Non-prosecution agreements and deferred prosecution agreements have distorted many areas of law, perhaps none more than the Foreign Corrupt Practices Act.
As highlighted in the article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement,” since introduced to the FCPA context in 2004, alternative resolution vehicles have become the dominant way the DOJ resolves corporate FCPA scrutiny and serve as an obvious reason for the general increase in FCPA enforcement over the past decade. To the many cheerleaders of increased FCPA enforcement, NPAs and DPAs are thus worthy of applause.
Yet in a legal system based on the rule of law, quality of enforcement is more important than quantity of enforcement. Through empirical data and various case studies, the above article measures the impact NPAs and DPAs have on the quality of FCPA enforcement and concludes that NPAs and DPAs — while resulting in higher quantity of FCPA enforcement — result in lower quality of FCPA enforcement.
Last week President Elect Donald Trump nominated Senator Jeff Sessions (R-AL) to be Attorney General and this post reboots comments made by Sessions about NPAs and DPAs that first appeared on FCPA Professor in June 2010.
As a long-time advocate of FCPA reform, including through amending the FCPA to include a compliance defense coupled with abolishing NPAs and DPAs (see here and here among other prior posts), I am hopeful that Sessions, if confirmed, remains troubled by the DOJ’s frequent use of NPAs and DPAs and returns the DOJ to enforcement policies and procedures that better align with the rule of law compared to the DOJ’s current a la carte practices (see here for the recent post detailing the five options the DOJ has created to resolve alleged instances of corporate FCPA scrutiny).
As highlighted in the above-referenced article, a commonly accepted rule of law principle is limited government powers. The World Justice Project defines this factor as “systems of checks and balances . . . to limit the reach of excessive government power,” and the distribution of authority “in a manner that ensures that no single organ of government has the practical ability to exercise unchecked power.”
NPAs, DPAs (as well as the most recent DOJ invention – a declination with disgorgement), violate this accepted rule of law principle and what prior DOJ officials have created, Trump administration DOJ officials can dismantle and return the DOJ to “traditional prosecutions” as Sessions previously remarked.
Further relevant to the prior comments of Sessions highlighted below, is that the so-called “Arthur Andersen effect” (i.e. that criminal charges alone, and certainly criminal convictions, could be the death sentence of a business organization) officially died when FedEx recently prevailed over the DOJ in a criminal enforcement action (see here for the prior post).
The remainder of this post highlights the exchange between Sessions and James Cole during Cole’s Senate Judiciary Committee hearings for the Deputy Attorney General Position.
SEN. SESSIONS: […] I noticed just as an aside you did a speech entitled role of an in-house lawyer in a corporation in October of ’06, and you stated this. “The experience with Arthur Andersen taught the government something that consequences were too drastic and hurt too many innocent employees. The government now tries to work settlements with companies that find themselves in that kind of predicament and the company does not get indicted and therefore can continue to exist.” Well, we know that Arthur Andersen failed immediately upon being charged as I recall that. So I’m not suggesting this is a totally improper statement. But it seems to go beyond strict enforcement of the law and try to preserve corporations who perhaps should be charged and suffer whatever consequences might result from their criminal acts. Do you have any second thoughts about that quote that I just read?
MR. COLE: Senator Sessions, I don’t. The point of that was to say that there are reasons why you charge corporations and reasons why you don’t charge corporations. And certainly the Justice Department starting back when the Attorney General Eric Holder was deputy attorney general has issued a series of memoranda that guide prosecutors in determining when a corporation should be charged. The issue is so sensitive because when you charge a corporation and you cause its demise through that charge, thousands and thousands of employees who had no role in the misconduct are hurt. Thousands and thousands of shareholders who had no role in the misconduct and whose savings were invested in that corporation are hurt, and it’s those people who had no role who are hurt are the ones you need to think about, as well, when you decide whether to charge a corporation.
SEN. SESSIONS: Well, I think that’s, I guess, a reality, but it’s got to be carefully thought through, else you’re just picking and choosing winners. You’re saying BP is too big to fail. They’ve got employees, too. This is a dangerous philosophy. Normally, I was taught if they violated a law, you charge them. If they didn’t violate the law, you don’t charge them.
MR. COLE: Well — and one of the issues, Senator, that is very much, as I understand it, in the forefront of the prosecution decisions in the Department is to prosecute the individual executives in these companies who are responsible for these criminal acts because that’s how you’re going to get the most deterrence.
SEN. SESSIONS: But are you now saying that you’re backing off corporate indictments?
MR. COLE: No, I am not at all. I’m just saying there are many ways to be quite effective, and I think you have to balance the interests of how much damage you’re doing to people who had nothing to do with the wrongdoing versus how much deterrence you’re going to be placing on future conduct like this. And I think you have to make sure that you are effective in the prosecution, both of corporations and of the individual officers.
SEN. SESSIONS: Yeah, so how much empathy you have for the employees. Well, anyway, it’s a tough decision. I guess we could go ’round and ’round, but I think you need to be careful with that philosophy. It has some danger to it. I think you fully recognize, as an experienced prosecutor that you are, the — I also salute you for wanting to reinvigorate traditional prosecutions in the Department. I hope that you will look at the numbers, you will look at the prosecutions and make sure that they are working effectively and that they’re high enough based on the number of prosecutors and investigators in the country. I’m not sure that we are. We’ve added a lot of prosecutors and assistant United States attorneys around the country. They’re paid big salaries. They need to be producing day after day. […]”