Top Menu

Archive | FCPA Scholarship

A Look Back At 2015 FCPA Enforcement And Related Developments

2015 year in review

Each year, in addition to numerous posts published on FCPA Professor, I author a more comprehensive Foreign Corrupt Practices Act year in review / recent developments article that is published by a law review or journal.

This publication process typically moves at a snail’s pace, but just because the calendar says April doesn’t mean it is too late to learn about the top FCPA events and issues from the prior year.

The 2015 version of the FCPA year in review article is forthcoming in the Cleveland State Law Review and can be downloaded for free here.

Among the issues addressed in the article are the following:

Continue Reading

Revisiting The Benefits Of Voluntary Disclosure With Responsible Statistical Analysis

Statistical Analysis

Today’s post is from Peter Leasure J.D. (current Ph.D. candidate, University of South Carolina, Department of Criminology and Criminal Justice).


When asked about all sorts of automotive and household repairs, a dear friend used to reply, “I know just enough to get into trouble.”

Such can be the case with statistics and Foreign Corrupt Practices Act (FCPA) research. While statistical research within the FCPA is sparse[1], some efforts have been made. However, some of these efforts fell short and the entire legal field, especially those publishing legal journals, could greatly benefit from a better understanding of statistics.

My new article forthcoming in the Journal of Financial Crime titled “Embracing Fragility in Our Data: A Cautionary Example from Research on the FCPA and Voluntary Disclosure” (click here to download) provides a clear example of the need for a greater understanding of statistics in FCPA research.

“Embracing Fragility in Our Data” critiques the methodology of a previous study [2] which looked at whether there are benefits to voluntary disclosure of FCPA misconduct. In the study being critiqued, results showed that voluntarily disclosing companies faced nearly two and a half times higher total fines than companies that did not voluntarily disclose. A simple Google Scholar search yields twenty eight manuscripts that have relied upon and cited the findings noted by that previous study. It is no doubt likely that several other academics and practitioners have also relied upon and communicated those findings.

Continue Reading

Must Read: Distorted FCPA Statistics Exposed

Laurel and Hardy

If you have any interest in Foreign Corrupt Practices Act enforcement you must read an article recently published by the Rutgers Law Review titled “A Common Language to Remedy Distorted FCPA Enforcement Statistics” (click here to download the article).

In the article, you will learn how various FCPA Inc. participants have adopted creative and haphazard counting methods that infect the quality and reliability of FCPA enforcement and related statistics of interest to many in the legal and business communities.

Are these creative counting methods that yield higher FCPA enforcement statistics part of a deliberate business strategy by certain FCPA Inc. participants to make FCPA enforcement appear more robust than it actually is to generate more business? That is for you to decide.

In the article, you will learn how the lack of an FCPA common language has several negative effects including the quality of FCPA lawyering, the quality of empirical FCPA research, and the quality of FCPA reporting by the media.

Regarding the later, it must be recognized that much FCPA media reporting is done by FCPA Inc. participants themselves in search of convenient hooks to sell their own FCPA-related compliance products or services. In short, many FCPA media sources have – just like the FCPA Inc. participants providing the original enforcement statistics – a vested business interest in making FCPA enforcement appear more robust than it actually is and the result is an FCPA “echo chamber” of sorts.

In the article, you will learn how a proposed FCPA common language can improve the quality and reliability of FCPA statistics and thus allow a more cogent conversation to take place regarding FCPA issues.

In short, read the article and decide for yourself whether FCPA Inc. needs more exacting standards. (See this Wall Street Journal Risk and Compliance Journal article for additional information).

A Q&A Regarding The Uncomfortable Truths And Double Standards Of Bribery Enforcement

Double Standard4

The below Q&A first appeared in Bloomberg BNA’s White Collar Crime Report on February 5th.

In the Q&A, I respond to questions posed by BNA’s Robert Wilhelm regarding my recent article “The Uncomfortable Truths and Double Standards of Bribery Enforcement.”


Q:  In your opinion, does the U.S. government walk-it-like-it-talks-it in terms of FCPA enforcement?

A:  No I don’t and hence the reason I wrote the article.

There are a number of instances in which the U.S. government has been an active participant in bribery, had knowledge of and supported private sector bribery, has selectively enforced bribery laws given the company under scrutiny, and has otherwise used overblown and inconsistent rhetoric when speaking of enforcement of bribery laws. And these instances are just based on information in the public domain.

After reading the article, individuals can decide for themselves whether the U.S. government ‘‘practices what it preaches’’ (as stated by the government) when it comes to enforcement of bribery laws and whether the United States is indeed ‘‘in a unique position to spread the gospel of anticorruption’’ (as also stated by the government).

