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Broad Coalition Of Business Groups Seek Real FCPA Reform

At the FCPA Guidance press conference last November (see here), Assistant Attorney General Lanny Breuer wisely noted that the Guidance was not “complete closure” to various concerns regarding the Foreign Corrupt Practices Act and he stated that the DOJ “welcomes” continued discussions regarding FCPA reform.

And why should non-binding enforcement agency Guidance be the end to FCPA reform discussions?  As Breuer and then SEC enforcement chief Robert Khuzami both acknowledged during the press conference, the Guidance “does not represent a change in policy.”

And why should Wal-Mart’s potential FCPA scrutiny (one of approximately 100 companies currently the subject of FCPA scrutiny) which involves FCPA issues as a condiment to a bigger corporate governance sandwich be the end to FCPA reform discussions?  (See here for the prior post).

As I noted in my article “Grading the Foreign Corrupt Practices Act Guidance” while there were certain FCPA reform measures, such as abolishing NPAs and DPAs, as I have urged, that the enforcement agencies could have accomplished through a change in policy in the Guidance, other FCPA reform measures, like amending the statute to include a compliance defense, can be accomplished only through congressional action and presidential signature.

This post last month detailed the Manhattan Institute’s post-Guidance call for FCPA reform, and this recent post highlighted various post-Guidance FCPA reform scholarship from a practitioner and an academic.

Earlier this week, the Chamber of Commerce and a broad coalition of business groups (such as the American Bankers Association, the American Gaming Association, the American Insurance Association, the Generic Pharmaceutical Association, the National Association of Manufacturers, the National Foreign Trade Council, the Financial Services Roundtable, and the Poultry Federation) sent this letter to the DOJ and SEC “to identify several areas of continuing concern for businesses seeking in good faith to comply with the FCPA.”

The letter addressed the following sections:  compliance programs and voluntary disclosure, foreign official / instrumentality, parent-subsidiary liability issues, successor liability issues, mens rea for corporate criminal liability and declinations.

As to compliance programs, the letter states, in pertinent part, as follows.

“Even if a company had in place a state-of-the-art compliance program that was well-designed to prevent FCPA violations and that was aggressively enforced, it remains exposed to liability if the program is circumvented by even one employee. The [Guidance] offers little assurance that the company’s pre-existing, strong compliance program will be given sufficient weight in the charging decisions of the Department and the SEC. Such assurance should be provided through legislative reform of the FCPA to add an affirmative defense that would permit a company, if charged with an anti-bribery violation, to rebut the imposition of criminal liability if the individuals responsible for the violation circumvented compliance measures that were otherwise reasonably designed to identify and prevent such violations and implemented with appropriate vigor.”

As to declinations, the letter states,in pertinent part, as follows.

“We do not share the view expressed by some in the Department and SEC that because the agencies do not routinely provide information on declinations in other types of cases, FCPA cases should not be treated any differently. The FCPA is exceptional in that: (i) it is over 30 years old, not a brand new law; (ii) it is very aggressively enforced, in terms of the number of pending investigations initiated each year and in the massive fines and penalties that are sometimes imposed; and (iii) it lacks a material body of case law through which it can be interpreted by the business community. Other statutes, including ones targeting financial fraud, antitrust violations and money laundering, have been extensively construed by the courts. As the Department and SEC recognize in the [Guidance] it is the courts and not the agencies that have the final say. However, until such time as a significant body of case law is developed, we encourage and would welcome regular release of anonymized information on declinations.”

“[A] decision not to bring a case where the evidence of a violation simply is lacking should not be considered a “declination.”  We remain concerned that the Department and the SEC may be defining “declination” to include both circumstances. In order to provide useful guidance and positive incentives to companies seeking to comply with the FCPA, the Department and the SEC should continue to provide information – on an anonymized basis – regarding matters in which the agencies found sufficient evidence of an FCPA violation but nevertheless declined to pursue prosecution or enforcement action on the basis of other circumstances, such as the company’s voluntary disclosure, cooperation and remedial measures.”

Regarding the two issues discussed above, it is simply wrong and closed-minded to view these issues as “Chamber” issues when the reality is that many people for many years have been saying the same thing.  (See my “Revisiting a Foreign Corrupt Practices Act Compliance Defense” article (which details the pro-compliance defense positions of many former high-ranking DOJ officials among others) and my “Grading the Foreign Corrupt Practices Act Guidance” article for a discussion of declination issues.

As the letter this week by a broad-coalition of business groups indicates, FCPA reform discussion is not dead, nor should it be.  A compliance defense is not a race to the bottom, it is a race to the top.  (See here for the prior post).  Abolishing NPAs and DPAs, and thereby reconstructing a system of checks and balances to FCPA enforcement, is consistent with the rule of law.  So too is increasing transparency in government decision-making.

During the FCPA reform debate in the 1980’s, Senator Alfonse D’Amato opened Senate hearings on a bill to amend the FCPA by stating as follows. “The discussion which takes place during these hearings is not a debate between those who oppose bribery and those who support it. I see the major issue before us to be whether the law, including both its antibribery and accounting provisions, is the best approach …”.

During Senate hearings, Senator John Heinz stated as follows. “… There are many people that are extremist, and there are others who get carried away by their enthusiasm who are going to argue that even if we change the provisions in the present act […], we are legalizing bribery. That strikes me as the worst kind of demagoguery, because it implies that everything that Congress has done in the past is perfect. And does anybody believe that?”

The FCPA Guidance issued last November was not the result of a policy debate as to whether the current FCPA and its enforcement is the best approach.  In fact, if you analyze, in chronological order, enforcement agency statements and positions (see pages 1-2 of my “Grading the Foreign Corrupt Practices Act Guidance” article) there is a credible argument to be made that one of the purposes of the Guidance was to prevent such a policy debate from going forward.

The FCPA is a fundamentally sound statute and I stated as such in my November 2010 Senate testimony.  But how many truly believe that the FCPA is a perfect statute or that its enforcement is best accomplishing the objectives of punishing improper payments and deterring future improper payments?

These are worthy objectives to pursue.  For this reason, it is good that FCPA reform discussions continue in the hopes that a substantive policy debate can result.

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