Assessing DOJ Transparency
Recently Assistant Attorney General Leslie Caldwell gave this speech at an event hosted by New York University Law School’s Program on Corporate Compliance and Enforcement.
The focus of the speech, as stated by Caldwell, was “the Criminal Division’s efforts to increase transparency in its corporate prosecutions.” It is an important topic as transparency is a fundamental tenet of the rule of law.
Caldwell’s speech was mostly forward-looking so time will tell how transparent the DOJ will be in the future including in the FCPA context.
This post assesses DOJ transparency as it relates to Foreign Corrupt Practices Act enforcement over the past several years and highlights that DOJ transparency is as foggy as the road in the picture.
When reading the below excerpts from Caldwell’s speech, you may want to keep the following points in mind.
Since 2010, the DOJ has used NPAs or DPAs to resolve approximately 85% of corporate FCPA enforcement actions. These resolution vehicles are negotiated behind closed doors in Washington, D.C. and thus are anything but transparent.
Caldwell states in her speech that “the factual statements filed with resolution documents typically include a detailed recitation of the misconduct, as publicly admitted by the company.” However, you can judge for yourself whether the following FCPA NPAs contain “a detailed recitation of the misconduct”.
Ralph Lauren NPA (3 page statement of facts most of which identifies relevant parties);
NORDAM Group NPA (2.5 page statement of facts most of which identifies the relevant parties);
Lufthansa Technik NPA (no statement of facts relevant to the entity).
In any event, kudos to Caldwell for recognizing that “opaque” enforcement “carries little deterrent effect.”
The article “The Facade of FCPA Enforcement” highlights four pillars which contribute to the “facade” of FCPA enforcement. One pillar highlighted was “same facts, different result.” The article used what were substantively carbon-copy enforcement actions against Lucent Technologies and UTStarcom, which nevertheless led to materially different charges and penalties, to make the point that FCPA charging decisions are not based solely on the facts and law, but less transparent factors as well.
In any event, kudos to Caldwell for recognizing that “unreasoned” enforcement “carries little deterrent effect.”
Further to the point that FCPA charging decisions seem not to be based solely on the facts and law, but less transparent factors as well, consider the BAE enforcement action. Despite the DOJ alleging conduct that clearly implicated the FCPA’s anti-bribery provisions, BAE (a large U.S. defense contractor) was not charged with violating the FCPA.
Consider also the mysterious conclusion to James Giffen enforcement action. Giffen was criminally charged with making more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with certain oil transactions in which various American oil companies acquired valuable rights in Kazakhstan.” However, Giffen’s defense was that his actions were made with the knowledge and support of the CIA, the National Security Council, the Department of State and the White House. In 2010, the enforcement action took a sudden and mysterious turn when Giffen agreed to plead guilty to a one-paragraph superseding indictment charging a misdemeanor tax violation. Perhaps one day the reasoning behind the sudden turn of events will become transparent.
Consider also certain subtle statements in the FCPA Guidance relevant to transparency.
Footnote 379 of the Guidance states as follows. “Historically, DOJ had, on occasion, agreed to DPAs with companies that were not filed with the court. That is no longer the practice of DOJ.”
Page 75 of the Guidance suggests that the DOJ has used NPAs in individual FCPA-related cases (e.g., “If an individual complies with the terms of his or her NPA, namely, truthful and complete cooperation and continued law-abiding conduct, DOJ will not pursue criminal charges.” The Guidance also states that “in circumstances where an NPA is with a company for FCPA-related offenses, it is made available to the public through DOJ’s website.” (emphasis added). This statement suggests that when an NPA is with an individual for FCPA-related offenses, the agreement is not made public.
Indeed, as highlighted in the prior post “Secret FCPA Enforcement” there have been whispers in the FCPA bar for years about secret FCPA enforcement. As noted in the prior post, not once, not twice, but three times I sought clarification from the DOJ of the above Guidance statements.
In each instance there was no response. So much for that transparency thing.
Indeed, a key qualifier in Caldwell’s recent speech about transparency was the following statement: “we [the DOJ] usually publicly announce corporate resolutions and pleas, and make the documents available on our website”) (emphasis added).
Last, but not least before turning to actual excerpts from Caldwell’s speech, is the topic of so-called DOJ declinations. As evidence of the DOJ’s purported transparency, Caldwell states that the FCPA Guidance “has a section on declinations and provides anonymized examples of real FCPA cases in which we declined to bring a prosecution.”
