Schumer Calls For BP Investigation
Senator Charles Schumer (D-NY) has requested a Department of Justice investigation of BP.
It has nothing to do with the Gulf of Mexico, but rather the Foreign Corrupt Practices Act.
BP is British company, but its ADR shares trade on the New York Stock Exchange and BP is thus subject to the FCPA.
In a letter to Attorney General Eric Holder (see here) Schumer requests that the DOJ investigate whether BP violated any of the provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with the August 2009 release of Abdel Baset al-Megrahi, the Libyan terrorist convicted of the 1988 bombing of Pan-Am flight 103 that killed 270 people, including 189 Americans. [This post is limited to a discussion of the FCPA, and not the above referenced release.]
Why does Schumer think BP may have violated the FCPA?
Because, according to Schumer’s letter – “BP has admitted that it lobbied United Kingdom government officials to wrap up a proposed prisoner transfer agreement (PTA) with the Libyan government amid concerns that a delay in reaching this agreement would harm a deal BP had signed with Libya’s National Oil Company to explore for oil and gas in the Gulf of Sidra and in parts of Libya’s western desert—an agreement which BP estimated could lead to eventual earnings of up to $20 billion.”
Hold the phone and stop the presses … a large corporation has admitted that it lobbied its own government in connection with a business purpose.
This would seem to be yet another example of the FCPA’s double standard in that what is routinely done at home suddenly becomes a potential criminal matter when done in connection with international business. For other examples of the double standard see here and here.
Unless there is a finding that something of value went to a foreign official, the FCPA is not implicated because the law does not apply to giving things of value to a foreign government itself. Strange you say, but that is how the FCPA is written – a fact even the DOJ recognizes. See here for DOJ Opinion Procedure Release 09-01 in which the DOJ states that the proposed course of conduct “fall[s] outside the scope of the FCPA in that the [thing of value] will be provided to the foreign government, as opposed to individual government officials …”
Schumer’s letter also states:
“If BP, or its officials, promised the Libyan Government that it would secure al-Megrahi’s release from detention in exchange for oil exploration rights—or even that it would provide lobbying services for such a release on the Libyan Government’s behalf—BP may have been unlawfully authorizing performance of valuable services to the Libyan Government in exchange for profitable oil exploration rights in express violation of the FCPA. Similarly, if BP promised anything of value to United Kingdom government officials to secure al-Megrahi’s release, this would also violate the FCPA.”
According to Schumer’s press release, he and “Senators Gillibrand, Menendez, and Lautenberg last week requested the British government investigate the circumstances surrounding al-Megrahi’s release and requested that BP and the British government turn over all documents related to the oil companies’ efforts lobbying for a prison-release agreement with Libya. They also called for the US State Department to press the British to investigate BP’s involvement in the incident.”
It is unusual for a U.S. politician to call upon DOJ to investigate a foreign-based company (or any company for that matter) for FCPA violations – particularly when the conduct at issue largely centers on conduct between the company and its own government officials.
Although the U.K. Bribery Act is not yet law (see yesterday’s post here), when enacted, it is expected to have a broad jurisdictional scope and apply to certain U.S. companies, just as the FCPA applies to certain U.K. companies.
Following Schumer’s lead will a British politician request that the U.K. Serious Fraud Office investigate a U.S. company because it lobbied its own government officials in connection with a business purpose? As John Gapper, the associate editor and chief business commentator of the U.K. based Financial Times, stated in an editorial on the subject, “the US has been no stranger to dubious deals with foreign governments that benefit both its strategic interests and US companies.”
For more, see here for Christopher Matthew’s Main Justice story on the topic.
The Financial Reform Bill’s Whistleblower Provisions And The FCPA
Section 1504 (see here for the prior post) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is not the only provision of the “financial reform package” that may impact Foreign Corrupt Practices Act compliance and enforcement.
Sections 922-924 of the Act President Obama is expected to sign soon also has the potential to impact FCPA enforcement.
Why?
Because it creates new whistleblower provisions applicable to all securities laws violations and the FCPA is part of the Securities and Exchange Act of 1934.
