The Need For A Consensus “Declination” Definition
A pressing quality of FCPA information issue is the meaning of “declination.”
The purpose of this post is similar to this recent post titled “What is a Foreign Corrupt Practices Act Enforcement Action?” That is, to improve the quality and reliability of FCPA “declination” statistics given that such a statistic has become a new datapoint of interest.
As discussed in my article “Grading the Foreign Corrupt Practices Act Guidance” (here), to my knowledge, the DOJ has never offered a declination definition, but perhaps in an effort to portray a fair and balanced FCPA enforcement program, the DOJ appears to be advocating an expansive definition.
Using two recent examples of FCPA scrutiny, I discuss below how certain FCPA commentators are also liberally applying the declination label to instances of FCPA scrutiny that do not result in any FCPA enforcement action. I then suggest a declination definition.
Deere
As highlighted in this prior post, in August 2011 various media outlets reported that Deere received an inquiry from regulators in July regarding alleged payments made in Russia and nearby countries. In a subsequent statement, Deere stated as follows. “On July 25, 2011, Deere received a request from the SEC that it voluntarily produce documents relating to Deere’s activities, and those of third parties, in certain foreign countries. Deere is cooperating with the SEC’s requests.”
In a press release (here) last week, Deere stated as follows.
“Deere & Company has been notified in a letter from the U.S. Securities and Exchange Commission Enforcement Division staff that it has completed an investigation of Deere and does not plan to pursue any enforcement action. In August 2011, news media reported that Deere & Company was subject to an inquiry concerning alleged payments to foreign officials in Russia and surrounding countries. At that time, Deere stated that it had received a request from the SEC that Deere produce documents related to the company’s activities, and those of third parties, in certain foreign countries. Deere said it fully cooperated with the SEC during the investigation and is pleased to report this conclusion. The company also stated that Deere remains committed to its core value of doing business with the highest integrity around the globe.
Soon thereafter (see here), the FCPA Blog termed the resolution of Deere’s FCPA scrutiny as a “declination.”
W.W. Grainger
Another liberal use of the term “declination” occurred in the context of W.W. Grainger’s recent FCPA scrutiny. (See here for the prior post discussing the company’s disclosure). In November 2012, Grainger updated its prior disclosure in a quarterly filing and stated as follows.
“As previously reported, the Company has been conducting an inquiry into alleged falsification of expense reimbursement forms submitted by employees in certain sales offices of Grainger China LLC, a subsidiary of the Company. In the course of the investigation the Company learned that sales employees may have provided prepaid gift cards to certain customers. The company’s investigation included determining whether there were any violations of laws, including the U.S. Foreign Corrupt Practices Act. The Company retained outside counsel to assist in its investigation of this matter. On January 24, 2012, the Company contacted the DOJ and the Securities and Exchange Commission to voluntarily disclose that the Company was conducting an internal investigation, and agreed to fully cooperate and update the DOJ and SEC periodically on further developments. The results of the investigation, which have been submitted to the DOJ and the SEC, did not substantiate initial information suggesting significant use of gift cards for improper purposes. On August 14, 2012, the DOJ closed its inquiry into this matter.” (emphasis added).
Soon thereafter (see here), the FCPA blog stated in a headline that “after China investigation, Grainger wins DOJ declination.”
Declination?
The company specifically disclosed that it did not “substantiate initial information” suggesting potential FCPA issues.
How is this a declination?
In this prior post, I offered my definition of a declination as being – an instance in which an enforcement agency has concluded that it could bring a case, consistent with its burden of proof as to all necessary elements, yet decides not to pursue the action. Others have offered the same definition (see here for a Wilmer Hale Client Alert -“the concept of a declination is supposed to be reserved for instances in which the offense is chargeable but the government declines in its own discretion to bring a case”).
Anything less ought not be termed a “declination.” It is really no different that saying a police officer “declined” to issue a speeding ticket in an instance in which the driver was not speeding. This is not a declination, it is what the law commands, and such reasoning applies in the FCPA context as well.
Analyzing Allianz
Earlier this week, $12.3 million flowed into the U.S. treasury.
