from an Acting Chief role he’d held since April 2017, the SEC’s announcement2 highlighted five enforcement items from Mr. Cain’s résumé – none of which involved a U.S.-based corporation or individual.3
Given the many noteworthy actions that the SEC brought against U.S.-based corporations during the years when Mr. Cain was Deputy Chief and then Acting Chief of the 40-attorney FCPA Unit, the omission of any actions against U.S.-based entities and the inclusion of only actions against non-U.S. entities in the SEC’s announcement of Mr. Cain’s promotion sends a potential message about the Unit’s priorities going forward.
“Leveling the Playing Field” Through Cooperation with International Regulators
That implied message is supported by Mr. Cain’s own words in the announcement: “I look forward to building upon the important work the unit has done to combat corruption and level the playing field globally” (emphasis added).
The phrase “level the playing field” is an historical favorite of the SEC’s in many contexts, including international anti-bribery. Mr. Cain co-authored “A Resource Guide to the U.S. Foreign Corrupt Practices Act,”4 a joint SEC and U.S. Department of Justice guidebook published five years ago, which repeatedly states that the FCPA is used by U.S. officials to create a “fair” and “level” “playing field” for “honest businesses” and “U.S. businesses.”
Use of the phrase in the SEC’s announcement of Mr. Cain’s promotion echoes other recent statements by the SEC’s leadership in the one-year-old “America First” Trump administration.
To protect U.S. businesses perceived as being disadvantaged by others’ alleged bribery, the SEC may be signaling an intent to referee every competitor – or at least those issuers over whom the SEC has enforcement jurisdiction – on the global marketplace’s “playing field.” It likely would do so in coordination with fellow regulators from around the world. In fact, all five examples cited by the SEC in Mr. Cain’s announcement involved joint enforcement by American and European officials.
SEC Leadership’s Statements on Joint International Anti-Corruption Enforcement
In recent public remarks on the FCPA and the OECD anti-bribery convention,5 Steven Peikin, SEC Enforcement Division Co-Director, stated his belief that the SEC’s “fight against corruption is much more effective when our international colleagues join us in a shared commitment to eradicating corruption and bribery and leveling the playing field for businesses everywhere” (emphasis added).
Mr. Peikin added that “in an increasingly international enforcement environment, the U.S. authorities cannot – and should not – go it alone in fighting corruption,” but further observed that “the level of cooperation and coordination among regulators and law enforcement worldwide is on a sharply upward trajectory, particularly in matters involving corruption.”
Mr. Peikin’s sentiment has been borne out, not only by the increased joint enforcement actions we are seeing by anti-corruption regulators from different countries, but also by what we understand to be the growing number of information-sharing channels between regulators at various seniority levels (including Mr. Cain) around the globe.
Furthermore, during the confirmation process of SEC Chairman Jay Clayton, whose nomination by President Trump was confirmed by the U.S. Senate on May 2, 2017, a Democratic Senator expressed doubt of Mr. Clayton’s commitment to enforce the FCPA. The skepticism stemmed from a 2011 report, co-authored by Mr. Clayton,6 which called for “a realignment of the U.S. position in the global anti-bribery enforcement regime” if the U.S. authorities must “continue to do it alone.”
Responding to this skepticism,7 Mr. Clayton stated that he viewed the FCPA as a “powerful and effective means” to combat government corruption – and that “international anti-corruption efforts are much more effective at combating corruption if non-U.S. authorities are similarly committed and seek to coordinate.” Likely recognizing the position he had taken in 2011, Mr. Clayton added that “[f]ortunately, international enforcement efforts appear to be more prevalent than they were a decade ago.”
Mr. Cain at Head of Wave Possibly Churning Toward Non-U.S. Issuers
Indeed, in multiple speaking engagements in 2017, Mr. Cain observed that those efforts are clearly trending upward.
At PLI’s “The SEC Speaks in 2017” conference in February 2017, Mr. Cain advised of increasing cooperation between international regulators on anti-bribery, including the SEC’s contribution in training more than 100 prosecutors in more than 35 jurisdictions worldwide on foreign anti-corruption enforcement. In October 2017, at both PLI’s “White Collar Crime 2017” and Securities Docket’s “Securities Enforcement Forum 2017,” Mr. Cain reiterated the joint enforcement efforts by global regulators, calling it “the wave of the future.”
Now, Mr. Cain is leading that wave.
Non-U.S. issuers should prepare with a risk-based, anti-bribery assessment of their books and records and their internal controls, focused on the FCPA’s requirements and U.S. regulators’ guidance. They should also adopt corporate anti-corruption and ethics policies, and provide compliance training on the company’s FCPA obligations to executives, managers, employees, agents, distributors, and anyone else doing business on the company’s behalf who may pose bribery risks to the company.
Experienced legal counsel with close knowledge of the FCPA and the SEC should be consulted, to properly address the unique risks for each issuer operating on the SEC’s worldwide “playing field".
- 15 U.S.C. §§ 78dd-1, et seq.
- Press Release, U.S. Sec. & Exch. Comm’n, Charles Cain Named Chief of Foreign Corrupt Practices Unit (Nov. 2, 2017), available at sec.gov.
- The five bullet points that the SEC selected were composed of (1) Sweden-based telecommunications provider Telia Company AB ($965 million global settlement); (2) Dutch telecommunications provider VimpelCom Ltd. ($795 million global settlement); (3) Hungary telecommunications provider Magyar Telecom, PLC (“Magyar”) ($90.8 million global resolution); (4) Magyar’s German parent company, Deutsche Telekom, AG ($4.36 million global resolution); and (5) three of Magyar’s former top executives (settlement involving money penalties and officer-and-director bars).
- U.S. Dep’t of Justice & U.S. Sec. & Exch. Comm’n, A Resource Guide to the U.S. Foreign Corrupt Practices Act (Nov. 14, 2012), available at justice.gov.
- Steven R. Peikin, Enforcement Division Co-Director, U.S. Sec. & Exch. Comm’n, Reflections on the Past, Present, and Future of the SEC’s Enforcement of the Foreign Corrupt Practices Act (Nov. 9, 2017), available at https://www.sec.gov/news/speech/speech-peikin-2017-11-09.
- Jay Clayton (Chairman), et al., N.Y. City Bar Ass’n Comm. on Int’l Bus. Transactions, The FCPA and its Impact on International Business Transactions – Should Anything Be Done to Minimize the Consequences of the U.S.’s Unique Position on Combating Offshore Corruption? (Dec. 2011), available at nycbar.org.
- Hearing Before the Committee on Banking, Housing and Urban Affairs on the Nomination of Jay Clayton, 115th Cong. S. Hrg. 115-9 (Mar. 23, 2017) (Responses to Written Questions of Senator Brown from Jay Clayton, A.17), available at gpo.gov.
Client Alert 2017-280
