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DOJ’s McFadden And Sessions Nicely Articulate The Policy Rationale For An FCPA Compliance Defense

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As highlighted in the article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” the value and efficacy of an FCPA compliance defense is not just limited to more just and fair results when it comes to “hard enforcement” of the FCPA by the DOJ and SEC.

More importantly, an FCPA compliance defense will also increase “soft enforcement” of the FCPA. Soft enforcement generally refers to a law’s ability to facilitate self-policing and compliance to a greater degree than can be accomplished through “hard” enforcement alone.

Stated differently, the goal of the FCPA is to prevent bribery of foreign officials and that goal is best accomplished not solely through ad hoc “hard” enforcement actions, but by also better incentivizing corporate compliance designed to prevent improper conduct. Numerous prior posts (here, here, herehere, here, here, here, here, here, here, here) have highlighted this dynamic including how the DOJ has long recognized the importance of “soft enforcement” of the FCPA.

In recent speeches, DOJ Deputy Attorney General Trevor McFadden (as well as Attorney General Jeff Sessions) nicely articulated the policy rationale for an FCPA compliance defense. However, actions speak louder than words and the DOJ (and SEC) have continually failed to support the best positive incentivize to maximize “soft” enforcement of the FCPA.

In this recent speech, McFadden stated:

“The Criminal Division’s aims are not to prosecute every company we can, nor to break our own records for the largest fines or longest prison sentences. Our goal is for companies and individuals to voluntarily comply with the law. And it is by working with companies transparently and in partnership that we can achieve this goal. Indeed, working with cooperating businesses is a very important element in fighting corruption, whether by preventing violations before they occur or dealing with past violations. We recognize that businesses are our partners in the fight against corruption, because they are in the best position to detect risk, to take preventative measures, and to educate those who act on their behalf on appropriate best practices.”

In this separate speech a few days later, McFadden stated basically the same thing:

“Our aim is to motivate companies and individuals voluntarily to comply with the law.  It is by working with companies transparently and in partnership that we can achieve this goal.  We recognize that business organizations are our partner in the fight against corruption, because they are in the best position to detect risk, to take preventative measures and to educate those who act on its behalf on best practices.  We hope that, in this cooperative effort, we can reduce corruption with effective compliance programs that prevent nefarious conduct from happening and through effective prosecutions to resolve violations in a way that punishes the conduct and deters similar future misconduct.”

Likewise, in this recent speech, Attorney General Jeff Sessions stated:

“The Department of Justice investigates and prosecutes people and companies that break the law – including laws that criminalize corporate misconduct.  That is an incredibly important responsibility, and the men and women of our department take it seriously.  Our work ensures that law-breaking is punished, and helps deter future bad behavior.

[…]

But each case we bring may be a sign that something has already gone wrong.  That is what your work seeks to prevent, by building strong cultures of compliance within your companies to deter illegal and unethical conduct.  We applaud those efforts.  Our department would much rather have people and companies obey the law and do the right thing, so we don’t have to see them in court.

Your good work makes our jobs easier, and it makes your companies and our country better.

So on behalf of the Department of Justice, I thank you, once again, for doing this vital work.  We have done our part to reward effective compliance programs and to better understand your efforts; you have my commitment that we will continue to do so.”

In the recent speeches, the DOJ officials nicely articulated the policy rationale for an FCPA compliance defense. However, actions speak louder than words and the DOJ has not done its part to bestreward effective compliance programs.

As current DOJ Fraud Section Chief Andrew Weissmann stated before rejoining the DOJ in January 2015.

“The FCPA should incentivize the company to establish compliance systems that will actively discourage and detect bribery, but should also permit companies that maintain such effective systems to avail themselves of an affirmative defense to charges of FCPA violations.”

According to Weissmann, an FCPA compliance defense, as well as other FCPA reforms he advocated, were “best suited for Congressional action.” In other words, Weissmann did not believe that changes to DOJ policy were enough. Numerous former DOJ officials also support an FCPA compliance defens

An FCPA compliance defense will not magically result in 100% best-in-class FCPA compliance in all business organizations. However, if the DOJ’s goal is to “motivate companies and individuals voluntarily to comply with the law” (as DOJ officials recently said it was) more than just DOJ window-dressing such as the FCPA Pilot Program or the DOJ having a compliance counsel consultant are needed. Indeed, in the words of Weissmann, FCPA reform should best motivate compliance “on a daily basis” and “regardless of what the Department of Justice is doing.”

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