Why?
Because a German company used to have shares and bonds registered with the SEC. The German company had a German subsidiary that invested in an Indonesian joint venture. The Indonesian joint venture made, without any apparent knowledge or approval of the German company, alleged improper payments to employees of state-owned entities in Indonesia between seven to eleven years ago. When the German company learned of suspicious account activity at the Indonesian joint venture seven years ago, it directed the joint venture to close the suspicious account. The joint venture agreed to close the account and stop making the payments, even though it continued to make the payments through 2008.
The above paragraph pretty much explains the SEC’s Foreign Corrupt Practices Act enforcement action earlier this week against Allianz SE , a German company engaged in property and casualty insurance, life and health insurance, and asset management businesses around the world.
From November 2000 to October 2009, Allianz’s American Depositary Shares and bonds were registered with the SEC and it was thus an “issuer” under the Foreign Corrupt Practices Act.
In 1989 PT Asuransi Allianz Utama Indonesia (“Utama”) was formed as a joint venture. JV members included Allianz of Asia-Pacific and Africa GmbH (AZAP – a German company and a wholly-owned subsidiary of Allianz), PT Asuransi Jasa Indonesia (“Jasindo”) (“an Indonesian state-owned entity) and PT Asuransi Wuwungan. According to the SEC, during the relevant time period, AZAP owned 75% of Utama.
In the administrative cease and desist order (here) announced (here) earlier this week, the SEC found improper payments by Utama to employees of state-owned entities in Indonesia in order to obtain or retain business. The order also found that the payments were improperly recorded and that Allianz failed to devise and maintain a sufficient system of internal controls.
The SEC order states, in summary, as follows.
“These proceedings arise out of violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act (“FCPA”) by Allianz SE (“Allianz” or the “Company”), through its Indonesian majority-owned subsidiary, PT Asuransi Allianz Utama (“Utama”). Between 2001 and 2008, Utama managers made improper payments to employees of state-owned entities in Indonesia in order to obtain and retain business. Allianz learned of the improper payments from two complaints made several years apart. The first complaint was submitted in 2005 alleging significant misconduct, including unsupported payments to agents. A subsequent audit of Utama’s accounting records uncovered that managers at Utama were using “special purpose accounts” to make illicit payments, many to government officials, in order to secure business in Indonesia. Despite the audit, the conduct continued. The second complaint was lodged in 2009 to Allianz’s external auditors and alleged that Allianz created illicit off-the-books accounts. In response, Allianz began an internal investigation. The Commission staff opened an investigation in April 2010 after receiving an anonymous complaint of possible FCPA violations. The investigation determined that from at least 2001 through December 2008, the Utama managers, with the assistance of others in the Indonesian office, made payments to employees of state-owned entities in Indonesia to procure or retain insurance contracts related to large government projects in Indonesia. As a result of improper payments of approximately $650,626 to agents and employees of state-owned entities and others, Allianz realized $5,315,649 in profits. The payments were improperly recorded as legitimate transaction costs, thereby causing Allianz’s books and records to be inaccurate. Allianz failed to devise and maintain a system of internal controls sufficient to provide reasonable assurances to detect and prevent such payments.”
The order contains the following additional facts.
“In 1989, Allianz established Utama and continued the practice of using special purpose accounts for paying commissions to agents that generated business for Allianz. However, in February 2001, Indonesian Agent, an agent for Utama, Utama CEO 1 [a German citizen who was the Utama CEO from 1998 to 2001] and Utama’s Chief Financial Officer opened a separate, off-the-books account in the Indonesian Agent’s name (the “Agent special purpose account”). The Agent special purpose account was used to make improper payments to employees of Indonesian state-owned entities and others for the purpose of obtaining and retaining insurance contracts. In February 2001, Indonesian Agent and Utama CEO 1 executed a “Paying Agency Agreement” that set up the scheme to make the payments to employees of state-owned entities. This agreement established the off-the-books account that served as a slush fund to make bribe payments to foreign officials and others as instructed by Utama.”
