Top Menu

Darden to Patton Boggs

Last month, it was Mark Mendelsohn who left his DOJ FCPA prosecutor job for a lucrative FCPA private practice career (see here and here).

This month, it is John “Jay” Darden, the lead DOJ prosecutor in the recent Daimler enforcement action (see here). Earlier this week, Darden (here) began at Patton Boggs (see here).

While at DOJ, Darden was an active speaker on the FCPA circuit (see here and here and here).

As noted in Patton Boggs’ press release (titled “Patton Boggs Snares Senior Justice Fraud Prosecutor”), Darden, who has government health-care fraud experience as well, will play a “key role” in the firm’s FCPA practice.

In the release, the managing partner of Patton Boggs states that Darden’s “keen strategic insight and deep knowledge of how the Justice Department approaches investigations in different areas of the criminal law will help a diverse range of clients overcome allegations of wrongdoing” and that the firm is “delighted to have such a talented and experienced prosecutor join our ranks.” Darden noted that he “look[s] forward to using my expertise to assist clients with their compliance needs and to defend them against criminal allegations.”

A few weeks ago, Nathan Vardi’s Forbes article (see here) generated much coverage (see here, here, here and here).

If you found Vardi’s points about a revolving door (and all the questions that may arise from this) valid and legitimate, you have another recent example to cite.

If you found Vardi’s article a “low blow,” “unbalanced and “unhinged,” you may be asking, what’s the big deal, DOJ prosecutors leave the agency all the time for private practice careers … that’s just how Washington works.

Q & A With Martin Weinstein

Martin Weinstein (here) is a “dean” of the FCPA bar. Much of my early understanding of the FCPA came as a direct result of working with Martin on FCPA investigations and enforcement actions. I also have Martin to thank for several of the stamps in my passport.

Below is a Q & A exchange with Martin in which he talks about the FCPA’s early years, the current state of enforcement, and suggestions for change.

*****

Q: As a 1984 law school graduate did you have any exposure to the FCPA? Describe your first exposure to the FCPA?

A: When I was in law school, I never heard of the Foreign Corrupt Practices Act and didn’t even know that it existed until around 1991. I was an Assistant U.S. Attorney, and a witness I was interviewing mentioned to me that she thought that some payments had been made to an Egyptian government official. I remember turning to the investigating agent who was with me and saying, “isn’t there a statute somewhere that prohibits this?” That was my first exposure to the Foreign Corrupt Practices Act.

Q: You were lead DOJ counsel in the Lockheed case in the mid-1990’s. Generally describe this matter, how it was resolved, and whether resolution of this case, if brought in 2010, would look any different?

A: I was the lead counsel in the Lockheed case that was resolved in the mid-1990’s, specifically January 1995. It was, by all accounts, the first really serious corporate case brought in the then 20 year history of the Foreign Corrupt Practices Act. In that case, the company actually was indicted, and the allegations involved payments to a member of the Egyptian Parliament to obtain a contract through which the Egyptian Air Force would buy three C130 aircraft from Lockheed. There were two individuals also charged. The cases against all three defendants (the company and the two individuals) were resolved before trial, in the company’s case, literally days before the jury was to be selected.

The company agreed to plead guilty to a conspiracy to violate the Foreign Corrupt Practices Act. It agreed to pay a combination of civil and criminal damages in the amount of $24.8 million, which was twice the profit of the contract they had with the Egyptian military to sell the C130 aircraft.

One of the individuals pled guilty to a lesser charge, and the other individual, a marketing manager named Suleiman Nassar, actually fled to Syria. That was one of the most interesting parts of the case for me because I visited Damascus on several occasions and negotiated directly with the government. Nassar was imprisoned in Syria on these charges, but was ultimately released and returned to the U.S. to plead guilty to violating the FCPA and became, I believe, the first person to go to jail under the FCPA.

Q: Did FCPA enforcement, during the last decade, morph into something other than what Congress intended the FCPA to address when passed in 1977?

A: The last decade of FCPA enforcement has seen extraordinary evolution, and I think you have to say that when Congress passed the law in 1977, they did not envision the wide reach of enforcement today and the types of things that the government gets involved in, such as transactions, joint ventures, and successor liability. I do think that the DOJ and the SEC have stayed generally true to the vision of the FCPA, which focuses on things of value, primarily money, going to foreign government officials in exchange for business.

Q: What is your biggest challenge as an FCPA practitioner? How has your FCPA practice changed over the past decade?

A: The challenges as an FCPA practitioner have mainly involved keeping up with the pace of the enforcement agencies in recent years. Whereas cases used to involve U.S. companies and their businesses in a few countries, the typical case now involves enforcement actions by multiple sovereigns involving the same company at the same time, and that makes the practice more challenging and more fascinating.

Q: What are your clients’ biggest challenges / frustrations with the FCPA or FCPA enforcement? Have these challenges / frustrations changed over the past decade?