This post will cover three topics: an overview of the new whistleblower provisions; some thoughts on whether whistleblower provisions applicable to FCPA enforcement is wise policy; and some thoughts on whether the new whistleblower provisions will impact FCPA enforcement, and if so, to what extent.
Overview
Section 922 amends the Exchange Act by including a new section, 21F, titled “Securities Whistleblower Incentives and Protection.”
Pursuant to the new section:
* any whistleblower (meaning “any individual who provides, or 2 more more individuals acting jointly who provide, information relating to a violation of the securities laws” to the SEC)
* who voluntarily provides original information (meaning information that: (a) “is derived from the independent knowledge or analysis of a whistleblower;” (b) “is not known to the [SEC] from any other source, unless the whistleblower is the original source of the information;” and (c) “is not exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from the news media, unless the whistleblower is a source of the information”)
* to the SEC that leads “to the successful enforcement” of a “covered judicial or administrative action” (meaning “any judicial or administrative action brought by the [SEC] under the securities laws that results in monetary sanctions exceeding $1,000,000”)
* shall be entitled to an award equal to “not less than 10%” and “not more than 30%” “of what has been collected of the monetary sanctions imposed” in the underlying SEC enforcement action.
Monetary sanctions include “any monies, including penalties, disgorgement, and interest ordered to be paid” by the SEC.
In determining the amount of the award the whistleblower shall receive, the SEC “shall take into consideration: (i) the significance of the information provided by the whisteblower to the success [of the enforcement action]; (ii) the degree of assistance provided by the whistleblower [or the whistleblower’s legal representative] [in the enforcement action]; (iii) “the programmatic interest of the [SEC] in deterring violations of the securities laws by making awards to whistleblowers who provide information that lead to the successful enforcement of such laws; and (iv) such additional relevant factors as the [SEC] may establish by rule or regulation.”
Pursuant to the new whistleblower provisions, a whistleblower may be represented by counsel.
The provisions allow a whistleblower to submit information to the SEC anonymously, however in such a case, the whistleblower “shall be represented by counsel” and the whistleblower’s identity must be disclosed to the SEC before an award is made to such a whistleblower.
Section 922 specifically authorizes a whisteblower to receive an award “regardless of whether any violation of a provision of the securities laws, or a rule or regulation thereunder” underlying the SEC enforcement action “occurred prior to the date of enactment” of the provisions.
As with many whistleblower provisions, Section 922 prohibits employers from directly or indirectly discharging, demoting, suspending, threatening, harassing, or in any other manner discriminating against a whistleblower.
Section 922 also authorizes the SEC to share whistleblower provided information with other U.S. government agencies, including the Attorney General, as well as foreign securities authorities and foreign law enforcement.
In addition to the “original information” limitation discussed above, Section 922 also precludes the following categories of persons from receiving whistleblower awards: (a) various government and law enforcement agency employees; (b) “any whistleblower who is convicted of a criminal violation related to the [enforcement action];” and (c) “any whistleblower who gains the information through the performance of an audit of financial statements required under the securities laws and for whom such submission would be contrary to the requirements of section 10A of the Exchange Act.”
Pursuant to Section 922, the SEC “shall have the authority to issue such rules and regulations as may be necessary or appropriate” to implement the above-described provisions.
Wise Policy As Applied to FCPA Enforcement?
As indicated above, the new whistleblower provisions are applicable to all securities laws violations – not just the FCPA.
While the new provisions may or may not represent needed legislation as applied to non-FCPA securities law violations, I do not believe that the whistleblower provisions represent wise policy as applied to FCPA enforcement.
Why?
Quite simply the FCPA is enforced like no other securities law (at least that I am aware of).
