Will U.K. DPA’s Make A Difference?
Today’s post is from Kathleen Harris (a London based partner at Arnold & Porter). Prior to joining Arnold & Porter, Harris served (2008-2011) as Head of Fraud Business Group and Head of Policy at the U.K. Serious Fraud Office. In the post, Harris discusses the U.K.’s push towards deferred prosecution agreements. For more on this topic see this recent post (as well as prior posts mentioned therein).
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Will U.K. DPA’s Make A Difference?
Kathleen Harris
Deferred Prosecution Agreements (“DPAs”) and Non-Prosecution Agreements are used to great effect by the Department of Justice in the United States whereas they are not currently available as an enforcement tool in the UK. On 23 October 2012 the UK’s Ministry of Justice (MoJ) announced (here) that it will legislate to introduce DPAs in England and Wales. Clearly, the UK authorities wish to emulate the successful use of this enforcement tool across the Atlantic. However the model of DPA proposed for introduction in the UK is very different to the US prototype and there is a question mark as to whether they will prove to be as effective here as they are in the US..
Under the MoJ’s proposal , UK DPAs will only be available to organizations (commercial or otherwise) which are alleged to have committed economic crime, in particular fraud, bribery (specifically offences under the Bribery Act 2010), and money laundering. They will not be available to individuals at all, nor will they be available to organizations which are alleged to have been involved in non-economic crime. In the same way as the US, UK DPAs will entail a voluntary agreement with a prosecutor whereby, in return for complying with a range of conditions, the prosecutor will defer a criminal prosecution and if, at the end of the deferral period, the prosecutor is satisfied that the conditions have been fulfilled, there will be no prosecution.
However, the MoJ has consciously distanced itself from US DPAs on a number of key points, notably in relation to the level of judicial involvement and transparency. The MoJ stated as follows.
“Although the US model has been in use for over 20 years, in its current form it would not be suitable for the constitutional arrangements and legal traditions in England and Wales … the Government remains of the view that the US model offers a good example of the effective use of a voluntary agreement approach, albeit in a very different legislative context. However, our proposals will ensure a greater level of judicial involvement and transparency throughout the DPA process in order to command public confidence.”
With regard to the level of judicial involvement, the MoJ states that “under our plans, the judiciary will play a vital independent role in this process to ensure that DPAs are properly scrutinised, transparent and in the interests of justice. They will be empowered to block them if they do not agree that they are an appropriate response to the organisation’s wrongdoing.”
With regard to the level of transparency, the MoJ states that “there will be public scrutiny of the process – the public will know what wrongdoing has taken place and the sanctions for it, including any penalty that has been paid. The final hearing will be held in open court and the final agreement will be published by the prosecutor.”
The arguments for greater judicial oversight of the DPA regime in the UK than is the case in the US have been well rehearsed but whilst it is open to judges to set aside the agreement reached between company and prosecutor and to alter its terms, there will be understandable reluctance on the part of corporates to embark upon a course of action with such an uncertain outcome. This uncertainty will deter self reporting and self investigation, both of which are required if UK prosecutors are to tackle economic crime as effectively as their US counterparts.
Greater transparency is to be welcomed. It is a valid criticism of the Civil Recovery Orders obtained by the Serious Fraud Office against corporates in recent years, that there is little or no information disclosed to allow the public to understand the offending conduct that gave rise to the criminal property made subject to the order. This undermines faith in the justice system. In the US a lack of transparency and an absence of checks on prosecutorial discretion has led to recent judicial criticism of the operation of the DPA regime. Transparency ensures that all those with an interest in the matter, and especially victims, can see that the outcome is just and fair
It may be that the guidance that has been promised by the MoJ to accompany the proposed UK legislation will help to clarify areas of uncertainty and allow corporates, practitioners, and the wider public to understand how the decision making process will work. In particular the guidance should encourage transparent settlements and ensure victims are compensated. However, justice requires each case to be decided on its own facts and no guidance can anticipate all relevant factors. Accordingly, decisions will require the judicious application of prosecutorial discretion and in reality may lead to more challenges against the use of this discretion if sufficient safeguards are not in place to protect against potentially overzealous decision making to ensure large financial penalties. The wider the scope of such discretionary decision making the greater the uncertainty and the lesser the transparency.
