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What Percentange of DOJ FCPA Losses Is Acceptable?

To be sure, the DOJ – when put to its burden of proof in FCPA enforcement actions – has had success.  Although an appeal is pending, the jury convictions of Joel Esquenazi and Carlos Rodriguez in 2011 come to mind (see here for the prior post).

Yet recent events (July 2011 – Judge Richard Leon declared a mistrial in the first Africa Sting case as to four defendants (after earlier tossing several substantive counts against certain defendants; October 2011, a federal court in Seattle dismisses, at the urging of the DOJ, an FCPA enforcement action against Si Chan Wooh “in the interest of justice and the efficient use of government resources” (those are the DOJ’s words) after he previously pleaded guilty; November 2011, Judge Howard Matz vacated the FCPA convictions of Lindsey Manufacturing and its executives Keith Lindsey and Steve Lee and dismissed the indictment after finding numerous instance of prosecutorial misconduct; December 2011, in the second Africa Sting case, Judge Richard Leon, at the close of the DOJ’s case, dismissed  a conspiracy charge against all defendants – because this was the only charge Stephen Giordanella faced, he was exonerated; January 2012, Judge Lynn Hughes, at the close of DOJ’s case, dismissed FCPA charges against John Joseph O’Shea;  January 30, 2012 in the Africa Sting case, Patrick Caldwll and John Godsey were found not guilty by the jury and on January 31, 2012  Judge Leon declared mistrial as to the remaining three defendants) raise the following question:  what percentage of DOJ FCPA losses is acceptable?

After all, criminal charges damage lives, ruin careers and ostracize individuals from their  community. While it is unrealistic (and probably not desirable from a policy perspective) to expect the DOJ to win 100% of its FCPA cases when put to its burden of proof, given the referenced dynamics, I think it is realistic (and desirable from a policy perspective) to expect the DOJ to win a very high percentage of its FCPA cases when put to its burden of proof.

I posed the question – what percentage of DOJ FCPA losses is acceptable – to two individuals whose opinion and analysis on white-collar crime issues I highly respect.  Set forth below are their answers.

Scott Fredericksen (here) is the managing partner of the Washington, D.C. office of Foley & Lardner LLP.  He is a member of the firm’s Government Enforcement, Compliance & White Collar Defense and Securities, Enforcement & Litigation Practices.  Previously, Fredericksen had several stints at the DOJ including special counsel to the U.S. Attorney and Associate Independent Counsel in the Office of Independent Counsel.  Below is Fredericksen’s response to the question:  what percentage of DOJ FCPA losses is acceptable?

“By any measure the recent record of the DOJ in trying FCPA cases, well below the approximate 90% plus overall conviction rate the DOJ usually attains, is not acceptable. The recent  performance  in FCPA trials of individuals and small companies seems to represent a wrong turn by the DOJ, and it may stem from some fundamental misconceptions by the DOJ about the best approach to charging individuals with FCPA  violations.

First, the undeniable success the DOJ has had with  companies self-reporting and settling their FCPA cases with the DOJ is the result of an entirely different analysis by company counsel compared to counsel for individuals who face the loss of liberty and the prospect of real prison time.  No public company in approximately twenty years has challenged the DOJ at a trial for a FCPA violation and that probably will not change.  Companies usually face a more difficult task in defending themselves at trial that is not the case with individuals.  Even private companies face the burden that it only takes one of their employees who violate the FCPA to convict the company.

But when the DOJ insists on significant prison sentences in its FCPA charging decisions for individual defendants then experienced white collar lawyers will try those cases if there is a realistic opportunity for acquittal-exactly what has happened recently.  The reason is that FCPA cases are vulnerable for a few reasons, including ambiguous definitions that invite challenge, and the fact that often times the FCPA is not perceived by juries or the average person as an “intuitive” crime.  It is regulatory in nature and, rightly or wrongly, juries and the ordinary person do not necessarily perceive it as as a crime “worthy” of conviction and prison unless the evidence of a violation is strong and clear.

And the enforcement strategy must be fair. Using aggressive enforcement tactics such as the “Africa Sting” carries significant risk for the DOJ and for good reason.  It often runs counter to our sense of justice and juries are the first to see that. Yet, the DOJ has had considerable success prosecuting other sting cases in international prosecutions where there was strong evidence of an intent by the defendant to violate the criminal statute at issue. The record of 0-10  in the Africa Sting case here is more likely the result of a poorly designed “sting.”

The recent acquittals and hung verdicts was also remarkable for the earlier Rule 29 dismissal of the conspiracy count against the defendants by Judge Leon.  That is an unusual occurrence and speaks volumes about the lack of good evidence in the case.  A conspiracy count is usually the one count that survives and represents the framework for the government’s case. The lesson to be learned is that  it takes experienced prosecutors to make the right decisions in charging FCPA cases, and the DOJ must always stand firm in its review of sting cases to insure that there is no uncertainty or unfairness in its design.

Finally, Judge Matz’ decision to vacate the FCPA convictions in the Lindsey Manufacturing case for prosecutorial misconduct is an unfortunate reflection on the DOJ standards and training more than it is a comment on the DOJ enforcement of the FCPA. Prosecutorial misconduct has to be dealt with at the DOJ level with real sanctions for prosecutors who intentionally violate fundamental rules, including losing the privilege of representing the Department of Justice.” [For a prior post on this issue, see here].

Peter Henning (here) is a Professor of Law at Wayne State University School of Law.  Previously he was an enforcement attorney in the DOJ’s Fraud Section (as well as at the SEC) and, among other things, Professor Henning writes the always informative White Collar Crime Watch (here) at the New York Times.  Below is Professor Henning’s response to the question: what percentage of DOJ FCPA losses is acceptable?

“The recent acquittals in the Gabon FCPA sting case, coupled with a hung jury for other defendants, and dismissal of charges for prosecutorial misconduct in another foreign bribery prosecution in Southern California, raise an interesting question about the Justice Department’s focus on individuals as defendants.  While it is usually easy to get a company to agree to a guilty plea, or to enter a deferred prosecution agreement, individuals are more likely to take a case to trial.  So how many losses are too many?

The recent post (here) on the FCPA Professor Blog by the jury foreman in the Gabon sting case highlights how difficult it is to pursue these cases with a very complex law that requires proof of different intents – like knowingly and corruptly – based on circumstantial evidence against people who often have an unblemished record.  Multi-defendant cases are not uncommon in the drug area, but those are not nearly as difficult because the underlying conduct is clearly illegal, while the FCPA involves business transactions that are often quite ordinary.

I do not think there is a number that can be summoned to say when there are too many acquittals, especially because the result cannot be known in advance.  Some defendants have entered guilty pleas in cases that have resulted in acquittals of others, and the evidence in the Gabon sting case shows that there was a basis to pursue the charges.  But perhaps the Justice Department will now recognize that FCPA cases present distinct challenges, especially when multiple defendants are involved who will often have different levels of culpability.  It is not like the drug gang in which everyone is involved in illegal conduct, so ignoring the shades of gray in an FCPA case has been shown to be quite problematic.  Treating everyone as if they are the same does not work because, as the foreman’s report makes clear, juries are careful in assessing the evidence, and will not take a “birds of a feather flock together” approach, as can happen in other types of prosecutions.”

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Speaking of the guest post (here) earlier this week from the Africa Sting jury foreman, readers may also be interested in published comments to the post.  Also, as has been reported elsewhere (see here for instance), since the post ran, the DOJ, during a status conference with Judge Leon, requested a two week continuance for the next trial so that it can evaluate the remaining cases in light of recent events.

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