Double Blast of FCPA News

Keep up, compliance officers! A subsidiary of global consulting giant McKinsey agreed today to pay $122.8 million to settle FCPA charges in South Africa; and the Justice Department says it might allow some companies currently under corporate integrity agreements to exit those agreements early. 

Those are very different news stories, so we’ll take each one in turn — starting with that early-release idea, floated by a Justice Department official speaking at the American Conference Institute’s annual FCPA conference happening in Washington this week.

Brent Wible, chief counselor in the Criminal Division, gave a wide-ranging speech where he recapped FCPA enforcement statistics (“across-the-board robust enforcement”), bragged about anti-corruption collaboration around the world (“I’m excited at the progress we’ve made”), and talked up the department’s use of data analytics to uncover criminal violations (“we are continuing to make strides to identify misconduct”). 

Then, as Wible reviewed recent changes to the Justice Department’s corporate enforcement policy, he dropped this nugget of news:

Our prosecutors are evaluating active corporate resolution agreements to determine whether corporate defendants who resolved with the Criminal Division in recent years could be eligible for early termination based on the recent revisions to the Corporate Enforcement Policy. Keep an eye out for further developments here.

No, sir, Radical Compliance will not wait for further developments! We will begin speculating about what this means immediately.

For starters, let’s review what those recent revisions to the Corporate Enforcement Policy (CEP) were. Announced in a Justice Department blog post on Nov. 22, the updates broadly said that even if a company fails to voluntarily self-disclose misconduct or reaps significant profits from its scheme, the company could still secure very favorable settlement terms if it provided full cooperation and remediation. 

Specifically, Criminal Division chief Nicole Argentieri said this (emphasis added by me):

Where a company’s self-disclosure does not meet the definition of “voluntary self-disclosure” as articulated in the CEP, but the company has demonstrated that it acted in good faith to self-report the misconduct — and that it fully cooperated and timely and appropriately remediated — prosecutors will consider the company’s self-disclosure in determining the appropriate resolution, including the appropriate form, the appropriate monetary penalty, and the length of the term of the agreement.

Now connect that policy shift back to Wible’s news today. Presumably this means that prosecutors are looking at recent FCPA settlements where companies flubbed the voluntary self-disclosure, but did everything else right. Those companies might soon be able to exit their deferred- or non-prosecution agreements early.

Still speculating here, but companies fitting that profile could include Albemarle, which paid $218 million to settle FCPA charges in 2023; SAP, which paid $220 million at the start of 2024, and ABB, which paid $460 million to settle charges in 2022. All three companies failed to win voluntary self-disclosure credit for various reasons, but then performed admirably on cooperation with investigators and remediating their compliance programs.

Wible’s announcement is the latest volley in a charm offensive the Justice Department has waged this fall, trying to entice companies to keep working with the department to settle cases rather than (a) keep quiet about your misconduct; or (b) fight prosecutors in court. We’re likely to see more of this as the Trump Administration arrives. 

McKinsey Settles FCPA Charges, Too

While Wible delivered his news in Washington, prosecutors in New York announced that the Africa subsidiary of global consulting giant McKinsey is paying $122.8 million and entering into a deferred-prosecution agreement to settle FCPA charges stemming from bribes paid in South Africa in the 2010s.

As described in court documents, McKinsey Africa funneled bribes to government officials at Transnet, the state-owned company that manages South Africa ports, and Eskom, the state-owned energy company. In exchange for the bribes, McKinsey won lucrative consulting contracts that brought the firm at least $85 million in profits from 2012 to 2016.

It seems that McKinsey did not win any credit for voluntary self-disclosure, but prosecutors did praiseMcKinsey for “immediately and proactively cooperating from the inception of the department’s investigation.” Other steps the firm took included:

• Producing “voluminous” records upon request and making numerous factual presentations;
• Promptly alerting prosecutors when McKinsey discovered its own internal investigation that one of the partners involved had been deleting documents;
• Reporting, in real time, newly discovered information and documents that allowed prosecutors to preserve and obtain evidence as part of their own independent investigation; 
• Tracing complex internal accounting money-flows and currency exchange-information in response to requests from the department; and
• Making company officers and employees available for interviews.

McKinsey Africa also took all the usual remedial steps, such as suspending the McKinsey partner involved in the bribery and then firing him when the company discovered the document destruction; strengthening its anti-corruption training and its due diligence procedures; and pausing all work with state-owned companies while McKinsey Africa undertook its internal investigation.

One other interesting item: the firm repaid “all revenues that McKinsey and McKinsey Africa received from potentially tainted contracts to the SOEs in South Africa from which they received contracts as a result of the criminal scheme.” And that’s separate from the $122.8 million criminal penalty announced today.

Under U.S. Sentencing Guidelines, McKinsey had been facing a potential penalty of $188.9 million. Thanks to its cooperation and remediation, prosecutors awarded a 35 percent reduction from that sum and landed at $122.8 million.

Does all this mean that McKinsey, too, might be eligible for early release from its DPA? That seems doubtful; Wible was clearly talking about companies that had already received DPAs, not new ones. Then again, once the Trump Administration takes over, who knows what might come next?