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DOJ’s Empty Rhetoric On Individual FCPA Prosecutions Continues

This [1] previous post highlighted the empty rhetoric of a former DOJ Criminal Division Chief regarding individual FCPA prosecutions.

A change in leadership at the DOJ Criminal Division has not brought about a change in the rhetoric.

As noted in this [2] Reuters FCPA article, current Chief of the Criminal Division Leslie Caldwell stated:

“Certainly…there has been an increased emphasis on, let’s get some individuals.”

“It’s very important for us to hold accountable individuals who engage in criminal misconduct in white-collar (cases), as we do in every other kind of crime.”

Once again, the rhetoric is empty.

Sure the DOJ can point to a few core actions in which the DOJ has “clustered” multiple defendants into one action to achieve notable individual prosecution numbers.  The April 2014 action [3] against six individuals allegedly involved in a conspiracy to obtain Indian mining licenses is a good example as was the “clustering phenomenon [4]” in the enforcement action against five individuals associated with Direct Access Partners.   As highlighted in this [5] previous post (with statistics calculated through the end of 2013), 53% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just four cases and 75% of the individuals charged by the DOJ since 2008 have been in just nine cases.

In the vast majority of corporate FCPA enforcement actions (based presumably on the conduct of real individuals not ghosts as I indicated in my 2010 Senate FCPA testimony [6]), the talk of individual prosecutions is nothing more than empty rhetoric.  Indeed, as highlighted in this [5] previous post (with statistics calculated through the end of 2013) since 2008 approximately 75% of corporate FCPA enforcement have not (at least yet) resulted in any DOJ charges against company employees.

Consider the below chart with the 20 most recent corporate FCPA enforcement actions.  Only one has resulted (at least yet) in any DOJ charges against company employees.

Corporate Action

Related Prosecution of Company Employees

 

HP

No

Marubeni

No

Alcoa

No

ADM

No

Bilfinger

No

Weatherford

No

Diebold

No

Total

No

Ralph Lauren

No

Parker Drilling

No

Tyco

No

Pfizer

No

Nordam Group

No

Orthofix

No

Data Systems & Solutions

No

Biomet

No

BizJet / Lufthansa

Yes

Smith & Nephew

No

Marubeni

No

Magyar / Deutsche Telekom

No

The DOJ has long recognized that an FCPA enforcement program based solely on corporate fines is not effective and does not adequately deter future FCPA violations. For instance, in 1986 the DOJ Deputy Assistant Attorney General stated:

“If the risk of conduct in violation of the [FCPA] becomes merely monetary, the fine will simply become a cost of doing business, payable only upon being caught and in many instances, it will be only a fraction of the profit acquired from the corrupt activity. Absent the threat of incarceration, there may no longer be any compelling need to resist the urge to acquire business in any way possible.”

In 2010, the DOJ Deputy Chief of the Fraud Section likewise stated that a corporate fine-only FCPA enforcement program allows companies to calculate FCPA settlements as the cost of doing business.   In this new era, the DOJ has consistently stated that prosecution of individuals is a “cornerstone” of its FCPA enforcement strategy and in a 2012 speech the Assistant Attorney General stated: “If you look at the FCPA over the past 4 years, you’ll see we really have been vigorous about holding individuals accountable.” Add Caldwell’s recent statements to this long line of empty rhetoric.

Despite the rhetoric, the actual statistics demonstrate that FCPA enforcement is largely corporate enforcement only.