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And The Apple Goes To …

I am pleased to introduce a new monthly feature to FCPA Professor – the FCPA Professor Apple Award.

The Apple Award recognizes informed, candid, and fresh thought-leadership on Foreign Corrupt Practices Act or related topics.

There is no prize, medal or plaque awarded to the FCPA Professor Apple Award recipient.

Just recognition by a leading FCPA website visited by a diverse group of readers around the world.

There is no nomination procedure for the Apple Award.  If you are writing something informed, candid and fresh about the FCPA or related topics, chances are high that I will find your work during my daily searches for FCPA content.

The inaugural FCPA Professor Apple Award goes to ….

Philip Urofsky of Shearman & Sterling.  In this article recently published in Bloomberg BNA’s Securities Regulation and Law Report, Urofsky (the former Assistant Chief of the DOJ Fraud Section) asked, in connection with the recent Ralph Lauren enforcement action, “are there any limits to parent corporation liability?”

In the article, Urofsky stated, in pertinent part, as follows.

“The facts of the case … point to the steady entrenchment of a more ominous prosecution theory:  an approach that appears to approximate strict criminal and civil liability of parent corporations for their subsidiaries’ corrupt acts.  Although this disregard of corporate structures has been hinted at in previous SEC matters – and the theoretical underpinnings discussed in last year’s DOJ/SEC Resource Guide – the RLC case puts both agencies firmly in the camp of this aggressive and unprecedented expansion of corporate liability.”

“This approach, however, fails to honor the corporate form and the black-letter rule that to ‘pierce the corporate veil’ the government and other litigants must show that the parent operated the subsidiary as an alter ego, and itself paid no attention to the corporate form.  Moreover, it is contrary to the language of the [FCPA’s] original history.”

In conclusion, Urofsky stated as follows.

“It is disquieting [that in the RLC case] the DOJ appears to have jumped on the charge-the-parent bandwagon, bringing a bribery case against a parent without alleging any involvement by the parent in those violations.  One can only speculate that it did so because it had no jurisdiction over the foreign subsidiary itself, given that it also did not allege any act by the subsidiary in U.S. territory.  However, as always, the maxim that bad facts make bad law applies, and evidentiary weaknesses cannot excuse the distortion of the statute’s previously clear and reasonable allocation of responsibility.”

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