Against the backdrop of little substantive FCPA case law, the FCPA is enforced based largely on government enforcement agency interpretations that have never been accepted by a court. For every FCPA enforcement action alleging conduct that all reasonable minds would agree violates the FCPA, there is seemingly three FCPA enforcement actions alleging conduct that many reasonable minds question whether the conduct even violates the FCPA. Yet, these latter FCPA enforcement actions, notwithstanding the dubious and untested legal theories they are based on, are routinely settled by companies via a resolution vehicle that does not require the company to admit or deny the SEC’s allegations. Quite simply, a settled SEC FCPA enforcement action does not necessarily represent the triumph of the SEC’s legal position over the company’s, but rather reflects a risk-based decision primarily grounded in issues other than facts and the law. It is simply easier and more cost-efficient for a company to settle an SEC FCPA enforcement (notwithstanding whatever dubious and untested legal theory it is based on) than to participate in long, protracted litigation with its principal government regulator. Ask any seasoned FCPA practitioner and, in a candid moment, they will tell you the same thing.
Against this backdrop, is it wise to award a whistleblower 10-30% of the fines, penalties and disgorgement the SEC recovers in an FCPA enforcement action? Is it wise to award a whistleblower in connection with an FCPA enforcement action when the contours of the FCPA largely remain undefined by the courts? It is wise to award a whistleblower when the company, for reasons other than law or fact, does not even mount a legal defense?
I submit that the answer to each of these questions is no.
Impact on FCPA Enforcement?
Much has been written about the whistleblower provisions and the impact on FCPA enforcement – beginning when the provisions were first included in Congressional financial reform bill drafts.
Among other law firms with an FCPA practice or FCPA practitioners writing about the subject, Morgan Lewis stated that the “new law is likely to greatly increase the number of FCPA matters under government investigation” (see here); Fried Frank predicted that the “new whistleblower program may end up playing a key role in identifying and prosecuting violations of the FCPA” (see here); and Richard Cassin on the FCPA Blog guessed that the “bounty program will result in more FCPA cases against corporations” (see here).
I am not so sure and my guess is that the new whistleblower provisions will have a negligible impact on FCPA enforcement.
My reasons?
For starters, the SEC has long had a similar whistleblower program for insider trading. The results? According to a Senate report accompanying the financial reform package, less than $160,000 paid out to five whistleblowers.
In addition, the new whistleblower provisions will only be triggered when a public company issuer is the subject of an FCPA enforcement action. No public company issuer, means no SEC jurisdiction, means no whistleblower awards. There are many more private companies subject to the FCPA than public company issuers and the new whistleblower provisions should not impact this prong of FCPA enforcement which is indeed large. For instance, with a few exceptions, the vast majority of companies indirectly implicated (at least at this point) in the Africa Sting case are all private companies.
Furthermore, and perhaps most important, most FCPA enforcement actions already result from voluntary disclosures. Is the universe of FCPA enforcement actions really going to expand when public company issuers are already largely voluntarily disclosing conduct to the SEC – presumably the same conduct that a whistleblower would disclose?
On this issue, one thing the new whistleblower provisions may do is pit the whistleblower vs. the company in a strange, yet competitive, high-stakes game of “who has the fastest car” to Washington to disclose the conduct. Simply put, if the whistleblower loses, the information he or she discloses will no longer be “original information” and thus no award. If the company loses, the disclosure will no longer be “voluntary” and the hoped for credit under the DOJ’s Principles of Prosecution of Business Organizations and the Sentencing Guidelines will disappear. Against this backdrop, it may be that more conduct will be disclosed that may not even violate the FCPA because the risks of having the “slower car” are to great to pass up. But then again (as detailed in this post) a company voluntarily disclosing conduct that may not even violate the FCPA seems to a norm these days.
If the new whistleblower provisions do indeed have an appreciable impact on FCPA enforcement, the following questions, among others, come to my mind.
Will a law firm with an established FCPA practice start representing whistleblowers on the theory that a contingent fee on a 10-30% cut of an FCPA settlement is more profitable than hourly fee investigations or compliance?
Will a go-to FCPA plaintiffs firm emerge? Which firm/lawyer will it be?
Will the new whistleblower provisions trigger more substantive FCPA case law? How many enforcement actions based on whistleblower information that a company paid for a bottle of wine and opera tickets for an employee of a Chinese state-owned enterprise (ignoring the fact that the company did the same thing for other customers) will it take before a company says – enough of this silliness – will someone please litigate the enforcement agencies “foreign official” interpretation?
