Friday Roundup
FCPA enforcement down 100% and some items for the weekend watch/read list.
Enforcement Down 100%
Last year at this time there were already 23 FCPA enforcement actions (22 defendants in the Africa Sting case and the Natco Group enforcement action).
So far this year there have been 0.
Thus, FCPA enforcement is down 100%.
I don’t expect you to take this statistic seriously and I don’t intend it to be. Rather, it is meant as a commentary on the often times odd obsession some have with FCPA enforcement statistics (misleading as they may be in many cases).
On to more meaningful commentary by others.
For Your Viewing Pleasure
Two titans of the FCPA bar, Homer Moyer (here) and Martin Weinstein (here) were recently the focus of separate interviews on the BulletProofBlog as to various FCPA topics.
Informative views here and here.
For Your Reading Pleasure
Gary Stein (here – Schulte Roth & Zable) has an informative overview (here) of “Sentencing of Individuals in FCPA Cases.”
I’ve been documenting the growing trend of judges significantly rejecting DOJ sentencing recommendations in FCPA cases (see here) and Stein “hits the nail on the head” with this paragraph:
“The DOJ exercises virtually unlimited discretion in deciding who gets charged in FCPA cases and, for all practical purposes, in deciding the amount of the financial penalty imposed against corporate violators. But sentencing of individual defendants, particularly after U.S. v. Booker, is ultimately a matter of judicial, not prosecutorial discretion. And it has become apparent that there is a wide and growing rift between the views of the DOJ and the courts as to the appropriate sentences for individual violators in FCPA cases.”
Tired of all the “are you ready” hysteria surrounding the U.K. Bribery Act?
If so, you will want to read “Keep Calm and Carry On” (here) by Alexandra Wrage (President of Trace) recently published by In Compliance Magazine. Among other things, Wrage states that “the argument that companies that have navigated FCPA waters for a decade or more are unprepared for the new UK Act is unfounded.”
See here for my “bold” prediction that implementation of the U.K. Bribery Act (whenever that occurs) is not that big of deal for most companies and that U.K. enforcement of the Bribery Act is likely to be measured and disciplined.
*****
A good weekend to all.
U.K. Developments
A Bribery Act review, high profile departures from the Serious Fraud Office – the agency gearing up to enforce the Bribery Act – but wait, will the Serious Fraud Office even be the agency to enforce the Bribery Act?
Bribery Act
As widely reported last week (see here and here), the U.K. Bribery Act, set for implementation in April 2011, is to undergo a review ordered by Prime Minister David Cameron’s office.
Richard Alderman, Director of the U.K. Serious Fraud Office, stated as follows in an e-mail.
“It is for the UK Government and Parliament to consider implementation of the Bribery Act. The SFO is well placed to provide assistance to any review because of our experience in this area particularly following the many discussions we have had with business and professional advisers in the UK and the US.”
Barry Vitou and Richard Kovalevsky have a good overview of recent events here at briberyact.com.
SFO Departures
The U.K. Serious Fraud Office is gearing up to enforce the Bribery Act, but it has recently lost two senior officials instrumental in Bribery Act preparation and guidance development.
Robert Amaee (SFO Head of Anti-Corruption) is joining Covington & Burling’s London office. See here for Covington’s release which states as follows: “[Amaee’s] leading government role in anti-bribery and anti-money laundering issues will add an important new dimension to our global practice in this critical area of law. We see our clients focusing increasingly on these matters, and Robert will be a tremendous asset to our clients not only in the UK but across all of our offices.”
Charlie Monteith (SFO Head of Assurance) is joining White & Case’s London office. See here for the firm’s release which states as follows: “When it comes into force in April 2011, the UK’s new Bribery Act will change the risk landscape for any company which carries out business in the UK, wherever it’s located … having [Monteith] onboard is going to be an enormous asset to clients in helping them understand and comply with this seismic piece of legislation.”
See here for the Bloomberg article regarding the SFO departures.
Which Agency Will Enforce the Bribery Act?
While the SFO is gearing up to enforce the Bribery Act, efforts are afoot to reorganize how white collar crime is investigated and enforced in the U.K. See here for more.
This and That
Year in Review Perspectives
In this prior post, I shared some “Year in Review” perspectives of others.
I also recommend the following reads as well.
See here for Gibson Dunn’s “2010 Year-End FCPA Update.”