However, as highlighted in the article “Grading the FCPA Guidance” 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. Moreover, in all 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.
At last to the excerpts in Caldwell’s speech.
“One of my priorities in the Criminal Division is to increase transparency regarding charging decisions in corporate prosecutions. I know that many corporate counsel have concerns about what they perceive as a lack of transparency in how the department decides when to bring charges, or to seek some lesser resolution.
Greater transparency benefits everyone. The Criminal Division stands to benefit from being more transparent in part because if companies know the benefits they are likely to receive from self-reporting or cooperating in the government’s investigation, we believe they will be more likely to come in and disclose wrongdoing and cooperate. And on the flip side, companies can better evaluate the consequences they might face if they do not receive cooperation credit. Transparency also helps to reduce any perceived disparity, in that companies can compare themselves, as best as possible, to other similarly-situated companies engaged in similar misconduct.
There are often limits to how much we can disclose about our investigations and prosecutions—particularly for investigations in which no charges were brought—but we are trying to be more clear about our expectations for corporate cooperation and the bases for our corporate pleas and resolutions.
One of the themes of today’s program is the shaping of corporate culture. Shaping corporate culture through deterrence is an area where the Criminal Division plays an important role. One important purpose of criminal prosecution of corporations is the deterrence of future would-be wrongdoers. But to achieve deterrence, the Criminal Division must transparently communicate its expectations and the consequences of corporate misconduct. An opaque or unreasoned enforcement action carries little deterrent effect.
We recognize the productive role we can play in influencing corporate conduct, and we take seriously the effects of our enforcement actions. Wherever possible, we try to communicate clear guidance to the corporate community through our criminal resolutions, our interactions with companies and their counsel during an investigation or prosecution and other channels such as conferences like this one.
During my first year in leading the Criminal Division, we have tried to make as clear as possible what we expect from those companies that choose to cooperate. Put simply, if a company wants cooperation credit, we expect that company to conduct a thorough internal investigation and to turn over evidence of wrongdoing to our prosecutors in a timely and complete way. Perhaps most critically, we expect cooperating companies to identify culpable individuals—including senior executives if they were involved—and provide the facts about their wrongdoing.
As this sophisticated audience knows, there is no “off the rack” internal investigation that can be applied to every situation at every company. Effective investigations must be tailored to the unique misconduct at issue and the circumstances of each company. But, there are hallmarks of all good internal investigations. Chief among them is the identification of wrongdoers. Prosecuting individuals, including corporate executives, for their criminal wrongdoing is a top priority for the Criminal Division. Corporations seeking cooperation credit should conduct their internal investigations with those principles in mind.
The mere voluntary disclosure of corporate misconduct—by itself—is not enough. All too often, corporations expect cooperation credit for voluntarily disclosing and describing the corporate entities’ misconduct, and issuing a corporate mea culpa. True cooperation, however, requires identifying the individuals actually responsible for the misconduct—be they executives or others—and the provision of all available facts relating to that misconduct.
Investigations must also be independent and designed to uncover the facts, not to spread company talking points or whitewash the truth. We expect that the complete facts about the wrongdoing will be provided, and in a timely way. As we work to be transparent, we expect transparency in return. Transparency is a two-way street, and we expect companies that are claiming to cooperate to walk the walk.
The Criminal Division, meanwhile, will conduct its own investigation. We will pressure test a company’s internal investigation with the facts we gather on our own, and we will consider the adequacy of an internal investigation when we evaluate a company’s claim of cooperation.
Let me be clear, however, the Criminal Division does not dictate how a company should conduct an investigation. If a company decides to conduct an internal investigation and seek cooperation credit, that company must determine how best to conduct its own internal investigation. Although we can provide guideposts, the manner in which an internal investigation is conducted is an internal corporate decision.
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We recognize that information about the bases for our corporate guilty pleas and resolutions is an important reference point for companies that are evaluating whether to self-disclose a violation or cooperate. Corporations may wish for a formula or definitive matrix that could be applied in this context. But, while a rote formula might bring certainty and consistency, it would do so at the expense of the individualized justice that comes with thoughtful and nuanced prosecutorial decision-making.
