Thank you, Andrew, for the kind introduction, and thanks to
Latin Lawyer and Global Investigations Review for co-hosting this important
event. It is a privilege to join you
here in São Paulo representing the Criminal Division of the U.S. Department of
Justice.
I have had the honor of serving in the Department of Justice
for almost my entire professional career.
Most of that time, I spent as a federal prosecutor in Manhattan, where I
specialized in prosecuting national security offenses and international narcotics
trafficking. I currently serve as the
Principal Deputy Assistant Attorney General of the Department’s Criminal
Division.
The Criminal Division, which is led by our Assistant
Attorney General Brian Benczkowski, includes over 600 attorneys spread across
17 sections and offices. While most of
our attorneys are based in Washington D.C., many of them are stationed around
the United States, and even around the world, including here in Brazil. That makes eminent sense at a time when, as
economies become increasingly global, so too are the criminal schemes we
target. Trial attorneys in the Criminal
Division investigate and prosecute a broad range of sophisticated economic
fraud, global corruption, and international money laundering, as well as many other
crimes, such as gang violence, narcotics trafficking, and public corruption.
The Criminal Division also houses the Department of
Justice’s Office of International Affairs, which handles all of our foreign
legal assistance and extradition matters.
The work of our Office of International Affairs is more important than
ever in today’s world. As transnational
crime grows in scope and complexity, we increasingly find ourselves building
cases, piece by piece, in cross-border investigations with evidence and
witnesses that span the globe.
Today’s conference has been an ideal opportunity for us to
take stock of our collective efforts to address corporate and government
corruption. But it also provides an
opportunity to pause and reflect more fundamentally on the principles that
guide our efforts at the Department of Justice in combatting such
corruption. Sometimes, there can be such
a fixation on the end results that garner the headlines that we overlook the
importance of the prosecutorial principles that led to those results.
Today, I want to talk about those principles and how we, at
the Department of Justice, are applying them.
Specifically, I want to talk about the Department of Justice’s
recognition of the need for better defined “rules of the road” in corporate
enforcement, and what we have been doing to articulate and clarify those
rules. By that, I am referring to the
Department’s efforts to establish settled and predictable guideposts by which
prosecutors exercise their discretion – guideposts that we hope provide greater
clarity and clearer expectations to the private sector, and allow companies to
conform their conduct accordingly.
We realize that transparency in this space is essential to
inducing results that benefit both law enforcement and the private sector
alike. Companies regularly face
difficult decisions with respect to law enforcement – perhaps most notably, for
purposes of today’s conference, how to respond after uncovering misconduct. Companies also usually behave as rational actors. If a company knows what factors we are
considering and what outcome the company can reasonably expect based on the
actions it takes, that company is in a better position to make an informed,
rational decision as to what course of action is in its interests.
In addition, when the Department of Justice not only strives
for greater transparency in its guiding principles, but sets those principles
with an eye on providing tangible incentives for good corporate behavior and
pursuing fair and appropriate corporate resolutions, we hope companies will
realize it is in their interests to implement robust internal controls and
effective compliance programs, and if they uncover misconduct, to voluntarily
disclose to law enforcement, cooperate, and remediate.
Oftentimes, prosecutors and companies are perceived as
adversaries. While that certainly is
sometimes the case, the goals and interests of prosecutors and companies often
are very much aligned. When prosecutors
and companies each work to advance the fight against corruption, it inures to
our mutual benefit – just as the harms of corruption are a mutual plague that
we all endure. Corruption not only
distorts private competition, but it erodes the public trust. Rampant bribery of government officials hurts
not just honest businesses, but innocent citizens and faith in the rule of
law. Conversely, compliance with
anti-corruption laws like the Foreign Corrupt Practices Act (FCPA) facilitates
not just the freedom and fairness of our markets, but also deeper values of
governmental integrity and democratic accountability.
It is for these reasons that we want companies to comprehend
what conduct on their part will be favorably credited and what will be
penalized, as well as the standards and factors that will guide our exercise of
prosecutorial discretion in the first place.
To foster that transparency, the Department has taken
affirmative steps to make our prevailing “rules of the road” as plain and
predictable as possible for prosecutors, companies, and business leaders. We have done that through various policies we
have announced, some of which I will discuss this afternoon, specifically, the
Department’s FCPA Corporate Enforcement Policy, the Criminal Division’s application
of the principles underlying the Corporate Enforcement Policy beyond the FCPA,
and the Department’s policy governing coordinated resolutions. While these policies, like the Department’s
other internal operating policies, do not create a private right and are not
enforceable in court, they do promote consistency among our prosecutors, guide
prosecutors’ exercise of discretion, and afford those outside the Department
greater clarity about how prosecutors go about our decision-making.
