A guest post from T. Markus Funk and the Hon. Virginia M. Kendall.
The U.S. Department of Justice’s updated FCPA guidelines, released June 9, mark a high-profile strategic shift in enforcement priorities. The bulk of the law firm commentary has focused on internal compliance and investigation, suggesting that the FCPA enforcement under the Trump Administration may not be as dead as initially thought. And that is entirely reasonable, as far as it goes.
However, as detailed in a recent Law360 analysis, a less-discussed, yet arguably equally significant, implication of the new guidelines is the potential spike in U.S. companies reporting corrupt practices by foreign competitors.
As those of us who have been on both sides of the whistleblowing divide know, a well-crafted, evidence-based summary of potential competitor misconduct can have a significant impact. Most directly, it can birth DOJ and foreign enforcer investigations. If this assessment is accurate, US-headquartered companies, aware of the powerful incentives the DOJ has just offered up, may now find themselves in an unusual situation of affirmatively asserting, rather than simply receiving and then defending against, whistleblower claims.
A Shift Toward External Investigations (and Protecting US Business Interests)
Traditionally, FCPA enforcement centered on internal probes into employee or vendor misconduct. Outside counsel is hired to investigate the allegations of misconduct, reports their factual findings to the company, and then considers a range of next steps, including proposing remediation steps, governmental self-disclosure, closing the file, etc.
The new guidance materially flips that narrative. It affirmatively encourages U.S. companies to investigate and report bribery by overseas rivals, most particularly when such conduct disadvantages US-based businesses.
Under the subtitle of “Safeguarding Fair Opportunities for U.S. Companies,” the new DOJ guidelines observe that bribery negatively affecting U.S. companies undermines the rule of law, allows competitors “to obtain lucrative contracts and illicit profits[,] … skew[s] markets and disadvantage[s] law-abiding U.S. companies and others for many years.” The guidelines go on to remind US businesses and those advising them that the “most blatant bribery schemes have historically been committed by foreign companies.” It is difficult to read this as anything other than the DOJ’s warm invitation to inform it when there is evidence that a foreign competitor is attempting to win business through bribery and other forms of corruption.
Towards a New Paradigm?
The DOJ’s guidelines are nothing if not straightforward. Prosecutors are instructed to focus on individuals directly involved in bribery, rather than broad corporate liability, and they are explicitly told to prioritize cases where they receive evidence of foreign corruption with the requisite U.S. jurisdictional nexus. To the extent the cadre of DOJ FCPA prosecutors follows these directives, we should expect to see targeted enforcement with the aim of shielding U.S. companies from unfair competition abroad.
What’s In It for Potential Whistleblowing Companies?
A fair question is whether US companies will be willing to expend resources so that outside counsel can build a persuasive whistleblower case.
In the past, companies have had to retain counsel to defend against allegations, not infrequently wholly unfounded, of corrupt conduct. The goal of those investigations was to explain to prosecutors “what really happened,” to put any misconduct into context, and ultimately, to avoid more significant legal trouble.
Now, retaining experienced outside counsel to investigate possible unfair competition proactively has what companies will undoubtedly consider a far more appealing upside. If a company can persuade the DOJ prosecutors in the Bond Building in DC that they have gathered actionable evidence of foul play, this could stop the competitor’s market-distorting conduct in its tracks. However, more than that, if pursued aggressively as the guidelines suggest, it could also result in the competitor incurring a substantial financial and public relations penalty for their misbehavior.
So while “defensive” investigations are geared at avoiding issues (and filling any discovered compliance gaps), investigations into competitor misconduct can be viewed as offensive investigations with a distinctly more appealing ROI. Such an offensive strategy, among other things, holds the promise of delivering significantly more appealing short and long-term financial positives for the US-headquartered reporting company.
US companies may initially feel a bit uncomfortable about being thrust into the role of whistleblower, which in some business circles has been considered a dirty word. That said, and upon reflection, these same companies may recognize the clear benefits of re-leveling the playing field through affirmative reporting of misconduct so that any ill-gotten competitive edges are either stopped or, better yet, reversed. Blowing the whistle on competitor corruption promises to fundamentally reorient the competitive playing field in a manner that few other legal actions can achieve.
Markus, now in private practice, is a former federal prosecutor (Chicago) and conflict-deployed State Department lawyer (Kosovo). He is the author of From Baksheesh to Bribery: Understanding the Global Fight Against Corruption and Graft (Oxford University Press; Co-Authored with Northern District of Illinois US Attorney Andrew S. Boutros).
Judge Kendall is the Chief Judge for the Northern District of Illinois. She taught law at institutions including Yale Law School and currently teaches a class on human trafficking, supply chain law, and public corruption at the University of Chicago School of Law and has written extensively on the US and transnational impact of bribery and corruption.
