On June 4, 2018, the U.S. Department of Justice (“DOJ”) and French National Financial Prosecutor’s office (“PNF”) announced the first coordinated resolution by U.S. and French authorities in a foreign bribery case. The resolution, entered into with Société Générale S.A., one of the largest financial institutions in France, represents a remarkable evolution in anti-corruption cooperation and enforcement between U.S. and French authorities. While France has long faced pressure to enhance its enforcement of anti-corruption laws, this coordinated resolution, coupled with a new anti-corruption law known as the Loi Sapin II, demonstrates a new commitment by French authorities towards regulating companies that operate within the country’s jurisdiction, enforcing international anti-corruption standards, and cooperating with the U.S. in doing so.
This coordinated resolution serves as a warning that companies conducting cross-border business in the United States and France should recalibrate their regulatory and enforcement strategies to address potential legal exposure and risks across multiple jurisdictions.
As part of the coordinated resolution, Société Générale and one of its wholly-owned subsidiaries agreed to pay more than $1 billion in total penalties to U.S. and French authorities relating to violations of U.S. and French anti-corruption laws and manipulation of the London InterBank Offered Rate (“LIBOR”). In connection with the anti-corruption settlement, Société Générale acknowledged having made payments to high-level officials in the Libyan government to secure investments from state-owned financial institutions.
Société Générale entered into a deferred prosecution agreement with the DOJ, while its wholly-owned subsidiary pleaded guilty to violations of the anti-bribery provisions of the U.S. Foreign Corrupt Practices Act (“FCPA”). Société Générale and its subsidiary agreed to pay a combined total criminal penalty of $585 million to settle the DOJ’s FCPA charges.
Meanwhile, Société Générale also entered into a criminal resolution with the PNF that included a penalty of $292.8 million. As part of the global resolution, the DOJ agreed to credit Société Générale’s criminal penalty to the PNF against the total criminal penalty of $585 million payable to the DOJ. The Société Générale settlement constitutes the DOJ’s first coordinated penalty arrangement with a foreign regulator since Deputy Attorney General Rod Rosenstein announced a new policy and guidelines last month to avoid the “piling on” of fines and penalties by multiple regulators for the same criminal conduct.
The coordinated resolution in the Société Générale case signifies a dramatic shift in the relationship between U.S. and French regulators. In the past, the DOJ has asserted violations of the FCPA against several of France’s largest companies, including Alcatel-Lucent S.A., Alstom S.A., Technip S.A., and Total, S.A. French authorities did not bring corresponding enforcement actions in any of those cases, and French officials went so far as to criticise the DOJ publicly for its enforcement of U.S. laws against French companies.
Yet, the passage of the Sapin II anti-corruption law in November 2016 suggested an evolution in French anti-corruption enforcement policy. French authorities appeared ready to move towards meaningful regulation and enforcement, including the expansion of French prosecutors’ extraterritorial enforcement authority. Questions remained, however, about whether France’s new anti-corruption agency, known as the AFA, and French prosecutors’ offices would be sufficiently funded under the new anti-corruption law. Scepticism also persisted about how vigorously the new anti-corruption standards would be enforced.
If the coordinated settlement against Société Générale is any indication, France is taking its new anti-corruption commitment seriously. The DOJ even cited the AFA’s monitoring of the financial institution as one of the factors in its determination not to impose a compliance monitor as a condition of settlement.
The DOJ and PNF’s coordinated settlement with Société Générale highlights the heightened exposure multinational companies face to both U.S. and French anti-corruption laws. In terms of the settlement’s broader implications, it serves as a reminder to companies conducting cross-border business: U.S. and foreign regulators are no longer merely sharing evidence with one another, but increasingly they are bringing coordinated enforcement actions through which they share in the criminal penalties.
Companies need to be in a position to understand how strategic decisions in one jurisdiction could affect regulatory, enforcement and litigation risks across multiple jurisdictions. For instance, voluntary self-disclosure and cooperation could result in “cooperation credit” in the event of a settlement with the DOJ, but may not be recognised as mitigating factors by foreign regulators. A company’s decision to settle with U.S. authorities rather than litigate might be seen as an admission of guilt by regulators and investors in other jurisdictions. And, the decision to settle or litigate a regulatory action in one jurisdiction could lead to correlated civil litigation or regulatory risks in that jurisdiction and others.
Going forward, multinational companies should develop strategies for implementing compliance programs and responding to regulatory inquiries that anticipate and balance regulatory, litigation and reputational risks across multiple jurisdictions.
This article was previously published in Thomson Reuters Regulatory Intelligence.