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This prior post titled “It Ought to Stop” discusses various aspects of the FCPA conference business. The Corporate Crime Reporter (here) picks up the issues as well and discusses how the press is largely being shut out from the FCPA conference later this week in Washington, D.C., including as to several panels in which public servant DOJ and SEC officials are speaking.
The U.K. Moves One Step Closer To The “Facade” Of Enforcement
Prior posts here, here, here and here have tracked the desire of United Kingdom law enforcement agencies to import deferred prosecution agreements (DPAs). In response to the U.K. Ministry of Justice’s (“MoJ”) open consultation process, I submitted this letter suggesting that the MoJ should say no to DPAs in the Bribery Act context. Among other things, I noted that in its consultation paper, the MOJ relied upon several unfounded assertions when discussing use of DPAs in the U.S.
I also posed the following questions the MoJ should consider during its consultation process. “Why does a law with an adequate procedures defense require the third option of a deferred prosecution agreement (the first two options being prosecute vs. not prosecute)? If a corporate has adequate procedures, but an isolated act of bribery nevertheless occurs within its organization, the corporate presumably would not face prosecution under the Bribery Act. This seems like a just and reasonable result and there is no need for a third option in such a case. On the other hand, if a corporate does not have adequate procedures (thus demonstrating a lack of commitment to anti-bribery compliance) and an act of bribery occurs within its organization, it presumably would face prosecution under the Bribery Act. This seems like a just and reasonable result. Does a third option really need to be created for corporates who do not implement adequate procedures?”
Last week, the MOJ issued it consultation response (found here). Despite stating in the Executive Summary that its response “summarises the responses” received, no where in the response does the MoJ address the questions I posed.
The MoJ’s response makes much of the fact that “respondents overwhelmingly welcomed the proposals to create a new tool for prosecutors to tackle economic crime, with 86% of respondents agreeing that Deferred Prosecution Agreements have the potential to improve the way in which corporate economic crime is dealt with and would enable prosecutors to bring more cases to justice.”
This high percentage is hardly surprising. As indicated by Annex A of the MoJ consultation response, law firms were by far the largest category of the 75 respondents. In this regard, the MoJ’s response “poll” is like taking a poll of car dealers and car manufacturers asking them if they are in favor of new and unique ways to sell cars. Likewise, both the MoJ and law firms benefit from alternative resolution vehicles such as DPAs. However, the alternate reality that is DPAs harm other stakeholders and undermine the rule of law and justice. This is becoming increasingly clear in the U.S. and I predict will become clear as well in the U.K. with the passage of time.
The most revealing part of the MoJ’s consultation response concerns the “appropriate level of evidence that prosecutors would need in order to satisfy themselves that entering into a DPA would be appropriate. The response notes that there was disagreement as to whether the test for entering into a DPA should “be the same test as for bringing a prosecution (a “realistic prospect of conviction”) or whether a lower evidential threshold would suffice.”
The MoJ punts on this issue, yet implicitly endorses a lower evidential threshold. Its consultation response states as follows. “With regards to the evidential test, we consider that this should be included in the DPA Code of Practice for Prosecutors [yet more guidance that the MoJ says is forthcoming] and must set a sufficiently high threshold to establish a real threat of future prosecution for the other party. However, the exact contents of the DPA Code of Practice for Prosecutors will be a matter for those responsible for developing it.”
By endorsing a system whereby lower thresholds of proof will suffice to resolve a corporate “criminal” enforcement action, the U.K. has moved one step closer to a “facade” of enforcement.
