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Avoid Trial At All Costs!

Today’s post is from Paul Calli and Chas Short of Calli Law based in Miami.

Calli and Short, along with their former partner Steve Bronis, successfully represented Stephen Giordanella, the first person acquitted at trial in the Africa Sting case, briefly represented Patrick Joseph in the Haiti Teleco FCPA prosecution, before Joseph elected to cooperate with DOJ to avoid trial and hired different attorneys, and have counselled publicly traded companies doing business abroad, on the FCPA .

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At least, that’s the apparent directive if you’re a DOJ prosecutor tasked with trying to win the ever-elusive conviction against an individual DOJ claims violated the FCPA.

Earlier this month, Deputy Attorney General Sally Yates issued a memorandum titled “Individual Accountability for Corporate Wrongdoing.” [1]

Taking into consideration the Department of Justice’s dismal rate of failure when put to its burden of proof in FCPA enforcement actions (see here [2] for the article titled “What Percentage of DOJ FCPA Losses is Acceptable” and here [3] for the most recent example) Ms. Yates’ memo could easily be titled “Government Strategy for Extracting Cooperation and Guilty Pleas from Individuals Against Whom DOJ Lacks Sufficient Evidence of Criminality When a Neutral Federal Judge Will Likely Reject the Deficient Investigation and Prosecution, by Deputizing Corporate Employers Who Stand to Lose Everything To Entice and Incentivize Those Publicly Traded Companies to Partner With DOJ and Manufacture Prosecutions That Result In Guilty Pleas So DOJ Can Falsely Claim a Successful Conviction Rate Against Individuals By Diluting its Many Trial Losses With Pleas of Convenience.”

The proposed title is a little wordy, but it seems more transparent and accurate.  The title could be shortened to “DOJ’s FCPA Cooperation Playbook.”

Not surprisingly, after suffering so many embarrassing losses in failed prosecutions against individuals over the past 10 years, DOJ is looking for a quick fix.  The Yates Memo discusses the government’s view of how prosecutors, DOJ civil attorneys, and lawyers who represent companies that cooperate with government investigations should be looking at a number of issues regarding individual and corporate culpability.

We focus our discussion here on the Yates Memo’s statements about companies identifying “all individuals involved in or responsible for” misconduct in order to get “any” cooperation credit.

It’s important to recognize that the “guidelines” or “best practices” discussed in the Yates Memo do not supply anything in the way of hard guidance. The principles discussed are much the same as in prior memoranda and the Yates memo is in many ways a self-serving puff piece (those inclined to be more charitable to our often-overreaching government might call it “rhetoric”).

That’s not to say the Yates Memo is meaningless – it reiterates government interest in pursuing individuals as well as corporations for alleged misconduct.  More importantly, the Memo provides a clear indication that the DOJ has learned its lessons from a decade of overwhelmingly failed prosecutions against individuals and has shifted its strategy.   The Memo makes plain DOJ’s focus regarding prosecuting individuals will shift from trying to prove its case in an open trial, before a neutral judge, pursuant to our adversary system of Justice, where the accused can fight back with counsel, before a jury, to the closed door plea meetings held in the bowels of DOJ that lack transparency, precedent or any deterrent effect to individuals who may find themselves implicated in an FCPA investigation in the future.

The Yates Memo memorializes the government’s ardor for pinning a tin badge to corporations and requiring increasing levels of cooperation in order for the government to unilaterally deem that cooperation valuable. The memo is full of statements like:

“To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.” (Emphasis in original).

“[T]o be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide to the Department all facts relating to that misconduct.”

“If a company seeking cooperation credit declines to learn of such facts or to provide the Department with complete factual information about individual wrongdoers, its cooperation will not be considered a mitigating factor . . . .”

Once a company meets the threshold requirement of providing all relevant facts with respect to individuals, it will be eligible for consideration for cooperation credit.”

The current FCPA enforcement environment focuses in large part on investigations of large corporations that end in non-prosecution and deferred prosecution agreements. The process is non-public, and the government press releases that follow agreements tell only the government view of the facts. Accordingly, there is a lack of transparency and predictability of outcomes for corporations that consider cooperating with government investigations.

The Yates Memo introduces more uncertainty regarding what concrete investigative steps a corporation must make to satisfy the government and highlights the potential risks if the government thinks the corporation should have done more. There’s a clear risk, for example, that the government might view a choice not to engage in certain investigative steps as “declining[ing] to learn” of relevant facts. The language of the Yates Memo provides prosecutors with more excuses or talking points for saying that the corporation has not done enough. This of course is always the risk of cooperation and calls to mind the saying that one can’t be “a little pregnant.”

In setting these fuzzy but tough-sounding standards, the Yates memo underscores why individuals and corporations should consider holding the government to its burden of proof and going to trial. In FCPA cases, a plea and cooperation should not be the default position.

In FCPA trials, individuals often win and the government has been frequently embarrassed (see for example the recent Sigelman trial and the failed “Africa Sting” enforcement action). We are hard pressed to identify an area of white collar enforcement where there is a bigger gap between the theories that support pleas or deferred/non-prosecution agreements versus the kind of facts for which the government can obtain convictions at trial. The price of cooperation continues to be high for companies and, if you accept the Yates memo on in its face, those costs are likely to be higher now.

The Yates Memo’s discussion of cooperation is a reminder to individual businesspeople that in many investigations, the lawyers representing the company are not your friends. As with all cooperation, there is a tremendous pressure to point fingers – regardless of the truth – a pressure that the Yates Memo adds to.   Individuals confronted with the pressure outlined in the government’s new cooperation playbook should consider the downside to the government’s diminution of our Constitutional adversary system of justice effectuated by the government’s “shock and awe” pretrial tactics designed to avoid trial.

Trial is the great equalizer.  Everyone knows that people plead guilty when they are not guilty to avoid the risk of possibly serving a more lengthy jail sentence should DOJ get lucky a second time in an FCPA trial and win. But agreeing to plead guilty, become a federal convicted felon, and serve time in prison where you should not do so, without putting the government to its burden of proof, might well be a decision a person may regret for the rest of their lives.

A person facing the trial decision must work hard to confront the fear of the unknown that is trial – and not allow DOJ to succeed in exploiting that fear to extract a guilty plea that absolves the government of the responsibility of proving its case.

Coercion and cooperation are dangerous.  In the instance where an individual accused of FCPA violations pleads guilty because, like Richard Bistrong [4], he is actually guilty, wrist-slap probationary sentences reward criminality and deter law-abiding behavior.  As the Honorable Richard Leon stated when rejecting DOJ’s plea for probation and no jail for its criminal partner Bistrong in the DOJ’s failed Africa Sting case, “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big. Probation.” (See here [5]).

Individuals accused of FCPA crimes should consider trial, at all costs.  After all, just ask these persons who the DOJ formerly dubbed “Corporate Wrong-doers,” and who sent the DOJ packing and walked away vindicated.