See here for Markus Funk’s (Perkins Coie) Bloomberg piece, “Another Landmark Year: 2010 FCPA Year-In-Review and Enforcement Trends for 2011.”
See here for the FCPA Blog’s “2010 FCPA Enforcement Index.”
Bribery Act News
Vivian Robinson QC (General Counsel to the UK’s Serious Fraud Office) will be one of the participant’s in Securities Docket’s January 13th webcast – “100 Days and Counting: The Impact of the U.K. Bribery Act on U.S. Companies.” See here to register.
Speaking of the Bribery Act, the U.K. Telegraph recently ran two articles (see here and here) featuring Lord Goldsmith, the former U.K. Attorney General now at Debevoise & Plimpton (here).
Although one of the articles is titled, “Bribery Act: Lord Goldsmith Says Look to the U.S.”, his comments in the article demonstrate why the U.K. should not look to the U.S. when it comes to enforcing and implementing its new law. Lord Goldsmith says, “You can’t have a system where you can avoid the court at least sanctioning what has been done.” Elsewhere, Lord Goldsmith says “over a period of time it [the Bribery Act’s provisions] will become clearer, but that is the problem; it becomes clearer as a result of cases taking place – that means someone has been rung through the mangle first.”
No trend in FCPA enforcement has been more troubling during this era of the FCPA’s resurgence than the use of non-prosecution and deferred prosecution agreements – resolution vehicles that completely, or for all practical purposes, bypass judicial scrutiny. See here for the December 2009 GAO report on NPAs and DPAs and the lack of judicial scrutiny. One of the many troubling results of the frequent use of NPAs and DPAs in the FCPA context is that issues do not become more clear over time. If anything the issues have become more cloudy.
Nearly, thirty-five years since enactment of the FCPA, we are still left to wonder as to many basic FCPA elements – we know what the enforcement agencies’ interpretations are – but that is about it.
The other Telegraph articles states as follows. “The Serious Fraud Office is believed to have several potential cases lined up to test out the new legislation from April, although the Ministry of Justice anticipates it bringing just one major case a year.”
One of my “bold” predictions for 2011 (see here) is that enforcement of the U.K. Bribery Act will be disciplined and measured.
Finally, yesterday Gibson Dunn released (here) an informative summary of its recent meeting with Richard Alderman (Director of the U.K. Serious Fraud Office). Among the U.K. Bribery Act topics covered are gifts and hospitality, facilitating payments, jurisdiction, the unique judicial review of SFO decisions (query whether such mechanisms should be implemented in the U.S. – at least as to FCPA cases) and reporting issues.
Director Alderman and others at the SFO deserve “two thumbs up” for their policy of active engagement as the U.K. nears implementation of the Bribery Act. I spent a useful and informative afternoon at the SFO’s London offices and my Q&A exchange with Director Alderman can be found here.
The SFO’s active engagement policy is one that ought to be modeled by other enforcement agencies.
Interesting, Significant and Bold
Last week I had the pleasure of participating in Securities Docket’s Year in Review webcast (see here for viewing – the FCPA portion begins at about 51 minutes).
For those of you who missed the event, below are my thoughts on four significant events from 2010, three interesting events from 2010, and two bold predictions for 2011.
The FCPA in 2010 was interesting, significant, and bold all at once. Among other things, it was a year in which Assistant Attorney General Lanny Breuer declared a “new era of FCPA enforcement.” (see here).
Significant Events
The Foreign Corrupt Practices Act
If anyone out there still believes that the FCPA is a law that only applies to U.S. companies, you clearly have been living under a rock.
2010 was the year of non-U.S. companies resolving FCPA exposure.
BAE (here)(I am hesitant to call this matter an FCPA enforcement action because it wasn’t, but everyone seems to be doing so), Daimler (here), Technip (here), Eni/Snamprogetti (here), ABB (here), Panalpina (here), and most recently Alcatel-Lucent (more in a future post).
It has been reported that approximately 90% of 2010 FCPA fines and penalties were paid by foreign companies.
I expect this trend to continue – albeit perhaps not at the level seen in 2010. The 4th member of the JV involved in Bonny Island bribery – JGC of Japan – has yet to settle, certain of the medical device and pharma companies that have disclosed FCPA issues are non-U.S. companies, and an emerging trend I see is an increased focus on China-based issuers. For instance, last year, 25% of the IPOs were China based issuers and last month, Rino International (see here) disclosed an FCPA inquiry, the first time I believe a China-based issuer has been the focus of an FCPA inquiry.