Q: Are the selfish and political reasons for passage of the FCPA in 1970s any different then how the DOJ enforces the act today?

A: Yes, very much so. The primary policy reason Congress enacted the FCPA were the foreign policy implications of corporate payments to foreign government officials such as the Prime Minister of Japan, the President of Gabon, the President of Honduras, and other traditional government officials.

In the modern era of FCPA enforcement, few enforcement actions involve such ‘‘foreign officials.’’ Rather, the alleged ‘‘foreign officials’’ are employed by alleged state-owned or state-controlled entities. For instance, in 2015 FCPA enforcement actions the alleged foreign officials included employees of a real estate development firm, a sugar factory and a cement company. Moreover, a prominent enforcement theory (used in 17 corporate enforcement actions) is that physicians, lab personnel, and even a mid-wife, employed by various foreign healthcare systems are ‘‘foreign officials’’ and thus occupy a status on par with Presidents and Prime Ministers.

Q: Why isn’t there a ‘‘Giffen’’ defense, considering that the U.S. government knew exactly what he was doing, condoned it, yet then one day (different) charges him?

A: Perhaps one day, the real story about the Giffen enforcement action (an action discussed in the article to highlight several uncomfortable truths about U.S. government bribery enforcement) will be known, but I doubt it. It would appear that when the DOJ charged Giffen in 2004 it was unaware that other components of the government were aware of, and condoned of, his activities. A classic case perhaps of the left hand not knowing what the right hand was doing.

Interestingly, the FCPA does indeed state that ‘‘with respect to matters concerning the national security of the United States, no duty or liability . . . shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives.’’ The FCPA further provides as follows. ‘‘Each head of a Federal department or agency of the United States who issues such a directive pursuant to this paragraph shall maintain a complete file of all such directives and shall, on October 1 of each year, transmit a summary of matters covered by such directives in force at any time during the previous year to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate.’’

The above provisions, as written would appear to only apply to the FCPA’s books and records and internal controls provisions, and not the anti-bribery provisions, but I believe that this was a drafting error. Regardless, the public surely does not have access to the materials of the Senate Select Committee on Intelligence. Thus, how often a ‘‘Giffen’’-like defense is asserted in practice is largely a black hole.

Q: Does the DOJ use the FCPA as leverage against the large companies to essentially force the company to plead to a lesser charge?

A: Plead? Very few business organizations are required to that as a condition of resolving an FCPA enforcement action. Rather, since 2010 when this ‘‘new era of FCPA enforcement’’ was declared by the DOJ, approximately 85% of corporate FCPA enforcement actions have involved non-prosecution agreements or deferred prosecution agreements.

In the NPA/DPA process, the law and facts largely take a backseat to the leverage the DOJ has against risk averse business organizations. My recent article ‘‘Measuring the Impact of NPAs and DPAs on FCPA Enforcement’’ (49 U.C. Davis Law Review 497), tests a hypothesis and concludes that while NPAs and DPAs have resulted in a higher quantity of FCPA enforcement, they have also resulted in a lower quality of FCPA enforcement. In short, there is an open question whether the conduct at issue in several NPAs or DPAs violated the FCPA as passed by Congress and as interpreted by courts.

As a dean of the FCPA bar has stated: ‘‘One reality is the enforcement agencies’ views on issues and enforcement policies, positions on which they are rarely challenged in court. The other is what knowledgeable counsel believe the government could sustain in court, should their interpretations or positions be challenged. The two may not be the same. The operative rules of the game are the agencies’ views unless a company is prepared to go to court or to mount a serious challenge within the agencies.’’

Indeed, in the FCPA’s history the DOJ is 0-2 when put to its ultimate burden of proof by business organizations and has an overall losing record when put to its ultimate burden of proof by individuals. If more business organizations would put the DOJ to its burden of proof in FCPA enforcement actions, it is likely that the modern era of FCPA enforcement would look much different.

What is occurring in the FCPA space and beyond is troubling when you consider that this country otherwise values the rule of law.

Q: Regarding the latest change in DOJ guidelines in charging corporations and requiring disclosure of employee misconduct, will there be more high-profile targets? Will a CEO of a major firm (a business that does less than $5 million in contracts with the federal government) be charged?

A: I do not believe that the Yates Memo will have any meaningful impact on FCPA enforcement. For instance, the DOJ has been talking for years about the importance of individual FCPA enforcement. Yet approximately 70 percent of corporate FCPA enforcement actions lack any related charges against company employees (for reasons addressed above). Regardless of what impact the Yates Memo may have on FCPA enforcement, it is likely to be short-lived as the current crop of DOJ politicians are likely to leave the DOJ in the next 10-12 months with the change in executive administration.