Will a “sophisticated” whistleblower with knowledge of the enforcement agencies many dubious and untested legal interpretations use this “gray space” as a point of entry into a much larger potential award on the theory that the “sophisticated” whistleblower is well aware that the enforcement agencies will ask the “where else” question before agreeing to resolve an enforcement action even if the whistleblower is unaware of anything else besides the provided information (which may not even violate the statute) guessing that there is some books or records or internal control issue somewhere in the company that will crop up and raise the award level? (For more on this “where else” question see this prior post).
The new whistleblower provisions provide much to think about and raise the above (and no doubt numerous other) questions.
The best part of the new whistleblower provisions would seem to be that its impact on FCPA enforcement can be monitored and analyzed as Section 922 requires the SEC to submit annual reports to Congress on its whistleblower award program including “the type of cases in which awards were granted.” Section 922 also requires the SEC to “establish a separate office within the [SEC] to administer and enforce” the new whistleblower provisions and requires the SEC Inspector General to conduct a study of the whistleblower provisions.
Financial Reform Bill Contains Major Compliance Headache
News coverage today will be extensive as to the Dodd-Frank Wall Street Reform and Consumer Protection Act – the financial reform bill – that is expected to be signed by President Obama next week.
But you probably will not see much coverage as to a key “miscellaneous provision” tacked onto the end of the massive bill.
However, to many readers of this blog, this key “miscellaneous provision” is sure to cause much angst – as well it should. And no, I am not talking about the whistleblower provisions included in the financial reform bill that can reward a whistleblower who reports securities laws violations, a provision some are calling the FCPA Whistleblower Bounty Program (see here), even though the provisions are not specific to the FCPA. I will cover these provisions in a future post.
The “miscellaneous provision” is Section 1504.
It is titled “Disclosure of Payments by Resource Extraction Issuers” and it is substantively similar to S.1700, a bad bill that was introduced in the Senate in September 2009. I covered this bill, and its many problems, in this prior post.
As I noted in the prior post, bribery and corruption are bad, but that does not mean that every attempt to curtail bribery and corruption is good.
Case in point is Section 1504 of the financial reform bill.
In short, Section 1504 will substantially increase compliance costs and headaches for numerous companies that already have extensive FCPA compliance policies and procedures by further requiring disclosure of perfectly legal and legitimate payments to foreign governments. Section 1504 is akin to “swatting a fly with a bazooka” and it attempts to legislate an issue that was sensibly put to rest in the mid-1970’s when Congress held extensive hearings on what would become the FCPA.
Section 1504 amends Section 13 of the Securities Exchange Act of 1934 (15 USC 78m) (“Periodical and Other Reports”) by adding a new section “Disclosure of Payments by Resource Extraction Issuers.”
Under this section, “no later than 270 days after enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the [SEC] shall issue final rules that would require:
• a “Resource Extraction Issuer” (a defined term which means an issuer that:(i) is required to file an annual report with the Commission; and (ii) engages in the commercial development of oil, natural gas, or minerals”)
• to include in its annual report
• “information relating to any payment”
• made by the issuer, “a subsidiary” of the issuer, “or any entity under the control of the issuer”
• to a “foreign government” (a defined term which means a “foreign government, a department, agency, or instrumentality of a foreign government, or a company owned by a foreign government, as determined by the Commission”) or the “Federal Government”
• for “the purpose of the commercial development of oil, natural gas, or minerals.”
Although it is possible that the final SEC rules may shed more light on the above provisions, at this point not much about Section 1504 is clear.
Therein lies the problem.
Not sure, if your company is a “Resource Extraction Issuer” because you are unclear what “commercial development of oil, natural gas, or minerals” means?
No problem, Section 1504 provides this crystal clear definition – “the term ‘commercial development of oil, natural gas, or minerals’ includes exploration, extraction, processing, export and other significant actions relating to oil, natural gas, or minerals, or the acquisition of a license for any such activity, as determined by the [SEC]. “
In other words, if you are an issuer, and you engage in “significant actions relating to oil, natural gas, or minerals” you just may have some huge, new reporting / disclosure requirements imposed on you!
Still confused? Join the club.