Two Tiers of Justice
Under basic rule of law principles, the law is to be equally and consistently applied to all subject to the law, regardless of how big or small the company is and regardless of what type of company is involved.
In a troubling trend, two tiers of justice have emerged from FCPA enforcement.
If the company is a large multinational company, the company will end up paying large fine, but chances are the company will not be charged with FCPA anti-bribery violations.
For instance, the DOJ’s allegations against BAE (see here) included that the company provided various benefits – through U.S. payment mechanisms – to influence Saudi officials through and through other conduct that clearly had a U.S. nexus. Yet, BAE, one of the world’s largest defense contractors, was not charged with any FCPA anti-bribery violation.
Daimler, according to the DOJ (see here), had a corporate culture that tolerated and/or encouraged bribery and its numerous bribery schemes involved various high-ranking executives. Yet, Daimler, was not charged with any FCPA anti-bribery violations.
It’s bribery yet no bribery, and it contributes to what I’ve called the façade of FCPA enforcement (see here).
While certain companies in certain industries appear immune from FCPA anti-bribery charges, in other instances, instances generally involving small companies such as Nexus Technologies (here) or Lindsey Manufacturing (here), the DOJ seems to come out with guns a blazing and criminally indicts the company for violating the FCPA. One can legitimately ask what did these companies do that BAE, Daimler, and some other companies didn’t do?
The two tiers of justice is also present when it comes to individual enforcement actions. As was highlighted in the recent Senate hearing, one odd aspect of the most high-profile, egregious instances of corporate bribery is that, for the most part, no individuals are charged. Yet in cases that can only be called minor in comparison, Nexus Technologies, Lindsey Manufacturing and the Haiti Teleco cases come to mind, the DOJ again seems to come out with guns a blazing and criminally indicts multiple individuals.
Companies that commit bribery on a major scale, involving hundreds of millions dollars, are still able to secure multi-million dollar U.S. government contracts (see here and here). On the other hand, individuals like Charles Jumet are sent to prison for nearly 7 years for making a $200,000 payment to secure a lighthouse and buoy contract and conspiring to violate the same law that major companies are apparently immune from violating. (See here).
DOJ officials frequently talk about the rule of law (here), and the importance of consistency and transparency in charging decisions (here), but these examples raise the issue of whether such principles are followed when it comes to FCPA enforcement.
Is the Facilitating Payments Exception Meaningless?
When Congress passed the FCPA in 1977 and amended it in 1988 it clearly understood and accepted that the statute was not going to cover every conceivable unethical payment made in transacting overseas business. (See here). The legislative history is clear on this point and that is why the FCPA contains an express exception for so-called facilitating or grease payments.
Yet one can legitimately ask whether this exception intended by Congress has any meaning.
In November, a group of companies collectively paid approximately $235 million to settle FCPA enforcement actions principally involving import permits for oil rigs, other customs and duty payments to Nigerian officials, and payments to expedite shipment of product in Nigeria and some other jurisdictions. (See here for a summary of the CustomsGate enforcement actions).
It seems a bit silly when several major companies settle an FCPA enforcement action for this amount of money to ask the question – did the conduct at issue even violate the FCPA, but this question should be asked in connection with the CustomsGate enforcement actions. It is also a question that can legitimately be asked as to several other recent FCPA enforcement actions that involve permits, licenses, certifications and other administrative tasks that have nothing to do with obtaining or retaining government contracts.
The issue as I see it is not whether such payments are ethical, but whether such payments violate the narrow anti-bribery provisions Congress intended and whether, once again, the DOJ and the SEC are actually enforcing the FCPA as Congress intended or whether the FCPA has morphed into a broader corporate ethics statute.
If the FCPA should become a broader corporate ethics statute, let Congress make that decision – not the DOJ or the SEC.
Emergence of a Plaintiff’s Bar
The FCPA, it has been held by some courts, does not contain a private right of action – yet there are other legal avenues available to plaintiffs to hold companies that violate the FCPA accountable. (See here).
Common causes of action include derivative claims against officers and directors, securities fraud claims by investors, RICO claims, unfair competition claims and antitrust claims such as last year when one of Innospec’s competitors sued it in Virginia state court in connection with its recently settled FCPA enforcement action. (See here).
