Introduction

The American vision of truly global enforcement of anti-corruption laws has come into sharper focus in the last few years. Corporations and their personnel operating in the current competitive global environment should take note of the large number of follow-on prosecutions following US convictions. 2019 has witnessed yet another increase in independent anti-corruption investigations by non-US enforcement authorities and continued growth in anti-corruption laws around the world. While the American authorities have long pressed for such global enforcement, the US Justice Department (DOJ) and the Securities and Exchange Commission (SEC) now face real competition in the quest to stamp out corruption and to fill their treasuries while doing it. Corporations and their counsel must recognize the increased legal risk these developments bring and prepare for an increase in scrutiny from all directions.

When the United States was the primary leader in the fight against corruption, the decision on what to do in the wake of serious bribery allegations was fairly linear: investigate, disclose, remediate and settle. But now corporations faced with such allegations have a complex web of risk analysis to consider: which anti-corruption laws apply, what is the nationality of the alleged offenders, where did the conduct occur, what rights do the witnesses have in their jurisdictions, what obligations does the corporation have, how is the relevant data regulated, what is the risk of either follow-on or joint prosecutions, who is the primary regulator and, often the most difficult question, should the company self-disclose. Governments worldwide are more eager than ever to get their bite at the lucrative penalty apple and less willing to step aside and allow the US government to take the lead.

The proliferation of non-US prosecutions and anti-bribery laws commends caution, deliberate investigations, and thoughtful consideration before the traditional disclosure, designed to appeal only to the United States. And above all, this complex enforcement environment should lead all businesses engaged in cross-border business to avoid these difficult challenges in the first place by proactively spending more time, effort and resources on robust anti-corruption compliance.

Notable Examples of Follow-on Prosecutions

The massive settlement payments traditionally made under the US Foreign Corrupt Practices Act (FCPA) — which are on track to be the third-highest in history in 2019 — have increasingly prompted non-US authorities to open independent or parallel investigations. Perhaps one of the first examples of follow-on prosecutions resulted from a FCPA settlement involving a French telecommunications company. In January 2010,  the company paid USD$10 million to settle charges that it paid kickbacks to government officials within the Costa Rican government. Honduras’ Special Prosecutor's Office Against Corruption later opened an investigation into these allegations but closed it without bringing charges. In December 2010, the company paid USD$137.4 million to the DOJ and the SEC to settle FCPA violations arising from improper payments in Costa Rica, Honduras, Malaysia and Taiwan. Two days later, after the settlement and the company’s admissions were published by the US government, the Special Prosecutor's Office in Honduras reopened its investigation.

A more recent example involves an Israeli pharmaceutical company On 22 December 2016, the DOJ and the SEC announced that the company would pay almost USD$520 million in connection with bribery schemes in Russia, Ukraine and Mexico. Just five days after the settlement and facts admitted by the company were published, the Russia General Prosecutor’s Office announced it would open an investigation into the company. In February 2017, it was announced that Israeli authorities were investigating the same conduct at issue in the US settlement. On 15 January 2018, the Israeli Justice Ministry announced that the company had conditionally agreed to pay USD$22 million in penalties to resolve bribery allegations in Russia, Ukraine and Mexico.

Perhaps the most well-known recent example of cross-border parallel prosecutions involved what was one of the largest construction and engineering firms in South America. On 21 December 2016, the company reached what they hoped would be a global settlement of bribery charges with American, Brazilian and Swiss prosecutors for a combined USD$3.5 billion for a bribery scheme in 12 countries. But at the time of the announcement of the settlement, Argentina and Peru had already opened probes into the company’s construction contracts for suspected kickbacks to foreign officials.

The settlement announcement prompted still more follow-on prosecutions, with Ecuador, Colombia, the Dominican Republic, Panama and Guatemala opening investigations, and in some cases, independently settling charges. Despite the firm’s effort to reach a global settlement — or perhaps because of it — the massive number of the follow-on prosecutions led to financial disaster for the company. In the summer of 2019, the company filed for bankruptcy in both Brazil and the US. Adding to its woes, despite paying approximately USD$184 million in fines to settle charges in the Dominican Republic in 2017, that case may now be re-opened because the company failed to pay an additional USD$32 million installment required by the settlement, in September 2019.

