Recently Sandra Moser (Principal Deputy Chief, Fraud Section, DOJ) delivered these remarks (provided to me by the DOJ) at an event titled “Global Forum on Anti-Corruption in High Risk Markets.”
This post provides commentary on the remarks ranging from how best to incentivize compliance, the U.S. “piling” on foreign law enforcement actions, individual accountability, DOJ transparency in resolving FCPA enforcement actions, and the DOJ’s FCPA Pilot Program.
Moser began her remarks as follows:
“We stand at a critical juncture in the fight against transnational corruption. And the importance of this fight cannot be overstated. The impact of corruption is unambiguous. Because of the efforts of prosecutors in countries across the globe—some of them the very definition of high risk—the curtain has been ripped back/ revealing deep-rooted and pervasive corruption up to the highest levels of governance/ and putting on display for the world to see its devastating effects:
The way that corruption undermines the rule of law and destabilizes economies; the link between corruption and terrorism and the attendant threat to global security; the erosion of the free and fair market and, with it, the public’s confidence.
Here at home, foreign corruption puts American companies that are playing by the rules at a competitive disadvantage, resulting in significant and tangible harm to business, employees and shareholders.
Blunting corruption’s corrosive effects depends on rigorous enforcement of anti-corruption laws to be sure. But, of course, it also depends on you. Because just like the impact of corruption, the impact of compliance is plain. So, today, I would like to talk to you about both efforts.”
During her speech, Moser encouraged the compliance audience to “be better, do better” and stated:
“Invest in compliance now rather than using that would-be investment to pay a criminal fine down the road. Empower your compliance executives by giving them their rightful seat at the table and listening to what they have to say. Don’t put them in the awkward position of having to sit before the Department and defend a program that they fought to make better and were denied the resources or backing to see through.
Elsewhere, Moser stated:
“So, the message should be clear – Wherever the locus of misconduct and whatever the industry, compliance must continue to play an increased role. Law enforcement and regulators don’t want to be going at this alone.
As I said on the onset of my remarks, the impact of corruption is glaring but, so too, is the impact of compliance when taken seriously and approached with sincerity and commitment. Let’s all continue to strive to be better and do better in the struggle to combat global corruption.”
In other words, add Moser to the long list of government officials who have nicely articulated the policy rationale for an FCPA compliance defense (see here for a recent post on the same subject).
If the DOJ was truly interested in companies “investing” in compliance, “empowering” compliance executives and making sure that compliance executives had the “resources or backing” they need, the DOJ would support – not reject as it long has – an FCPA compliance defense. (See here for a prior post among many others on this subject).
Back to Moser’s speech in which she stated:
“The Fraud Section is doing our part to try to be better and do better.
We are working harder than ever to coordinate with global partners and avoid what some have termed “piling on” in attendant global resolutions.
We are taking additional steps to enhance our enforcement of the FCPA against both corporate and individual actors, and to promote transparency in doing so.
And we are endeavoring to work smarter and more efficiently through increased internal coordination to combat bribery and fraud regardless of the market or industry.”
There is much to mull over here.
Let’s start with the “piling on” comment.
As highlighted in this recent post of the 27 corporate enforcement actions from 2016, 11 (41%) were against foreign companies (based in many instances on mere listing of securities on U.S. markets and in a few instances on sparse allegations of a U.S. nexus in furtherance of an alleged bribery scheme). Even more dramatic, of the net $2.27 billion settlement amounts from 2016 corporate enforcement actions, approximately $1.44 billion (63%) resulted from enforcement actions against foreign companies. All of the foreign companies that resolved 2016 FCPA enforcement actions were from peer OECD Convention countries.
Regarding individual prosecutions, as highlighted in this recent post since September 2015 there have been nearly 20 corporate FCPA enforcement actions brought by the DOJ and not one has resulted (at least yet) in any DOJ charges against company employees.
Zero. Zilch. Nada.
Regarding transparency, it’s difficult to take Moser’s comment seriously given that the DOJ’s last two corporate enforcement actions (see here and here) contained between one paragraph (CD Smith) to one page (Linde) of substantive allegations. It’s also difficult to take her comment seriously given that the DOJ refused to provide basic factual information regarding these enforcement actions (see here).