Such causes of action have been pursued before 2010, but 2010 witnessed an explosion in such claims and so-called investigations by plaintiff firms representing investors.
The most noteworthy example is what I called the feeding frenzy surrounding SciClone Pharamaceutials. (See here). Last August, the company simply made an FCPA disclosure – that it was contacted by the SEC and the DOJ in connection with the government’s pharma industry sweep. The company’s stock dropped about 30%. Within weeks about a dozen plaintiff firms announced “investigations” and/or filed securities fraud cases – never mind the company’s stock price regained all that value within about a month.
When a company’s FCPA violations are found to be condoned or encouraged by the board or officers, such plaintiff causes of action would seem to be warranted.
However, these types of FCPA violations are rare – the more typical situation is where, because of respondeant superior, a company faces FCPA exposure because of the actions of a single or small group of employees whose conduct was in violation of the company’s FCPA policies and procedures. In these typical situations, I question what value these so-called “investigations” by plaintiff firms have or what purpose these derivative or securities fraud claims serve.
Interesting Events
Giffen Enforcement Action
When an enforcement action begins with allegations (here) that James Giffen made more than $78 million in unlawful payments to two senior Kazakhstan officials in connection with oil transactions for major American oil companies and abruptly ends with a one-paragraph superceding information (here) charging a misdemeanor tax violation and the company he worked for settling an FCPA enforcement action focused solely on two snowmobiles (here) – I call that interesting.
Even more interesting is that part of Giffen’s defense was that his actions were taken with the knowledge and support of the CIA, the National Security Council, the Department of State and the White House. (See here for a prior post).
A few years ago George Clooney and Matt Damon starred in Syriana (here) a movie about the FCPA.
The Giffen enforcement action presents a superb Hollywood script – it is the most mysterious conclusion to an FCPA enforcement action ever – made even more interesting given that the presiding judge called Giffen a cold war hero and stated that the case should never have been brought in the first place. (See here for the prior post).
Africa Sting Cases
In January 2010, the DOJ arrested 22 defendants – most while attending a gun show in Las Vegas – in connection with a major undercover sting operation in which the government, utilizing an individual who had already pleaded guilty to separate FCPA violations, assisted the government in manufacturing a case involving a fake foreign official from Gabon. (See here, here and here for prior posts).
The defendants (see here) are principally owners or employees of small gun and weapons companies.
I would put this case in the interesting category.
Contrary to media reports and even DOJ statements, it is not the first time undercover tactics were used in connection with an FCPA investigation (see here), but the magnitude and breadth of the tactics were indeed unprecedented.
This case is far from over and the remaining defendants are sure to raise entrapment, among other legal issues, and this will be an interesting case to follow in 2011.
The Africa Sting case has draw the attention of an industry that probably had never thought much about FCPA compliance. Thus, regardless of the ultimate outcome of the case, it has likely resulted in an industry and small enterprises thinking more proactively about FCPA compliance and risk assessment.
Greater Scrutiny and Why Questions
2010 also saw greater scrutiny and why questions about the FCPA, FCPA enforcement and what I have called FCPA Inc.
For the time time in nearly a decade, Congress held hearings (see here) on the FCPA in which some basic why questions were asked.
The U.S. Chamber sponsored a paper (here) titled “Restoring Balance – Proposed Amendments to the FCPA” that was widely covered and, in some circles, railed.
Several members of Congress are legitimately scratching their heads as to why companies that settle fraud, bribery and corruption cases continue to secure lucrative U.S. government contracts and the House passed a bill (here) that seeks to debar companies found to be in violation of the FCPA from receiving U.S. government contracts. Problem is, because of the façade of FCPA enforcement (see here), it will be an impotent bill.
In May 2010, Congressman Towns, chairman of the House Committee on Oversight and Government Reform, sent a letter to Attorney General Holder expressing concern that settlements of civil and criminal cases, including FCPA cases, by the DOJ are being used as a shield to foreclose other appropriate remedies such as suspension and debarment. (See here for the prior post).
And in Spring 2010, Forbes ran a front-page story titled “The Bribery Racket,” an article, notwithstanding some of its flamboyant language, raised several valid and legitimate questions and issues when it comes to FCPA enforcement. (See here for the prior post).