In the concluding section of my 2010 article “The Facade of FCPA Enforcement” (here), I stated that among the reasons why the facade of FCPA enforcement matters is “the increasing frequency by which other nations are modeling enforcement of their own bribery laws on U.S. enforcement methods and theories.” I warned that a “global facade of enforcement” will follow unless these methods are corrected here in this country. These methods have not been corrected here at home. Indeed, as noted in this recent post, Assistant Attorney General Lanny Breuer recently defended the DOJ’s use of NPAs and DPAs. I have argued here, here and elsewhere that use of NPAs or DPAs in the FCPA context allow “under-prosecution” of egregious instance of corporate bribery while at the same time facilitate the “over-prosecution” of business conduct.
The global push for alternative resolution agreements I warned about in the “Facade of FCPA Enforcement” is just beginning. As noted in this recent Irish Times article, there is now discussion of importing these agreements into Irish law. And who can blame the Irish?
Alternative resolution vehicles allow law enforcement agencies to pad enforcement statistics creating the appearance that such “enforcement” actually accomplishes a worthy objective. How will Irish law enforcement authorities keep pace with the U.S. and (now the English) if it has fewer options? If its enforcement statistics are lower, the Irish will be shamed by civil society organizations and others (who appear to place a premium on quantity of enforcement vs. quality of enforcement).
As evidence that DPAs are a wanted device in this new “global arms race” (i.e. which country can bring the most bribery and corruption enforcement actions) the MoJ says that obtaining DPAs will be a “prize.” Specifically, the MoJ consultation response states as follows. “We will now forward legislative provisions to introduce DPAs in England and Wales in the Crime and Courts Bill, which is currently making its way through Parliament. The prize will be a more just and effective system for dealing with economic crime, where wrongdoers are identified and brought to justice as commonly as for other offences.” (emphasis added). Further to this issue, last week U.K. Solicitor General Oliver Heald stated (here) as follows. “DPAs will be a swifter, more nimble way to conduct enforcement.”
The global facade of enforcement is beginning to take hold. Does anyone else care?
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Even though this post has been critical of the MoJ for moving forward on DPAs, the following points remain relevant.
As highlighted in this previous post, the U.K. has rejected non-prosecution agreements – a resolution vehicle that has been used to resolve several FCPA enforcement actions. As also highlighted in the previous post, even though the U.K. is moving forward on DPAs, its proposed model is not the U.S. model. Rather, the U.K. model envisions judicial involvement in the DPA process from an early stage whereby the proposed DPA is considered by the judiciary at a preliminary hearing before it returns for final judicial approval.
Indeed, the U.K. Solicitor General recently stated (here) as follows. “We decided to build on the U.S. model by formulating proposals which ensure a greater level of judicial involvement, from an earlier stage, as well as greater levels of transparency in order to command the confidence of the public.”
Assistant Attorney General Lanny Breuer On …
Yesterday, Assistant Attorney General Lanny Breuer spoke at IBC Legal’s World Bribery & Corruption Compliance Forum in London. See here for his remarks. Breuer touched upon a number of topics (but not FCPA guidance as noted by the FCPA Blog here), including the following as excerpted below.
General
“I am asked to speak about efforts in the United States to fight foreign bribery perhaps more than on any other subject, and all over the world.”
“As you may know, no criminal FCPA case can be brought in the United States without the Fraud Section’s authorization. I have said before that I personally believe our FCPA work is so important. It helps to level the playing field for U.S. and foreign companies, and motivates corporations to create genuine cultures of compliance. Moreover, corruption has such negative effects, particular in emerging economies, that we must use every tool at our disposal to fight it. Not only does corruption corrode the public trust and weaken democratic institutions, but it also creates gaps in government structures that organized criminal groups and terrorist networks can exploit. The FCPA, which has been on the books for approximately 35 years, was the first effort of any nation to specifically criminalize the act of bribing foreign officials. But only in the last several years has the law become a strong enforcement tool.”
“In recent years, we have witnessed a significant awakening to the problem of corruption around the globe. Russia, China and India are taking foreign bribery more seriously than ever before; the U.K. has an important new Bribery Act; and, perhaps due in part to United States enforcement efforts, companies and individuals doing business around the world are coming to appreciate that they will be held accountable for the way they conduct business with foreign officials. In short, the world is moving in one direction only with respect to anti-corruption efforts. There is still plenty of work to be done. But we are making progress, and I hope and believe that we will continue to make strides in this area together.”
