The American Conference Institute's 15th Annual Forum in Houston on the Foreign Corrupt Practices Act featured remarks from David Last, the Chief of the Department of Justice's FCPA Unit, and Charles Cain, the Chief of the Securities and Exchange Commission's FCPA Unit.
Here are some of the key takeaways:
Impact of ESG reporting: Last pointed out that a company's reporting on environmental, social, and governance (ESG) activities can affect the accuracy of its books and records within the FCPA's ambit if not handled properly. Enforcement authorities have used the FCPA's books and records provision to pursue violations that do not involve bribery. Last indicated that this is an area to keep in mind for ESG.
Importance of data: Last and Cain expect companies to use data to execute, test and improve their compliance programs and controls. Not every company can invest in sophisticated AI, but "all companies have data" and must use it. Compliance functions must have full access to their company's data in a way that allows them to determine whether their program is effective. Moreover, "if data is being used to a degree of sophistication on the business side, the compliance side must have access." Companies should be able to articulate how they have used data, what they have learned from it, and what actions they took in response.
Avoiding a monitorship: Following the October 2021 Monaco Memo's renewed focus on monitorships, Last explained that in deciding whether to impose a monitor, the DOJ considers cost and necessity. On the latter, the DOJ's fundamental question is whether a compliance program is fully implemented, has been tested, and is adequately resourced at the time of resolution. A monitorship is more likely to be imposed where a program is deficient in multiple respects.
Statute of limitations: Cain noted that the FCPA unit still aims to bring cases promptly within the general five-year statute of limitations, despite the statute's recent increase to 10 years for disgorgement regarding certain scienter-based violations of federal securities laws.
International cooperation: Last highlighted the "exponentially" increasing role of cooperation among international authorities. His unit frequently receives leads from non-US enforcement officials who ask to pursue joint investigations: "You've got someone sitting in your backyard in Texas, Miami, New York - is this something you'd be interested in doing?" Last said "rest assured that the prosecutors in the [FCPA] unit are extremely busy working on multiple significant matters about companies and individuals," with an "extremely strong" pipeline of cases. The DOJ is "making prosecution of corporate crime a priority."
As companies increase their ESG reporting and activities, it is important to understand how they interface with the FCPA's books and records provision, requirements regarding disclosures under securities laws, and potentially inconsistent statements and activities across business units. Separately, developing a compelling narrative now about how a company uses the full suite of data available to manage its controls and compliance activities will pay dividends if problems arise in the future.
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