Under the heading “Utama’s 2001-2005 Improper Payments” the order states, in pertinent part, as follows.
“During the period 2001 to 2005, Utama Marketing Manager [an Indonesian citizen] made payments from the Agent special purpose account to account introducers employed by state-owned entities to secure insurance contracts on large government projects in Indonesia. Utama Marketing Manager received approval from Utama management to use the Agent special purpose account for improper purposes. Utama CEO 2, the CEO from 2003-2006, was aware of the Agent special purpose account and the improper payments to foreign officials. […] The improper payments made to foreign officials were disguised in the Utama insurance contracts as “overriding commissions.” Despite the fact that Allianz has a majority share of Utama and consolidated the subsidiary’s accounts into its own books and records, Utama’s accounting system was maintained in Indonesia and Allianz did not have effective controls over the accounting. Allianz did not have the ability to access Utama’s accounting system and, therefore, did not detect the movement of funds to the Agent special purpose account. In addition, the Agent special purpose account was maintained in the name of the Indonesian Agent to make it appear that all movement of funds to this account was for legitimate commission payments. Likewise, Allianz did not have effective controls over the commission payment request process, which allowed payments to go to the Agent special purpose account without supporting documentation. […] On December 1, 2005, a whistleblower complaint concerning the special purpose account was submitted to both the Allianz whistleblower hotline and Utama’s joint venture partner Jasindo, and then forwarded to the head of AZAP. The complaint itemized a number of control weaknesses, most notably, the existence of the Agent special purpose account and its lack of transparency. On December 8, 2005, Allianz Group Audit initiated an audit of the Indonesian office; however, the review was limited to embezzlement from the Company. […] However, no additional steps were taken to determine the nature and purpose of the accounts or to identify the recipients of payments from the accounts. On December 12, 2005, based on the audit findings Allianz directed the Utama management to close the Agent special purpose account. Although the Utama management agreed to close the account and to stop making the payments, it continued making improper payments to secure business for Allianz through 2008.”
Under the heading “Utama’s Post-2005 Improper Payments” the order states, in pertinent part, as follows.
“Despite the directive to close the account and to stop making payments, Utama Marketing Manager continued to use the Agent special purpose account to make improper payments to foreign officials from 2005 to 2008. […] Utama CEO 2 approved the continued use of the Agent special purpose account to make payments on the two government insurance contracts at issue. Later, Utama Marketing Manager and his staff expanded the improper payments to numerous other foreign officials on government insurance contracts. From 2005 to 2008, Utama Marketing Manager employed various methods to make payments to foreign officials. In addition to booking payments through the Agent special purpose account, Utama Marketing Manager made payments by either: 1) booking commissions to an agent that was not associated with the account for the government insurance contract and then withdrawing the funds booked to the agent’s account as cash to pay the foreign official; or 2) overstating the amount of a client’s insurance premium, booking the excess amount to an unallocated account and then “reimbursing” the excess funds to the foreign officials, who were responsible for procuring the government insurance contracts. Similar to the Agent special purpose account, Allianz did not have effective controls over the Utama accounting system or the commission payment process, which allowed payments to be made to an agent’s account without supporting documentation. Allianz did not have any controls over the use of the unallocated account that was maintained at Utama. As a result, Utama Marketing Manager was able to take funds from Utama to pay foreign officials without detection. In March 2009, Allianz’s outside auditor received an anonymous complaint alleging that an Allianz executive created or initiated slush funds during his tenure with AZAP. Between December 2005, when the Allianz Executive Vice-President of the Asia-Pacific Division directed Utama to close the Agent special purpose account and the March 2009 Whistleblower complaint, Allianz took no steps to ensure that the Agent special purpose account was closed and that similar improper payments were not being made.”
Under the heading “Investigation and Remediation” the order states, in full, as follows.