Asset Recovery
“Criminal enforcement is a critically important aspect of our anti-corruption work. But, in the Criminal Division, we have also been developing an asset forfeiture initiative – the Kleptocracy Asset Recovery Initiative – that involves civil actions against the proceeds of foreign official corruption. Attorney General Holder announced the initiative in Uganda in 2010, and my team and I have been building the initiative in the Criminal Division’s Asset Forfeiture and Money Laundering Section since then. Our theory is simple: Even if we cannot pursue you criminally in the United States – because we lack criminal jurisdiction, for example – corrupt leaders should not be permitted to use the United States as a safe haven for the proceeds of their corrupt activities. We have recently had our first Kleptocracy Initiative successes. In July, for example, we announced that we had secured a restraining order against more than $3 million in corruption proceeds related to James Onanefe Ibori, the former governor of the oil-producing Delta State in Nigeria; and, earlier this month, we executed restraints against an additional $4 million in Ibori assets, including the proceeds from the sale of a penthouse unit in the Ritz-Carlton in Washington, D.C. Ibori was previously convicted here in the United Kingdom on money laundering and fraud charges and sentenced to 13 years in prison. Another example involves two civil forfeiture complaints we have filed against approximately $70 million in assets allegedly belonging to Teodoro Nguema Obiang Mangue, a government minister for Equatorial Guinea and the son of that country’s president. According to the complaints, despite an official government salary of less than $100,000 per year, Minister Obiang corruptly amassed wealth of more than $100 million. Among the items that we are seeking to forfeit are a Gulfstream jet, a mansion in Malibu, Calif., and $1.8 million worth of Michael Jackson memorabilia.”
DPAs / NPAs
“As a result both of increased FCPA enforcement and increased policing of corporate conduct in general, I think that the culture of corporate compliance has improved in recent years. As I explained in a speech in New York City recently, until roughly 20 years ago, prosecutors in the United States, when they encountered corporate misconduct, were usually faced with a stark choice – either to indict, or walk away. That began to change in the 1990s, when the government started doing something new: agreeing to defer prosecution against the corporation in exchange for an admission of wrongdoing; cooperation with the government’s investigation, including against individual employees; payment of monetary penalties; and concrete steps to improve the company’s behavior. And, over the past decade, deferred prosecution agreements, or DPAs, have become an important part of corporate criminal law enforcement. I am aware that the U.K. government recently put forth a proposal to introduce DPAs as a way of resolving corporate cases in the U.K. Based on the United States experience, my sense is that the availability of DPAs here would represent a positive step forward. In the United States, the increased use of DPAs has meant far greater accountability for corporate wrongdoing. Whereas prosecutors often declined when their only choice was to indict or walk away, now companies know that avoiding the disaster scenario of an indictment does not mean an escape from accountability. […] DPAs and NPAs are appropriate in certain circumstances and, therefore, they can be useful alternatives to criminal indictments. But they cannot be a substitute for criminal charges.”
Individual Prosecutions
“As I have said repeatedly, the strongest deterrent against corporate wrongdoing is the prospect of prison time. That is why I have put such a high priority on making sure that individuals are prosecuted when the evidence warrants prosecution.”
Morgan Stanley
“A former managing director of Morgan Stanley, Peterson pleaded guilty to conspiring to evade the bank’s internal FCPA controls and was sentenced to prison in August. Because Morgan Stanley voluntarily disclosed Peterson’s misconduct, fully cooperated with our investigation and showed us that it maintained a rigorous compliance program, including extensive training of bank employees on the FCPA and other anti-corruption measures, we declined to bring any enforcement action against the institution in connection with Peterson’s conduct. Prosecutors need to be smart about how they use their discretion in the FCPA context, as in every context. And, as we did in the Peterson case, we always attempt to strike an appropriate balance between vigorous and responsible enforcement.”
