Earlier this week, at the same time the SEC announced non-prosecution agreements against Nortek and Akamai Technlogies (see here and here for prior posts), the DOJ released two “declination” letters involving the companies. [Note: the FCPA Blog’s assertion that the letters were “released by the companies and not by the DOJ” is false. The DOJ’s press office released the letters in an e-mail titled “Department Declination Letters for Akamai and Nortek FCPA Inquiries” on Tuesday, June 7th at 12:24 p.m.]
Before the expected flood of FCPA Inc. client alerts and commentary regurgitating the assertions in the DOJ letters and otherwise extoling the virtues of the DOJ’s FCPA Pilot Program, this post intervenes by posing the salient question – based on the information in the the public domain just what viable charges did the DOJ decline?
For starters, let’s review a couple of things.
The SEC enforces the FCPA civilly and the DOJ’s Criminal Division enforces the FCPA criminally.
The FCPA’s contain two sets of provisions: the anti-bribery provisions and the books and records and internal controls provisions.
It is a matter of black-letter law that legal liability (whether FCPA anti-bribery violations or otherwise) does not hop, skip and jump around a business organization. In other words, just because an employee of a subsidiary of an issuer engages in improper conduct, does not mean that the issuer is legally liable for that conduct absent veil piercing / alter ego circumstances. Even the FCPA Guidance recognizes this legal fact.
The books and records and internal controls provisions can result in criminal charges only to the extent the issuer engaged in knowing and willful conduct. Such criminal charges are typically reserved for factually egregious conduct (i.e. Siemens and VimpelCom).
The SEC’s Statement of Facts in both the Nortek NPA and Akamai NPA are, from a substantive standpoint, only approximately one page long. These statement of facts are the only information in the public domain concerning the conduct that the DOJ “declined” to prosecute.
Neither NPA contains any statement of fact, suggestion, or inference that anyone at Nortek Inc. or Akamai (the issuers) participated in, authorized, or had knowledge of the improper conduct of the subsidiary employees. Indeed, as is often the case, the SEC specifically found that subsidiary employees concealed the improper conduct from the issuers.
Moreover, neither NPA contains any statement of fact, suggestion, or inference to support a veil piecing / alter ego finding (and here it should be noted that the SEC has asserted such theories in several recent FCPA enforcement).
Based on the above SEC statement of facts, neither NPA finds that Nortek or Akamai violated the FCPA’s anti-bribery provisions.
Switching gears to the DOJ’s “declination” letters, both letters reference “possible violations of the FCPA”
- By Nortek “despite the bribery by employees of the Company’s subsidiary in China”
- By Akamai “despite the bribery by an employee of the Company’s subsidiary in China and one of that subsidiary’s channel partners”
In other words, the DOJ’s “declination” letters are consistent with the SEC’s brief statement of facts: there is no articulated evidence that anyone at Nortek Inc. or Akamai (the issuers) participated in, authorized, or had knowledge of the the improper conduct.
In short, the question needs to be asked: what viable anti-bribery charges against Nortek and Akamai did the DOJ actually “decline”?
Turning next to the books and records and internal controls provisions, viable criminal charges exist only to the extent the issuer engaged in knowing and willful conduct. Here again, there is no articulated evidence to support such charges.
In other words, the question needs to be asked: what viable books and records and internal controls charges against Nortek and Akamai did the DOJ actually “decline”?
As discussed in the recent article “Grading the DOJ’s FCPA Pilot Program,” given the lack of transparency surrounding FCPA enforcement, it will be difficult (if not impossible) to assess the FCPA Pilot Program.
The timing of the Nortek and Akamai “declination” letters, as well as the specific reference of the FCPA Pilot Program in the letters, was clearly an attempt by the DOJ to “market” its FCPA Pilot Program.
Just like another instance of the DOJ “marketing” its “declination” decisions, there are many who are likely to drink the Kool-Aid and advance the DOJ’s policy statement to advance their own interest. For instance, Akamai’s counsel issued this release hours after the DOJ letters were released touting the resolutions.
More sophisticated (and less interested) observers however should take a step back and ask the salient question: just what viable criminal charges did the DOJ actually “decline.”
Based on the only information in the public domain about the Nortek and Akamai enforcement actions, the answer appears to be none.