For decades, the department has disclosed the factors that prosecutors must evaluate when considering corporate criminal charges and resolutions. The corporate prosecution principles were originally adopted two decades ago—in the Holder Memo, issued when now Attorney General Holder was the Deputy Attorney General—and have been refined through the years into the current Filip Memo, otherwise known as the Principles of Prosecution of Business Organizations.
This audience is no doubt versed in the comprehensive considerations laid out in the nine Filip factors, which are publicly available on the Internet. When applied to a particular case against a business organization, the factors could lead to charges, a deferred prosecution agreement or a non-prosecution agreement—known as DPAs and NPAs—or a declination.
Arriving at a corporate resolution requires a unique balancing of the Filip factors in each case. But this balancing does not take place in a prosecutorial vacuum. In virtually every instance, we invite company counsel to make a presentation regarding the application of the Filip factors in the case at hand before we make a charging decision. Again, wherever possible, we encourage an open and transparent dialogue between the company and our prosecutors at every stage.
In each of our corporate resolutions—be it a guilty plea, NPA or DPA—we provide an explanation of the key factors that led to our decision. The factual statements filed with resolution documents typically include a detailed recitation of the misconduct, as publicly admitted by the company. The actual agreements outline the factors that were significant in determining the type of resolution, such as the corporation’s cooperation—if any—and remedial measures. We usually publicly announce corporate resolutions and pleas, and make the documents available on our website.
In the future, you should expect that our resolutions will include even more detailed explanations of our considerations. This is a priority of mine. While these documents already provide significant insight into our thought processes, they will soon provide an even greater explanation of our analysis and conclusions.
In addition to their use as enforcement tools, our plea agreements, DPAs and NPAs provide a transparent explanation of the department’s expectations when it comes to compliance programs. Companies seeking to measure their own compliance programs need look no further than many of the resolutions we have made publicly available.
DPAs and NPAs provide explicit roadmaps for companies to get back on track, sometimes under the watchful eye of a monitor or court. There is perhaps no more transparent guidance to a specific corporation than the terms in a DPA or NPA, especially when we set forth remedial or compliance measures we expect.
These agreements have real teeth. When companies subject to a NPA or DPA are required to cooperate and fail to do so, or where they engage in other criminal conduct during the term of the agreement, the Criminal Division will not hesitate to tear up a DPA or NPA and file criminal charges, where such action is appropriate and proportional to the breach. The Criminal Division’s role is not just to set guideposts for companies that have engaged in significant misconduct, but to prosecute those corporations when they ignore those guideposts. Just as with individuals, companies are expected to learn from their mistakes. A company that is already subject to a DPA or NPA for violating the law should not expect the same leniency when it crosses the line again.
Over the course of my career, I have found that when it comes to affecting corporate conduct, nothing has a more powerful impact than concrete examples. Such examples have traditionally stemmed from publicized corporate prosecutions, as it is more challenging to publicize investigations in which we decline to file charges. The department has maintained a long-standing practice not to discuss non-public information on matters it has declined to prosecute, based in large part on concerns about the privacy rights and interests of uncharged parties. There are serious privacy concerns inherent in publicly identifying an individual who was implicated in our criminal investigation if we eventually decide not to bring charges. Indeed, internal department policy prohibits us from publicly identifying those individuals who have been investigated, but not charged.
Likewise, companies often strongly oppose publicity that they were under Justice Department scrutiny, even if we ultimately declined to prosecute.
The challenge we are currently working to address is how to publicize these cases while taking into consideration the legitimate concerns of the companies and individuals who were under investigation. We are looking for ways to better inform the community about cases in which we decline to prosecute, as there is often as much to learn from a decision not to bring charges as a decision to prosecute. We seek not just to prosecute, but to encourage and reward good corporate citizenship, and increasing transparency can play an important role in achieving that goal.
A significant example of our efforts in this regard is the Foreign Corrupt Practices Act Resource Guide published by the Criminal Division and the Securities and Exchange Commission. The Guide has a section on declinations and provides anonymized examples of real FCPA cases in which we declined to bring a prosecution. Although each potential case is based on its own unique circumstances and facts, the examples in the Guide provide useful insight into the circumstances of real-world declination decisions.