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I had the pleasure to Chair the 2010 World Bribery & Corruption Compliance Forum in London. See here for my opening remarks.
In my remarks I stated as follows regarding NPAs and DPAs. “Non and deferred prosecution agreements share a common thread – they both remove, whether in whole or in part, an independent judiciary from a critical role in a transparent legal system founded on the rule of law – and that is ensuring that provable facts support each element of the crime alleged and ensuring that resolution specifics are in the public interest. In his recent Innospec sentencing remarks, Lord Justice Thomas cited a paper – “The Risk of Abusing a Dominant Position” – that notes, among other things, that the newly enacted SFO guidance on“alternative methods to the disposal of criminal investigations by way of negotiated pleas or other resolutions by corporate defendants” may “introduce some unintended risks of abuse.” I share this concern and assert that it is troubling when an area of law largely develops outside of the judicial system via privately negotiated agreements – agreements that corporates often feel compelled to enter into, regardless of facts or legal theories, mindful of the “sticks” the enforcement agencies posses. I support the study Transparency International (“TI”) has called for in its recent “Progress Report on the OECD Convention.” That report expresses a concern that negotiated settlements could be“questionable deals” between enforcement agencies and companies and it calls for procedures to make settlement terms subject to judicial approval independent from the prosecutor’s office.”
See here for my recent post on Breuer’s unconvincing defense of NPAs and DPAs.
Assistant Attorney General Breuer’s Unconvincing Defense Of DPAs / NPAs
Last week in this speech before the New York City Bar Association, Assistant Attorney General Lanny Breuer defended the DOJ’s frequent use of NPAs and DPAs. See here for video of the speech.
This post first contains excerpts of Breuer’s speech and then comments on it and the issues raised.
Breuer began his speech as follows. “Over the past three-and-a-half years, the Department of Justice has entered into dozens of DPAs, and non-prosecution agreements, or NPAs. I’ve heard people criticize them and I’ve heard people praise them. What I’m here to tell you, is that, along with the other tools we have, DPAs have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe. Though the U.S. Supreme Court blessed the concept of corporate criminal liability over 100 years ago – in New York Central Railroad Company v. United States – until roughly 20 years ago, we had only the blunt instrument of criminal indictment with which to attack corporate crime. Prosecutors faced a stark choice when they encountered a corporation that had engaged in misconduct – either indict, or walk away. In the 1990s, however, the government began doing something new: agreeing to defer prosecution against the corporation in exchange for an admission of wrongdoing, cooperation with the government’s investigation, including against individual employees, payment of monetary penalties, and concrete steps to improve the company’s behavior. And, over the last decade, DPAs have become a mainstay of white collar criminal law enforcement. The result has been, unequivocally, far greater accountability for corporate wrongdoing – and a sea change in corporate compliance efforts. Companies now know that avoiding the disaster scenario of an indictment does not mean an escape from accountability. They know that they will be answerable even for conduct that in years past would have resulted in a declination. Companies also realize that if they want to avoid pleading guilty, or to convince us to forego bringing a case altogether, they must prove to us that they are serious about compliance. Our prosecutors are sophisticated. They know the difference between a real compliance program and a make-believe one. They know the difference between actual cooperation with a government investigation and make-believe cooperation. And they know the difference between a rogue employee and a rotten corporation.”
Breuer further stated as follows. “One of the reasons why deferred prosecution agreements are such a powerful tool is that, in many ways, a DPA has the same punitive, deterrent, and rehabilitative effect as a guilty plea: when a company enters into a DPA with the government, or an NPA for that matter, it almost always must acknowledge wrongdoing, agree to cooperate with the government’s investigation, pay a fine, agree to improve its compliance program, and agree to face prosecution if it fails to satisfy the terms of the agreement. All of these components of DPAs are critical for accountability. Perhaps most important, whether or not a corporation pleads guilty … or enters into a DPA with the government, the company must virtually always publicly acknowledge its wrongdoing. And it must do so in detail. This often has significant consequences for the corporation, and it prevents companies from explaining away their resolutions by continuing to deny that they did anything wrong.”