Moser next stated:
“From an enforcement perspective, I stand before you more confident than ever that we are well-positioned to remain at the forefront of the fight against corruption. Not just because of the efforts of our prosecutors and law enforcement agents, which I’ll discuss in more detail, but also because I can safely say we are not alone in this fight. Not even close. In the past, commentators concluded that the U.S. was going it alone. That we were the world’s policeman. That can no longer be said. Countries like Brazil, Switzerland, the Netherlands, Germany, the United Kingdom, and many, many more are not just joining the fray but are taking a leading role. These countries have watched the United States, they have worked with us, they have learned from us, and they are now following the example we set, in some cases, actually adopting tools that we employ. One need look no further than Brazil to see how far and how fast a country can come in confronting corruption head on. It is truly remarkable what they have done, and they are not slowing down.
Certain of these countries are also establishing their own mechanisms for reaching resolutions with corporations. Countries like the United Kingdom, France, and Australia have begun using deferred prosecution agreements and non-prosecution agreements as an alternative to the binary choice of prosecuting a company or walking away from the case entirely. This allows those countries to reward and incentivize good corporate behavior, like voluntarily self-disclosing, cooperating and remediating by, among other things, making a real commitment to compliance. Importantly, it also allows these countries to account for situations where there might exist significant collateral consequences to a company if it were to plead guilty or be indicted.”
Actually, the U.K. specifically rejected use of non-prosecution agreement noting that they:
“[Are] unsuitable for the constitutional arrangements and legal traditions in England and Wales. We have concluded that [NPAs] are not suitable for this jurisdiction due to their markedly lesser degree of transparency, including the absence of judicial oversight.” (See here for the prior post).
Moreover, correct me if I am wrong, but neither France nor Australia use non-prosecution agreements to resolve bribery offenses.
As to Moser’s comment that other countries “have learned from us, and they are now following the example we set, in some cases, actually adopting tools that we employ,” this is a curious statement given that the other countries that have adopted DPAs have materially different DPA regimes compared to the U.S.
Moser’s statement that alternative resolution vehicles “allow those countries to reward and incentivize good corporate behavior, like voluntarily self-disclosing, cooperating and remediating by, among other things, making a real commitment to compliance” has zero empirical evidence support.
As highlighted in this prior post, in the past the DOJ was specifically asked by the OECD to provide information about the deterrent effect of DPAs and NPAs and the DOJ merely responded as follows:
“Scholars have recognized that quantifying deterrence is extremely difficult. This is equally true for the deterrent effect of DPAs and NPAs. Thus, as discussed at the time this recommendation was made, measuring ‘the impact of NPAs and DPAs in deterring the bribery of foreign public officials’ would be a difficult task, save providing certain anecdotal and other circumstantial evidence.”
Moser next stated: “In 2016, the Fraud Section’s FCPA Unit resolved 13 corporate matters with fines exceeding $1.3 billion.”
The reason I highlight this sentence is because the number of corporate matters the DOJ references in 2016 (13) is consistent with the core approach to keeping FCPA statistics, that I have long maintained is the proper way to keep FCPA statistics, and rejects the many creative and haphazard way that many FCPA Inc. participants keep FCPA statistics that make FCPA enforcement appear more robust than it actually is. (See here). Moreover, the 13 figure cited by the DOJ includes the 2 declination with disgorgements from 2016 (as will be highlighted in a future post some commentators advance the absurd position that these are not actual FCPA enforcement actions).
Most next stated:
“Coordination with foreign countries will continue, and that number of coordinated resolutions will grow, including with new countries. This is important for several reasons. First and foremost, it is fair to companies. It encourages companies to cooperate across the board, because we understand that, at the end of a case, money paid out is derived from one pie. A resolving company should not have piled upon it duplicative fines via separate resolutions that do not credit one another. Although the “piling on” problem is not entirely solved by doing this (other countries may certainly try to reach additional resolutions), our efforts do mitigate this problem, and we are trying to do better in this regard.”
Coordination, of course, signals strong relationships between the United States and global partners. Such coordination should also clearly signal to companies doing business on the international stage the necessity for consistent rules of the road when it comes to compliance. Anti-corruption policies should apply with equal force across a business, no matter what its size and regardless of the perceived local practices of high risk markets. Without such consistency there cannot be real confidence in compliance efforts. Employees left to their own devices, especially in high risk markets, leave themselves and their companies exposed and vulnerable.”
Moser also stated: “more than ever before, we are prosecuting and convicting employees and officials involved in transnational corruption, including in high risk markets.”
Portions of this statement are false.