“In response to the March 2009 Whistleblower complaint, Allianz convened a Whistleblower Committee to do an internal investigation and retained counsel to conduct an internal investigation of Utama’s payment practices in Indonesia. Allianz did not report the conduct to the Commission staff. In April 2010, the staff opened an investigation after receiving an anonymous complaint of possible FCPA violations. The staff contacted Allianz concerning the allegations. Allianz’s cooperation in the staff’s investigation and the timeliness of its response to the Commission’s requests for documents and information improved over time. Allianz hired new counsel and took steps to further its cooperation and remedial efforts. The staff’s investigation uncovered 295 government insurance contracts that were obtained or retained by improper payments of approximately $650,626 to Indonesian government officials and others from 2001 through 2008. As stated above, in some instances the nature of the improper payments was disguised in invoices as an “overriding commission” or as a commission for an agent that was not associated with the government insurance contract. In other instances the improper payments were structured as an overpayment by the government insurance contract holder, who was later “reimbursed” for the overpayment. The excess funds were then paid to foreign officials, who were responsible for procuring the government insurance contracts. Allianz took various remedial measures, including employment action against several individuals who were involved in the conduct or failed to stop the conduct. Allianz issued new or enhanced FCPA compliance and internal accounting control policies and procedures, including mandating strict scrutiny of payments to third party intermediaries. Allianz also updated the anti-corruption clause in its third-party contracts to specifically refer to the FCPA. Allianz provided enhanced FCPA compliance training to its employees and improved its current global anti-corruption compliance program.”
Under the heading, “FCPA Violations” the order states, in pertinent part, as follows.
“Utama, a majority-owned subsidiary of Allianz, made improper payments to foreign officials to obtain or retain government insurance contracts. Utama improperly recorded the payments as legitimate transaction costs. Utama’s financial statements were consolidated into Allianz’s financial statements. As a result of the conduct described above, Allianz violated Section 13(b)(2)(A) of the Exchange Act, which requires issuers to keep accurate books, records and accounts. Further, as evidenced by the extent and duration of Utama’s improper payments and their improper recordation, and the fact that Allianz was not aware that Utama’s commission payment request process allowed funds to be diverted for improper payments, Allianz failed to recognize the compliance risks posed by Utama. Allianz also failed to devise and maintain an effective system of internal controls sufficient to provide reasonable assurances that improper payments were not being made by its subsidiary. As a result of the conduct described above, Allianz violated Section 13(b)(2)(B) of the Exchange Act, which requires issuers to devise and maintain a sufficient system of internal accounting controls. […] Section 13(b)(2)(A) of the Exchange Act does not require that the amounts involved be “material,” nor is it necessary to prove “scienter” under its provisions. SEC v. World-Wide Coin Invs. Ltd., 567 F. Supp. 724, 749-51 (N.D. Ga. 1983). Similarly, there is no scienter requirement for establishing a violation of Section 13(b)(2)(B).
According to the SEC release, “without admitting or denying the findings, Allianz agreed to cease and desist from further violations and pay disgorgement of $5,315,649, prejudgment interest of $1,765,125, and a penalty of $5,315,649 for a total of $12,396,423.”
See here for a prior guest post discussing the Dodd-Frank provision granting the SEC authority to impose civil monetary penalties in administrative proceedings such as the Allianz matter.
There is much to analyze in the nine-page cease and desist order.
For starters, the SEC required disgorgement even though no FCPA anti-bribery violations were alleged or asserted. This prior post highlighted an article concerning “no-charged bribery disgorgement” by various Debevoise & Plimpton attorneys, including Paul Berger (here) a former Associate Director of the SEC Division of Enforcement. The article concluded that “settlements invoking disgorgement but charging no primary anti-bribery violations push the law’s boundaries, as disgorgement is predicated on the common-sense notion that an actual, jurisdictionally-cognizable bribe was paid to procure the revenue identified by the SEC in its complaint.” The article noted that such “no-charged bribery disgorgement settlements appear designed to inflict punishment rather than achieve the goals of equity.”
Your first reaction might be – the SEC could have charged Allianz with FCPA anti-bribery violations given the findings of the cease and desist order, but choose not to. If that is your reaction, based on the information in the cease and desist order, you are wrong.