It is troubling that the DOJ Fraud Section is driven by individual policies. For instance, in the past decade there have been numerous DOJ policy memos guiding corporate enforcement (the Holder Memo, the Thompson Memo, the McNulty Memo, the Filip Memo, and now the Yates Memo).

Q: How many enforcement actions would there be if corporations simply decided to not self-disclose?

A: In the FCPA’s modern era, there tend to be between 10-15 core corporate enforcement actions per year. Approximately 50 percent of those actions originate from corporate voluntary disclosures. Several other corporate enforcement actions—including many of the largest enforcement actions from a settlement amount perspective—originate not in U.S. law enforcement activity, but foreign law enforcement activity.

Another question to ask is how many corporate enforcement actions there would be if NPAs and DPAs did not exist? To a certain extent, the answer can be found in FCPA enforcement statistics from 1977 to 2004 (when the DOJ first brought alternative resolution vehicles to the FCPA context).

FCPA risk clearly needs to be on the radar screen of business organizations competing in the global marketplace. However, and even accounting for the factors highlighted above, there is not very much FCPA enforcement considering that every single U.S. business organization (public or private) is subject to the FCPA, approximately 1,000 foreign companies with shares traded on a U.S. exchange are subject to the FCPA, and to the extent a certain jurisdictional nexus is met all companies in the world can be subject to the FCPA.

Q: Why does the DOJ continue with rhetoric that enforcing the FCPA ensures that roads and schools are built, when in reality, the bribery at issue was not for a contract to build said road or school?

A: Because it makes for good politics and nonprofits, NGOs and others who presumably never read FCPA enforcement actions fall for the rhetoric hook, line and sinker. Not only do few FCPA enforcement actions involve the conduct you identify, but also most companies that resolve FCPA enforcement actions are otherwise viewed as selling the best product for the best price and there is rarely an allegation or suggestion of any kind in the enforcement action that the product at issue was compromised.

This of course is not to condone the alleged underlying conduct, only to demonstrate that the U.S. government’s rhetoric about the nature and purpose of its FCPA enforcement program is often hollow.

Q: If U.S. national security is a reason not to enforce the FCPA, why does the DOJ link enforcement actions to national security concerns?

A: Again, it makes for good politics. When the government tries to link FCPA enforcement to national security it sort of puts the enforcement program in an untouchable category. After all, if the goal of FCPA enforcement is to keep Americans safe, how can anyone ask questions about FCPA enforcement? Well, we should ask questions because upon further examination this justification makes little sense given the allegations in a typical enforcement action including the alleged ‘‘foreign officials.’’ Moreover, as highlighted above, approximately 50 percent of corporate enforcement actions are the result of voluntary disclosures.

Notwithstanding the simplicity and hollowness of the national security link, again many are falling for this DOJ rhetoric hook, line and sinker. Here is a recommendation to those inclined to believe the rhetoric: Read the actual enforcement action, the alleged facts including the alleged ‘‘foreign officials,’’ the origins of the enforcement action, and ask yourself is there any credible link to national security in this enforcement action?

Q: The Double Standard Problem: Why is it bribery if a CEO throws a party for a foreign dignitary to ensure access to that official, but the same activity for a U.S. senator is legal?

A: I guess the short answer is because the DOJ is likely to say it is. But as highlighted in the article, this is the double standard problem. The ‘‘domestic bribery statute’’ (18 U.S.C. 201) was enacted prior to the FCPA, has similar elements, and indeed the FCPA was largely modeled on 18 U.S.C. 201.

However, time and time again we see situations in which business interactions with ‘‘foreign officials’’ seem to be subject to different standards than business interactions with U.S. officials? Similarly, we tend to reflexively label a ‘‘foreign official’’ who receives ‘‘things of value’’ from private business interests as corrupt, yet generally turn a blind eye when it happens here at home.

Ought not there be some consistency between enforcement of the FCPA and the domestic bribery statute? Of course there ought to be, but there sure does not seem to be much consistency.

Q: Is there a solution to the double-standard problem?

A: One can look at this two ways. Is enforcement of the ‘‘domestic bribery statute’’ too lax or is enforcement of the FCPA too aggressive?

When it comes to corporate interaction with U.S. government officials, I think enforcement of 18 USC 201 and related laws are too lax. But here, there are complicating factors because the U.S. Supreme Court has held that money is a form of speech and that ingratiation and access are not corruption.

