Five behind-the-scenes insights into DOJ cross-border investigation priorities

The Fraud Section within the US Department of Justice (“DOJ”) plays a key role in shaping many multi-jurisdictional investigations.  On October 19, Freshfields hosted DOJ Fraud Section leaders and others to discuss their insights, including into the DOJ’s enforcement strategy.  We discuss five of those insights, covering market manipulation, foreign corruption, self-reporting, prosecutions of individuals, and partnerships with other regulators.  The complete participant details are provided below.* 

1. The DOJ is focusing on global issues across sectors

The DOJ has devoted increasing attention to “spoofing” within commodities markets in the UK, Germany, and Australia.  The term refers to cases where traders artificially manipulate market prices by quickly entering and canceling purchase orders.  In 2016, the DOJ secured a guilty plea from Navinder Singh Sarao, a UK-based trader who caused the Dow Jones to fall 600 points in only five minutes.  Robert Zink, the Acting Principal Deputy Chief of the DOJ Fraud Section, likened such cases to the DOJ’s recent automobile investigations, where conduct principally occurred outside of the US, but where “the consequences were global and affected Americans.”  Sandra Moser, the Acting Chief of the DOJ Fraud Section, rejected the notion of industry “sweeps,” but both Moser and Zink noted that evidence and insights acquired in one case can often spur a new investigation.

2. FCPA enforcement remains a core mandate

Despite claims that the DOJ may shift focus away from Foreign Corrupt Practices Act (“FCPA”) investigations, Zink and Moser emphasized that the FCPA remains a pillar of the Fraud Section’s mandate.  Zink noted an “extraordinary number of criminal resolutions” during 2016 and in the first weeks of 2017—leading to a brief lull prior to a $965m foreign bribery settlement involving Telia Company AB in September 2017.  Amid political transitions, Moser explained that the DOJ has kept the Fraud Section at the “forefront” of these matters. 

3. Self-reporting incentives continue—but companies must meet high disclosure burdens

The DOJ continues to provide incentives for corporate cooperation with investigations, such as the FCPA Pilot Program.  Yet Moser clarified that that cooperation credit  requires “complete” and “fulsome” disclosure.  She rejected the notion that there was a “sliding scale of cooperation” prior to the 2015 Yates Memorandum, which established the current cooperation credit guidelines.  In cases where companies seek formal assurances that the DOJ will decline prosecution, Zink explained: “if a company … remediates, discloses, and gives us evidence [to prosecute high level executives] … there is a real possibility of … a pass, or at the very, very least, [only] disgorgement [of ill-gotten gains].”

4. Prosecutions of Individuals May Reach “Record” Levels

The DOJ is also focusing on criminal and civil prosecutions against individual defendants.  This accords with Yates Memorandum guidance that investigations should focus on individuals “from the inception.”  Zink noted, “success is judged by many metrics, including prosecuting human beings for crimes.”  He predicted a “record year” for individual prosecutions.  

5. There are growing Trans-Atlantic partnerships

The DOJ is strengthening its partnerships with other regulators.  Moser highlighted “tremendous relationships with law enforcement agencies in the UK”—including joint investigations on market manipulation, global schemes, and FCPA investigations.  To forge further ties, Albert “BJ” Stieglitz, an Assistant Chief in the DOJ FCPA Unit, will serve as a detailee for two years within the Serious Fraud Office (“SFO”) and Financial Conduct Authority (“FCA”) in the UK. 

Do these DOJ priorities suggest greater clarity for multinational companies?

Multinational companies confront a daunting array of regulatory regimes and enforcement authorities around the world.  In this complex regulatory environment, Clare Montgomery QC, a leading fraud expert at Matrix Chambers, cautioned that “uncertainty breeds a lack of cooperation” with regulators.  Moser noted that the DOJ aims to provide a “clear path forward,” but acknowledged that companies must still navigate “muddy waters” in some instances. 

For example, despite some convergence between US and UK enforcement bodies, the SFO and FCA have their own views on internal investigations and cooperation credit—which are not always aligned with the DOJ approach, particularly given the differences between legal systems.  Similarly, the panel noted that the differences in privilege laws across the two jurisdictions can give rise to uncertainty as to what communications relating to a Trans-Atlantic investigation are protected by attorney-client privilege.  

As global regulatory cooperation grows, multinational companies must continue to closely follow developments in the US, the UK, and beyond.

---

* Ben Morgan, a London-based Freshfields Partner and former Joint-Head of Bribery and Corruption for the UK’s Serious Fraud Office, introduced the panel discussion on “Trans-Atlantic Enforcement and Beyond: What’s Next for Cross-Border Investigations?”  Dan Braun, a Washington, DC-based Freshfields Partner and former Deputy Chief of the DOJ Fraud Section, moderated.  

The speakers included: Sandra Moser, Acting Chief of the DOJ Fraud Section; Robert Zink, Acting Principal Deputy Chief of the DOJ Fraud Section; Clare Montgomery QC, a leading fraud expert for Matrix Chambers; and Harsh Trivedi, Associate General Counsel for JP Morgan.  The DOJ participants spoke only in an individual capacity and their views and opinions were not intended to reflect those of the DOJ or the US Government.