- FCPA Professor - http://fcpaprofessor.com -

The BAE “Soapbox”

Below is a compilation of what certain others in the FCPA community are saying about the BAE enforcement action.

Steven Tyrrell (here [1]) notes (here [2]) that the BAE “case again demonstrates the DOJ’s willingness to push its jurisdictional reach in cases involving foreign-based, non-issuers that make suspect payments outside the United States.” Tyrrell notes that “in spite of [a] seemingly slight jurisdictional nexus, DOJ aggressively pursued this FCPA matter and obtained an agreement from BAE to plead guilty to a felony and pay a $400 million penalty.” Even though the BAE criminal information contained bribery allegations (see here [3]), the information did not change any FCPA offenses. Yet, Tyrrell and many others, continue to describe the BAE matter as an “FCPA matter.” Tyrrell’s aggressive comments are curious (and perhaps telling) in that he was the DOJ Chief of the Fraud Section responsible for prosecuting the FCPA from 2006 until his recent departure into private practice. (See here [4]).

Miller Chevalier recently released (here [5]) a thorough alert on the BAE matter. Among other things, the alert points out that the BAE matter “raises a host of significant legal and policy questions that are only partly explained in the public documents” associated with the matter. The alert points the “differences in the factual allegations in the two settlements” [SFO/DOJ] and notes that “the oblique nature of the violations charged, the negotiated terms of the settlements, and the allegations that are not made in the public settlement documents provide a glimpse of the political undercurrents, legal maneuvering, and policy objectives that underlie this settlement and raise potentially far-reaching precedential issues.”

Brian Whisler (here [6]) had this to say:

“In a nutshell, the BAE resolution: (1) reconciles with DOJ’s publicly-stated commitment to deter corruption and bribery through the enforcement / prosecution of high impact, high profile cases — there are apparently other similar large scale matters in the DOJ pipeline (e.g., DaimlerChrysler); (2) reconciles with the UK’s effort to become a bigger player on the world enforcement scene, with the enhancement of penalties and other legislative efforts to give more teeth to the UK’s anti-corruption regime (keeping up with Germans in the aftermath of Siemens); and (3) suggests that defense contractor and procurement fraud in general will remain in the sights of the enforcement community for a considerable time, so long as we have one or more theaters of active military engagement.”

An FCPA lawyer who wished to remain anonymous had this to say:

“First, the SFO and the British justice system in general suffer in this settlement. From the British side, the deal has the feel of something that was quickly put together to put a lid on what else might develop. SFO investigators reportedly were still interviewing people on the morning the BAE resolution was announced. Larger than that issue, BAE clearly did wrong in Tanzania, but its actions in other markets were far equally disturbing and there will be no formal accounting for those acts. The unwritten message seems to be that industrialized nations continue to recognize that certain companies are “too big to fail,” and will take steps to protect even a company that does wrong, so long as the company is critical to some important national issue like defense or homeland security. Ultimately, these types of actions erode the moral authority of the industrialized world to demand the developing world to clean up its house. U.S. authorities have made a strong effort to have others step up and take the lead on anti-corruption issues, so that the world does not see anti-corruption as simply a U.S. issue. To some degree, the settlement in the U.S. diminishes that effort, as well. The developing world will see this deal as having been pushed by the U.S. They also will see the deal as not doing much to help the countries that BAE harmed through its corrupt business efforts. The small charity payment to Tanzania seems almost an afterthought inside of a $400 million deal, which is a drop in the bucket compared to BAE’s profits. The world likely will view the entire fine as a fairly minor slap for a company that has made a lot of money in the world market place because of its improper conduct.”

Finally, Ben Heineman, Jr. (here [7]) noted that the BAE story is “depressingly familiar.” He notes that the BAE matter (and the Siemens matter) represent problems “in the developed world (!!), not in the developing world” and states that if “these iconic developed world companies had such widespread issues, it is reasonable to think that they are hardly alone.”

Willing to share you thoughts on the BAE matter? The comment box is open.