When it comes to corporate interaction with ‘‘foreign officials,’’ I think enforcement of the FCPA in many cases is too aggressive. Indeed, many FCPA enforcement actions involve an expansive category of ‘‘foreign officials’’ and contain allegations about travel and entertainment, and other nominal things of value such as karaoke bars, flowers, cigarettes, and most recently internships. What is the solution? Here again, we can ask two questions in connection with many FCPA enforcement actions. The first is why did the DOJ/SEC assert an aggressive enforcement theory? The second, recognizing that the action likely originated from a corporate voluntary disclosure, is why did the company with the advice of its FCPA counsel disclose the conduct in the first place? Part of that answer requires one to acknowledge that voluntary disclosures are the fuel that fires the multi-billion dollar industry known as FCPA Inc.

Q: Why isn’t it illegal for the U.S. government to lobby on behalf of American businesses, when the same action by a private actor is an FCPA violation? Isn’t the law supposed to be blind?

A: Of course Lady Justice is blind, but the reality is she often lifts up the blindfold to take a peek. The FCPA community often talks about code words and euphemisms to hide bribery. Well it happens here in the United States as well. When the U.S. government uses taxpayer money to influence foreign governments or foreign officials to advantage U.S. business, the government constructs programs around it and gives it names such as foreign aid or foreign military assistance. But when a private actor uses shareholder money to accomplish the same thing, the government tends to call it bribery.

Bribery ought to be bribery pure and simple, and subtle distinctions should not be drawn based on the source of money or influence. Doing so merely creates a distinction without a difference.

Friday Roundup


Listening in, for the reading stack, and time served.  It’s all here in the Friday Roundup.

Listening In

This previous post about the $75,000 FCPA enforcement action against Hyperdynamics highlighted that the company spent approximately $12.7 million in pre-enforcement action professional fees and expenses (a shocking 170:1 ratio).

In this recent investor conference call, company executives stated:

“The FCPA investigations restricted our available opportunities to raise capital and significantly increased our legal bills.


Speaking of legal fees I do want to address the fees we incurred during the FCPA investigation.  As you know, we spent $12 MM from inception to closure of that investigation.  We were unhappily aware that FCPA investigations can take years to conclude but that we only had until September 2016 because of the date for the conclusion of the concession.  We therefore determined that our only option was to do everything in our power to facilitate a resolution of the investigation, and ultimately were able to close the investigations in 20 months. This came at a very heavy legal cost to say the least, but again it was the best option we saw to move forward on the path to drilling the well.”

Dear Hyperdynamics executives and shareholders, you ought to be asking some serious questions about the extent of your pre-enforcement action professional fees and expenses.

To learn more how settlement amounts in an FCPA enforcement action are often only a relatively minor component of the overall financial consequences of FCPA scrutiny and enforcement, see here for “Foreign Corrupt Practices Act Ripples.”

Reading Stack

In 2015, the UC-Davis Law Review and Fordham Law Review both held events focused on bribery and corruption topics. The articles from those events were recently published and are available below.

UC-Davis Law Review

Fordham Law Review

Time Served

In 2013 and 2014 the DOJ brought FCPA and related charges against various individuals associated with broker dealer Direct Access Partners in connection with alleged improper payments to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes, an alleged Venezuelan state-owned banking entity that acted as the financial agent of the state to finance economic development projects).

As recently noted here by Reuters:

“Gonzalez “avoided prison time beyond the 16-1/2 months she already served after admitting that she accepted millions of dollars in bribes from a Wall Street brokerage to which she steered business. Maria de los Angeles Gonzalez de Hernandez, who was a senior official at Caracas-based Banco de Desarrollo Económico y Social de Venezuela, also known as Bandes, was further ordered by U.S. District Judge Denise Cote to forfeit the roughly $5 million she garnered from the scheme. Cote said she was “affected by the degree of remorse” Gonzalez showed in a statement she read to the court through an interpreter. “We’re enormously grateful for the court’s compassion and understanding,” said Jane Moscowitz, Gonzalez’s attorney, after the sentencing.”

Previously in connection with the same core action:

  • Jose Hurtado was sentenced to three years in prison, followed by three years of supervised release, and consented to a $11.9 million forfeiture.
  • Ernesto Lujan was sentenced to two years in prison, followed by three years of supervised release, and consented to a $18.5 million forfeiture.
  • Tomas Clarke was  sentenced to two years in prison, followed by three years of supervised release, and consented to a $5.8 million forfeiture.
  • Benito Chinea was sentenced to four years in prison, followed by three years of supervised release, and consented to a $3.6 million forfeiture; and
  • Joseph DeMeneses was sentenced to four years in prison, followed by three years of supervised release, and consented to a $2.7 million forfeiture.


A good weekend to all.


Powered by WordPress. Designed by WooThemes