An Equally Valid DOJ Press Release
Last week the DOJ announced in this release the departure of Assistant Attorney General Lanny Breuer. Breuer’s position was obviously not FCPA specific, but he took a great interest in the DOJ’s Foreign Corrupt Practices Act enforcement program and frequently made speeches on the FCPA in which he – to use his own words – “spread the gospel” (see here).
Not surprisingly given the nature and purpose of the release, the DOJ touted Breuer’s enforcement record, including in the FCPA context. The release stated as follows.
“The Criminal Division has also substantially increased enforcement of the Foreign Corrupt Practices Act (FCPA), convicting three dozen individuals for FCPA-related offenses – a record number – and entering into more than 40 corporate resolutions involving eight of the top 10 largest FCPA penalties in history. The Criminal Division also partnered with the Securities and Exchange Commission to publish groundbreaking guidance on FCPA enforcement.”
In the abstract, there is nothing incorrect about the above information. However, against the backdrop of the numerous statistics I published in recent weeks (see here for a summary) a different picture emerges.
A different picture also emerges when one considers the following undeniable facts about FCPA enforcement under Breuer’s criminal division. In short, what follows would have been an equally valid DOJ release concerning Breuer’s departure.
In January 2010, Breuer called the arrest of 22 individuals in the military and law enforcement products industry a “turning point” in the DOJ’s FCPA enforcement program (see here). The DOJ’s “turning point” prosecution in the so-called Africa Sting cases ended the following way. In granting the DOJ’s dismissal of the charges, Judge Richard Leon stated as follows.
“This appears to be the end of a long and sad chapter in the annals of white collar criminal enforcement. Unlike takedown day in Las Vegas, however, there will be no front page story in the New York Times or the Post for that matter tomorrow reflecting the government’s decision today to move to dismiss the charges against the remaining defendants in this case. Funny, isn’t it, what sells newspapers? The good news, however, is that for these defendants, agents, prosecutors, defense counsel and the court we can get on with our professional and personal lives without the constant strain and burden of three to four more eight-week trials hanging over our heads. I for one hope this very long, and I’m sure very expensive, ordeal will be a true learning experience for both the department and the FBI as they regroup to investigate and prosecute FCPA cases against individuals in the future. Two years ago, at the very outset of this case, I expressed more than my fair share of concerns on the record regarding the way this case has been charged and was being prosecuted. Later, during the two trials that I presided over, I specifically commented again on the record regarding the government’s very, very aggressive conspiracy theory that was pushing its already generous elasticity to its outer limits. Of course, in the second trial that elastic snapped in the absence of the necessary evidence to sustain it. In addition, in that same trial, I expressed on a number of occasions my concerns regarding the way this case had been investigated and was conducted especially vis-a-vis the handling of Mr. Bistrong. I even had an occasion, sadly, to chastise the government in a situation where the government’s handling of the discovery process constituted sharp practices that have no place in a federal courtroom. Notwithstanding all of this water over the dam, and there has been a lot of water, I’m happy to see and I applaud the department for having the wisdom and courage of its convictions to face up to the limitations of its case as revealed in the past 26 weeks of trial and the courage to do the right thing under the circumstances. Having served at the higher levels of the department, I know that that was not an easy decision. They never are, when so much has been invested, and the agents and the prosecutors are so convinced of the righteousness of their position. I for one however am confident this will be in the end a positive, if not painful, lesson that results in better prosecutions of individuals in the future under the FCPA. As for the defendants, I hope the healing process is a swift one and that they get back to their normal lives in the very near future. Finally, I would be remiss if I did not comment on the tireless and spirited effort by the defense counsel from all over the country who came here to try these very lengthy and complicated cases under difficult circumstances and some even pro bono. Their hard work and effective advocacy are a testament to how strong our criminal defense bar is nationwide. And so without further adieu I grant the government’s motion to dismiss. The defendants are excused.”
In May 2011 Breuer stated, after a jury found Lindsey Manufacturing and its executives Keith Lindsey and Steve Lee guilty in an FCPA trial, as follows. These verdicts “are an important milestone in our Foreign Corrupt Practices Act (FCPA) enforcement efforts.” (See here). The”important milestone” ended when Judge Howard Matz vacated the convictions, dismissed the indictment after finding numerous instances of prosecutorial misconduct, and stated as follows.
“[The instances of misconduct were so varied and occurred over such a long time] that they add up to an unusual and extreme picture of a prosecution gone badly awry. […] The Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court’s order, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.”
“Dr. Lindsey and Mr. Lee were put through a severe ordeal. Charges were filed against them as a result of a sloppy, incomplete and notably over-zealous investigation, an investigation that was so flawed that the Government’s lawyers tried to prevent inquiry into it. In some instances motives, statements and conduct were attributed to them that were wholly unfounded or were obtained unlawfully . . . [. . .] The financial costs of the investigation and trial were immense, but the emotional drubbing [Lindsey and Lee] absorbed was even worse. As for [Lindsey Manufacturing], the very survival of that small, once highly respected enterprise has been placed in jeopardy.”
In November 2009, Breuer’s criminal division criminally charged John Joseph O’Shea with FCPA offenses (see here). The case ended when Judge Lynn Hughes granted O’Shea’s motion for acquittal after the DOJ’s case. Judge Hughes stated as follows.