Is selling equipment to a core resource extraction company, which is then used to explore for oil, natural gas, or minerals a “significant action relating to oil, natural gas, or minerals?” Is selling exploration software to a core resource extraction company, which is then used to explore for oil, natural gas, or minerals a “significant action relating to oil, natural gas, or minerals?”
What is a payment?
That’s an easy one and Section 1504 provides this crystal clear definition – the term payment means:
(i) a payment that is (I) made to further commercial development of oil, natural gas, or minerals; and (II) not de minimis; and
(ii) includes taxes, royalties, fees (including license fees), production entitlements, bonuses, and other material benefits, that the Commission […] determines are part of the commonly recognized revenue stream for the commercial development of oil, natural gas, or minerals.”
Ignoring for the moment the imperfect and imprecise definition of “Resource Extraction Issuer,” it is one thing to require such issuers to disclose royalties paid to a foreign government, and if that is viewed as providing transparency and eliminating bribery and corruption (however dubious that view may be), well then perhaps Section 1504 is a good piece of legislation.
But Section 1504 seeks disclosure and reporting of much, much more and could conceivably require disclosure of every single dollar a “Resource Extraction Issuer” makes to a “foreign government, a department, agency, or instrumentality of a foreign government, or a company owned by a foreign government, as determined by the Commission” for the “purpose of the commercial development of oil, natural gas, or minerals.”
Here is the real kicker though.
Section 1504 requires all payments (meeting the above definitions – if indeed you can figure out what those definitions are) to be disclosed, including perfectly legitimate and legal payments.
To those who supported Section 1504, I’ve got this to say – “we’ve been down this road before.”
It is called the FCPA (and the various versions of the statute before it was enacted). Years of congressional hearings were had as to this very same disclosure issue and we don’t need to repeat this exercise.
Here is some background.
The FCPA as enacted in 1977 contained (and still contains) an outright prohibition on improper payments to “foreign officials” to obtain or retain business (the anti-bribery provisions) as well as books and records and internal control provisions – but not disclosure provisions.
The original versions of what became the “FCPA” (i.e. the “Foreign Payments Disclosure Act” and other similar bills) started out with disclosure provisions, including provisions requiring all U.S. companies to disclose all payments over $1,000 to any foreign agent or consultant and any and all other payments made in connection with foreign government business.
As to these disclosure provisions, many people, including, most notably Senator Proxmire (D-WI – a Congressional leader on what would become the FCPA), were concerned that the disclosure obligations were too vague to enforce and would require the disclosure of thousands of payments that were perfectly legal and legitimate.
Proxmire said during congressional hearings, “I would think they [the corporations subject to the disclosure requirements] would want some certainty. They want to know what they have to report and what they don’t have to report. They don’t want to guess and then find themselves in deep trouble because they guessed wrong.”
The final House Report (see here) on what would become the FCPA is even more clear. It states (when discussing the various disclosure provisions previously debated, but rejected):
“Most disclosure proposals would require U.S. corporations doing business abroad to report all foreign payments including perfectly legal payments such as for promotional purposes and for sales commissions. A disclosure scheme, unlike outright prohibition, would require U.S. corporations to contend not only with an additional bureaucratic overlay but also with massive paperwork requirements.”
The words of the late Senator Proxmire and the sensible conclusion reflected in the House Report are equally applicable to Section 1504.
Section 1504 (while however noble its intended purpose) is akin to “swatting a fly with a bazooka.”
The FCPA already criminalizes improper payments made to the “foreign government” recipients targeted in Section 1504 to the extent those payments are made to “obtain or retain business.”
Do we really now need a law that requires “Resource Extraction Issuers” to disclose all such payments, even perfectly legitimate and legal payments?
In passing the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress apparently said yes to this question. However, with any bill of this magnitude, it is likely that certain members of Congress did not even know what they were voting for or, if they did, were willing to accept undesirable “miscellaneous provisions” to ensure overall passage. In fact, what is now Section 1504 never made it “out of committee” since being introduced in September 2009. A similar bill was also introduced in 2008, but likewise went nowhere.