It is not just the seasoned US enforcement regime that can lead to follow-on prosecutions. Non-US bribery settlements have also created havoc in their wake. For example, in 2013, Chinese authorities charged a British pharmaceutical company for paying bribes to publicly employed doctors in exchange for selecting that company’s products. A Chinese court found the company guilty in 2014 and fined it USD$489 million. After its own investigation in the wake of the Chinese settlement, in September 2016, the SEC imposed a civil penalty of USD$20 million on the company for exactly the same conduct. In other jurisdictions where the company operates, criminal authorities opened bribery investigations into the company. Both Poland and Romania opened subsequent investigations into the allegations, with Polish authorities later charging 13 individuals for related conduct in Poland in connection with their probe. The UK Serious Fraud Office also opened an investigation that was closed in September 2019 without any action.

The recent bribery inquiry involving a Dutch offshore services company is another instance where a non-US bribery settlement prompted a US follow-on prosecution. In 2014, the company paid USD$240 million to settle a Dutch investigation into improper payments made to officials in Angola, Brazil and Equatorial Guinea. In 2017, the company paid an additional USD$238 million to settle with the DOJ FCPA violations in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq. In 2018, the company paid USD$189 million to Brazilian authorities to settle corruption charges.

These cases are only some of the more notable examples in recent years; many others have involved follow-on prosecutions. Nonetheless, they undoubtedly show that counsel must factor into their risk calculus the very real potential for follow-on prosecutions. In addition, this aggressive multi-national enforcement changes the calculus when serious allegations of bribery come to light; careful thought must be given before following the traditional path of disclosure long advocated for by the American DOJ and the SEC.

Increase in Global Anti-corruption Laws

In recent years, many countries have either passed new anti-corruption legislation or aggressively enhanced existing laws. Over time, countries have approached public corruption with different tools. For example, many target the bribe-taker (public official), while others target the bribe-giver, whether individual or corporate. These developments complicate the evaluation of risk and risk mitigation when doing business across national boundaries.

India, for instance, passed a significant amendment to its Prevention of Corruption Act in 2018, which expanded liability for those who pay bribes and public bribery against companies. Before this law, India’s anti-bribery law only applied to public servants who accepted bribes. The amendment goes to the heart of the problem by establishing a new offence for those who engage in bribery of a public servant to perform a public duty improperly. The amendment also incorporates a new bribery offence for a “commercial organization,” aiming the power of the law directly at corporations. This offence renders any “commercial organization” liable “if any person associated with the commercial organization gives or promises to give any undue advantage to a public servant” intending to obtain or retain business or advantage in the conduct of business for that commercial organization.

Notably, however, the amendment also adopted new defenses for bribery. It recognized a defense for the provider of an undue advantage if that person (i) was “compelled” to give an “undue advantage” and (ii) reports the acceptance of the undue advantage to a law enforcement authority or investigating agency within seven days of the act. In addition, the new Indian law mirrors the UK Bribery Act by incorporating a defense for a “commercial organization” charged with bribery if it can prove it had “adequate procedures” in compliance with any such guidelines as may have been prescribed to prevent persons associated with it from undertaking such conduct.

Italy also expanded liability in passing its “bribe-destroyer” law in January 2019. This law increased penalties for individuals and companies in relation to certain acts of bribery. It also broadened the definition of a “foreign public official” to include officials within a public international organization; members of international parliamentary assemblies, international or supranational organizations; and officials and judges of international courts. However, it also adopted a new benefit for co-operation— allowing companies that committed certain bribery offences to limit disqualifying sanctions to a maximum of two years, provided the company, before the first decision or judgment, actively collaborates to avoid further consequences of the offence and voluntarily discloses information that helps obtain evidence of the crime or identifying other offenders, or that ensures the resulting profits are seized.

Other countries, like Russia, have passed laws providing prosecutors with new tools to combat corruption. Russia’s new law, passed in April 2018, permits Russian courts to freeze the assets of companies under investigation for corruption up to the maximum amount of any potential fine. The law also provided companies with a new defense to bribery if they (i) assist in detecting or investigating the bribe or (ii) prove that the bribe had been extorted.

Increase in International Co-operation

Increased co-operation adds another dimension to cross-border cases. New mechanisms have been added to heighten co-operation. Some of these measures are more informal, such as the DOJ embedding prosecutors from its Criminal Division in London to co-operate with UK’s Financial Conduct Authority (FCA) and Serious Fraud Office (SFO). Other countries have also sought to mirror American-style deferred prosecution agreements (DPAs). In 2014, the UK passed legislation authorizing DPAs and the SFO entered its first DPA with a British bank, involving violation of the Bribery Act in 2015. The SFO has secured a handful of DPAs since. Canada adopted the use of DPAs in 2017. The spread of the use of DPAs is likely to correspond with increased co-operation with US authorities as foreign governments seek to emulate the US model of enforcement.

