FCPA enforcers say they'll stay the course on enforcement under Trump
6 June 2017. By Mike Swift.
While a US Supreme Court decision that limited the Securities and Exchange Commission's use of disgorgement was "a tough decision" for the agency, the SEC's San Francisco regional director painted a hopeful picture Tuesday about the vitality of the agency's enforcement of the Foreign Corrupt Practices Act and other laws.
Based on oral argument before the Supreme Court in Kokesh v. SEC, the agency was not surprised by Monday's 9-0 decision overturning the SEC's longtime assertion that its use of disgorgement could be exercised without a time limit, said Jina L. Choi, the San Francisco regional director.
One lesson of the Kokesh decision, Choi said at a panel discussion* in San Francisco, is that "it's important for us to bring our enforcement actions quickly," to move on FCPA and other enforcement actions as quickly as possible to a violation "in order to deter the conduct."
Monday's Supreme Court decision did not involve an FCPA case, but disgorgements sanctioning conduct that occurred more than five years earlier have contributed heavily to the agency's FCPA settlements in the past. The high court ruled that the SEC does not have authority to impose sanctions on securities law violations beyond the five-year statute of limitations.
Choi noted Tuesday that enforcement actions brought by its San Francisco office are up so far in 2017 compared to the same period in recent years. And she said she is optimistic about the tenure of the newly appointed SEC chairman, Jay Clayton.
"I am optimistic that he is one who believes in the mission of the agency," she said. "He has great respect for the staff. He's a careful communicator, not one to make precipitous decisions. I think he's deliberative. My sense is he's also decisive. That heartens me."
In terms of the SEC's enforcement focus, "I don't anticipate a lot of change in our core competency, the core cases that we bring," Choi said. The fact that there are currently only two sitting members of the SEC has not been a problem in getting enforcement actions approved so far, she said.
While the seeds of those investigations were typically sown during the Obama administration, so far under the Trump administration "our ability to bring cases … has not been hampered," Choi said.
Another member of Tuesday's panel, Robert Rees, an assistant US attorney for the economic crimes and securities fraud section for the US Department of Justice in San Francisco, said he sees no major change in the focus of enforcement of the FCPA or other white-collar crimes under the Trump administration.
"We're people, and we read the news, and we can become focused on what is the latest thing that's happening, but that's really, really on the margins," Rees said.
For now, Brian Stretch, the US attorney for the Northern District of California when Trump took office, remains in place. While Rees said he can't know for sure what will happen when a new US attorney appointed by Trump arrives, there is an organizational continuity in the staff that spans presidential administrations.
"It's very unlikely that whoever comes in is going to make major changes in the economic crimes and securities fraud section," Rees said.
In terms of FCPA enforcement, it's possible that the DOJ and SEC will be able to speed up their investigations because of strengthening cooperation with enforcers in other countries, several members of the panel said.
Matthew J. Jacobs, a white-collar defense attorney with Vinson & Elkins in San Francisco, noted that one of his clients, an EU citizen who was in line to get a deal to not be prosecuted by the DOJ in an FCPA case, was worried about his exposure to prosecution in his home country. But the DOJ agreed to work with authorities in that country to secure the same protection there.
"I've never seen that before," Jacobs said. "I do think the level of [international] cooperation we're seeing — you see it in antitrust cases on dawn raids — is real."
Another member of the panel, Cameron P. Hoffman, senior corporate counsel who handles FCPA compliance for Silicon Valley cybersecurity company Symantec, said the "cottage industry of lawyers that popped up" to deal with FCPA and other whistleblower complaints to the SEC has focused the attention of companies on in-house compliance programs and investigations.
"I think it has changed the game," Hoffman said of the whistleblower program. "It does make companies think two times — or three times, or four times — about what sort of resources they are going to give to a complaint."
Choi agreed with Hoffman's view that the quality of a company's in-house compliance program is highlighted if the company faces an FCPA investigation by the SEC or DOJ.
It's important, the SEC official said, for companies to "elevate the position of compliance officer within the organization."
"Make sure they are not just seen as a cost center, that they are seen as a very important and integral part of an organization," Choi said. "Being able to say that is a powerful thing when you are trying to resolve a case."
*Annual SEC/DOJ Enforcement 2017 Update. Sandpiper Partners. San Francisco, California. June 6, 2017.