The US’ Foreign Corrupt Practices Act (FCPA) is the benchmark for anti-corruption efforts around the world but the ways in which it is being used are changing, as various countries work on their own efforts.
US authorities continue to pursue corruption allegations. On October 11, a financial advisor in Florida pleaded guilty to laundering money in violation of the FCPA and Ecuadorian laws.
Frank Roberto Chatburn Ripalda admitted to conspiring with an oil services company to secure work with PetroEcuador, a statement from the Department of Justice (DoJ) said. Chatburn also admitted to concealing bribe payments from Brazil’s construction company Odebrecht. He faces up to 20 years in prison for his part in the affair, with sentencing due in mid-December.
In many ways the PetroEcuador case ticks many of the boxes that characterise current trends in the FCPA’s enforcement.
The act has seen blockbuster fines levied, most recently in Brazil as part of Operacao Lava Jato – or Operation Car Wash – which caught up the country’s state-backed Petrobras, in addition to various other companies, including Odebrecht.
“The successes in Brazil are driving interest in tackling corruption throughout Latin America, with prosecutors hailed as heroes, and that is emboldening judicial authorities in other countries,” Fry Wernick a partner at Vinson & Elkins told Energy Voice. “If you’re a company working in these areas, you should be acutely aware of this shift.”
International co-operation is a major trend, with local prosecutors and authorities seeking to work with US investigators to pursue the allegations – and often the proceeds of crime.
In addition to sharing expertise and insight, US authorities are also willing to share the fines with local authorities. “For instance, in the Petrobras prosecution the lion’s share went to Brazil. In the Odebrecht case, Brazil received 90%. The UK received 75% of the amount paid by Rolls Royce,” Wernick continued. European states, such as Switzerland, have also proved willing to support the US’ pursuit of FCPA cases.
“Cases are likely to stem from operating in difficult environments, such as Latin America or Central Asia,” the lawyer said. Other areas in Latin America that are attracting attention include Mexico and Argentina, with work in the latter focused on the “notebook scandal”.
In some places, relationships between governments has slowed work. Ties between the US and Venezuela are increasingly strained, for instance, but the DoJ was still able to bring prosecutions against “dozens of individuals” over bribes paid to PDVSA.
The first real test of the FCPA came in 2006 with the prosecution of Statoil, which was fined $21 million. Since then, prosecutors have become more ambitious and the scope of this drive has paid off. This year, more than $1.9 billion in fines have been levied under the FCPA. While energy does not account for the largest number of cases, it does rack up a substantial amount of fines.
“There’s been a huge uptick in enforcement over the last few years,” Wernick said. The amount of resources the US has dedicated to the work has increased, with the size of the unit doubling in the last five years, and with four dedicated FBI teams also working on FCPA issues. The Vinson & Elkins lawyer joined the FCPA unit in 2014. “DoJ prosecutors have improved both quantitatively and qualitatively. The department has gone out and recruited prosecutors and, as a result, there are much stronger cases being built.”
Initially, most cases brought by the DoJ involved self disclosure, “but this is no longer the case, there has been a move to gumshoe investigative work, based on sources and subpoenas. There’s a focus on identifying the transfers of money and following the evidence. The DoJ doesn’t do industry sweeps but inevitably whistleblowers come forward and the DoJ does pay attention to news.”
The next step
While the US continues to dominate the prosecution of corruption cases around the world, handling around 75% of cases, the DoJ and Securities and Exchange Commission (SEC) are eager to step back and let other countries do the heavy lifting.
This has come as other states, particularly in Europe, have ramped up their ability to prosecute complicated corruption sagas. One such instance cited by Wernick was the case in Milan involving Eni and Shell, over payments to the Nigerian government to secure OPL 245. The company officials appear to know that a large share of the $1.3bn signature bonus would be distributed to well-connected officials.
Eni recently reported the DoJ had settled its investigation into this case, although was quickly forced to issue a correction as it appeared the US authorities were actually sitting back to watch the Milan prosecution play out. Should the Italian court not come to a conclusion that the US finds satisfactory, Eni and Shell may yet face further problems under the FCPA.
The FCPA continues to evolve and in some ways the US authorities appear to take a tougher line on foreign corruption than domestic. There had been concerns that when US President Donald Trump came to power he would choose to dial down the pursuit of the FCPA, famously saying the legislation put US companies at a “huge disadvantage” in an interview in 2012. This has not come to pass, Wernick said.
Rather, there has been a “global awakening” of anti-corruption movements, he continued, citing the scandal caused by the 1MDB fund in Malaysia and the Panama Papers as highlighting this topic. Just as global sentiment on corruption is continuing to shift, so too does the US legislation. “There are six FCPA trials in the next 12 months”, Wernick said. More trials mean more “developments read into law by appellate courts, who inevitably will make decisions to interpret and define the more ambiguous parts of the law”.