"An Enforcement Rich Environment"

"An Enforcement Rich Environment"

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May 01, 2009

Former U.S. Attorney General John D. Ashcroft was the featured speaker at ACI’s FCPA and International Anti-Corruption for the Pharmaceutical and Medical Device Industries conference in New York yesterday.  Although Mr. Ashcroft’s presentation directly followed a session entitled “Working with Compliance Monitors:  Protecting the Pharmaceutical and Device Business Model When Obligated to Work with Monitors”, Mr. Ashcroft did not address, or even allude to, the conflict-of-interest allegations made when his firm was awarded a no-bid contract, worth $28 million to $52 million, to monitor a settlement between the government and Zimmer Holdings.  Instead, Mr. Ashcroft focused exclusively on today’s “enforcement rich environment” for FCPA prosecutions.

Mr. Ashcroft cited the following factors to support his argument that the current political climate creates an increased opportunity and momentum for the enforcement of FCPA cases:

1.     heightened international awareness of the human cost of corruption as evidenced by international treaties addressing corruption and new signatories to these treaties;

2.     the economic urgency created by the worldwide economic downturn and the possibility of more whistleblower and “disgruntled competitor” reports of misconduct;

3.     a climate of distrust of the financial services and business community and the associated appetite for uncovering and punishing corporate wrongdoing; and

4.     the post 9-11 cooperation between governments to control flows of money to terrorist organizations which conditions governments to cooperate in other multinational investigations.

In addition, the U.S. government’s success in resolving recent FCPA cases increases the likelihood of even greater enforcement of the FCPA in the future.  Specifically, the $800 million fine against Siemens for violating the internal controls and books and records provisions of the FCPA dwarfs the previous FCPA high water mark of $44 million.  In Mr. Ashcroft’s view, attention-getting penalties like those levied against Siemens are likely to motivate additional FCPA prosecutions.  Indeed, a tally of the number of FCPA cases brought annually since 2003 bears this out.  As highlighted by Mr. Ashcroft, 26 FCPA cases were brought in the three year period from 2003 through 2006.  In each of 2007 and 2008, 38 and 33 FCPA cases, respectively, were brought.  However, the jump in the number of cases brought in the period before 2006 and in the last two years is insignificant when compared to the 100 FCPA investigations reportedly opened to date in 2009.

Mr. Ashcroft’s advice for companies seeking to compete in an environment of elevated FCPA enforcement activity?  Build strong compliance programs, invest in training and diagnostic tools and, if you do discover a problem, “go to the DOJ before the DOJ comes to you.”

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"An Enforcement Rich Environment"


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