Many assume that my article “The Facade of FCPA Enforcement” is all about over-enforcement of the FCPA based on untested and dubious legal theories not subjected to judicial scrutiny. To be sure, these topics are discussed in great detail in the article.
However, also discussed in great detail in the article is the opposite end of the spectrum. That being, despite seemingly clear-cut instances of corporate bribery per the government’s own allegations, a corporate enforcement action is resolved without FCPA anti-bribery charges. The 2010 article discussed the most pertinent cases at the time – Siemens and BAE.
In this April 2012 post, I first commented on the egregious nature of the BizJet corporate enforcement action and noted that when conduct giving rise to corporate liability involves senior executive misconduct and apparent knowing acquiescence by the Board, the entity – simply put – should not be offered an alternative resolution vehicle. Yet, BizJet was allowed to resolve the enforcement action via a deferred prosecution agreement, meaning that should it abide by the terms and conditions of the agreement, BizJet will never be required to plead guilty to anything.
The following was known in 2012 about the BizJet enforcement action.
- The conduct giving rise to the enforcement action was engaged in by various executives at the highest levels of the company.
- The Board of Directors was specifically informed by certain of the executives that the company “would pay referral fees in order to gain market share.”
- The scope of the improper conduct engaged in by the various executives was not just limited to Mexico and Panama as suggested by the 2012 corporate enforcement action. Rather, according to the DOJ, improper conduct also related to BizJet business in Brazil and Chile.
- According to the DOJ, the scope of the improper conduct was not just limited to foreign business conduct, but domestic business conduct as well. The recently unsealed information states that customers or potential customers BizJet bribed “included customers both in the United States and abroad.
- Regarding the above referenced Board of Directors meeting, the DOJ asserts that in response to a question by a director about how BizJet would survive the next six months without ‘burning cash,’ a senior executive stated that BizJet expected to gain market share by paying ‘referral fees’ just as the competition was doing.
In short, and per the DOJ allegations, BizJet was an egregious instance of corporate bribery, broad in scope. conceived of and executed by senior executives, with board knowledge and acquiescence.
The question ought to be asked – where was the BizJet board and what, if anything, did it do in November 2005 upon learning that senior executives were engaged in bribery?
Per the DOJ’s allegations, this was not a situation in which the Board of Directors needed to engage in any detailed inspection of the company’s books and records or have sophisticated knowledge to discover the bribery scheme. Rather, the Board was specifically told by senior executives that the company was engaged in bribery.
In a notable case in the corporate director context (Francis v. United Jersey Bank) the court stated that “the sentinel asleep at his post contributes nothing to the enterprise he is charged to protect […] Shareholders have a right to expect that directors will exercise reasonable supervision and control over the policies and practices of a corporation. The institutional integrity of a corporation depends upon the proper discharge by directors of those duties.”
The egregious BizJet enforcement action also raises the question of whether corporate criminal liability means anything?
Many, including myself, believe that corporate criminal liability principles need revisiting.
For purposes of this post however, the important perspective is that of the DOJ which has long maintained that corporate criminal liability is a fundamentally sound legal doctrine not in need of revision.
If that is the DOJ position, then it must be asked – does corporate criminal liability actually mean anything if a company like BizJet – given the DOJ’s allegations – is not actually criminally prosecuted or required to plead guilty?
In short, the resolution vehicles the DOJ has created and championed has again lead to a “facade of enforcement” – albeit an instance on the opposite end of the spectrum that I normally highlight.