Contrary to popular misperception, the FCPA’s anti-bribery provisions apply to foreign issuers only to the extent “mails or any means or instrumentality of interstate commerce” are used in connection with the improper payments. The SEC’s order does not contain any findings concerning any U.S. nexus in regards to the payments at issue.
The above paragraph, in addition to the notion that the SEC’s order does not contain any findings to suggest willful violations of the FCPA’s books and records or internal control provisions, helps explain the lack of DOJ involvement in the matter. Nevertheless, some (see here) used the “d” word (as in declination) in describing the DOJ’s decision not to bring charges against Allianz. However, for the reasons explained above, there appears to have been no criminal charges to bring against Allianz. This is not a declination.
In this regard, the Allianz enforcement action is similar to the 2011 enforcement action against Diageo (see here for the prior post).
According to this Wall Street Journal Corruption Currents post, “Claudius Sokenu of Arnold & Porter LLP conducted the company’s internal investigation and Joel Cohen of Gibson Dunn & Crutcher LLP was brought in subsequently to assist as the company neared a resolution.”
The Guidance And Declinations
Much of the buzz surrounding the Guidance concerns six anonymized examples of matters DOJ and SEC declined to pursue, including a discussion of the facts DOJ and SEC considered when choosing to decline the particular matters. However, contrary to the buzz, this is not first time, nor most detailed instance, of the DOJ publicly disclosing it FCPA “declination” decisions.
In 1983 in the context of FCPA reform hearings, a House Committee wanted to better understand and access the DOJ’s FCPA enforcement program. To this end, it requested a variety of information from the DOJ, including its closed FCPA cases. The DOJ responded with “summaries of all closed investigations of alleged FCPA violations” and its response detailed 83 investigations summarized over 18 pages.
In reading the summaries, it is interesting to note that several instances concern conduct that would very likely be the basis of an FCPA enforcement action in this current era. It is further interesting to observe from the summaries something old-fashioned on display. That is the DOJ being mindful of the evidentiary burdens it would be put to in bringing an action (either in persuading a grand jury to indict or ultimately prevailing at trial). For most of the FCPA’s history, the DOJ had two choices when faced with conduct that might implicate the FCPA: prosecute or do not prosecute. In this era, the DOJ has created and championed a system with a third option – non-prosecution and deferred prosecution agreements. Since introduced to the FCPA context in 2004, this third option is one of the more obvious reasons for the increase in FCPA enforcement.
More recently, the DOJ provided information concerning its FCPA “declination” decisions in follow-up answers to questions asked at the June 2011 House FCPA hearing. (See here for the prior post). The information DOJ provided to Congress then is substantively similar to the “declination” information included in Guidance.
Aside from not being as revolutionary as observers may think, the Guidance “declination” examples raise more questions than answers. For instance, in three of the examples, it is not even clear based on the information provided that the FCPA was violated. For instance, Example 1 at most indicates that a company received competitor bid information from a third party with connections to a foreign government and discovered various FCPA red flags during an internal investigation. Example 4 at most indicates that a customs agent engaged by a company’s foreign subsidiary made small bribe payments without any discussion of whether the company or its foreign subsidiary possessed the requisite knowledge under the FCPA’s third-party payment provisions. Example 5 at most indicates that a company, in connection with its acquisition of a foreign company, learned of potential improper payments without any discussion of whether the foreign company was subject to the FCPA’s jurisdiction. (For additional reading on this quality of the examples, see this recent Guidance alert authored by WilmerHale – specifically pgs. 8-9).
Moreover, in all of the declination examples in the Guidance, the factors motivating the “declination” decision – such as voluntary disclosure and cooperation, effective remedial measures, small improper payments – can often be found in many instances in which FCPA enforcement actions were brought.
The discussion of so-called “declinations” in the Guidance raises once again the pressing question of how the enforcement agencies actually define a “declination.” To my knowledge, the DOJ has never offered a definition, but perhaps in an effort to portray a fair and balanced FCPA enforcement program, the DOJ appears to be advocating an expansive definition. However, in the criminal context the term “declination” should be reserved for instances in which the DOJ concludes that it can prove beyond a reasonable doubt all the necessary elements of a cause of action, yet decides not to pursue the action.