That is all water under the bridge as they say, because Section 1504 is likely soon to become law.
“I was taught if they violated a law, you charge them. If they didn’t violate the law, you don’t charge them.”
In 2008 (the most recent year for which I’ve seen the following statistic) seven of the sixteen non-prosecution or deferred prosecution agreements entered into by the DOJ were in the FCPA context. (See here).
NPAs and DPAs are thus very much a Foreign Corrupt Practices Act topic and these resolution vehicles are frequently covered on this blog. (See here and here).
Thus, the following exchange between Senator Jeff Sessions (R-AL) and James Cole caught my eye. It occurred during Cole’s Senate Judiciary Committee confirmation hearings last week 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. Quote: “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.” Closed quote. 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. […]
******
The above exchange raises an interesting question – what is the “shelf life” of the Arthur Anderson prosecution?
In other words, how long will the 2002 prosecution (and related consequences) guide DOJ corporate charging decisions? Will a DOJ prosecutor in 2015 or 2020 be persuaded not to criminally indict a corporation because of what happened in 2002? Should a corporation escape the most severe consequences of criminal conduct just because it employs lots of people? Just because the corporation sells certain products to certain customers?
All questions to ponder as another week begins.
FCPA Debarment Bill Introduced
Last week, Representative Peter Welch (D-VT) introduced H.R. 5366 (see here).
Titled the “Overseas Contractor Reform Act,” the bill states that “it is the policy of the United States Government that no Government contracts or grants should be awarded to individuals or companies who violate the Foreign Corrupt Practices Act of 1977.”
The bill states, “any person found to be in violation of the Foreign Corrupt Practices Act of 1977 shall be proposed for debarment from any contract or grant awarded by the Federal Government within 30 days after a final judgment of such violation.”
However, there is a big “unless” qualifier.
The qualifier is “unless waived by the head of a Federal Agency.” The bill states: “The head of a Federal agency may waive this section for a Federal contract or grant. Any such waiver shall be reported to Congress by the head of the agency concerned within 30 days from the date of the waiver, along with an accompanying justification.”
Because most FCPA enforcement actions are settled through a non-prosecution agreement (NPA) or deferred prosecution agreements (DPA) (see here), the bill may need some tweaking if it is to be effective.
Among other issues will be: is a company that agrees to an NPA or DPA to resolve an FCPA case “found to be in violation of the FCPA.” Likely not.
Also, the bill defines “final judgment” as when “all appeals of the judgment have been finally determined, or all time for filing such appeals has expired.” Again, this assumes that all FCPA enforcement actions are resolved through actual judicial proceedings – which is not how FCPA enforcement works in many cases.
Other issues with the bill is that “persons” merely includes: an individual, a partnership and a corporation. Other business entities are equally capable of violating the FCPA and the bill, to be most effective, should adopt the definition of “domestic concern” in the FCPA. (see 78dd-2(h)(1) here).
Other potential shortcomings with the bill is that it only applies to violations of the FCPA’s antibribery provisions. Thus, the bill would not be triggered by the recent “bribery, yet no bribery” cases (Daimler, BAE, and Siemens) – see here, here and here. In these cases, despite DOJ allegations that would seem to establish that the company violated the FCPA’s antibribery provisions, none of these companies were charged with violating the FCPA’s antibribery provisions. Instead, non-FCPA charges or FCPA books and records and internal controls violations were charged in an attempt to avoid application of the European Union debarment provisions. (This fact is apparent from the DOJ’s sentencing memos in the cases – see here).
The big picture flaw with H.R. 5366 (as currently drafted) is it assumes all FCPA enforcement actions are resolved through judicial proceedings and it assumes all FCPA enforcement actions are resolved with charges that actually fit the facts.
Neither of these assumptions are accurate – that why I call FCPA enforcement, in many cases, a facade.
Nevertheless, despite the shortcomings of H.R. 5366 as drafted, the bill is a step in the right direction.
The bill has been referred to the House Oversight and Government Reform Committee. Yesterday’s post (see here) profiled a letter from the Chairman of that committee, Edolphus Towns (D-NY), to Attorney General Holder regarding debarment issues.