This scrutiny in 2010 raised valid and legitimate public policy questions that hopefully will be picked up on in 2011.
Bold Predictions
After a year in which (1) the largest individual prosecutions involved a fake “foreign official” (2) the most egregious cases of corporate bribery were prosecuted without FCPA anti-bribery charges; and (3) a signature case abruptly ended with a misdeamenor tax violation and a corporate prosecution involving two snowmobiles, I wonder what bold will look like in 2011.
Here are two bold predictions for 2011.
The Dodd-Frank Whistleblower Provisions Will Have a Negligible Impact on FCPA Enforcement
My (what seems) contrarian thoughts are the same as when I first made this post in July.
Enforcement of the U.K. Bribery Act Will Be Disciplined and Measured
The U.K. Bribery Act, already delayed, and with implementation slated for April 2011, has been the subject of much discussion and much over-hype in my opinion.
It has been called the FCPA “on steroids” (here) and if one subscribes to the industry marketing material, you might be left with the impression that the end of the world is near.
True, the Bribery Act is broader than the FCPA. For starters, it is an all-purpose bribery and corruption statute and addresses bribery and corruption in the private sector – not just bribery to “foreign officials” like the FCPA.
True, the Bribery Act has potentially a very broad reach – so does the FCPA.
True, the Bribery Act has no exception for facilitating payments – the FCPA does – although as highlighted above, query whether this exception means anything.
However, the Bribery Act has the “adequate procedures” defense – something the FCPA does not have – but query whether it should.
Thus, while the Bribery Act is indeed more broad than the FCPA, because of this defense, it is at the same time more narrow than the FCPA.
Public statements by U.K. officials suggest that this adequate procedures defense is a meaningful defense. For instance, in September at the World Corruption and Compliance Forum, an event I chaired in London, the U.K. Attorney General (Dominic Grieve) stated (see here) that “any company small or large” that puts into place a system of adequate procedures “has nothing to fear” when an employee or agent “goes off the rails” and makes a bribe payment. Attorney Grieve said that a company should have nothing to fear if it is “walking the walk, and talking the talk” when a rogue employee makes an improper payment. On the other hand, Attorney Grieve stated that that “those who don’t heed the warnings and don’t take the necessary steps have something to fear.” Richard Alderman, the Director of the U.K. Serious Fraud Office, stated in October (see here) as follows. “I have heard some people say that this offence is one of strict liability. I do not agree. No offence will have been committed if there were adequate procedures. I have also heard people say that the fact of bribery might mean that there were inadequate procedures by definition and so the defence can never be made out. Again, I do not agree. In the real world there may be occasional lapses despite adequate procedures rigorously enforced. The issue ultimately for the Judge and jury (and for the SFO in deciding on a prosecution) will be – were those procedures adequate?” As to the adequate procedures defense, Vivian Robinson (General Counsel of the Serious Fraud Office) said in an October webcast (here) that because of the defense “there is every reason to be optimistic that we won’t get as a result of the Act and this particular section a huge expanse in the number of prosecutions of corporates.”
As demonstrated by the Innospec matter (see here), the U.K. courts are playing, and rightfully so, a much greater role than U.S. courts in reviewing bribery and corruption cases. I’ve been told that even if the SFO prosecutes a corporate bribery case with an NPA or DPA, the U.K. courts will still play a meaningful oversight role – a role that is unfortunately not true here in the U.S.
In sum, I don’t see how companies already subject to the FCPA and already thinking about compliance in a pro-active manner, have much to worry about when it comes to the U.K. Bribery Act because of the adequate procedures defense.
I will be surprised if U.K. enforcement of the Bribery Act reaches the level of U.S. enforcement of the FCPA and I will be surprised if the U.K. Bribery Act develops outside of the judicial system as has generally been true with U.S. enforcement of the FCPA.
A Practical Resource For Managers and Executives
Aaron Murphy (Latham & Watkins – here) has published a new book – “The Foreign Corrupt Practices Act: A Practical Resource For Managers and Executives” (here).
In this Q&A exchange, Murphy describes his book and his motivations for writing it. He also answers a few questions about FCPA reform proposals and the U.K. Bribery Act.
*****
Having spent several years at a large law firm with an FCPA practice, I know how busy the practice can be. Where did you find the time to write such an extensive book?