With this definition, many of the Guidance “declination” examples are like a police officer “declining” to issue a speeding ticket in instances in which the driver was not speeding. This is not a “declination”- it is what the law commands – and such reasoning applies in the FCPA context as well.
Friday Leftovers
Once I started, it was hard to stop. This previous post linked to and provided brief excerpts from law firm client alerts 48 hours after release of the Foreign Corrupt Practices Act guidance by the DOJ and SEC. (See here). I updated the post throughout the week and it now contains links and excerpts to approximately 40 law firm alerts. If nothing else, the release of the FCPA guidance was news and demonstrates once again the existence of a vibrant and competitive FCPA industry. The clear consensus – among those who have publicly stated a position on the guidance – is the same as noted last week – the guidance offers little in terms of actual new substance and FCPA reform issues remain.
Several posts next week will explore various aspects of the guidance.
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As many in FCPA Inc. know, the release of the guidance occurred one day before a major industry event in Washington D.C. It was at this event last year that Assistant Attorney General Lanny Breuer announced the DOJ’s intention to issue guidance in 2012. (See here for the prior post).
Breuer once again spoke at the event and in his speech he largely carried forward the empty rhetoric from his other recent FCPA speech. (See here for the previous post). Breuer even used religious allegory in describing the DOJ’s FCPA enforcement program when he stated as follows. “[W]e in the United States are in a unique position to spread the gospel of anti-corruption, because there is no country that enforces its anti-bribery laws more vigorously than we do.”
Below are additional excerpts from his speech.
“As a result of our efforts over the past three-and-a-half years, robust FCPA enforcement has become part of the fabric of the Justice Department: Our global anti-corruption mission has seeped into the Criminal Division’s core. And there is no turning back. The FCPA is now a reality that companies know they must live with and adjust to; and this nation is better off for it.”
“We are focused on bribes of consequence – ones that have a fundamentally corrosive effect on the way companies do business abroad.”
In his speech, Breuer also gave props to the FCPA blogosphere when he stated as follows. “I’ve heard that there are even several blogs that keep track of each one of our cases, which I think is terrific.” It is terrific to fact-check FCPA enforcement agency speeches and to hold public officials accountable in enforcing a high-profile law.
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Speaking of the FCPA blogosphere (broadly speaking), several covered the industry event at which Breuer spoke.
See here from the Corporate Crime Reporter (focusing on DOJ and SEC declinations).
See here from Morrison & Foerster (a general discussion of DOJ and SEC comments).
See here from Howard Sklar at his Open Air Blog (apparently taking credit for the fact that the FCPA has always contained a corrupt intent element).
See here from Matteson Ellis at his FCPAmericas Blog (general discussion of issues).
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Breuer (along with other FCPA notables) also recently spoke at a Federalist Society event in Washington, D.C . See here for the writeup by Main Justice (an on-line news agency). For more on the event, see here from Law360.
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The DOJ’s FCPA website (here) has always contained a list of its FCPA Opinion Procedure Releases. Recently, the site was updated to provide a useful subject-matter index of the releases (here) as well as summaries (here).
The Guidance Press Conference
The Foreign Corrupt Practices Act guidance (here) released yesterday by the DOJ and SEC was a year long effort, no doubt subject to multiple revisions and review, and was highly scripted.
Not so with the press conference yesterday by Assistant Attorney General Lanny Breuer and SEC Enforcement Division Director Robert Khuzami. This post highlights certain of the comments made by Breuer and Khuzami at the press conference and contains a few comments of my own.
Breuer began the conference by noting that the guidance represents the “most comprehensive effort ever [by the DOJ] to explain [its] approach to enforcement as to a particular statute.” He said that the DOJ strives to be “transparent” in this area and wants everyone to “understand why we prosecute cases as vigorously as we do and why we make our charging decisions.”
Khuzami added that the guidance should “clear up some myths about the types of conduct that get prosecuted.”
