Monday, January 16, 2017

Corporate compliance officers aren’t part of the Calcbench core audience, but they are nice people, and often hang out with the financial reporting types who are so dear to our hearts.

So today we’re going to examine a subject compliance officers find fascinating—enforcement of the Foreign Corrupt Practices Act—to show yet another way our databases can earn their keep.

First, for anyone needing a refresher: the FCPA bars publicly traded companies from bribing officials of foreign governments to win business in those countries. Violating the FCPA is a serious compliance no-no. Companies that do violate the FCPA often end up spending millions to investigate the problem, plus regulatory fines that can run to nine figures or more. The Brazilian conglomerate Odebrecht-Braskem settled a massive FCPA case in December for more than $3 billion.

This all means that compliance officers study companies’ FCPA disclosures like the entrails of sacrificial birds. So we decided to investigate: exactly how large is that “FCPA pipeline,” anyway?

That’s easy enough to find. We visited our Interactive Disclosure Page and chose the disclosure type “Commitments and Contingencies” from the pull-down menu on the left. Then we went to the text box on the right, checked the “restrict to specified disclosure type” box, and entered “FCPA” in the search field.

Then, presto! We found 48 commitment or contingency disclosures filed in 2015 (currently our default year, since 2016 annual reports haven’t arrived yet).

To get a measure of FCPA disclosures over time, we simply repeated that process for all years back to 2010. The results are below.

We should add several caveats here. First, many of these disclosures are the same companies, disclosing the same FCPA contingencies, year after year. That’s because FCPA investigations can easily take several years, and companies must keep disclosing them until their cases are resolved.

Second, this isn’t a definitive measurement of all FCPA disclosures that U.S. filers have made. Many companies also mention the FCPA in their risk factors or in Management Discussion & Analysis—but those mentions don’t always mean that the company is under FCPA investigation; the company might just be talking about the FCPA as a potential risk.

We examined the Commitments and Contingencies disclosure because if you’re citing FCPA concerns there, most likely you’re admitting a potential problem. Perhaps the case will be resolved without penalty, but at the very least, we know that disclosing an FCPA contingency means you’re “in the pipeline.”

And we should always remember that some companies might be investigating possible FCPA misconduct but haven’t reported it yet; or the Justice Department might be investigating FCPA misconduct and the company doesn’t know it yet.

So the exact dimensions of the FCPA pipeline might differ from what we see here. Still, these numbers do give a sense of how the pipeline has expanded and contracted over time. (It may well contract again this year, since we saw a flurry of FCPA settlements in December.)

And these numbers also show just how versatile Calcbench data can be. If you have a question about something that gets disclosed, you almost always can find the answer somewhere in here.

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