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Issues To Consider From The Olympus Enforcement Action

This prior post [1] went in-depth into the recent $22.8 million Foreign Corrupt Practices Act enforcement action against Olympus Latin American Inc.

This post continues the analysis by highlighting various issues to consider.

20th Enforcement Action

Certain people seem to be confused about the reasons why Foreign Corrupt Practices Act enforcement has generally increased over the past decade.

However, there are several practical (as well as provocative) reasons.

Among the more obvious practical reasons (no doubt it is provocative as well) is that in 2002 the FCPA enforcement agencies came up with the theory that employees (such as physicians, nurses, mid-wives, lab personnel, etc.) of certain foreign health care systems are “foreign officials” under the FCPA and thus occupy a status equal to Presidents, Prime Ministers, and other bona-fide foreign officials that Congress had in mind when passing the FCPA in 1977.

It is one of the more aggressive and dubious FCPA enforcement theories there is.  It has never been subjected to judicial scrutiny and perhaps most telling as to its validity and legitimacy, the DOJ has never charged an individual with an FCPA violation based on this theory.

Nevertheless, the theory is frequently used in FCPA enforcement actions and the Olympus enforcement action represents the 20th time it has been used in a corporate enforcement action.

Interested in learning about other practical reasons for the general increase in FCPA enforcement? This prior post [2] details three historical events that together served as the foundation for 35% of all corporate enforcement actions between 2007-2011 and resulted in 55% of the settlement amounts in corporate enforcement actions between 2007-2011.

Timeline

As highlighted in this prior post [3], reports of Olympus’ FCPA scrutiny surfaced in the summer of 2012. Thus, from start to finish, the company’s FCPA scrutiny lasted approximately 3.5 years.

If the FCPA enforcement agencies want the public to have confidence in their enforcement program, it must resolve instances of FCPA scrutiny much quicker.

An Interesting Juxtaposition

As highlighted in the prior post, the Olympus FCPA enforcement action (which focused on various things of value allegedly provided to publicly employed healthcare professionals in Brazil, Bolivia, Colombia, Argentina, Mexico, and Costa Rica) was part of a much broader enforcement action against related entities.

The non-FCPA portion of the overall enforcement action focused on similar conduct. Specifically that Olympus entities “won new business and rewarded sales by giving [U.S.] doctors and [U.S] hospitals kickbacks, including consulting payments, foreign travel, lavish meals, millions of dollars in grants and free endoscopes.”

Therein lies a similarity.

However, this non-FCPA conduct was criminally charged as violations of the Anti-Kickback Statute which generally prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business.

The statute specifically defines the term “federal health care program” as well as other key terms which make explicit what is covered.

Contrast this with the FCPA’s anti-bribery provisions with generally prohibit the payment, offering or authorization of money or anything of value, to a “foreign official” to “obtain or retain” business.

The FCPA defines “foreign official” as follows.

“foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”

In short, employees (such as physicians, nurses, mid-wives, lab personnel, etc.) of certain foreign health care systems are not explicitly captured in the FCPA and it is only through a creative, aggressive and dubious interpretation of that term that the Olympus (and 19 other) FCPA enforcement actions were based.

As noted in one of the best guest posts in FCPA Professor history [4]:

“prosecutors don’t set out deliberately to interpret criminal statutes in ways that [capture defendants] on the basis of a standard that not a single Supreme Court Justice finds supportable, but it has happened already and may well happen again in the context of the Foreign Corrupt Practices Act because of a phenomenon … as “prosecutorial common law”

The broader Olympus enforcement action highlights how Congress is capable of passing specific statutes which explicitly capture conduct. In short, if Congress wants a law that explicitly governs conduct with employees of foreign health care systems, it is capable of passing such a law, because the FCPA is not that law.

As the Supreme Court has repeatedly stated in various forms. “If Congress desires to go further, it must speak more clearly.”