First, let me say a few words about the cases we prosecute. The Department’s recent enforcement of the
FCPA should send a very clear message:
We remain steadfastly committed to protecting free markets and promoting
ethical business practices through our continued vigorous enforcement of the
FCPA.
To that end, we believe that our emphasis on individual
accountability has the greatest impact on preventing and deterring
corruption. In the past fiscal year, the
Criminal Division’s FCPA Unit brought public charges against over 30
individuals, and secured 19 convictions.
That was on par with the prior year, when our FCPA Unit charged 28
individuals and obtained 23 convictions.
Over the next six months, Criminal Division prosecutors are scheduled to
conduct five trials in FCPA prosecutions against individuals. That is on top of the three FCPA trials we
had in calendar year 2017. To give a
sense of the significance of those numbers, from the years 2013 to 2016, only
one FCPA case went to trial.
Our enforcement actions against corporations that violate
the FCPA likewise have remained robust.
Over the past fiscal year, we reached eight corporate FCPA resolutions,
with about $925 million in total corporate U.S. criminal fines, penalties, and
forfeiture. That too was consistent with
the prior fiscal year, when we announced 11 FCPA corporate enforcement actions
with about $1.15 billion in U.S. criminal fines, penalties, and forfeiture. These figures of course do not account for
instances where we exercised our discretion to decline prosecution, given the
company’s voluntary self-disclosure, cooperation, and remediation.
These recent resolutions have covered a broad spectrum of
corporate corruption. In June, we
announced our first-ever coordinated resolution with France in a foreign
bribery case, when Société Générale, a global financial services institution,
agreed to pay more than $860 million in criminal penalties to resolve charges
for bribing Libyan officials and manipulating benchmark interest rates, known
as the LIBOR. We have announced 14
guilty pleas by individuals involved in the massive bribery and money
laundering scheme at Venezuela’s state-owned oil company, PDVSA. And we have announced a $47 million criminal
penalty for a Credit Suisse subsidiary for its role in a corrupt scheme to win
banking business by awarding employment to friends and family of Chinese
officials.
Of course, our close relationship with Brazil has borne
fruit with some of the Department of Justice’s most significant FCPA
resolutions over the past 12 months.
Most notably, about a month ago, Petrobras, Brazil’s
state-owned energy company, entered into a non-prosecution agreement with the
Department and agreed to pay more than $850 million in penalties. High-level executives at Petrobras had
facilitated the payment of hundreds of millions of dollars in bribes and then
cooked the books to conceal the sprawling bribery scheme from investors and
regulators.
Last December, Keppel Offshore & Marine, a
Singapore-based company with offices in the United States that operates
shipyards and repairs shipping vessels, agreed to pay more than $422 million to
resolve charges with authorities in the United States, Brazil, and
Singapore. The criminal scheme at issue
spanned over a decade and involved in excess of $55 million in bribes paid to
win contracts. Brazilian authorities
played an important role in helping secure that resolution, which also included
guilty pleas by Keppel Offshore’s U.S. subsidiary and a former senior member of
the company’s legal department.
In last November, SBM Offshore, a Netherlands-based company
that manufactures and designs offshore drilling equipment, agreed to pay a $238
million penalty in connection with bribes paid to officials in Brazil, Angola,
Equatorial Guinea, Kazakhstan, and Iraq.
In addition, SBM’s U.S. subsidiary, SBM’s former chief executive
officer, and a top executive of the U.S. subsidiary each pleaded guilty to
conspiracy to violate the FCPA.
These resolutions should make clear: Even among the many
pressing priorities being tackled by today’s Department of Justice – from
combatting violent crime, to dismantling transnational criminal organizations
and drug cartels, to fighting the opioid epidemic – foreign corruption that
impacts the U.S. economy will not be tolerated.
I alluded to the reasons why earlier. With the world more interconnected than ever,
economic problems and foreign corruption across the globe impact American
businesses and financial markets. Bribes
paid to corrupt government officials allow those leaders to advance their own
personal interests at the expense of the interests of their citizens and of the
national security and economic interests of other nations. And when companies pay bribes to foreign
officials to secure an unfair business advantage, companies who play by the
rules and abide by ethical standards are disadvantaged, as are their employees
whose jobs are at risk if their employers lose business to unscrupulous
competitors.
