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A Peek Into The Opaque World Of FCPA Monitorships

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Previous posts herehere, and here highlighted the DOJ’s efforts (along with Siemens and its monitor) to block public release of the Monitor reports provided to the DOJ in connection with resolution of the still record-setting 2008 Siemens FCPA enforcement action.

From the beginning, I’ve had my own suspicion as to why the DOJ (and other parties) are actively seeking to block release of the Monitor reports and it has nothing to do with the issues discussed in the DOJ’s (and other parties) briefs.

A prior opinion by Judge Rudolph Contreras (D.D.C.) largely sided with the DOJ (and Siemens) by finding that the DOJ justified the withholding of certain information pursuant to various Freedom of Information Act (FOIA) exemptions. Nevertheless, the court denied summary judgment on other issues including the DOJ’s assertion that a FOIA exemption allowed it to withhold certain information under the deliberative process privilege.

In this recent filing, the DOJ renewed its summary judgment motion by submitting two declarations by former DOJ FCPA Unit Chief Mark Mendelsohn and Charles Duross.

As highlighted below, many of the DOJ’s arguments are spurious.

Regardless, the filings provide a peek into the opaque world of FCPA monitors as well as the interesting webs that some individuals weave.

In its motion, the DOJ argues states:

“having the Siemens monitor documents in the “public domain will decrease the amount and accuracy of information that DOJ received from future monitorships, which will ultimately inhibit DOJ’s ability to reduce corporate crime.”

This is a curious statement given that monitors are only imposed on certain companies after the company has already violated the FCPA (often in egregious ways).

The DOJ further states:

“Disclosure of the documents here would undermine the ability of DOJ and SEC to effectively enforce the FCPA, deter corporate misconduct, and help rehabilitate wrongdoers.”

[…]

“As a result of the monitorship, among other things, Siemens developed and instituted new policies, procedures, trainings, and systems to foster and ensure effective compliance. […] That likely would not have happened – or at the very least would have happened to a significantly lesser degree – if Siemens and the Monitor would have been concerned that information that the Monitor gave to DOJ would have been publicly disclosed.”

The inference here is that monitors are needed to “effectively enforce the FCPA, deter corporate misconduct, and help rehabilitate wrongdoers.” Yet didn’t the DOJ and SEC just “effectively enforce” the FCPA in an egregious enforcement action against Telia in which no monitor was required as a condition of settlement? Are we to assume that the Telia enforcement action will not “deter corporate misconduct,” and that Telia has not been “rehabilitated” because no monitor was imposed?

And wait a minute, in the Telia enforcement action the DOJ stated:

“the Company engaged in extensive remedial measures, including … creating a new and robust compliance function throughout the company; implementing a comprehensive anti-corruption program; and overhauling the Company’s corporate governance structure”

Yet, according to the DOJ’s brief, this stuff doesn’t happen (or at the very least happens to a significantly lesser degree) unless a monitor is appointed who can have private, non-disclosable communications with the DOJ.

The declarations filed by former DOJ FCPA Unit Chiefs Mark Mendelsohn (here) and Charles Duross (here) in support of the DOJ’s positions make for an interesting read in that they provide a peek (but just a peek) into the opaque world of FCPA monitorships.

For instance, in the Duross declaration we learn that while the Siemens’ monitorship seemed to go smoothly, Duross states:

“By contrast, there were other monitorships that required intervention. For example, we had situations where we had to direct the monitor to do more work, or we had to criticize a monitor for going beyond his mandate, or we had to mediate disputes between a company and a monitor. We did not need to do that in the Siemens case because the company and the Monitor were able to work together effectively. But to be clear, however, the lack of intervention was not the result a lack of oversight or critical assessment. Rather, it was the result of hard work by the company and the Monitor to work together effectively.”

The Duross declaration is also interesting from the following standpoint.

In the declaration, Duross states “that he has been serving as the compliance monitor of large Brazilian engineering and construction company pursuant to its resolution of an FCPA case brought by the DOJ” a not-so-subtle reference to the Odebrecht / Braskem enforcement action.

Thus, Duross provided an “assist” (in the form of a declaration) to the DOJ in its current litigation, serves as a DOJ appointed monitor and, according to this bio, his current practice has an emphasis on white-collar criminal matters including “defense of clients before government enforcement agencies.”

That is quite the interesting web.

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