Feds Take FCPA Fight to Wall Street

U.S. regulators just took the fight against bribery and corruption to a new arena: Wall Street. Attorneys John Goselin and Mauro Wolfe of Duane Morris explain:

“On May 7, 2013, the U.S. Attorney’s Office for the Southern District of New York unsealed extraordinary criminal charges against two registered representatives of a U.S. broker-dealer and a high-level Venezuelan government official for engaging in a ‘Massive International Bribery Scheme.’ What makes this fraud scheme remarkable is that it involves the activities of a U.S. broker-dealer, its client, a foreign-owned and controlled bank, the Foreign Corrupt Practices Act and several suspicious transactions that potentially should have raised concerns—a perfect storm.”

It’s an “unprecedented FCPA wake-up call” for the financial industry, continue Goselin and Wolfe:

“In the event that there was previous uncertainty, U.S. financial markets are now on notice that the FCPA is an obligation and that the U.S. government has reason to ask more questions. It appears worthwhile for companies to be prepared and have their house in order to potentially avoid problems later. There is no excuse now for medium- to small-broker dealers, companies and funds to avoid looking into these matters, as it may end up being a worthwhile endeavor in the end.”

Key takeaways for Wall Street?

1. The feds are stepping up their game:

“The inclusion of money laundering charges also bolsters both the offenses charged and the government’s ability to seek more aggressive penalties in the form of longer prison sentences, steeper fines and larger forfeitures. Money laundering counts are often used to reach individuals whose conduct is outside the scope of the FCPA, such as foreign officials who have received bribes. Money laundering charges also provide the government with another avenue to reach the proceeds of crime through forfeiture actions.” (Morrison & Foerster)

2. Ignoring warning signs can be costly:

“According to the SEC complaint, there may have been red flags for the U.S. broker-dealer to consider. ‘In 2007 and 2008, [the Broker-Dealer] reported revenues of approximately $15 million and $27 million, respectively, almost exclusively from unsolicited equity transaction commissions.’ (SEC Complaint para. 21.) In 2009, the Broker-Dealer’s business changed dramatically, as its ‘revenues soared in 2009 to $75 million (five times what it had been only two years before) and were $31 million in the first half of 2010, with the increase almost exclusively due to the fraudulent scheme.’” (Duane Morris)

3. Latin America continues to be a focus of regulators:

“This indictment is also another example of DOJ’s increased attention to FCPA-related misconduct in Latin America. […] As Latin America’s economies continue to grow, state involvement in these economies remains high, and DOJ continues to target corruption overseas, Latin America will remain a high-risk region in which to do business. Companies operating in Latin America should enhance their compliance efforts and be vigilant in addressing and preventing conduct that could come to the attention of DOJ and the SEC.” (Morrison & Foerster)

The updates:

Find additional updates on the Foreign Corrupt Practices Act at JD Supra Law News>>