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Harvard Law Prof Is Concerned About Judicial Scrutiny Of FCPA Enforcement


Harvard Law School Professor Matthew Stephenson has an impressive background.

Yet his Foreign Corrupt Practices Act views are, well, let’s just say interesting.

Recently, in the aftermath of the Second Circuit’s decision in U.S. v. Hoskins (see here, here and here for prior posts), Stephenson further advanced his view that judicial scrutiny of FCPA enforcement is not good because the DOJ might lose.

In terms of relevant background, Stephenson describes himself as a “hawk when it comes to FCPA enforcement” and “tends to think that FCPA enforcement needs to be even more robust.” (See here). Stephenson has previously suggested (see here and here):

“[T]hat one possible drawback to dramatically ramping up enforcement of the FCPA against individuals … is that individual defendants are relatively more likely to litigate than are corporate defendants. This not only might entail a greater drain on the resources of the government enforcement agencies—a familiar and well-understood concern—but it could also lead to adverse appellate rulings on the meaning of key FCPA provisions …”.

Previously, Stephenson has observed that if the government would lose some appellate court cases that it would be “from an FCPA enforcement perspective, … a disaster, as it would affect not only the case in which the opinion issued, but all other cases within the jurisdiction, whether against individuals or corporations, that raise the same legal issue.”

Shortly after Donald Trump’s victory in November 2016 Stephenson (a Hillary Clinton supporter according to the Federal Election Commission’s website) wrote:

“Like many people, both here in the US and across the world, I was shocked and dismayed by the outcome of the US Presidential election. To be honest, I’m still in such a state of numb disbelief, I’m not sure I’m in a position to think or write clearly. And I’m not even sure there’s much point to blogging about corruption. As I said in [a prior post] the consequences of a Trump presidency are potentially so dire for such a broad range of issues–from health care to climate change to national security to immigration to the preservation of the fundamental ideals of the United States as an open and tolerant constitutional democracy–that even thinking about the implications of a Trump presidency for something as narrow and specific as anticorruption policy seems almost comically trivial. But blogging about corruption is one of the things I do, and to hold myself together and try to keep sane, I’m going to take a stab at writing a bit about the possible impact that President Trump will have on US anticorruption policy, at home and abroad. I think the impact is likely to be considerable, and uniformly bad:

First, the Foreign Corrupt Practices Act (FCPA) is likely to be substantially weakened, perhaps even repealed (though I think the latter possibility is still relatively unlikely). The FCPA “reform” crowd–the Chamber of Commerce, the defense bar, and their various supporters–will now have a Congress that is likely to support “reforms” that substantially weaken the statute, and a President who is already on record as calling the FCPA a “horrible law.” It may not be a top priority of the Republican Congress and the Trump Administration, but I expect that the Chamber and others will seize this legislative opportunity to push through many of the reforms that have been on their wish list for quite some time.

Second, even putting aside possible changes to the FCPA itself, I fully expect that the era of vigorous FCPA enforcement […] is over. It’s hard for me to imagine that the Attorney General of a Trump Administration (Rudy Giuliani, perhaps?) would make prosecuting foreign bribery a significant priority, or would devote substantial resources to this area. It might take a little while for the change to become apparent–there are still some cases in the pipeline, after all–but I’d be shocked if the US maintained anything like its current level of FCPA enforcement.”

Perhaps a law professor in a self-described “state of numb disbelief” and not in a “position to think or write clearly,” should decline to hit the publish button. But that did not happen and reflective of the troubled state of “news” in this modern era and perhaps due to Stephenson’s institutional affiliation (i.e. a Harvard Law Professor can’t possibly be wrong), the above doom and gloom predictions soon became a narrative that spread like wildfire. (See e.g. here and here).

To his credit, one year after making the above “doom and gloom predictions” (and with much FCPA enforcement still to occur in 2017) Professor Stephenson publicly admitted that he was “totally wrong” or “mostly wrong” as to his predictions.

Returning to Stephenson’s apparent disdain for judicial scrutiny of FCPA enforcement, in the aftermath of the Hoskins decision, he wrote:

“The more the DOJ pushes ahead with prosecutions of individuals, the more of these cases are likely to be litigated to judgment and appeal, and the DOJ may well lose some of those cases in ways that have adverse collateral consequences for other cases (including cases against corporations). I know some folks out there—entirely understandably—see this as a reason to encourage more litigation. After all, if the DOJ is overreaching, isn’t a good thing that the courts have the opportunity to push back? I get that, but my response is that I don’t think courts necessarily get these issues right. (I’m still not sure about Hoskins itself—again, it’s a hard case as a legal matter, and I haven’t sorted through the relevant materials yet.) Indeed, I tend to think that many federal courts are overly solicitous of white-collar defendants and insufficiently familiar with the FCPA’s role and function. (For that reason, I’m not particularly enthusiastic about the prospect of the current US Supreme Court getting its hands on any of these cases.) So, at least from the government’s perspective, much as it’s satisfying to put some bad guys behind bars, and much as doing so might placate critics who think that imposing fines on corporations rather than sending executives to jail is “chickens**t” it might be worth proceeding with caution on individual prosecutions, especially those that involve aggressive and untested legal theories that the government also hopes to invoke in negotiating settlements with corporations.”

My own two cents – this is a sad commentary (particularly from a law professor) on the role and purpose of the DOJ and law enforcement more broadly.

In this follow-up post, Stephenson provides additional commentary on the Hoskins decision. The post says or suggests several times that the FCPA’s anti-bribery provisions are extraterritorial as applied to non-U.S. actors.

However, this is false. The alternative jurisdiction prong of dd-1 does not apply to non-U.S. issuers. In other words, to violate the FCPA’s anti-bribery provisions, a non-U.S. actor may be subject to dd-1 which requires “use of the mails or any means or instrumentality of interstate commerce” or dd-3 which requires an even more demanding standard of ” while in the territory of the United States.”

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