In response to a question whether the Chamber of Commerce should be satisfied with the guidance, Breuer stated that he called former Attorney General Michael Mukasey [who has lobbied on behalf of the Chamber for FCPA reform) prior to the conference and that the guidance reflects the Chamber’s suggestion for various hypotheticals. Breuer said that “any fair-minded person” should see the guidance as a “substantial step forward in transparency in a very real way.”
Breuer was asked specifically about an FCPA compliance defense and said such a defense would be “dangerous and antithetical to the way [the DOJ] pursues criminal justice cases.” Breuer stated that such a defense “runs the risk of a race to the bottom” and that there “can’t be an absolute defense.”
As to declinations and the inclusion in the guidance of various generic examples of apparent enforcement agency declinations, Breuer stated that the enforcement agencies “tried to provide clarity as to how [they] use [their] discretion” and that the guidance tries to give reader sa “fair sense of how we evaluate the cases.” Khuzami added that the declination “numbers are not really that important” but the principles behind the declinations are and that “companies can mold behavior” based on the declination examples given.
From my perspective, one of the more important statements made during the press conference was when Khuzami and Breuer spoke about how companies should spend compliance dollars.
In reference to the various hypotheticals in the guidance concerning travel and entertainment, Khuzami said that he heard from companies that they were spending compliance dollars to guard against these issues, that companies were spending a huge amount of resources on such issues and that such a focus was taking dollars away from compliance efforts as to high risk activity. Khuzami said that this was an argument he and Breuer have heard and that this argument “makes perfect sense.” Khuzami said that he was “interested in companies spending compliance dollars in the most sensible way” and he hoped that the guidance and the hypotheticals provided would help companies as to where they can “minimize investment and where they can maximize it.” Breuer added that the DOJ wants compliance programs “to address real matters of concern.”
One can interpret Khuzami’s and Breuer’s remarks on this topic as they like, but my interpretation was that they were saying that part of the reason why companies have such a high level of FCPA anxiety is not necessarily because of the FCPA or its enforcement, but rather the marketing and commentary by certain segments of FCPA Inc. If that was their intent and purpose, I agree.
Breuer next was asked whether the guidance will put an end to the Chamber’s concerns surrounding the FCPA and its enforcement. He said that “like with everything in life there is a process” and that the Chamber will probably want ongoing discussions about the FCPA and its enforcement and that the DOJ “welcomes that discussion.” Breuer said that the guidance was likely not “complete closure” as to various concerns regarding FCPA issues. Khuzami added that he “expects further commentary and proposal and expression of dissatisfaction” but that this “is the nature of the business we are in and an important part of the process.”
As to “foreign official” and the lack of a bright-line rule in the guidance, Khuzami said that they declined to draw a bright line because control of an enterprise can occur in different ways and that there are “many indirect ways of ownership and control.” Breuer did say that the guidance acknowledges that it is unlikely that less than 50% control will result in an enterprise being considered an instrumentality, but that there might “specific factors” that may make such an enterprise an instrumentality.
To those who are inclined to believe that the guidance represents anything new, Breuer said that the guidance “does not represent a change in policy” but it “gives others a window and greater guidance” as to the enforcement agencies policies. Khuzami agreed and said that Breuer’s comment was “absolutely right.” Khuzami said that the “real value [of the guidance] is its clarity and transparency” and that the guidance is a unique opportunity “to communicate directly with the regulated community.” He said that this opportunity does not always exist and that companies often receive information that is delivered and deciphered through counsel. Khuzami said that the real “value of the guidance is that [corporate] officials can put this on their desk and read it, understand it directly and not through others.” He said that this is the “great value” of the guidance. I agree and previously stated (here) that the guidance collects in one document information that was previously scattered and that in this way the guidance has substantial value and is easily accessible to anyone.
Breuer was next asked whether the enforcement agencies plan to update the guidance over time or whether it represents a one-time publication. Breuer stated that “for the foreseeable future” the guidance is it. He said that the public needs to be realistic as to the roles the DOJ has and that by devoting time to the guidance prosecutors were not spending time prosecuting cases. Khuzami added that rather than a “second-edition” that the guidance may be clarified over time through speeches or other commentary.