The Criminal Division’s FCPA website continues this effort at transparency by posting relevant enforcement actions and opinion letters. The department responds to opinion requests concerning enforcement intent about prospective actions that might violate the anti-bribery provisions of the FCPA. This procedure enables companies and individuals to request a determination in advance as to whether proposed conduct would constitute a violation of the FCPA. These opinion letters are publicly available on our website. While they are binding only on the party that makes the request, they provide significant guidance on the department’s approach to enforcing the FCPA.
Through these and other steps, the Criminal Division has prioritized increased transparency in our corporate investigations and prosecutions. We strive to disclose more information, to the extent we can, while protecting ongoing investigations and privacy rights. And we encourage companies to do the same—to self-disclose criminal violations and to cooperate with our investigations—or risk the consequences.”
Assistant Attorney General Caldwell – “We Do Not Expect Companies To Aimlessly Boil The Ocean”
The article “Foreign Corrupt Practices Act Ripples” discusses how settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement.
The largest component of FCPA enforcement or scrutiny tends to be pre-enforcement action professional fees and expenses. Where an analysis is possible (it is not possible in all cases because not all companies disclose pre-enforcement action professional fees and expenses) the ratio of pre-enforcement action professional fees and expenses to settlement amount is often 3, 5, 7 times (or even higher) actual settlement amounts.
In the minds of many, pre-enforcement action professional fees and expenses have spiraled out of control and have become a boondoggle for FCPA Inc.
As highlighted in “A Foreign Corrupt Practices Act Narrative,” in 2013 Charles Duross (at the time the DOJ’s FCPA Unit Chief) called out the industry at an American Bar Association event. Duross suggested that often company lawyers are seeking to over-do-it through a global search of operations for FCPA issues. He discussed a case in which a company and its professional advisors came to a meeting with a global search plan and he said “no, no, no, that is not what I want.” He indicated that the lawyers and other professional advisors in the room ‘looked unhappy,’ but that the general counsel of the company was happy.”
The above “Narrative” article also highlighted calls for greater restraint from various FCPA lawyers.
As highlighted in this prior post, one of most interesting portions of the December 2014 Avon deferred prosecution agreement was the following statement by the DOJ.
“The Department also considered that the Company, taking into account its own business interests, expended considerable resources on a company wide review of and enhancements to its compliance program and internal controls. While the Company’s efforts in this regard were taken without Department request or guidance, and at times caused unintended delays in the progress of the Department’s narrower investigations, the Department recognizes that the Company’s efforts resulted in important compliance and internal controls improvements.”
Against this backdrop, last week Assistant Attorney General Leslie Caldwell gave this speech at an event hosted by New York University Law School’s Program on Corporate Compliance and Enforcement. As relevant to the topic of this post, Caldwell stated:
“All too often, criticism is leveled against the Justice Department for purportedly causing companies to spend years, and many millions of dollars, investigating potential violations. This is particularly true in the FCPA context where the need for international evidence can add to the expense and burden of an investigation. Critics wrongly question the wisdom of disclosing misconduct and cooperating with the government in light of what they perceive to be the department’s requirement that companies then must conduct unnecessarily costly, time consuming and widespread investigations.
There is no question that some cooperating companies spend large sums of money investigating potential misconduct and correcting internal controls issues that allowed the misconduct to occur. The decision to incur those costs, however, is one made by those companies, not a requirement of the department. When a company chooses to cooperate with the government, the manner in which the company approaches its cooperation, and its own investigation of the conduct, can significantly affect the length of the investigation and the costs incurred by the company.
Although we expect internal investigations to be thorough, we do not expect companies to aimlessly boil the ocean. Indeed, there have been some instances in which companies have, in our view, conducted overly broad and needlessly costly investigations, in some cases delaying our ability to resolve matters in a timely fashion.
For example, if a company discovers an FCPA violation in one country, and has no basis to suspect that violations are occurring elsewhere, we would not necessarily expect it to extend its investigation beyond the conduct in that country. On the other hand, if the same people involved in the violation also operated in other countries, we likely would expect the investigation to be broader.
This example is not intended to suggest the proper scope of an investigation of any given matter. My point instead is that, to receive cooperation credit, we expect companies to conduct appropriately tailored investigations designed to root out misconduct, identify wrongdoers and provide all available facts. To the extent a company decides to conduct a broader survey of its operations, that decision, and any attendant delay and cost, are the result of the company’s choices, not the department’s requirement.