That is why we will continue to hold accountable to our laws
foreign businesses that avail themselves of American markets and American
citizens, whether doing businesses in the United States or overseas.
Importantly, however, the Department conveys its approach to
fighting corporate and government corruption not only through the matters that
have led to sizable criminal resolutions, but also through the criminal
violations we decline to prosecute. We
have made concerted efforts to formalize and clarify the “rules of the road” in
this regard by clearly articulating the criteria the Department considers when
deciding whether to pursue FCPA charges.
This has been largely through the Department’s FCPA
Corporate Enforcement Policy that I mentioned earlier. The Department’s Justice Manual – which
previously had been known as the U.S. Attorneys’ Manual – contains our FCPA
Corporate Enforcement Policy. The
decision to memorialize the Corporate Enforcement Policy in the Justice Manual
is part of our efforts to ensure greater transparency, consistency, and
predictability in our enforcement of the FCPA.
The Policy, in clear terms, sets out how we evaluate a company’s
violation of the FCPA, based on our assessment of actions taken by that company
in the face of the misconduct and the credit we afford those actions.
Most importantly, if a company voluntarily self-discloses
the misconduct, fully cooperates with the Department, and engages in timely and
appropriate remediation, including by paying all disgorgement, forfeiture, and
restitution for the misconduct, there will be a presumption of a
declination. The Policy also enumerates
a non-exhaustive list of aggravating circumstances that can overcome that
presumption.
If aggravating circumstances call for a criminal resolution,
notwithstanding a company’s voluntary self-disclosure, full cooperation, and
timely and appropriate remediation, the Policy instructs that prosecutors shall
seek up to a 50 percent reduction off the bottom of the applicable fine range
pursuant to the U.S. Sentencing Guidelines, unless the company was a criminal
recidivist, and also provides that prosecutors normally will not require the
appointment of a monitor assuming an effective compliance program has been
implemented.
The Policy further advises companies that if they fail to
voluntarily self-disclose, they still are eligible for limited credit – up to a
25 percent reduction off of the low end of the Sentencing Guidelines fine range
– provided they fully cooperate and engage in timely and appropriate remediation.
We also want to make sure companies understand what these
terms mean, so they can conduct themselves accordingly. The FCPA Corporate Enforcement Policy
therefore contains detailed, multi-factor definitions of “voluntary
self-disclosure,” “full cooperation,” and “timely and appropriate
remediation."
I am not going to mention all the factors that are
considered, but I do want to emphasize that an important part of a company’s
cooperation is assisting in the investigation and prosecution of individuals
involved in the misconduct. Our
commitment to individual accountability stands in the interest of both
companies and the Department alike.
After all, a company that violated the FCPA only acted through its
employees and agents, and that company most likely is composed predominantly of
employees who had nothing at all to do with the illegal conduct. It therefore makes sense that if a company is
doing everything right in the face of misconduct committed by a limited subset
of employees, we should prosecute those culpable individuals, yet remain
mindful of how we are impacting those employees who did not break the law.
The principles underlying the FCPA Corporate Enforcement
Policy make sense and are grounded in sound policy. For that reason, in March, we explained that
the Criminal Division would consider the criteria contained in the FCPA
Corporate Enforcement Policy as “nonbinding guidance” in other corporate
criminal cases outside the FCPA context.
In July, we clarified that the principles from the Corporate Enforcement
Policy also apply to mergers and acquisitions that uncover potential FCPA
violations. And less than a month ago,
we announced that Criminal Division prosecutors also will look at these
principles in the context of mergers and acquisitions that uncover other types
of criminal wrongdoing, not just FCPA violations.
Through the principles articulated in the FCPA Corporate
Enforcement Policy, we are trying to create a climate in which companies can
expect to be treated fairly and predictably when they decide to timely and
voluntarily report misconduct, and then cooperate and remediate.
Thus far, the results have been very positive.
In 2018, we have issued multiple corporate declinations
under the FCPA Corporate Enforcement Policy.
I will briefly discuss two declinations that were issued
this past August. In one instance, we
declined to prosecute the Insurance Corporation of Barbados Limited (ICBL) for
bribery of a Barbadian government official in exchange for insurance
contracts. In the other, we declined to
prosecute Guralp Systems Limited, a company that designs and manufactures
seismological instruments, despite evidence of FCPA violations relating to
payments to an Earthquake Research Center director in Korea.
