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The Significant Differences Among OECD Convention Countries On Legal Person Criminal Liability

Apples to Oranges

Fact # 8 in “Ten Seldom Discussed FCPA Facts That You Need to Know” concerns how it is an apples to oranges comparison to compare Foreign Corrupt Practices Act enforcement to enforcement of similar foreign laws in the 41 other countries that are party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention).

There are a couple reasons for this.

First, the U.S. is rare among OECD Convention countries in resolving alleged FCPA violations via non-prosecution agreements, deferred prosecution agreements, or administrative actions. The common thread in all three resolution vehicles is the absence or practical absence of any judicial scrutiny of FCPA enforcement theories. In contrast, in nearly every other OECD Convention country, law enforcement agencies must do something that may be considered old-fashioned by current U.S. standards and that is prove actual legal violations to someone other than itself. In doing so, these foreign law enforcement agencies have two choices (charge or do not charge) vs. the three choices in the U.S. (charge, do not charge, or use an alternative resolution vehicle).

Another reason, and the topic of this post, is the wide differences among OECD Convention countries when it comes to legal person liability for alleged bribery offenses. As demonstrated in this post, the U.S. appears to be unique among all other 41 OECD Convention countries when it comes to legal person criminal liability for alleged bribery offenses.

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Friday Roundup

Roundup

A public service announcement, Wal-Mart’s pre-enforcement action professional fees and expenses, scrutiny alert, happenings in Bermuda, a fee dispute, quotable, a useful timeline, for the reading stack, and good for a few chuckles. It’s all here in the Friday roundup.

A Public Service Announcement

Section 5 of the Federal Trade Commission Act requires the disclosure of a material connection between an advertiser and an endorser when the relationship isn’t otherwise apparent to consumers. As the FTC has made clear, the law applies to bloggers.

Certain members of the FCPA’s blogosphere (who frequently write about compliance best practices, transparency, conflicts of interest and related topics) may want to take notice and act accordingly.

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FCPA Flash – A Conversation With Billy Jacobson

Podcast Logo

The FCPA Flash podcast provides in an audio format the same fresh, candid, and informed commentary about the Foreign Corrupt Practices Act and related topics as readers have come to expect from the written posts on FCPA Professor.

This FCPA Flash episode is a conversation with Billy Jacobson. Jacobson has experience with the FCPA from a number of vantage points few can claim.  He has been an Assistant Chief for FCPA enforcement in the DOJ fraud section.  He has been a Senior Vice President, Co-General Counsel and Chief Compliance Officer for Weatherford International Ltd., a large oil and natural gas services company that does business around the world.  Currently, he is a lawyer in private practice at Orrick and was previously a lawyer in private practice at other firms.

In the episode, Jacobson discusses the DOJ’s FCPA “pilot program” announced in April 2016, his policy suggestions for more effective FCPA enforcement, an FCPA compliance defense and what the FCPA might look like if it was passed today (instead of 1977), and whether a business organization should put the DOJ to its burden of proof.

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Weissmann Should Have Listened To His Former Self

Weissmann

A supreme irony regarding last week’s announcement by the DOJ of a “new” Foreign Corrupt Practices Act “pilot program” is that the substantive document highlighting the “pilot program” bears the signature of Andrew Weissmann (Chief of the DOJ’s Fraud Section).

As highlighted in this prior post, Weissmann assumed this position in January 2015 after being a vocal critic of various aspects of the DOJ’s FCPA enforcement program as well as corporate criminal liability principles generally.

As stated in the FCPA “pilot program” that bears his signature, the goal of the program is the following:

“The principal goal of this program is to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs. If successful, the pilot program will serve to further deter individuals and companies from engaging in FCPA violations in the first place, encourage companies to implement strong anti-corruption compliance programs to prevent and detect FCPA violations, and, consistent with the memorandum of the [Yates Memo] increase the Fraud Section’s ability to prosecute individual wrongdoers whose conduct might otherwise have gone undiscovered or been impossible to prove.”

Prior to last week’s announcement of the “pilot program,” the DOJ last Fall also announced the new position of “compliance counsel,” a development that Weissmann is widely viewed as motivating. Regarding the compliance counsel position, in this recent interview, Weissmann stated that a motivation in creating the DOJ’s new compliance counsel position was to “empower a robust compliance function within organizations. We can play a big role in fostering that development.”

Asked what he “hope[d] to accomplish in general and specifically to assist the compliance professional,” Weissmann responded: “I hope that, in seeing how seriously the Department of Justice takes compliance, we will strengthen the voice of the compliance professionals and help them get a stronger seat at the table as a key stakeholder in how businesses are run.”

Whether its the stated goal of the “pilot program” to “encourage companies to implement strong anti-corruption compliance programs to prevent and detect FCPA violations” or to best “empower a robust compliance function within organizations” and best “strenghten the voice of the compliance professional [to] help them get a strong seat at the table,” Weissmann should have listened to his former self because his former self seemed to recognize that the DOJ’s recent announcements are not the best answer to accomplish its stated goals.

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Wal-Mart’s FCPA And Compliance Related Expenses Stand At $738 Million – Expected To Grow To Approximately $850 Million

Wal-Mart

In its recent 4Q FY2016 earnings call presentation Wal-Mart disclosed $33 million in Foreign Corrupt Practices Act and compliance related expenses ($25 million for ongoing investigations and inquiries and $8 million for global compliance program and organizational enhancements).

Doing the math, Wal-Mart’s 4Q FCPA and compliance-related costs is approximately $520,000 per working day.

Over the past approximate four years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses.

While some pundits have ridiculed me for doing so, such figures are notable because, as has been noted in prior posts and in my article “Foreign Corrupt Practices Act Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny.

Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.

While $520,000 per working day remains eye-popping, Wal-Mart’s recent figure suggests that the company’s pre-enforcement action professional fees and expenses have largely crested as the figures for the past nine quarters have been approximately $470,000, $470,000, $516,000, $563,000, $640,000, $662,000, $855,000, $1.1 million and $1.3 million per working day.

In the aggregate, Wal-Mart’s disclosed pre-enforcement professional fees and expenses are as follows.

FY 2013 = $157 million.

FY 2014 = $282 million.

FY 2015  = $173 million.

FY 2016 = $126 million.

In addition, Wal-Mart disclosed: “in fiscal year 2017, we expect our FCPA-related expenses to range between $100 and $120 million.”

Regardless of what may (or may not) have happened at Wal-Mart approximately 5-10 years ago, it is clear that Wal-Mart has recently become an industry-leader in FCPA compliance best practices.

Should you have any doubt about this, read Wal-Mart’s annual “Global Compliance Program Report” (see here for FY 2015 and here for FY 2014).

The significant investment Wal-Mart has made in FCPA compliance should be relevant as a matter of law in the future if a non-executive employee or agent acts contrary to Wal-Mart’s policies and procedures and in violation of the FCPA.  (See my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense“).

Compliance defense detractors say that such a defense will promote “check-a-box compliance” and a “race to the bottom.”

There is nothing “check-a-box” about spending approximately $250 million over the past four years on FCPA compliance enhancements nor can one credibly argue that if other companies follow Wal-Mart’s enhancements and approach that this is a “race to the bottom.”

The key policy issue is this.

Wal-Mart has engaged in FCPA compliance enhancements in reaction to its high-profile FCPA scrutiny.

Perhaps if there was a compliance defense more companies would be incentivized to engage in compliance enhancements pro-actively.

A compliance defense is thus not a “race to the bottom” it is a “race to the top”  (see here for the prior post) and it is surprising how compliance defense detractors are unable or incapable of grasping this point.

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