To assist cooperating companies in appropriately targeting their investigations, to the extent possible, we will make clear to those companies our areas of interest. I tell my prosecutors that where possible, if it would not compromise our own investigation, we should share information about our investigation with a cooperating company to help focus the company’s internal inquiry. I encourage an open dialogue between company counsel and our prosecutors about the progress of the internal investigation. Companies that truly demonstrate a commitment to cooperation will find that this dialogue comes easily.”
Friday Roundup
In-depth, scrutiny alert, further Alstom-developments, quotable, and for the reading stack. It’s all here in the Friday roundup.
In-Depth
In November 2014, Dutch-based SBM Offshore resolved an enforcement action in the Netherlands. With a settlement amount of $240 million, the SBM Offshore enforcement action was one of the largest bribery-related enforcement actions of 2014 – regardless of country.
This recent article titled “The Cover-Up at Dutch Multinational SBM” in Vrij Nederland (a Dutch magazine) goes in-depth as to SBM’s scrutiny. The article has largely escaped the attention of Western media and the FCPA-related blogosphere, but is worth the time to read. The article begins as follows.
“The corruption scandal at Dutch multinational SBM Offshore, which in November reached a $240 million out-of-court settlement with the Dutch Public Prosecutor (OM), is much larger than thought, as testimony of a former employee now shows. The company has actively pursued a strategy of “containment” and has consistently misled the market. So why did the OM settle?”
Among other things, the article highlights the role of U.S. lawyers and law firms involved in the SBM representation.
Scrutiny Alert
In this recent article, the L.A. Times details, based on obtained documents, the expenditures involved in filming the movie Sahara. Among the expenditures, according to the article – “local bribes” within the Kingdom of Morocco. The article states:
“Courtesy payments,” “gratuities” and “local bribes” totaling $237,386 were passed out on locations in Morocco to expedite filming. A $40,688 payment to stop a river improvement project and $23,250 for “Political/Mayoral support” may have run afoul of U.S. law, experts say.
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According to Account No. 3,600 of the “Sahara” budget, 16 “gratuity” or “courtesy” payments were made throughout Morocco. Six of the expenditures were “local bribes” in the amount of 65,000 dirham, or $7,559.
Experts in Hollywood accounting could not recall ever seeing a line item in a movie budget described as a bribe.
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The final budget shows that “local bribes” were handed out in remote locations such as Ouirgane in the Atlas Mountains, Merzouga and Rissani. One payment was made to expedite the removal of palm trees from an old French fort called Ouled Zahra, said a person close to the production who requested anonymity.
Other items include $23,250 for “Political/Mayoral support” in Erfoud and $40,688 “to halt river improvement project” in Azemmour. The latter payment was made to delay construction of a government sewage system that would have interrupted filming.”
Further Alstom Developments
Yesterday, the U.K. Serious Fraud Office announced:
“Charges have been brought by the SFO against Alstom Network UK Ltd and an Alstom employee in phase three of its ongoing investigation.
Alstom Network UK Ltd, formerly called Alstom International Ltd, a UK subsidiary of Alstom, has been charged with a further two offences of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as two offences of conspiracy to corrupt contrary to section 1 of the Criminal Law Act 1977.
Michael John Anderson, 54, of Kenilworth in Warwickshire, who was working as a business development director for Alstom Transport SA in France, has been charged with the same offences.
The alleged offences are said to have taken place between 1 January 2006 and 18 October 2007 and concern the supply of trains to the Budapest Metro.
The first hearing in this case will take place at Westminster Magistrates’ Court on 12 May 2015.”
Quotable
In this recent speech, DOJ Assistant Attorney General Leslie Caldwell stated:
“Through deferred prosecution agreements and non-prosecution agreements – or DPAs and NPAs – in cases against companies, we are frequently able to accomplish as much as, and sometimes even more than, we could from even a criminal conviction. We can require remedial measures and improved compliance policies and practices. We also can require companies to cooperate in ongoing investigations, including investigations of responsible individuals. To ensure compliance with the terms of the agreements and to help facilitate companies getting back on the right track, we can impose monitors and require periodic reporting to courts that oversee the agreements for their terms.
Some of these outcomes may resemble remedies that can be imposed by regulators. But these agreements have several features that cannot be achieved by regulatory or civil resolutions.
Criminal Division resolutions require that an entity admit to its misconduct. Commerzbank, for example, admitted responsibility and agreed to a detailed statement of facts that was filed with the court. Whereas some regulators permit “no admit, no deny” resolutions – for legitimate reasons of their own – we require that individuals and entities acknowledge their criminal culpability if they are entering into a NPA, DPA or pleading guilty.