I spend a lot of my life on airplanes and in hotel rooms.
This book is different from the treatises and manuals that are already out there. Why did you write this book, and in particular, this kind of book?
There are some good legal treatises and manuals. But they aren’t aimed at educating the managers and employees who can be on the receiving end of an FCPA investigation. My book is written for managers and others who are on-the-ground in foreign countries. I wanted to write an engaging book that changed the kinds of internal questions that get asked about expenses, agents, state-owned entities, and other issues.
The book grew out of the fact that I was having the same conversation with clients and their managers over and over again. It occurred to me that despite sitting through a couple of PowerPoint slides about the FCPA during a compliance training, the managers did not understand how and where bribery occurs.
I’d be interviewing the manger of a company’s foreign operations in a high risk country and have a stack of documents to go through with him. I’d ask him a series of questions about some fairly run-of-the-mill issues – why certain dinners occurred with some government officials, what the thousand dollars of “miscellaneous” expenses on a hotel bill were for, whether the manager ever saw any of the holiday gifts he approved a large budget for – and it would often become clear to me that the manager had no idea that I was asking him about possible bribes. It had simply never occurred to him that there could be FCPA risks associated with any of these kinds of expenses. And those kinds of blind spots existed with managers who supposedly had received FCPA training.
Numerous times people have told me that they remember the FCPA training they had, but that they never thought the Act applied to the kinds of expenses I’m asking them about.
I tried to keep this book tethered to real-world situations. Theoretical discussions and policy debates are interesting and important – and there is some of that in the book – but it doesn’t really help a manager spot concrete issues. It doesn’t tell a manager what to watch out for. And that was the aim of this book.
I think there is plenty to debate about anticorruption enforcement generally, but whether you agree with the DOJ or the SEC’s position on something doesn’t really matter a whole lot when you’re trying to answer a question on a live issue, in real time. Can we make this payment or not? Should we use this agent, despite these rumors? Can I take this guy from a state-owned company out for a round of golf and dinner? Those are real questions. Hard, fact-specific questions that often need to be answered immediately. My goal was to make sure that managers understand that those are the questions they need to ask. Those are the questions they need to get some help answering. Theoretical debates don’t help a manager who is faced with a situation in the real world.
Do you think business personnel are surprised by the breadth of the FCPA, at least as it is interpreted and enforced by the DOJ and SEC?
Absolutely. Everyone thinks bribery is about suitcases full of money. Even though managers get trained and are told it’s much broader, they either don’t hear it, don’t believe it, or just think “Yeah, but it couldn’t happen in my organization.” They walk out of the training and it’s business as usual. Senior executives back at headquarters think everything is fine because their people have all been shown some slides with FCPA language. But there’s often a fundamental disconnect between the training and life on the ground in a company’s foreign operations.
I kept thinking there had to be a better way to help companies train their people on the front end, so I would quit having those conversations on the back end, after violations have already occurred.
I set out to write a book that was non-technical. A book that was practical. Something that takes managers – and I use that term loosely, meaning anyone who is in charge of other people – through all of the areas where FCPA issues typically come up and show them how they come up. I wanted something that gave managers a guided tour of the kinds of things FCPA practitioners see everyday.
What do you think is behind the inadequacy of much FCPA training?
I think it’s mostly a function of resources. I’m really sympathetic to in-house compliance personnel who are tasked with FCPA training. Usually, FCPA is just one of several areas they’re responsible for, and their organization is spread out over ten, twenty, fifty, or a hundred countries. It just becomes impossible for them to get out there and directly train all of their company’s employees. And, with constant turnover, acquisitions, mergers, it’s a never-ending task. New people are always joining a large organization. And FCPA training is just one of the things they have to do.
So you see the FCPA getting a few slides in a much larger PowerPoint that tries to cover insider trading, antitrust, OFAC and money laundering issues, regulatory issues, and all kinds of other stuff. Employees walk out with a glazed look on their faces and they haven’t really learned anything.
I wanted to help solve that problem. Here is something that companies can make required reading for all finance people and every manager over a certain level. Put it in their new hire package. Make them sign a certification that they’ve read and understood it, and put that in their personnel file. Then companies at least have documentation that the people charged with overseeing their business really were trained in detail. It hopefully gives companies some protection down the road if there is a problem, and, most importantly, it will educate employees about how the FCPA works and how FCPA compliance issues come up in the real world. If it does that, the book isn’t just insurance against future violations, it will actually result in compliance.