“The problem here is that the principal witness against Mr. O’Shea … knows almost nothing.”
“The government should have been prepared before they brought the charges to the Grand Jury. […] You shouldn’t indict people on stuff you can’t prove.”
The approximate 25 individuals (individuals who had their real lives altered, their real careers sidetracked, their real reputations harmed, and their real wallets emptied) probably have a different perspective on FCPA enforcement under Breuer. And with good and valid reasons.
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.
*****
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.
*****
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).
*****
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.
*****
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).
Empty Rhetoric
Assistant Attorney General Lanny Breuer once again took to the podium to highlight the DOJ’s FCPA enforcement program.
This time the event was the 13th Annual Pharmaceutical Regulatory and Compliance Congress. If you wanted to hear Mr. Breuer speak at the event, you had to pay approximately $2,000 per person (see here for the conference organizer’s website). (See here for the post earlier this week “It Ought to Stop”). In the past, the DOJ released a transcript of Breuer’s remarks at this annual event, but the DOJ press office responded to my inquiry by saying that Breuer spoke from talking points and that his full remarks would not be released.
Thankfully, the on-line news agency Main Justice covered the event (see here). Its report notes that Breuer called the DOJ’s aggressive anti-corruption enforcement a “signature achievement” of the Obama administration.
Time out.
It’s a “signature achievement” that the DOJ’s largest single investigation and prosecution of individuals in the history of the DOJ’s enforcement of the FCPA (a prosecution Breuer previously called a “turning point”) ended with the DOJ going 0-22 which prompted the judge to call the end of the cases a “long and sad chapter in the annals of white collar criminal enforcement”? (See here for the prior post regarding the Africa Sting case).
It’s a “signature achievement” when a federal court judge vacates the convictions and dismisses the indictments in a case (a prosecution Breuer previously called an “important milestone”) because the instances of prosecutorial misconduct, in the words of the judge, were so varied and occurred over such a long time “that they add up to an unusual and extreme picture of a prosecution gone badly awry”? (See here for the prior post regarding the Lindsey Manufacturing case).
It’s a “signature achievement” when a federal court judge grants, at the close of the DOJ’s case, a motion for dismissal and states that “the problem here is that the principal witness against [the defendant] … knows almost nothing.” (See here for the prior post regarding the O’Shea case). As noted in this previous post, the judge in the O’Shea case also stated as follows. “The Government should have been prepared before they brought the charges to the Grand Jury. [A key FCPA element is] something you have to prove. And you shouldn’t indict people on stuff you can’t prove.”
As noted in my article “What Percentage of DOJ FCPA Losses Is Acceptable?” all of the above events occurred in the past 9 months.
It’s a “signature achievement” to bypass judicial scrutiny in resolving FCPA enforcement actions? Thus far this year, 100% of corporate FCPA enforcement actions have been resolved via a non-prosecution or deferred prosecution agreement. In 2011, 82% of corporate FCPA enforcement actions were resolved with such vehicles and in 2010 88% of corporate FCPA enforcement actions were resolved with such vehicles.
If Breuer’s concept of “signature achievement” means that the DOJ has created an environment in which a thriving FCPA industry has incentives to make voluntary disclosures which the DOJ then processes without judicial scrutiny, then perhaps Breuer’s terminology has some meaning. But in all other respects, Breuer’s “signature achievement” remark is empty rhetoric.
And its not the only example of empty rhetoric in his speech.
Main Justice also reports that Breuer highlighted the DOJ’s prosecution of individuals and stated as follows. “If you look at FCPA over the past 4 years, you’ll see we really have been vigorous about holding individuals accountable.”
You gotta be kidding me.
I have looked at FCPA enforcement over the past four years and here are the facts.
Thus far in 2012, 100% of corporate FCPA enforcement actions have not resulted in any individual charges against company employees. In 2011, approximately 75% of corporate FCPA enforcement actions have not resulted in any individual charges against company employees. In 2010, approximately 70% of corporate FCPA enforcement actions have not resulted in any individual charges against company employees. As noted in this previous post, since 2008, approximately 70% of corporate FCPA enforcement actions have not resulted in any individual charges against company employees.
In my 2010 Senate testimony (here) and in this prior post, I offer an explanation for this, but the explanation only magnifies the “facade” of FCPA enforcement.
Upon learning of Breuer’s “signature achievement” comment, Paul Calli (Carlton Fields) who successfully represented Stephen Giordanella in the Africa Sting case stated as follows. “ I don’t think Breuer is purposefully trying to mislead and scare the American business community when he withholds the truth that is the recent series of historic losses suffered by the DOJ’s FCPA unit and its repeat offenses of misconduct as found by three different federal judges across the country. Instead, I think Breuer is playing the role of cheerleader and spinning it his way by – to borrow from the old Johnny Mercer song – accentuating the positive and eliminating the negative. Truth is, I don’t think he is that involved in the decisions.”
Whatever the reason or motivation for much of Breuer’s recent speech, the fact remains it is littered with empty rhetoric.
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.”
*****
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.”
*****
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.
*****
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.