Where we enter into DPAs, a criminal information is filed with the court and prosecution of the information is deferred for the time of the agreement. Where a company fails to live up to the terms of its agreement, an information is already filed, and we can tear up the agreement and prosecute based on the admitted statement of facts. That’s a powerful incentive to live up to the terms of the agreements.
When we suspect or find non-compliance with the terms of DPAs and NPAs, we have other tools at our disposal, too. We can extend the term of the agreements and the term of any monitors, while we investigate allegations of a breach, including allegations of new criminal conduct. Where a breach has occurred, we can impose an additional monetary penalty or additional compliance or remedial measures. And let me be clear: the Criminal Division will not hesitate to tear up a DPA or NPA and file criminal charges, where such action is appropriate and proportional to the breach.
Obviously, not every breach of a DPA warrants the same penalty. We are committed to pursuing an appropriate remedy in each case, and we will calibrate the penalty we pursue to fit the nature of the violation and the corporation’s history and culture. And we will do so transparently, with an explanation of what factors led to the resolution in each case.
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[C]riminal prosecution is the best manner in which to punish culpable individuals. And the seriousness of potential or actual punishment for felony criminal convictions, including incarceration for individuals, and the stigma and reputational harm associated with criminal charges or convictions, serve as powerful deterrents.”
For the Reading Stack
This Wall Street Journal Risk & Compliance post suggests that the ongoing corruption investigations in Brazil are becoming full-employment events for FCPA Inc. According to the article:
“Multinationals with operations in Brazil are making frightened calls to their lawyers, as the country’s spreading corruption scandal reaches more companies.
[…]
Attorneys say companies with operations in Brazil are scrambling to assess whether they could get swept up in the probe. “They are very worried,” said Ruti Smithline, an anti-bribery specialist at Morrison & Foerster LLP. “The investigation is so widespread. If you have business in Brazil, the likelihood that this is going to touch you in some way is very high.”
Companies are racing to discover questionable activities before authorities in Brazil do. “They are asking: ‘Is our house clean? If authorities look at these relationships what are they going to find?’” Ms. Smithline said.”
The WSJ post asserts:
“[Brazil’s new anti-corruption law, the Clean Companies Act] holds companies to even higher standards and stricter liability than the U.S. Foreign Corrupt Practices Act. For example, unlike the FCPA, under the Brazilian law a company can be prosecuted for corruption even if didn’t realize it was paying a bribe and had a great compliance program in place.”
This is a most off-target statement as Brazil law does not even provide for corporate criminal liability like the FCPA. Moreover, business organizations are often the subject of FCPA enforcement actions even though the company had in place pre-existing compliance policies and procedures.
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Miller & Chevalier’s FCPA Spring Review 2015 is here.
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A good weekend to all.
The Numbers Do Not Support Chair White’s Statement Regarding Individual FCPA Enforcement Actions
In this recent testimony before the House Financial Services Committee, SEC Chair Mary Jo White stated: “as in other areas, the Commission is focused on holding individuals accountable in FCPA cases.” (emphasis added).
The numbers do not support White’s statement.
As highlighted in this recent post, since 2008 approximately 85% of SEC corporate FCPA enforcement actions have not (at least yet) resulted in any related SEC action against company employees.
Indeed, prior to the SEC’s November 2014 FCPA enforcement action against Stephen Timms and Yasser Ramahi (individuals who worked in sales at FLIR System Inc.) there was a 2.5 year gap in any SEC individual enforcement actions. During that 2.5 years, the SEC brought 19 corporate enforcement actions and not one involved any related SEC action against company employees.
As to the accountability portion of White’s statement, the two SEC individual FCPA enforcement during the last three years (the above Timms / Ramahi action and the January 2015 action against former PBSJ International employee Walid Hatoum) involved SEC administrative orders in which the individuals were allowed to settle without admitting or denying the SEC’s findings.
It is debatable what is more concerning.
A political actor making assertions without knowledge of and/or understanding of the underlying facts.
Or a political actor making assertions with knowledge of and/or understanding of the underlying facts, but making the political statement anyway.
Regardless of the cause or reason prompting Chair White’s recent statement, the numbers do not support her assertion that the SEC is “focused on holding individuals accountable in FCPA cases.”
