Providing Excellent Service Through A Global Perspective

Tuesday, May 31, 2011 - 01:00

The Editor interviews Claudius O. Sokenu, Partner, Arnold & Porter LLP.

Editor: Could you tell us a little about your background before you began practicing law?

Sokenu: I was born in London, England and spent my formative years in England and Nigeria, attending boarding school in London and Lagos. Ultimately, I moved back home to England for law school. After my law degrees, I came to the United States for a master's program at Georgetown University Law School in Washington, DC, where I received an LL.M in Securities and Financial Regulations. Thereafter, I began my professional career on the Advanced Commitment Honors Program at the Securities and Exchange Commission in the Enforcement Division.

Editor: You are widely known for your expertise on, among other areas, the Foreign Corrupt Practices Act (FCPA). Could you tell us how you got introduced to the FCPA?

Sokenu: During my time at the Commission, where I spent three years, I was also a member of the Enforcement Division's FCPA Working Group, which is now known as the FCPA Unit. It was there that I first started working on FCPA cases, including the SEC and Justice Department actions against Baker Hughes, Inc.

After my time at the Commission's Enforcement Division, where I prosecuted a variety of federal securities law violations including accounting fraud, disclosure violations, insider trading, broker-dealer and investment management misconduct, market manipulation and other violations of the federal securities laws, I joined Mayer Brown LLP in New York. At the time, Mayer Brown (and, parenthetically, other firms as well) did not have much of an FCPA practice. In addition to my work on securities enforcement and complex commercial litigation and white-collar cases of the Enron era, I started Mayer Brown's FCPA practice. At the beginning of 2009, I left Mayer Brown to join Arnold & Porter as a partner.

Editor: Would you share with our readers some details in terms of your current practice at Arnold & Porter and the types of matters that you are handling?

Sokenu: Broadly, my practice involves representing both U.S. and non U.S.-listed multinational companies, big four accounting firms, hedge funds, private equity firms, investment banks, broker-dealers and their boards of directors, officers and senior management, and other employees in all aspects of securities litigation, SEC enforcement, white collar criminal defense, corporate internal investigations, congressional investigations, crisis management, derivative actions and complex commercial litigation, including allegations of accounting fraud, FCPA violations, insider trading, broker-dealer regulations, and Regulation FD.

Editor: There seems to have been a substantial increase in the enforcement of the federal securities laws and related statutes in recent years. Can you shed some light on the reasons behind this increase in enforcement activity?

Sokenu: Over the last decade or so, we have seen the global economy go from one financial scandal to the next, whether it is the dotcom crisis, the accounting fraud scandal, the market-timing scandal, and lately the housing bubble. That wave of crisis and loss of investor confidence in our securities market has prompted Congress, prosecutors and regulators to take a more aggressive stance towards enforcement of the federal securities laws in an effort to restore investor confidence in our securities markets. Examples of the government's reaction include the enactment of the Sarbanes-Oxley Act of 2002 following the accounting fraud crisis epitomized by Enron and WorldCom, and the Dodd Frank Act of 2010 following the collapse of the housing market.

Directors and officers of publicly traded companies now have real civil and criminal liability for corporate malfeasance. In addition, the pressure on boards of directors to self report potential violations of the federal securities laws, the newly enacted whistleblower laws, and other case law developments over the last decade have all significantly contributed to the increase in the overly aggressive enforcement regime that we are currently seeing. My prediction is that those dynamics are here to stay for some time.

Another important trend is the type of techniques that law enforcement personnel use in pursuing potential violations of the federal securities laws. The SEC and the Justice Department have indicated that they will pursue both corporations and their employees and, where appropriate, seek long prison sentences. Recent history teaches us that they are making good on their promise. On the criminal side, there has been a movement by prosecutors to use what are traditionally organized-crime techniques, such as those used in drug enforcement cases. These techniques include wiretaps, perp walks, dawn raids, and other heavy handed techniques that are more suited to organized rather than white collar crimes.

In summary, there has been a significant shift, not just in the laws that have been passed, but in the manner in which those laws are being enforced. The paradigm, I believe, has changed forever.

Editor: What resources should U.S. corporations rely on in ascertaining whether they are in compliance with the FCPA?

Sokenu: It is fair to say that FCPA enforcement activity has never been greater. Each year appears to set a new record for monetary fines, penalties, disgorgement, and prison sentences. Over the last five years, we have seen several companies pay hundreds of millions of dollars to settle blockbuster FCPA allegations. We have also seen a huge outcry from corporations and the defense bar complaining that the FCPA is SEC- and Justice Department-made law with little or no judicial pronouncements from the courts. This is true, they assert, because companies tend to settle without going to trial.

One view is that we are seeing more and more FCPA cases being litigated by individuals and so, hopefully, the jurisprudence will develop over time. That said, there is some useful guidance from recent decisions concerning who is a "foreign official" and what constitutes "willful blindness" in the FCPA context. Those decided cases are helpful tools that companies can rely on in deciding whether or not their compliance programs are meeting expectations.

There is also the opinion release process. Corporations can go to the Justice Department for an opinion as to proposed conduct or a transaction in order to determine whether that conduct or transaction would be viewed as potentially violative conduct prior to engaging in the conduct. There are also settled cases, which can often be helpful in informing a corporation's compliance program because those settled cases represent the government's current view of what the law should be.

