Co-authored with Carla Christofferson, Executive Vice President and Chief Risk Officer at DXC.technology.
During 2020, people around the world were subject to lockdown orders, school and office closures, and travel bans due to the COVID-19 pandemic.
While government regulators were forced to devote substantial resources to the fight against COVID-19, the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have continued to enforce the Foreign Corrupt Practices Act (FCPA) and other regulatory statutes against the very technology companies that provide the means for businesses, schools, and other institutions to function remotely. In light of this sustained enforcement activity and the arrival of a new U.S. presidential administration, domestic and international technology companies with certain ties to the United States should continue to invest in a robust and sophisticated compliance regime that will guide them into the future.
Recent enforcement actions and trends
Although the overall number of enforcement actions under the FCPA was down compared to previous years, 2020 saw the largest combined value of FCPA-related fines when measured by total dollar value – close to US$3 billion as of 19 October 2020. Not surprisingly, the technology and telecoms industries were not immune, and remained squarely in the sights of government regulators and prosecutors for alleged violations of bribery and corruption laws.
Is one email all it takes?
In United States v. Coburn, 439 F. Supp. 3d 361 (D.N.J. 2020), a prosecution of two former high-ranking executives of Cognizant Technology Solutions Corporation, the United States District Court for the District of New Jersey addressed the issue of what constitutes the proper “unit of prosecution” under the FCPA. The defendants allegedly conspired to pay a US$2 million bribe to government officials in India, to obtain a permit to open an office facility. They were charged in a 12-count indictment that included three counts arising under the substantive anti-bribery provisions of the FCPA – 15 U.S.C. §§ 78dd-1 & 78ff(c)(2)(A). One of the defendants moved to dismiss two of the three bribery counts on the basis of multiplicity, arguing that three emails relating to a single bribery scheme could not form the basis of three separate counts in the indictment.
While acknowledging the absence of binding authority on the issue, the Coburn court held that a single email in furtherance of a bribe is sufficient to support a separate count in an indictment alleging FCPA violations. The plain wording of 15 U.S.C. § 78dd-1(a) (Section 1(a)) makes it unlawful for covered parties “to make use of the mails or any means or instrumentality of interstate commerce” in furtherance of a bribe (emphasis added). The court relied on this wording to find that “to make use of” was the “operative verb” under Section 1(a), and that, “[t]he domestic use of international communications as a means of accomplishing foreign bribery by remote control bears enough earmarks of wrongfulness to suggest that it is central to the offense.” The court rejected the defendant’s argument that the proper unit of prosecution under the FCPA should be based on the “essence” or “gist” of the statute – i.e., the payment of a bribe to a foreign official.
To date, Coburn has not been adopted by any federal circuit courts of appeal. Nevertheless, the upshot of the court’s unit of prosecution analysis is clear: in light of the prevalence of electronic communications to conduct business internationally, corporate compliance departments should vigorously monitor possible red flags, as a single email or telephone call in furtherance of a bribe can form the basis of an indictment.
The interplay of trade sanctions violations and bribery and corruption investigations
Technology companies operating internationally often face compliance risks based on more than one criminal or regulatory regime. Specifically, in recent years, U.S. government enforcement agencies have pursued multinational corporations for their alleged non-compliance with anti-bribery laws, as well as the United States’ trade sanctions framework. In September 2019, Quad/Graphics, Inc. (Quad) agreed to pay nearly US$10 million to resolve charges that it violated the FCPA by bribing public officials in Peru and China, and creating false records to conceal commercial transactions with a Cuban state-owned entity (In the Matter of Quad/Graphics, Inc., SEC. Admin. Proceeding No. 3-19531 (26 September 2019)). Quad allegedly paid bribes to public officials to enhance sales in Peru, and later sought to bribe multiple judges when it became embroiled in a tax dispute with Peruvian authorities. In addition, the SEC alleged that Quad failed to implement an adequate compliance program to identify and prevent transactions with a state-owned Cuban telecommunications company, in violation of trade sanctions and export control laws, as well as the FCPA’s books and records provisions. Other technology companies have similarly faced enforcement actions on multiple legal fronts.
The SEC’s case against Quad captures the intersectional compliance risk associated with bribery and corruption as well as trade sanctions. Moreover, it demonstrates how U.S. enforcement agencies can scrutinize technology companies for a wide range of alleged misconduct. Notwithstanding these allegations, the SEC took note of Quad’s voluntary disclosure and remedial efforts in its decision to accept Quad’s settlement offer. In the criminal context, voluntary self-disclosure is similarly valued as one of three prerequisites for a presumptive declination under DOJ’s FCPA Corporate Enforcement Policy. The decision to self-disclose potential violations is always fact-sensitive, and the potential advantage of disclosure, cooperation, and remediation must be evaluated in light of the conduct at issue.
It is not uncommon for the U.S. government to broaden the scope of an investigation to cover allegations of wrongdoing under multiple statutes or regulatory regimes. An investigation into allegations of business dealings with embargoed countries can morph into an investigation of bribery and corruption, and vice versa. Indeed, the government has invested considerable resources into the enforcement of trade and economic sanctions over the past several years – specifically with respect to technology companies that possess some of the world’s most valuable technologies and intellectual property. Companies in the technology, media, and telecoms sector should therefore expect continued governmental probes of their foreign business dealings, which could lead to revelations of bribery and corruption if internal compliance guidelines are not rigorously enforced.
2020 saw no shortage of governmental scrutiny of technology companies in the United States. With the inauguration of Joe Biden and Kamala Harris as the president and vice president respectively, we expect this trend to continue, including a likely surge in FCPA enforcement actions.
Whereas President Trump and his senior advisers took a skeptical view of the FCPA, calling it “unfair” and suggesting substantive changes to the law, we do not expect the same hostility from a Biden-Harris Justice Department. Joe Biden’s pick of Judge Merrick Garland for the position of Attorney General signals a renewed commitment to the independence of the Justice Department. As such, we expect the trend of aggressive FCPA enforcement to continue, and that these investigations will be conducted free from political interference.
We also expect the new administration to focus on misconduct at the individual level when investigating corporations for foreign bribery schemes. During the Obama administration, DOJ emphasized the need for companies to identify and hold accountable individual employees. This principle was incorporated into DOJ’s Justice Manual, which now states that “[i]n order for a company to receive any consideration for cooperation... the company must identify all individuals substantially involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all relevant facts relating to that misconduct.” This focus on deterrence through individual accountability will likely guide prosecutors and investigators as they investigate allegations of misconduct under the new administration.
The economic downturn brought on by the COVID-19 pandemic also presents fertile ground for fraud and corruption. As we saw during the recessions of 2001 and 2007–2008, FCPA enforcement actions are likely to rise due to the increased likelihood of misconduct during difficult economic times. In light of the global nature of the pandemic and its attendant economic fallout, foreign officials may be more inclined to condition their approval for certain ventures on a bribe. Accordingly, it is up to corporate compliance departments to closely monitor global business dealings for possible signs of misconduct under the FCPA and other anti-bribery laws, to minimize the risk of an enforcement action by U.S. prosecutorial or regulatory agencies.
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