In The FCPA Space, Who Speaks For Whom?
I launched this website in 2009 and have writing on Foreign Corrupt Practices Act and related topics on a near daily basis. Everything I have written or said about the FCPA (whether on this website, my more formal articles or my Congressional testimony) has represented my genuine beliefs and you can hold me accountable for them.
Yet when it comes to many others writing and speaking in the FCPA space, the question arises – who speaks for whom? Are others expressing genuine beliefs and willing to be held accountable for what they say and write.
Numerous prior posts have exposed the flip-flopping of former DOJ/SEC enforcement officials on various FCPA topics (see here for instance) and the reverse of the situation was first highlighted on these pages when an FCPA enforcement critic and reform advocate – Andrew Weissman – was recently selected as the DOJ’s new fraud section chief.
Others – including those on Capitol Hill – soon picked up on the issue. As highlighted in this recent post Attorney General Nominee Loretta Lynch’s was specifically asked by a Senator as follows.
Q: As you know, the Criminal Division’s Fraud Section is charged with investigating and enforcing the criminal provisions of the FCPA. Recently, Andrew Weissmann was selected to be the Chief of the Fraud Section. Mr. Weissmann is a former prosecutor and FBI general counsel. In private practice, however, Mr. Weissmann has been an outspoken critic of DOJ’s FCPA program. Specifically, in a report36 Mr. Weissmann drafted for the U.S. Chamber of Commerce’s Institute for Legal Reform, he has recommended that: (1) a compliance defense to the FCPA should be added; (2) a company’s liability should be limited for the prior actions of a company it has acquired; (3) a “willfulness” element should be added for corporate criminal liability; (4) a company’s liability should be limited for the actions of a subsidiary; and (5) the definition of “foreign official” under the FCPA should be changed. Do you agree with any, some, or all of Weissmann’s proposals for reforming the FCPA?
RESPONSE: It is my understanding that Mr. Weissmann made these comments while in private practice and in connection with his representation of the U.S. Chamber Institute for Legal Reform (“Chamber”). It is also my understanding that, in the intervening time period, the Department has met with the Chamber, as well as other stakeholders, to engage in a healthy and productive dialogue regarding the Department’s interpretation and application of the FCPA. If confirmed as Attorney General, I would continue to foster dialogue with the Chamber and other stakeholders regarding our FCPA program.
That was a nice dodge by Ms. Lynch.
Yet it conveniently ignored – as highlighted in the previous post – that Weissmann, in his personal capacity, has long challenged traditional notions of corporate criminal liability and argued that when the DOJ “seeks to charge a corporation as a defendant, the government should bear the burden of establishing as an additional element that the corporation failed to have reasonably effective policies and procedures to prevent the conduct. See “Rethinking Corporate Criminal Liability,” 82 IND. L.J. 411, 414 (2007).
Some will say that when a lawyer in private practice writes a law review article that he/she is advancing their clients interests.
Sure, a lawyer is advancing their client’s interest in writing a legal brief or making an argument before a court.
But a law review article? What about a law firm client alert? What about when a lawyer appears on an FCPA panel at a conference and spontaneously responds to fellow panelist comments or audience questions?
Are we to discount everything the lawyer says about the FCPA because they are lawyer? If so, is there any genuine or legitimate beliefs being articulated about the FCPA that people are willing to be held accountable for?
This recent Bloomberg article about Weissmann and his new DOJ position states:
“A person familiar with Weissmann’s thinking said he viewed most of his [FCPA] congressional testimony as giving his personal views rather than doing work for a client. In the instances where he didn’t disclose his Chamber connection, Weissmann agreed to testify after congressional officials reached out to him proactively, said the person, who asked not to be named because he wasn’t authorized to speak publicly.”
The irony of this general topic is that when DOJ/SEC FCPA enforcement attorneys speak on FCPA topics their comments are preceded by the standard disclaimer – something to the effect of – the views I express today are my own and do not necessarily represent the views of the DOJ/SEC.
Hardly. The enforcement attorney is often carrying forward the talking points of the DOJ/SEC (a dynamic that is apparent when one compares various speeches, etc.).
So the question remains – in the FCPA space, who speak for whom?
All I know is that everything I have written or said about the FCPA has represented my genuine beliefs and you can hold me accountable for them.