Mr. Ephraim (Fry) Wernick, Assistant Chief, FCPA Unit, Criminal Division, Fraud Section, U.S. Department of Justice
―What is the principle of FCPA application?
▷The anti-bribery provision applies to companies and individuals in three cases. The first case is the companies listed on the U.S. stock market or issuing U.S. ADRs. The crimes committed by them in foreign countries are also applied. This also applies in the case of a domestic concern. It applies if it affects to a U.S. citizen or a permanent resident in U.S. or a corporation or an organization in the U.S. It applies to the individuals who contribute to the bribery process in the U.S. The bribe was paid through a U.S. account or the meeting organization for bribery is in the U.S. The provisions regarding on accounting applies only to the listed companies or ADR issuers. The purpose of the payment must be accurately recorded. It is punished if a bribe cost is recorded as expenses such as entertainment or lobby or consulting. The records of subsidiaries are included, because they affect to consolidated financial statements.
―Many Korean companies have been accused of bribery because they are involved in the case of manipulating government affairs. One of the questions is regarding applicability of the FCPA when they used U.S. e-mail accounts including Google's Gmail in their criminal acts.
▷The case in South Korea affects very important influence, but it's difficult to talk about specific cases. In principle, it is applicable, if U.S. based email accounts are used. However, investigation does not happen only with the fact that email accounts are used. There should be more specific evidences of application (FCPA coverage).
―The scope of application is vast. Are there internally preferred standards and procedures for initiating an investigation?
▷The path varies. Investigations can also be initiated through requests from foreign enforcement agencies, information provision, whistle blowing, and media reports. The primary criterion is the evidence. After checking the evidence and judging whether the application is applicable or not, document investigation starts and then, a witness interview is conducted. If there is a reasonable reason to prosecute, we prosecute. We do not consider whether it is an American or a foreign company.
―It is known that eight out of ten companies that have been most fined by FCPA violations are foreign companies.
▷Naturally, foreign companies are not chosen only. It can be presumed that American companies are relatively knowledgeable about FCPA and have been well equipped with a compliance control system, due to long law enforcement efforts.
―Isn’t it affected by the U.S. foreign policy of containment for foreign companies?
▷We are not related with the U.S. administration and are conducting independent investigations. There have been reports that the FCPA application will be reduced after the U.S. presidential election (After President Donald Trump was elected). However, there has been a large increase of the number of prosecutors in the FCPA department more than ever. We started with less than 10 prosecutors, but currently, 30 prosecutors are in charge of the FCPA. In the last year, 26 people were indicted for violations of the FCPA. This is the highest number so far. The largest amount of fines from the companies which violated the FCPA was recorded in 2016.
―Are comprehensive bribery and passive bribery also subject to punishment?
▷We don’t distinguish between comprehensive bribery and passive bribery. Bribery is what one gives valuable things expecting returns. Although bribing is not as concrete as you might expect, it can be investigated and punished, just by having vague expectations for obtaining profits in the future.
―What if in conflict with local laws in other countries, such as the Kim Young-ran law in South Korea?
▷If it is a bribery in the U.S. but it is illegal in other countries, it is recognized as a defense logic. However, it is rare because there is a considerable international consensus regarding bribery. I think that the limit of 30,000 won (Meal) and 50,000 won (Gift) are very strict standards in the Kim Young-ran law of South Korea. I think the violation of those standards is not enough to start to check whether the FCPA is violated. However, if the violation of the Kim Young-ran law is related with many more illegal corruption conducts afterwards, the possibility of investigation is open.
―How does a corporate compliance system affect investigations and prosecutions?
▷We see whether there is a compliance monitoring system and it is operating well. If a company has been punished in the past, we check whether a compliance monitoring system is improved. If a compliance monitoring system is operating well, when calculating the fines against a FCPA offender under the sentencing guidelines, penalty can be reduced by deducting tens of millions of dollars.
―We know that FCPA not only investigates and prosecutes but also sets up the standards for companies to follow.
▷We have introduced corporate monitoring policies to ensure compliance. An independent third party assesses whether a compliance system is operating effectively. If it is judged that it is operating well, it does not go up to corporate monitoring. For example, the Swedish telecommunications company, Telia, which its bribery had been found, corporate monitoring was not conducted since it improved its compliance and dismissed its employees related to the crime.
▶▶ Who is Mr. Ephraim (Fry) Wernick?
Mr. Wernick worked in his private practice at Strasburger & Price before becoming a federal prosecutor. In 2010, he was in charge of prosecution regarding custody of the terrorists, trapped in Guantanamo Detention Center in Cuba in 2010. In 2003, he was appointed as an Assistant Chief of the FCPA Division of the U.S. Department of Justice, in recognition of the successful investigation and prosecution of the criminal cases in the field of corruption. He is currently responsible for the investigation of companies and individuals violating the FCPA. He is a graduate of Brown University and the University of Texas School of Law.