Plus, making the book required reading sets expectations and sends a serious message to management that this is an issue the company cares about.
In terms of FCPA compliance, one often hears about “tone at the top.” Is this just a buzzword or do you think it has real-world application?
I think it’s extremely important with an issue like bribery. Small shifts in attitudes can have huge consequences. I think just making off-hand jokes along the lines of “we all know how it is in Country X” sends a powerful message that low-level regulatory bribery is okay. Meaning, as long as we’re not talking about suitcases full of cash, it’s no big deal, no one is really going to get upset about it.
But regulatory issues can be huge. Just look at the recent Panalpina settlements.
At the end of the day, my mantra is this: Companies don’t pay bribes. People do. The best thing a company can do is to train its people by showing them how real world situations affect them. That’s what this book is about.
There is a lot of talk these days about FCPA reform. What are your thoughts on this issue?
Well, it makes for good controversy, but I always say that no politician ever got elected by saying it was time to get soft on crime. Certainly not a pro-corruption platform. So I think there’s very little chance of any overhaul that is going to make compliance easier on companies. That said, there may well be some chance for clarifying legislation.
Everyone out there lobbying for reform needs to be very careful what they wish for. Corruption is a topic that makes for good headlines and politicians love good headlines. It’s not hard to imagine a politician who doesn’t care too much about the FCPA trying to do away with facilitating payments, or press for more severe jail time, just to make a name for themselves. So as I see it, there’s a risk that any reform process could get hijacked, and we could end up with a statute that looks more like the UK Bribery Act. Although that might not be a bad thing if US companies could get a very solid and clear adequate procedures defense out of it.
Although, as you know because you were there at the recent Senate hearings, the DOJ’s current position is that it’s not interested in what it views as a compliance amnesty program. I suspect we’re stuck where we are for the time being. Although the forthcoming enforcement of the UK Bribery Act will keep things interesting.
If the DOJ is enforcing, in many cases, a statute in a way that Congress did not intend, why is this a political issue? Can any legislative reform proposal address this structural issue?
These things are always ultimately political. There’s no question that DOJ has an aggressive interpretation of certain FCPA provisions. Whether DOJ is transcending Congressional intent or not is no different from any other problem of interpretation. The difference in the FCPA context, as you have raised in your work, is that there is only limited judicial oversight of those interpretations because so few of these matters ever get litigated. And while that point is well-taken, many courts might well interpret the FCPA the same way DOJ interprets it. So my view is that whether we take issue with DOJ’s interpretation or court interpretations, the solution always becomes a political issue. Congress is aware of the DOJ’s view and can take steps to modify or clarify the statute if it disagrees with that view, the same as it can and often does when it dislikes court interpretations of any other statute.
Now, whether any Congressional solution would result in anything better than what we currently have is anyone’s guess.
Do you think the UK Bribery Act is going to be a real game-changer? A lot of people are talking about the lack of a facilitating payments exception. Do you think the landscape is going to be very different once the Bribery Act comes into force?
I actually think that the biggest effect that it’s going to have is that it’s going to force large British companies that may not have focused on corruption issues before to finally have to focus on them. But for most multinationals – many of whom will be subject to both the FCPA and the Bribery Act – I think the landscape stays largely unchanged. The biggest deal for them is going to be getting an adequate compliance program in place.
The underlying ways in which bribery occurs inside of companies will remain the same. The controls and procedures that can address bribery will also remain the same. At the margins, there are some obvious differences between the FCPA and the Bribery Act, but the conduct they cover is mostly identical.
A lot of people have been talking about the different treatment of facilitating payments. I don’t think that’s nearly as big of a deal as the other main difference, which is the criminalization of private conduct. The UK statute explicitly looks to whether a relevant function of an employee’s job has been performed improperly as a result of a payment or gift. Who defines what the proper performance of an employee’s job is? The employer, of course.
So has the UK Bribery Act essentially transformed employee manuals and company policy manuals into de facto statutes? Improperly perform your job in violation of your company policy and you’ve committed a crime under British law? I see a potentially serious problem there. After all, many companies have policies that prohibit their employees from giving or receiving gifts from people with whom they do business. Do they need to think more carefully about what they put in those policies in light of what the UK Bribery Act does with them?