A: I think that companies’ main frustration is that even with an outstanding compliance program and 99% of the employees maintaining strict adherence to the laws, you can still have violations which expose the entire company to extraordinarily serious penalties. I think the government has, at times, lost track of the main motivations for this statute and has become focused on the amounts of penalties, the imposition of compliance monitors, and exercising government control over what are basically private businesses. The vast majority of companies are absolutely committed to following the spirit and the letter of the FCPA, but when a company gets into trouble, the whole enterprise can be put at risk because of the conduct of a few people, and that doesn’t seem right. I worry that the government has come to see private industry through “dirty” glasses: the punishments don’t seem to fit the crimes.

Q: The FCPA was passed in 1977, amended in 1988 and also amended in 1998. Given this approximate ten year cycle, is the FCPA in need of further amendment? If so, what would the “Weinstein” amendment look like?

A: I think the Weinstein amendment would focus on the very significant issue of who is a foreign official and what constitutes a state-controlled instrumentality. There is so little guidance in this area that an amendment to the law providing clarity to companies wishing to comply is really essential. For example, after the U.K. government takeovers of certain British banks and U.S. intervention in the auto industry, did all these private businesses become state-controlled instrumentalities rendering all their employees government officials? Companies should not have to guess who is and who is not a government official.

Q: Arguably the two most egregious bribery schemes in recent years involved Siemens and BAE. In both instances, the companies were not charged with FCPA antibribery violations. What message does this send?

A: Siemens and BAE were not charged with antibribery violations largely for two different reasons. In the Siemens case and a number of other cases, charging a company with antibribery violations renders it susceptible to significant suspension and debarment risks. If the government can find suitable alternatives to antibribery charges and still tell the full story of the conduct to the public, it is really a much more just solution not to expose the company to extreme suspension and debarment risks. In BAE, I think the issue was much more one of jurisdiction, and I think the government is going to find this issue repeatedly if it continues to seek to prosecute foreign companies that have relatively little contact with U.S. interstate commerce.

Q: How can law and business schools best expose future lawyers and business leaders to the FCPA? What advice do you have for law students interesting in a future FCPA practice?

A: The FCPA has been a fantastic area in which to practice and to watch evolve. For students who are interested in the field, I think the most important thing is to learn as much as you can about U.S. criminal law and U.S. securities law and their interplay with various anticorruption laws around the world. It has become a very complicated field and I think it is safe to say the stakes for companies and individuals have never been higher.

Potpourri

Some items of interest to pass along.

The Business Case for Fighting Bribery and Corruption

Principles for Responsible Investment, a coalition of investor groups that collectively manage over $1.7 trillion in assets, recently wrote to “21 major companies in 14 countries asking them to improve their disclosure of bribery and corruption risks and avoidance measures.” For more information see here.

Upcoming Events

Hungry for more information on the FCPA and related topics? Mark your calendar for these upcoming events.

“Foreign Corrupt Practices Act (FCPA) Overview 2010: Enforcement and Compliance Strategies” – May 18th – Winston & Strawn (see here).

“The Role of HR in FCPA Compliance and Ethics” – May 18th – Thomas Fox (see here).

“The Implications of the UK Bribery Bill: Preparing for a New Era of Enforcement” – May 18th – Steptoe & Johnson (see here).

“A Focus on FCPA Investigations” – May 25th – Morgan Lewis (see here).

“Corruption: The New Global Landscape” – June 10th, June 25th – Venable and Field Fisher Waterhouse (see here).

“The Bribery Racket” – Additional Commentary

A previous post (see here) covers Nathan Vardi’s “The Bribery Racket” piece in the current issue of Forbes. For additional commentary see here from Mary Jacoby at Main Justice.

SEC Seeking “Corporate Intelligence Specialist”

Have what it takes to join the SEC’s new FCPA unit? See here to find out.

The Bribery Racket

Those are the words on the cover of the current issue of Forbes Magazine.

The feature article (here) by Nathan Vardi is “How Federal Crackdown on Bribery Hurts Business And Enriches Insiders.”

Given my soon to be published piece, “The Facade of FCPA Enforcement” and my other comments on FCPA Inc., the FCPA’s revolving door, voluntary disclosure and the role of FCPA counsel, etc. (see here, here, here and here), Vardi’s article resonates with me, and perhaps with you as well.

Below are a few snippets from Vardi’s article:

“[FCPA is” nice work if you can get it–and to the tune of billions of dollars, lawyers, accountants and consultants, many with past ties to the Justice Department, are getting it. In the last few years, as the feds cranked up enforcement of the 33-year-old Foreign Corrupt Practices Act, a thriving and lucrative anti-bribery complex has emerged. Whether it’s having any impact on reducing bribery is another matter. Instead, companies can find themselves getting extorted in foreign lands, only to get extorted again by Washington. It works generally like this: A company that suspects bribery overseas hires a battery of lawyers, accountants and investigators who may then report any findings to Justice in hopes of some undefined leniency. More likely, the company pays out huge fines and then hires more lawyers as government-mandated compliance monitors, a job that can stretch into years of legal billing.”

