[On July 20th, the Wall Street Journal published an Op-Ed (here) by David Rifkin and Lee Casey concerning the FCPA implications of the News Corporation scandal titled “Payments and News-Gathering: The New First Amendment Threat.” I drafted and submitted to the WSJ a piece that, in part responded to certain of the FCPA assertions made by Rivkin and Casey, and in other respects sought to further inform the public discussion concerning News Corporation’s potential FCPA exposure and more broadly the current era of FCPA enforcement. The WSJ declined to publish the piece and it thus appears below – modified slightly to conform to the typical postings on this site]
One aspect of the growing News Corporation scandal concerns the Foreign Corrupt Practices Act (“FCPA”) given the allegations that News Corporation employees and agents may have provided cash or other things of value to London police officers to obtain non-public information that better allowed News Corporation entities to publish stories and thus sell more newspapers.
Based on these allegations and revelations, calls by certain U.S. senators for an FCPA investigation of News Corporation find firm support given how the Department of Justice and the Securities and Exchange Commission have aggressively interpreted the FCPA during the past decade of its resurgence. (See here for a prior post).
Yet, recently in a WSJ Op-Ed, David Rivkin (here) and Lee Casey (here), commenting on the FCPA implications of the News Corporation scandal, made the senseless assertion that the First Amendment makes an FCPA inquiry of News Corporation “inappropriate” because the “the FCPA was certainly not intended to police news-gathering .”.
In passing the FCPA in 1977, Congress clearly demonstrated a capability of creating certain exceptions. For instance, the FCPA has always contained a limited national security exception for conduct engaged in pursuant to a specific, written directive of the head of any Federal department or agency pursuant to Presidential authority to issue such directives. However, having analyzed the FCPA’s entire legislative history (including thousands of pages of Congressional hearing transcripts, Congressional floor statements, texts of competing bills, and Executive agency documents and statements – see here for more) I can say that there is no basis to suggest that Congress sought to exclude the media industry from the FCPA’s prohibitions.
Nor should the media industry be excluded from FCPA scrutiny if its news gathering methods include paying bribes to “foreign officials” to obtain information. Few would suggest that the media industry would be excluded from criminal liability if its news gathering methods include assault and battery of sources to obtain information. The same logic and reasoning applies when news gathering is facilitated through the payment of bribes.
Even though Rivkin and Casey are off-base with their First Amendment assertion, they do correctly state that “since the late 1990’s […] the Securities and Exchange Commission and the U.S. Department of Justice have begun applying the law ever more broadly – to conduct that has little connection to obtaining government contracts or other government benefits, such as product approvals, permits or licenses.” Likewise, a recent WSJ editorial (here) also correctly stated that the FCPA “has historically been enforced against companies attempting to obtain or retain government business” but that “U.S. officials have been attempting to extend their enforcement to include any payments that have nothing to do with foreign government procurement.”
The intense media coverage of New Corporation’s potential FCPA exposure has succeeded in raising two distinct, yet equally important questions, as to the FCPA’s current era of enforcement. The first question is whether – given the DOJ and SEC’s current enforcement theories – the London police officer payments can expose News Corporation to FCPA liability. That answer is yes and the First Amendment, for the reasons stated above, is not relevant to this question. The second question is whether Congress intended the FCPA to apply to the numerous FCPA enforcement actions (actions typically resolved through non-prosecution and deferred prosecution agreements and thus subject to little or no judicial scrutiny) in this new era that have nothing to do with obtaining or retaining foreign government contracts.
This is a valid and legitimate question and the same question could also be asked as to many other current FCPA enforcement theories. For instance, in the FCPA’s decade of resurgence, a significant percentage of FCPA enforcement actions do not involve foreign government officials. Rather, the “foreign officials” at issue are alleged employees of state-owned or state-controlled enterprises (such as procurement managers and project engineers) and thus employees of alleged “instrumentalities” of a foreign government. This common enforcement agency position, even as to commercial enterprises in which a foreign state holds merely a minority interest, is the functional and substantive equivalent of alleging that General Motors and American International Group are “instrumentalities” of the U.S. government and that all GM and AIG employees are therefore U.S. “officials.” The enforcement agencies frequently assert this position even though there is no express statement or information in the FCPA’s extensive legislative history to support the position.
In “The Façade of FCPA Enforcement” recently published by the Georgetown Journal of International Law (see here) and in my other writings I have extensively profiled how the FCPA has frequently come to mean whatever the enforcement agencies say it means and how the FCPA has morphed into an all-purpose corporate ethics statute. The issue is not whether payments to London police officers to obtain information or to employees of commercial enterprises with a dint of foreign government ownership are ethical – few would suggest they are. Rather the issue is whether such payments are what Congress intended to regulate when it passed the FCPA. If Congress desires an all-purpose corporate ethics statute vs. a limited foreign bribery statute that is a decision for Congress to make – not for the enforcement agencies to make via its charging decisions that are largely insulated from judicial scrutiny.
News Corporation’s potential FCPA exposure based on current DOJ and SEC enforcement theories has succeeded in focusing greater attention on this new era of FCPA enforcement and that is a good thing and in the public interest for this dialogue to continue.