In mid-June, a senior prosecutor in the Justice Department drafted a letter to a lawyer for Boston-based construction firm, CDM Smith, laying out her agency’s findings that the company’s employees bribed Indian government officials to win lucrative contracts.
According to the letter, posted online June 30 on the DOJ’s website, CDM Smith employees paid $1.1 million in bribes between 2011 and 2015 in order to win contracts that helped it net $4 million in profits — in violation of the Foreign Corrupt Practices Act, which prohibits bribing foreign government officials.
But instead of bringing charges, the DOJ’s letter informed the company’s lawyer Nathaniel Edmonds, of Paul Hastings, that the investigation would be closed, as long as the company agreed to “disgorge” or give back the illicit $4 million in profits.
Edmonds declined to comment for this article.
Resolving the case out of court without charges contrasts with other FCPA settlements, in which the DOJ has extracted hefty penalties, sometimes reaching into the nine-figure numbers. Although the anti-bribery statute was amended in 1998, it is only in the last decade that the DOJ has routinely reached a dozen FCPA corporate settlements annually, often more, and in the process created a major source of work for white collar lawyers. But since President Trump’s inauguration on Jan. 20, there has been a slowdown in new FCPA cases coming from either the DOJ or the Securities and Exchange Commission, which combined with declinations to prosecute companies, has fueled concern in the white collar bar that this administration will adopt a softer stance.
“I think everyone is waiting to see if there’s going to be a shift,” said Kara Novaco Brockmeyer, who departed as chief of the SEC’s FCPA unit in April to join Debevoise & Plimpton.
She added, “I think it’s still too early to read into it. There’s a period of time where you have new managers come in and it takes time to get up the speed.”
A DOJ spokesman said by email that there has not been any shift in FCPA policy and noted that, Trevor McFadden, the acting principal deputy assistant attorney general, gave a speech in May affirming the commitment of Attorney General Jeff Sessions and his agency to enforcing the FCPA.
“The department does not make the law, but it is responsible for enforcing the law, and we will continue to do so,” McFadden said. “Also, the department continues to prioritize prosecutions of individuals who have willfully and corruptly violated the FCPA. Attorney General Sessions has noted the importance of individual accountability for corporate misconduct.”
Still, the agency’s announcement that it had declined to bring charges against CDM Smith, marked the second in June that occurred under a pilot progam, launched in April 2016, that allows companies to receive steep discounts, of as much as 50 percent, on fines for FCPA violations — if a fine is assessed — provided they self-disclose the violations, and make other concessions to address internal problems.
The pilot program started under the Obama Administration, which handled five such cases in 2016 — a year in which the SEC and DOJ resolved a record 27 corporate enforcement actions under the FCPA, according to Philip Urofsky, of Shearman & Sterling who previously served as an assistant chief of the DOJ’s fraud section.
In a recent report issued by Shearman & Sterling, he calculated that at this time last year, the SEC and DOJ had brought 12 enforcement actions with total sanctions of $920.8 million. So far in 2017, the agencies have brought eight corporate enforcement actions with total sanctions of $272 million, Urofsky said.
But his report pointed out that six of the corporate enforcement actions in 2017 occurred in January prior to Trump taking office. After a busy year, it could be a rebuilding year in which prosecutors and SEC attorneys investigate and prepare new cases, he said.
“The rest of 2017 will be more indicative of whether we are on the cusp of a new era of FCPA enforcement,” Urofsky wrote in the recent report his firm published.
He attributed part of the slowdown in the past five months to the fact that some cases may have been “rushed out” as a crop of attorneys departed the agency during the transition in administrations.
But Urofsky also attributed the delay to unfilled leadership positions in the DOJ, which so far only includes deputy attorney general Rod Rosenstein [the slow pace of Trump’s nominations means there are hundreds of vacancies throughout the federal government, as has been reported]. Andrew Weissman, the chief of the fraud section, is working for Robert Mueller for his investigation of Russian interference into last year’s election.
As a result, many prosecutors may be waiting to file cases until all the leadership positions are filled, he added.
“There are no political appointees below the DAG right now, it’s a bit odd,” said Urofsky. “There’s always going to be a period of time before the political appointments take place. Usually it’s not six months.”
Brockmeyer, the former FCPA chief at the SEC, noted that the average FCPA investigation lasts four years, which puts several companies in range of a possible settlement.
In May, for instance, Bloomberg reported that Walmart was close to a $300 million settlement to resolve a Justice Department investigation into whether it paid bribes to government officials in Mexico and Brazil. The company had disclosed spending $837 million on legal fees for the case, the article said, and characterized a $300 million settlement as a “significant concession” by the DOJ, which reportedly had sought twice that amount.
For the moment, many white collar lawyers are taking a wait-and-see approach before judging how FCPA enforcement will play out.
“I think in another three or four months if we’re still not seeing cases, we’ll know,” said Brockmeyer.