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Is Much Of FCPA Enforcement Even Consistent With The Rule Of Law?

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Deputy Attorney General Rod Rosenstein delivered another dandy speech earlier this week that any college or professional student should read for career advice. More broadly – similar to Rosenstein’s speech highlighted last week – he again spoke about the rule of law.

Specifically, Rosenstein correctly noted: “The term ‘rule of law’ refers to the principle that the United States is governed by law and not arbitrary decisions of government officials. Rule of law systems are characterized by consistency and predictability.”

Yet actions speak louder than words and this post encourages you to think whether much of FCPA enforcement is even consistent with the rule of law principles highlighted above.

Arbitrary decisions of government officials and lack of consistency and predictability have been part of the FCPA conversation nearly as long as the FCPA itself.

For instance, in 1980 the Carter administration (recall that President Carter signed the FCPA into law in 1977) sent a report to Congress prepared by the Secretary of Commerce and the U.S. Trade Representative titled “Report of the President on Export Promotion Functions and Potential Export Disincentives.” In pertinent part, the report stated:

“The [FCPA] is identified by businessmen and attorneys as one of the most significant export disincentives.  […]  The Act inhibits exporting because of uncertainty within the business community about the meaning and application of some of its key provisions.

“Uncertainty about the meaning of key provisions of the FCPA and how it will be applied is having a negative effect on U.S. exports.  Many of the businessmen and attorneys consulted expressed the view that this uncertainty has a far greater impact than the actual prohibition against bribery.  The problem described, in essence, is that what conduct is prohibited and what conduct is not prohibited under the Act is often unclear.  In order to avoid possible violations of the Act, attorneys often give such cautious guidance that their clients simply forego any transactions where the FCPA could possibly become an issue.”

[…]

“Finally, companies point out that the extent to which companies have been successfully prosecuted under the FCPA does not define the extent of the disincentive.  Uncertainty can be a disincentive without any prosecutions and, moreover, exports are inhibited merely by the possibility of public charges and the adverse publicity surrounding them.  Even where a company is totally convinced that a court would find that it had not violated the FCPA, it nonetheless may forego the export opportunity for fear that an enforcement agency could publicly charge it with a violation of the Act.”

Likewise, in 1981 the Government Accounting Office (“GAO”), the investigative arm of Congress, released a report titled “Impact of Foreign Corrupt Practices Act on U.S. Business.” The report was based in part on a GAO questionnaire survey of 250 companies randomly selected from the Fortune 1000 list of the largest industrial firms in the U.S. Among the findings were the following:

“The GAO report noted concerns that the FCPA’s anti-bribery provisions were “vague and ambiguous” and stated that while “unambiguous requirements may be impractical and could provide a roadmap for corporate bribery” companies operating in the global marketplace “should be subject to clear and consistent demands by the Government agencies for enforcing the act.”

Similarly, as highlighted in this previous post, one of the best things ever written about the FCPA was penned by Robert Primoff in 1982 when he stated:

“The government has the option of deciding whether or not to prosecute.  For practitioners, however, the situation is intolerable.  We must be able to advise our clients as to whether their conduct violates the law, not whether this year’s crop of administrators is likely to enforce a particular alleged violation.  That would produce, in effect, a government of men and women rather than a government of law.”

All of the above concerns were back in an era when the DOJ either prosecuted a company for violating the FCPA or didn’t prosecute a company for violating the FCPA.

In other words, the above concerns were before the “invention” of non-prosecution agreements, before the “invention” of deferred prosecution agreements” and before the “invention” of so-called declinations with disgorgement.” Moreover, the above concerns were also articulated prior to “person of the moment” DOJ policy memo which can impact FCPA enforcement. Most recently it was the 2015 “Yates Memo,” before that it was the 2008 “Filip Memo,” prior to that it was the 2006 “McNulty Memo,” prior to that it was the 2003 “Thompson Memo,” and prior to that it was the 1999 “Holder Memo.” Whose name will next appear on yet another upcoming DOJ policy memo? Only time will tell.

Because of the resolution vehicles invented by the DOJ (and SEC) have come to dominate FCPA enforcement, FCPA enforcement is – as I wrote back in 2010 – often a “facade.” (See here for the article “The Facade of FCPA Enforcement”).

And it’s not just “over-enforcement” of the FCPA based on dubious theories resolved through resolution vehicles not subjected to any meaningful judicial scrutiny that presents rule of law problems. As highlighted in the article, it is also “under-enforcement” of the FCPA based on egregious allegations of corporate bribery that presents rule of law problems. As highlighted in the article, certain companies in certain industries seem immune from FCPA anti-bribery charges because of perceived collateral consequences. Although “lady justice” is supposed to be blind, it is clear from certain FCPA resolution documents (Siemens and BAE to name just a few) that government prosecutors treat different companies differently. Indeed, my “homework” assignment from Senator Arlen Specter in connection with the Senate’s November 2010 FCPA hearing was to address various questions about this concerning issue. Incidentally, treating certain companies differently in terms of FCPA charges and forms of resolution is in clear violation of OECD Convention Article 5 which states:

“Investigation and prosecution of the bribery of a foreign public official shall be subject to the applicable rules and principles of each Party. They shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.”

I’ve devoted my professional life to studying the FCPA including analyzing every FCPA enforcement action brought in the FCPA’s nearly 40-year history. In the last decade or so, I literally scratch my head when reading certain FCPA enforcement actions and particularly when trying to compare the enforcement actions to seemingly analogous enforcement actions that nevertheless resulted in different charges or findings, different resolution vehicles, or different settlement amounts. As a former FCPA practitioner I recognize that FCPA resolution documents don’t necessarily tell the whole story, but that simply leaves us with a transparency problem which is also a rule of law problem.

Like many others, I’ve frequently raised various rule of law concerns in connection with FCPA enforcement in various articles and numerous prior posts too frequent to include here. For instance, “The Uncomfortable Truths and Double Standards of Bribery Enforcement” highlights various case studies which allow the reader to decide for themselves whether there is inconsistent enforcement of the FCPA. Likewise, “Measuring the Impact of NPAs and DPAs on FCPA Enforcement” documents how the rule of law has suffered in the FCPA’s modern era of enforcement.

In the minds of many, FCPA enforcement has largely descended into a situation where it is an open question whether the current “crop of administrators” is likely to enforce a particular alleged violation and if so how. The end result i is often “government of men and women rather than a government of law.”

To be sure, neither Rod Rosenstein (nor the Trump administration) invented NPAs, DPAs, so-called “declinations with disgorgement” or “flavor-of-the-month” DOJ policy memos.

Yet, high-ranking DOJ officials should not talk about the importance of the rule of law and the importance of consistency and predictability (and to be sure numerous high-ranking DOJ officials in the Obama administration did the exact same thing) and then enforce the FCPA in ways that contradict those norms.

In short, actions speak louder than words.

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