“This is good business for law firms,” says Joseph Covington, who headed the Justice Department’s FCPA efforts in the 1980s and is now codirector of white-collar defense at Jenner & Block. “This is good business for accounting firms, it’s good business for consulting firms, the media–and Justice Department lawyers who create the marketplace and then get yourself a job.”

“[Mark] Mendelsohn declines to comment on his new job other than to note that it is routine for lawyers who leave the Justice Department to do white-collar defense work for corporations.” (For more on Mendelsohn see here and here)

“What are these prosecutors accomplishing? Maybe they are fighting for truth and justice. Maybe, that is, it makes sense for the U.S. to hold its corporations to a higher standard of integrity than the French or Chinese outfits they compete against when trying to win business abroad. The prosecutors, though, are doing something else at the same time. They are creating a lucrative industry–FCPA defense work–in which they will someday be prime candidates for the cushy assignments. A former prosecutor, to be sure, does not work on the defense of the same case he had as a government lawyer. But there is nothing to stop prosecutors from ginning up cases that will feed the lawyers who used to have their jobs or from looking forward to a payday in the private sector that will be made possible by their busy successors at Justice.”

“Many of the 150 pending cases will probably end with so-called deferred prosecution agreements. These involve the government threatening to bring an indictment against a company–which could effectively put the firm out of business–unless it agrees to adhere to certain practices. This hammer gives the feds immense power–for one thing, they don’t have to prove their legal theories of bribery in court.” (For more on non-prosecution and deferred prosecution agreements and the FCPA see here).

“The scope of things companies have to worry about is enlarging all the time as the government asserts violations in circumstances where it’s unclear if they would prevail in court,” says Lucinda Low, who has helped companies deal with the FCPA for years. “You don’t have the checks and balances you would normally have if you had more litigation.”

“The FCPA provides moneymaking opportunities even after a case is resolved. Following settlements the Justice Department often requires companies to hire a compliance monitor, whose job is to review a company’s continuing anti-bribery efforts. It seems that an important qualification for these gigs is having previously worked at the Justice Department–as 7 of the 13 FCPA monitors have done. When it came time for Daimler to pick a government-mandated compliance monitor for three years, the company hired former fbi director Louis Freeh.” (For more see here and here).

Vardi also discusses the recent NATCO matter (see here) – a case that resulted in a $65,000 SEC civil monetary penalty. Vardi states, “Natco reported the issue to the government and paid outside lawyers and accountants $11 million to investigate, causing Natco cash-flow problems.” (For additional voluntary disclosure cases that have seemingly gotten out-of-hand see here).

There’s alot in Vardi’s article.

So, what do you think?

As always, comments (even if anonymous) are welcome.

What Others Are Saying About Mendelsohn’s Departure

Earlier this week (see here), it was reported that Mark Mendelsohn (DOJ Deputy Chief – Fraud Section responsible for overseeing FCPA prosecutions) is headed to the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.

Earlier today, Paul Weiss released this statement. Among other things, the Paul Weiss release says that Mendelsohn “is internationally acknowledged and respected as the architect and key enforcement official of the DOJ’s Foreign Corrupt Practices Act (FCPA) enforcement program.” The release notes that Mendelsohn “built the DOJ’s modern FCPA program,” “designed and implemented the DOJ’s current FCPA enforcement program,” and “was responsible for overseeing all investigations and prosecutions under the FCPA.” According to the release, Mendelsohn’s “background and experience will be an enormous asset to our clients, which are facing increased scrutiny on FCPA and other cross-border criminal and regulatory issues.”

For other coverage of Mendelsohn’s departure see below.

The FCPA Blog (here) notes, among other things, that “Mark Mendelsohn transformed the FCPA from a legal backwater to a headline practice” and that during his “term, no corporations mounted a courtroom defense against FCPA charges; instead all made deals with the DOJ to settle their cases.” According to the FCPA Blog, “[t]hat gave Mendelsohn extraordinary power — in the FCPA realm, he and the DOJ became prosecutor, judge, and jury.”

Compliance Week (here) notes, among other things, that Mendelsohn “led a revival of FCPA enforcement when the law had lain largely dormant for more than 20 years” and that Mendelsohn “spoke at just about any public event he could find […] to preach the gospel of FCPA compliance.” The Compliance Week post contains unattributed comments calling Mendelsohn “the Moses of FCPA,” and “a veritable Oracle of Delphi … if he spoke at a conference, the high priests of the compliance world would work feverishly to decipher the meaning of his words.”

Main Justice (here) notes that Mendelsohn, “the face of the Justice Department’s aggressive crack down on Foreign Corrupt Practices Act violations” … “now stands to make millions in the private sector, where the business of offering advice to companies and individuals about complying with anti-bribery laws or dealing with investigations is a hot and burgeoning area of the law.”

Powered by WordPress. Designed by WooThemes