Breuer concluded as follows.
“To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects. Sometimes – though, let me stress, not always – these presentations are compelling. In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct. I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.”
“When the only tool we had to use in cases of corporate misconduct was a criminal indictment, prosecutors sometimes had to use a sledgehammer to crack a nut. More often, they just walked away. In the world we live in now, though, prosecutors have much greater ability to hold companies accountable for misconduct than we used to – and the result has been a transformation in the culture of corporate compliance. In appropriate circumstances, large corporations, such as Siemens AG, must plead guilty for their crimes. In other cases, because the company has gone to extraordinary lengths to turn itself around, for example, or provided the government with extensive cooperation, a deferred prosecution agreement or non-prosecution agreement may be the best resolution. No matter what, individual executives and employees must answer for their conduct. And, perhaps most important of all, companies know that they are now much more likely to face punishment than they were when our choice was limited to indicting or walking away. Overall, this state of affairs is better for companies, better for the government, and better for the American people.”
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Let’s probe the two reasons why the “old” system, in which the DOJ either brought criminal charges or didn’t, seems to trouble Breuer.
First, he stated as follows. “Prosecutors faced a stark choice when they encountered a corporation that had engaged in misconduct – either indict, or walk away.” There is absolutely, positively nothing wrong with this choice. Bringing criminal charges against person (natural or legal) should not be easy. It should be difficult. Our founding fathers recognized this as a necessary bulwark against an all powerful government. There is no legal or policy reason warranting a change from such a fundamental and long-lasting principle.
Second, Breuer, without specifically mentioning the prosecution, carries forward the Arthur Anderson effect that has guided DOJ policy for over a decade ((i.e. the notion that indicting a company will result in a corporate death sentence). Breuer stated as follows. “I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake.” However, as highlighted in this recent guest post, Gabriel Markoff recently debunked the Arthur Anderson effect as factually false.
Breuer is clearly troubled, with good reason, by traditional notions of corporate criminal liability. However, rather than seek substantive solutions to this issue, either on a statute by statute basis (such as a compliance defense to the FCPA – see here for “Revisiting a Foreign Corrupt Practices Act Compliance Defense”) or more comprehensively, Breuer instead defends an alternate reality that is equally problematic.
Use of NPAs and DPAs to resolve alleged corporate criminal liability presents two distinct, yet equally problematic public policy issues.
The first is that such vehicles, because they do not result in any actual charges filed against a company, and thus do not require the company to plead to any charges, allow egregious instances of corporate conduct to be resolved too lightly without adequate sanctions and without achieving maximum deterrence. On this issue, Breuer states in his speech that “when a company enters into a DPA with the government, or an NPA for that matter, it almost always must acknowledge wrongdoing.” This is a false statement. While the standard NPA and DPA templates do contain a section concerning acceptance of responsibility, the acceptance is as to conduct and alleged facts, not actual legal charges.
The second is that such vehicles, because of the “carrots” and “sticks’ relevant to resolving a DOJ enforcement action (for more on this issue, see “The Facade of FCPA Enforcement – here), often nudge companies to agree to these vehicles for reasons of risk-aversion and efficiency and not necessarily because the conduct at issue actually violates the law. Breuer essentially admitted as such in his speech when he stated as follows. “[Companies] know that they will be answerable even for conduct that in years past would have resulted in a declination.”
Thus, use of NPAs or DPAs allow “under-prosecution” of egregious instance of corporate conduct while at the same time facilitate the “over-prosecution” of business conduct.
The alternate reality that Breuer defends is defined by the absence or practical absence of judicial scrutiny of many DOJ enforcement theories. Thus, by supporting use of DPAs and NPAs, Breuer is advocating an enforcement climate that insulates DOJ’s enforcement theories from judicial scrutiny in all but the rarest of circumstances. It is not hard to see why the DOJ favors such a system. Such a system makes its job easier and places the DOJ in the role of prosecutor, judge and jury all at the same time. Former Attorney General Alberto Gonzales rightly observed as follows. “In an ironic twist, the more that American companies elect to settle [through DPAs and NPAs] and not force the DOJ to defend its aggressive interpretation of the [FCPA], the more aggressive DOJ has become in its interpretation of the law and its prosecution decisions.” (See here for the prior post).