In each case, our declination letter cited, among other
relevant factors, the company’s voluntary disclosure, significant remediation
efforts, and cooperation with the Department’s investigation, including with
respect to culpable individuals. With
respect to ICBL, we also emphasized that the company conducted a comprehensive
investigation and undertook remedial actions that included terminating all
employees involved in the misconduct and implementing an enhanced compliance
program and internal accounting controls.
The declinations in ICBL and Guralp Systems are also notable
because, in both cases, senior executives were implicated in the
misconduct. The involvement of executive
management in misconduct is one of the enumerated aggravating factors that can
weigh against a declination pursuant to the FCPA Corporate Enforcement
Policy. Our decisions nonetheless to
decline as to both ICBL and Gurlap Systems demonstrate that, although
aggravating circumstances can overcome the presumption of a declination, the
presence of such circumstances does not necessarily preclude a declination for
a company that does the right thing by voluntarily self-disclosing,
cooperating, and remediating.
For both of these declinations – as well as the eight
declinations that preceded them under the Corporate Enforcement Policy and the
predecessor Pilot Program – we have made our declination letters public and
available on the Department of Justice website.
Those 10 letters cite factors such as the company’s enhanced compliance
programs and internal controls, as well as the company’s full remediation. Here too, we are doing this in the interest
of transparency, so future companies understand what we expect if they hope to
qualify for a declination.
By the same token, it is important for the private sector to
understand our prosecutorial decisions in circumstances where a company does
not qualify for a full declination under the Corporate Enforcement Policy.
I mentioned last month’s resolution with Petrobras. Because Petrobras failed to voluntarily self-disclose
the misconduct, the company was not eligible for a declination pursuant to the
Policy. However, the Department did
agree to enter into a non-prosecution agreement with Petrobras, which included
a large criminal penalty.
In concluding that a non-prosecution agreement was
appropriate, the Department took into account several considerations, including
Petrobras’s cooperation and remedial efforts.
The cooperation included sharing with the Department, in real time,
facts Petrobras uncovered in its internal investigation, providing information
that otherwise would not have been available to U.S. prosecutors, and
collecting and analyzing voluminous evidence.
Petrobras’s remediation included replacing its Board of Directors and
Executive Board, implementing significant governance reforms, and committing to
reporting to the Department on its enhanced compliance program. We also took into account other
considerations, including, as an equitable consideration, that the company had
been victimized by embezzlement committed by many of the same executives who
violated the FCPA.
Also instructive is our deferred prosecution agreement with
Rolls Royce. That resolution predated
the FCPA Corporate Enforcement Policy, but was under the predecessor Pilot
Program. For more than a decade, Rolls
Royce had used third parties to bribe foreign officials around the world to
secure contracts and gain a competitive edge.
In explaining the Department of Justice’s decision to enter
into a deferred prosecution agreement, we noted that the company had failed to
disclose the criminal conduct until after the press had already reported on
allegations of corruption, and after the United Kingdom had already initiated
an inquiry. Nonetheless, Rolls Royce did
ultimately cooperate with the Department’s investigation, which resulted in the
prosecution of multiple culpable individuals.
The company also engaged in remedial measures, including terminating
relationships with multiple employees and third-party intermediaries who were
implicated in the bribery scheme, enhancing its compliance procedures to review
and approve intermediaries, and strengthening its internal controls to tackle
issues of corruption. For these reasons,
the criminal penalty reflected a 25 percent reduction from the bottom of the
U.S. Sentencing Guidelines range. In
short, while a declination was not appropriate, we gave credit where credit was
due.
To be sure, the facts of no two cases are alike. Nor are any two companies. Every decision by the Department will turn on
an individualized assessment of the totality of circumstances. But transparency as to our declination
criteria should help guide informed and rational decision-making by companies
and compliance professionals. After all,
companies stand in the best position to evaluate risk and implement measures to
deter corruption at the front end. The
ideal scenario, of course, is a corporate environment where criminal violations
do not occur in the first place. That is
why a prevailing objective of our efforts is to motivate companies to
voluntarily fortify themselves against the very violations that ultimately
could lead to criminal charges by investing in robust internal controls and
effective compliance programs. When
business and industry work with the Department, not against it, our public
institutions and the rule of law stand to gain.
As prosecutors with the Department of Justice, our goal is
just that: promoting the rule of law and working toward achieving justice. That means pursuing just, fair, and
appropriate results.
This brings me to the flip side of giving credit where
credit is due: when a criminal resolution is warranted, excessive penalties
should not be imposed for penalties’ sake.
In May, the Department announced a policy to address coordinated
resolutions and issues that arise when a company faces a combination of
criminal penalties along with civil or foreign penalties.
