U.S. foreign bribery cases fast-tracked due to statute of limitations ruling - SEC enforcement chief

NEW YORK (Thomson Reuters Regulatory Intelligence) - A recent decision by the U.S. Supreme Court that places a five-year limit on payments of disgorgement will require the Securities and Exchange Commission to speed up its pending Foreign Corrupt Practices Act cases, a top agency official said on Thursday.

Light trails shine from a passing bus in front of Big Ben and the Houses of Parliament in London, November 17, 2011.

The court's June ruling(here) affects many parts of federal law enforcement in which prosecutors require firms to pay back ill-gotten gains. But the cases under the FCPA anti-bribery law will be disproportionately affected because they take more time to investigate and often are based on repaying illicit gains, SEC Co-Director of Enforcement Stephen Peiken said.

“We have no choice but to respond by redoubling our efforts to bring cases as quickly as possible,” Peiken told a New York University Law School conference on the FCPA.

He said he supported the spirit of the court’s ruling since “litigation efforts are most effective, when we bring our cases close in time to the alleged wrongful conduct.” The Supreme Court in Kokesh v. SEC decided claims for disgorgement are subject to a general five-year statute of limitations from the date of the violation.

“In many instances, by the time a foreign corruption matter hits our radar, the relevant conduct may already be aged,” Peiken said. “And because of their complexity and the need to collect evidence from abroad, FCPA investigations are often the cases that take the longest to develop.”

The SEC brought a record number of FCPA cases last year, but the number has slowed sharply this year. Lawyers attending the conference said in private comments that the slowdown is part of a normal cycle at the agency as new leadership is installed, and the prior year’s cases were likely sped up by agency enforcement staff planning to exit.

Peiken told the group of compliance and legal professionals, including several international representatives, that the agency remains committed to pursuing FCPA violations. Speculation that enforcement would be eased was raised after President Donald Trump questioned its effect on U.S. business early in his election run. His appointment to head the SEC, Jay Clayton, during his career as a Wall Street lawyer had criticized enforcement of FCPA as overly zealous and suggested the possibility of placing curbs on the statute.

“Will the SEC continue to be committed to robust FCPA enforcement? My answer to that question is simple: Yes,” said Peiken. He cited Clayton as saying during his confirmation hearing that bribery and corruption undermine and distort the marketplace, and ultimately harm investors.

The enforcement head told the group that “the trend of the enforcement division is working closely with foreign law enforcement and regulators in anti-bribery actions to continue its upward trajectory in the coming years.” U.S. investigators and lawyers attending the conference, who asked not to be named, said there are a number of significant cases in the pipeline.

But the gap with past administrations is widening. The New York Law Journal in September published a study by two lawyers from Fried Frank, Steven M. Witzel and Arthur Kutoro, which said the FCPA slowdown has been marked in the present year, with just three FCPA cases filed, compared with 24 for the first nine months of the Obama administration and 17 for the same period in the George W. Bush administration.

(By Richard Satran of Regulatory Intelligence, New York. Richard Satran is a financial journalist covering daily and emerging issues for Thomson Reuters Regulatory Intelligence)