In short, Breuer’s defense of DPAs and NPAs was unconvincing. The Assistant Attorney General is clearly troubled by traditional notions of corporate criminal liability. However, rather than seek substantive solutions to this issue, Breuer instead defended an alternate reality that is equally problematic. This alternative reality benefits the DOJ, benefits the private bar, but harms other stakeholders and undermines the rule of the law and justice.
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In his speech, Breuer also supported the premise underlying an FCPA compliance defense when he stated as follows. “Companies also realize that if they want … to convince us to forego bringing a case altogether, they must prove to us that they are serious about compliance.” In my “Revisiting a Foreign Corrupt Practices Act” article (here), I demonstrate that despite the DOJ’s institutional opposition to an FCPA compliance defense, the DOJ already recognizes a de facto FCPA compliance defense albeit in opaque, inconsistent, and unpredictable ways. Breuer’s statement once again demonstrates the truth of this position. However, unpredictable de facto defenses have no place in a justice system based on the rule of law. Thus, an FCPA compliance defense accomplishes, among other things, the policy goal of removing factors the DOJ already considers in assessing corporate criminal liability from the opaque, inconsistent, and unpredictable world of DOJ decision making towards a more transparent, consistent and predictable model.
Add Alberto Gonzalez To The List Of Former High-Ranking DOJ Officials Who Support An FCPA Compliance Defense
In my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (Wisconsin Law Review – here), I highlight that against the backdrop of the DOJ’s current institutional opposition to an FCPA compliance defense, there is growing chorus of former DOJ officials who support a compliance defense. This group includes a former Attorney General (Michael Mukasey), a former Deputy Attorney General (Larry Thompson), a former Chief of the DOJ’s FCPA Unit (Joseph Covington), and former high-profile corporate crime prosecutor (Andrew Weissmann).
Add another former Attorney General to the list.
In a May speech (here) to the Lawyers for Civil Justice, Alberto Gonzalez (Attorney General 2005-2007) stated as follows. “I do not support bribery, but I support reforms to the FCPA that adds a compliance defense and a willfulness requirement for corporate criminal liability.”
On this topic, Gonzalez stated, for instance, as follows.
“I think that companies have an obligation of due diligence and should have in place a strong compliance program – particularly when doing business in countries where corruption is routine and expected. Companies cannot purposefully remain ignorant. The question is how much do they have to do? I think if the company follows the DOJ Principles of Prosecution: 1) makes a voluntary disclosure of wrongdoing, 2) if there was no participation in the illegal conduct by senior management, 3) if there is full cooperation with the government, including providing evidence and information against employees, officers, directors, and agents of the company, 4) if the company implements remedial measures to prevent future violations, including disciplining culpable employees, implementing internal controls, and improving anticorruption training, and 5) if the company has in place a strong compliance program before the alleged behavior happened, then I question the fairness in going after the company for the unknown violations by an agent in a foreign land.” (emphasis added).
In his speech, Gonzales also offered this perspective from his time as Attorney General.
“Because of the increased American business activity overseas, we made a conscious decision during the Bush Administration to allocate more time and resources to FCPA enforcement. And we quickly discovered two important truths. One, the FCPA gives prosecutors tremendous discretion in defining its scope, and, thus, tremendous leverage in charging decisions. Two, corporations do not like to be investigated by the Justice Department or the SEC for violations of the FCPA. It’s bad for business. So, these cases often settled, charges were dropped in exchange for either nonprosecution or deferred prosecution agreements. In an ironic twist, the more that American companies elect to settle and not force the DOJ to defend its aggressive interpretation of the Act, the more aggressive DOJ has become in its interpretation of the law and its prosecution decisions.”
For more on this dynamic, see my 2010 article “The Facade of FCPA Enforcement” (Georgetown Journal of International Law – here).