Other mechanisms include tangible changes to legal processes. For instance, in 2018, the US passed the Clarifying Lawful Overseas Use of Data Act (CLOUD Act), which gave prosecutors new information-sharing tools. One of these tools included the creation of a framework for an executive agreement between the US and a foreign government, which allows US authorities to access data stored in the foreign countries and vice versa. Under these agreements, a provider subject to the jurisdiction of a country with which the US has entered an executive agreement could be served with an order requesting customer data and the provider would be compelled to disclose the data, even if the data was stored in the United States. These new arrangements provide prosecutors with an alternative process for collecting evidence to Mutual Legal Assistance Treaties, which have been criticized as cumbersome and slow.

The US has moved swiftly to set up these executive agreements. The US and UK recently entered into one such agreement that will allow American and British law enforcement agencies, with appropriate authorization, to demand electronic data regarding a range of serious crimes, including terrorism, child sexual abuse and cybercrime, directly from tech companies based in the other country, without legal barriers. The US also recently announced entering formal negotiations for executive agreements with Australia and the EU.

This increase in co-operation has notably manifested in the past few years in global settlements where US authorities are settling bribery charges with companies or entities simultaneously with other foreign authorities. Settlements with a Brazilian oil and gas company, a French investment bank, and Singaporean offshore and marine infrastructure business are a few examples of global settlements being settled simultaneously.

Voluntary Disclosure: to Disclose or not - that is the Question

A voluntary disclosure to any one authority can result in significant ramifications. A company’s decision to disclose or not should involve a thorough analysis of the advantages and disadvantages. The risk of follow-on prosecutions and fighting legal actions in multiple jurisdictions should be carefully considered when conducting this analysis. Currently, the DOJ and the SEC do not provide for any express or formal “credit” or more leniency when a voluntary disclosure is made involving conduct in a foreign jurisdiction, though they have occasionally agreed to divide penalties with other jurisdictions.

Moreover, traditional practice and American jurisprudence does not often lead to any recognition of double or multiple jeopardy. The likelihood of multiple, overlapping penalties and collateral consequences should be recognized before any self-disclosure is made, whatever the local benefit advanced by the relevant authority. The legal fees, penalty costs and reputational harm associated with a follow-on prosecution can be daunting and are almost guaranteed, given the long-standing practice adopted by the DOJ and the SEC to demand admissions of criminal conduct, the underlying facts and the publication of these admissions, even in the case of a non-prosecution, in the settlement documents.

In short, a decision to disclose to the US is a decision to disclose to the world. And more often than not, the worldwide disclosure is made in words drafted by prosecutors in a manner that frequently highlights wrongdoing aggressively while ignoring mitigation. Such a description is sure to attract the attention of other enforcement agencies and the media. And their first impression is hard to revise.

The analysis, then, is no longer linear. But the first step remains clear: investigate thoroughly. Understand what happened, where it happened and who was involved. Then determine which agencies have jurisdiction and consider the cost and benefits of a single disclosure, a joint disclosure or a staged disclosure. These questions will be highly fact- and law-specific, but looking forward and understanding the global and overlapping interests of the enforcement authorities can provide key guidance.

Of course, always critical is to stop any identified misconduct, to discipline or remove wrongdoers and to enhance the compliance system. Enforcement agencies could open their own inquiry at any point. Critical to a successful resolution is the ability to demonstrate absolutely no tolerance for corrupt behavior and a commitment to compliance and remediation.

Conclusion

Anti-corruption enforcement is now a truly global affair. The laws continue to proliferate and enforcement is no longer driven solely by the United States. This reinforces the need to build and maintain a strong compliance system, to investigate promptly allegations of corruption and to mitigate thoroughly any identified misconduct. That has not changed.

The question of disclosure is far more complicated, however. The old advice to disclose allegations early to US enforcement authorities is complicated by the success of other jurisdictions in the fight against corruption. Understanding fully what transpired before disclosure is now more important than ever, and disclosure is no longer a foregone conclusion.

Thus, a prompt and deep investigation remains the right approach. A clear understanding of the events, the actors, and where the conduct occurred may actually lead to new and effective ways to use the global competition over enforcement as a means to resolve matters locally and to encourage a return to respect for long-held judicial notions such as the avoidance of double jeopardy and the unfair imposition of multiple punishments for the same conduct.

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