There is no question that there has been a rise in global
enforcement of corporate corruption.
Earlier today, panels discussed Brazil’s evolving enforcement landscape,
including the passage of the Clean Company Act about five years ago, as well as
other developments in anti-corruption laws throughout Latin America.
In 2018, companies understandably are concerned about facing
multiple enforcement actions for the same conduct. That is particularly the case in highly
regulated industries, where a company may be accountable to multiple regulatory
bodies in multiple countries. This
expansion of possible exposure can create a risk of repeated and
disproportionate punishment that goes beyond what is necessary to rectify the
harm and deter future violations. Duplicative
fines and penalties also could deter the very voluntary disclosures and
cooperation that we are trying to encourage.
The Department of Justice’s close relationships with many of
our foreign partners is more important than ever both in investigating and
prosecuting corporate corruption, and also in working toward fair and
appropriate resolutions. For instance,
of our eight corporate FCPA resolutions in the past fiscal year, four of them
were coordinated with foreign authorities.
This number of coordinated resolutions speaks volumes both to the
significant increase in global efforts to combat corruption and to our
steadfast commitment to coordinate with foreign authorities to avoid
duplicative penalties.
The formalization of a Department of Justice-wide policy
governing coordinated resolutions – which also has been memorialized in the
Justice Manual – reinforces that commitment and marks another step toward
greater transparency and consistency in our corporate enforcement. Under the policy, Department components must
appropriately coordinate with other Department components when looking to
resolve a corporate case based on the same misconduct, to achieve an overall
equitable result. And similarly,
Department of Justice attorneys, when possible, should coordinate with other
U.S. and foreign authorities seeking to resolve a case with a company for the
same misconduct. This may include
crediting and apportionment of financial fines, forfeiture, and restitution.
Obviously, there are practical considerations that can
constrain reaching coordinated outcomes, such as the timing of other agency
action, limits on cross-border information sharing, and situations in which the
company resists, rather than facilitates, a coordinated resolution. But the message of the policy is clear: the
Department of Justice is committed to coordinating with domestic and foreign
authorities, where doing so is consistent with our enforcement mission.
In Petrobras’s case, this meant crediting amounts being paid
to the Securities and Exchange Commission (SEC) and Brazilian authorities, with
Brazil receiving 80 percent, or about $682 million, and the Department of
Justice and the SEC each receiving 10 percent, or about $85 million. In addition, in agreeing to a non-prosecution
agreement with Petrobras, rather than pursuing a harsher resolution, the
Department took into account that Brazil was entering into a resolution with
Petrobras and that Brazilian authorities would be maintaining oversight of
Petrobras as a state-owned entity.
Similarly, the resolution in Keppel Offshore, which predated
by the announcement of a formal policy by several months, marked the Department
of Justice’s first coordinated FCPA resolution with Singapore. There, Brazil received half of the total penalty,
with the United States and Singapore each receiving one-quarter.
Likewise, when we calculated the fine in SBM Offshore, we
credited the company’s payment of penalties to the Dutch Prosecutor’s Office
and expected payments to the Brazilian Ministério Público Federal.
Earlier, I mentioned the Department’s decision to decline to
prosecute Guralp Systems Limited for FCPA violations. In deciding to issue that declination, we not
only considered the company’s voluntary self-disclosure, full cooperation, and
timely and appropriate remediation, but also the fact that Guralp, a U.K.
company with its primary place of business in the United Kingdom, was the
subject of an ongoing parallel investigation by the U.K.’s Serious Fraud Office
(SFO) and had committed to accepting responsibility with the SFO.
In our June resolution with Société Générale for LIBOR
manipulation and FCPA violations, we agreed to credit about $300 million that
Société Générale is paying to French authorities. In addition, we determined that the company
did not warrant a monitor, a determination we reached on account of the
company’s significant remediation, as well as the fact that there would be
ongoing monitoring by the French anti-corruption agency.
In each of these cases, we worked to reach a coordinated
resolution that amounted to a just and fair outcome and one that avoided
excessive punishment for the misconduct.
Whether through the policies we announce, the cases we
prosecute, the cases we decline to prosecute, or the credits and penalties we
impose, the Department has sought to make the “rules of the road” as
transparent as possible. Our efforts are
ongoing, and we hope they will be lasting.
And it is also our hope that this transparency will assist companies as
they make rational decisions, and that those decisions will favor greater
reporting of misconduct, increased cooperation with law enforcement, and stronger
compliance programs and internal controls.
Thank you again for inviting me here today. I look forward to your questions.
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