Together, the few decided cases, the settled cases, and the opinion releases all form a body of principles that can guide a corporation's compliance with the FCPA. The more a corporation's compliance program incorporates those basic tenets, the more likely it is that the program would be deemed effective.

Editor: You mentioned earlier that you advise companies on governance or compliance policy. Can you please give some examples of effective initiatives in the areas of regulatory compliance, internal investigations, internal operations or litigation?

Sokenu: First , the single most important tool for any FCPA compliance program to be effective is the tone at the top of the corporation. A corporation's board of directors, officers and senior management must instill in the corporation's employees, wherever they may be, the notion that compliance with laws is just as important, if not more so, than any one single corporate transaction, no matter the value. Second , identify the risks that are inherent in your corporation's businesses, whether that be geographic or transactional. Third , in doing so, keep in mind that your corporation's risk analysis is not static; things change, so be cognizant of potential changes. Fourth , design policies and procedures that address the specific risks that have been identified. Fifth , educate and sensitize the corporation to the policies and procedures through repeated training. Sixth , investigate potential violations. Seventh , take remedial and disciplinary actions as appropriate. These basic tenets should work for any type of compliance issues, whether that be FCPA, insider trading, off label marketing or other compliance issues.

Editor: Do you feel that there are any ways in which the FCPA could be reformed or improved and, if so, in what ways?

Sokenu: Are there parts of the FCPA that can be improved or clarified? Yes. But the larger and more important question is: Is the government, both on the civil and criminal side, enforcing the statute in the manner in which Congress envisioned when it passed and amended the FCPA? To what extent should a corporation be liable for the conduct of its third party vendors? Where and when should prosecutorial discretion be exercised? Where should the outer limits be on issues like facilitation payments? Who is a foreign government official? Should the government come out and say what its views are on particular areas of the statute and invite comment from the business community so that people can at least come to an understanding of what is appropriate behavior under the FCPA? What the business community needs is clarity of thought and certainty, and the SEC and Justice Department can do a better job in providing that clarity and certainty.

What has caused the most angst in this area is not so much the text of the statute, but the oppressive and dictatorial manner in which the government causes corporations to expend significant resources in conducting overly broad investigations that cost millions of dollars with little more than a hunch that potentially violative conduct is afoot. Time and time again, we see internal investigations that span dozens of countries in one company and the cost of doing those multi-country internal investigations, and the disruption to business, not to mention a corporation's reputational damage. This can be significant. I think what is most needed is prosecutorial discretion from the SEC and the Justice Department on what to investigate and the breadth of the investigation. In exchange for conducting these internal investigations, there should also be some certainty as to what a company can get in return for cooperation.

Editor: How has securities enforcement and litigation changed at your firm as a result of international anti-corruption laws and initiatives?

Sokenu: At Arnold & Porter what we try to do is to be sensitive to the demands of our clients as well as to the demands of countries in which they do business, including the cultural nuances. While, unlike some other firms, we do not maintain offices in every corner of the world, we do have a keen interest in where our clients do business, in understanding those markets, and in helping to develop a compliance frameworks for those markets. We try to provide a more customized approach not just to compliance, but also to how business gets done in different parts of the world. We are able to counsel clients on how to integrate a global as well as a local compliance environment. I, along with other of my colleagues, have conducted investigations in just about every continent there is, and have significant knowledge of markets where our global clients operate in multiple industries, including pharmaceuticals, defense, consumer goods, insurance, investment management, finance and medical devices.

Editor: Can you share with us how your dealings with the global compliance environment have been influenced by your experiences living and studying in three different continents?

Sokenu: Primarily, I think that the ability to be sensitive and adaptable to different cultures, without taking a U.S.-centric approach, makes me useful to clients. There is clearly a benefit to having lived on three different continents, having exposure to different cultures around the world. Having an understanding of global issues and a sensitivity to cultural nuances I think is a significant skill, particularly in the FCPA space.

Editor: You handle high profile cases and investigations, involving both criminal and civil actions, in many areas of the globe. What internal and external resources do you draw upon for support in these complex international matters?

Sokenu: When faced with a matter that has foreign implications, one must think differently about how one approaches those issues. I want a local counsel who understands the local laws and can guide me through the maze that is the local legal system. I also want someone who speaks the language, who understands the cultural nuances of doing business in that country.

Moreover, I want to understand and quickly sensitize the client to the hurdles that we are going to come across - whether that be data privacy, attorney client privilege, preservation of evidence, or the ability to review documents in their native form, among other things. In effect, I want to build the infrastructure from which I am going to do the work. More importantly, I want to make sure that the client is involved and understands these decisions as they are being made. Arnold & Porter is a first rate law firm with significant resources on these and other issues, and I draw from all over the firm in order to best serve our clients. There are very significant challenges to conducting investigations abroad, particularly high-profile investigations that captivate the media. Often, there are parallel congressional investigations, criminal and civil investigations, civil claims and non-U.S. claims. Managing all of the competing interests and making decisions that are not always seemingly cohesive is a tough exercise, and it requires focus and buy-in from the board of directors to senior management. These matters are incredibly challenging, incredibly interesting, and that is what I practice law for.

Editor: Because of your achievements and the global practice you have built, you have been mooted in some quarters as a likely general counsel in the next year or two. Is that something you are thinking about?

Sokenu: I am very flattered by the attention and the vote of confidence. For now, I am focused on doing excellent work for our clients.

Please email the interviewee at with questions about this article.