As highlighted in this previous post, DOJ individual FCPA prosecutions in 2016 and 2015 were fewer than in 2014 and DOJ individual prosecutions in 2014 were fewer than in 2013. Moreover, as mentioned above, since September 2015 there have been nearly 20 corporate FCPA enforcement actions brought by the DOJ and not one has resulted (at least yet) in any DOJ charges against company employees.
Indeed, approximately 80% of DOJ corporate FCPA enforcement actions since 2006 have not resulted in any DOJ charges against company employees. Compare this to the fact that from 1977 to 2004 approximately 90% of DOJ corporate FCPA enforcement actions resulted in related charges against company employees. In other words, measured against corporate enforcement action, related individual prosecutions are at historic lows.
But perhaps this will be changing as Moser stated:
“and we will be announcing numerous additional pleas in the coming months. Although sometimes we charge or plead out individuals under seal in furtherance of our ongoing investigations, I can share that the number of just those pleas which will be publicly-announced this year will still far exceed totals in past years.”
Related to individual prosecutions, Moser also stated:
“we are also convicting individuals at trial … These convictions makes clear we are taking cases to trial no matter how challenging – and make no mistake, FCPA cases are rife with difficulties. We are nonetheless securing guilty verdicts.”
Moser then cherry-picked a few recent examples and yes, as highlighted recently on FCPA Professor, for the first time in six years the DOJ did prevail in a contested FCPA action when put to its ultimate burden of proof. Yet, as highlighted in the post, the previous five DOJ trials were debacles.
Moser next stated:
“How else are we trying to do better? Over the course of the last 15 months, the Fraud Section’s FCPA Unit also has done better at making transparent those considerations that color corporate resolutions. Through the pilot program announced in April 2016, we offered clearer guidelines not only internally to our own prosecutors, but to companies and their employees, regarding what is required to receive full credit under its auspices. What it means to timely voluntarily self-disclose misconduct, to fully cooperate and to remediate. We continue to evaluate the virtue of the program but certain of the limited data available is striking: Of the companies that resolved during the first year of the pilot program, those that voluntarily self-disclosed obtained either a declination with disgorgement of illicit profits or a non-prosecution agreement with no less than a 50% reduction off of the low end of the Guidelines range. To say it another way: Of these resolving companies, none entered a guilty plea, none entered into a DPA and none had a monitor appointed. By contrast, of those companies that did not voluntarily self-disclose, roughly 80% resolved through a guilty plea or DPA, none received more than 25% off of the low end of the Guidelines, and about 72% had a monitor appointed. This is powerful information to consider when it comes time for a company to weigh carrots and sticks.”
Sure, since the April 2016 pilot program was announced the DOJ has announced 7 matters as being resolved “consistent” with the pilot program; however all of these matters were believed to be in the DOJ’s FCPA “pipeline” prior to the pilot program being announced. In other words, there has not yet been (it is believed) a “pure” pilot program resolution (i.e. conduct disclosed post April 2016 and resolved).
Moreover, Moser’s statements about NPA’s and reductions off the low end of the Guidelines range ignores the fact that these things were occurring prior to the pilot program being announced (see here for a prior post).
As highlighted in this prior post, it is difficult (if not impossible) to empirically assess whether one of the Pilot Program’s goals (to increase corporate voluntarily disclosures) is actually working. Simply put, many business organizations were voluntarily disclosing prior to the April 2016 Pilot Program and the precise question after the Pilot Program is whether the program is motivating voluntary disclosures to a greater extent than prior to the program. Yet, as highlighted in the same post, it is possible to assess whether another of the DOJ’s stated “main goals” of its Pilot Program is working and at present the undeniable answer is that, as measured against this “main goal,” the Pilot Program is currently failing.
Moser also stated as follows:
“On the international side, in recent years healthcare companies have come before the Fraud Section in connection with FCPA violations. Investigations have revealed that healthcare companies operating overseas frequently interact with state-employed doctors and foreign public officials who work for government-owned hospitals and medical institutions. In addition, publicly funded and administered foreign health care programs are invariably run by government officials, which means that, to do business in these countries, a company must deal with government officials. As a result, we have seen a number of significant FCPA cases involving the payment of bribes and kickbacks by healthcare companies to foreign officials to obtain a wide variety of improper business advantages.”
What is interesting about the above statement is that the DOJ has used the enforcement theory that physicians and others associated with foreign health care systems are “foreign officials” in approximately 25 corporate enforcement actions, but the DOJ has never prosecuted an individual based on this theory.
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