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Deputy AG Rosenstein On A Variety Of FCPA Issues


It is the end of November.

Thus, as sure as the sun rises in the east and dogs bark, our Foreign Corrupt Practices Act enforcement officials allowed themselves to be used as marketing props by a for profit conference firm to drive attendance to its paid event. (See here for how the selling of FCPA enforcement officials needs to stop).

In other words, a DOJ enforcement official spoke at ACI’s FCPA conference yesterday.

In this speech, Deputy Attorney General Rod Rosenstein talked about the rule of law, the DOJ’s no-piling on policy, the importance of individual prosecutions, and announced a tweek to DOJ policy regarding cooperation credit. Instead of requiring companies to identify every employee involved in criminal conduct, the DOJ’s new policy calls for companies to identify “every individual who was substantially involved in or responsible for the criminal conduct.”

Rosenstein began his speech by talking about the rule of law.

“The rule of law is indispensable to a thriving and vibrant society.  It shields citizens from government overreach.  It allows businesses to invest with confidence.  It gives innovators protection for their discoveries.  It keeps people safe from dangerous criminals.  And it allows us to resolve differences peacefully through reason and logic.

When we follow the rule of law, it does not always yield the outcome we prefer.  In fact, one indicator that we are following the law is when we respect a result that we do not agree with.  We respect it because it is required by an objective analysis of the facts and a rational application of the rules.

The rule of law is not simply about words written on paper.  The culture of a society and the character of the people who enforce the law determine whether the rule of law endures.

One of the ways that we uphold the rule of law is to fight bribery and corruption. Until a few decades ago, paying bribes was viewed as a necessary part of doing business abroad.  Some American companies were unapologetic about corrupt payments.

In 1976, the U.S. Senate Banking Committee revealed that hundreds of U.S. companies had bribed foreign officials, with payments that totaled hundreds of millions of dollars.  The Committee concluded that there was a need for anti-bribery legislation. It reasoned that “[c]orporate bribery is bad business” and “fundamentally destructive” in a free market society.  That was the basis for the Foreign Corrupt Practices Act.”

See this prior post asking whether  much of FCPA enforcement is even consistent with the rule of law.

Rosenstein then stated:

“Over the past year, our FCPA Unit reached eight corporate resolutions, four of which were coordinated with foreign authorities.  The cases involved a total of almost one billion dollars in corporate criminal fines, penalties, and forfeitures. Many of our cases require extensive coordination with domestic and foreign law enforcement partners.

Three recent corporate resolutions involved collaboration with the Securities and Exchange Commission. Those settlements resulted from coordinated dispositions consistent with the policy against “piling on” that we announced in May.

Under that new policy, Department components work jointly with other enforcement agencies with overlapping jurisdiction.  Our goal is to enhance relationships with law enforcement partners in the United States and abroad, and avoid duplicative penalties. It is important to punish wrongdoers.  But we should discourage the sort of disproportionate and inefficient enforcement that can result if multiple authorities repeatedly pursue the same violator for the same misconduct.”

See prior posts here, and here for how the DOJ has nevertheless “piled on” in recent FCPA enforcement actions.

Next, Rosenstein stated:

“Focusing on individual wrongdoers is an important aspect of the Department’s FCPA program.  Over the past year, we announced charges against more than 30 individual defendants, and convictions of 19 individuals. [Note these are broader than just actual FCPA enforcement actions but include instances in which alleged foreign officials are charged with money laundering and related offenses].

Last year, we initiated a review of our Department’s policy concerning individual accountability in corporate cases, to consider suggestions by our own employees and outside stakeholders about opportunities for improvements that will promote efficient enforcement and reduce fraud.

Today, we are announcing changes that reflect valuable input from the Department’s criminal and civil lawyers, law enforcement agents, and private sector stakeholders. Under our revised policy, pursuing individuals responsible for wrongdoing will be a top priority in every corporate investigation.

It is important to impose penalties on corporations that engage in misconduct. Cases against corporate entities allow us to recover fraudulent proceeds, reimburse victims, and deter future wrongdoing. Corporate-level resolutions also allow us to reward effective compliance programs and penalize companies that condone or ignore wrongdoing.

But the deterrent impact on the individual people responsible for wrongdoing is sometimes attenuated in corporate prosecutions. Corporate cases often penalize innocent employees and shareholders without effectively punishing the human beings responsible for making corrupt decisions.  The most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes.

So we revised our policy to make clear that absent extraordinary circumstances, a corporate resolution should not protect individuals from criminal liability. Our revised policy also makes clear that any company seeking cooperation credit in criminal cases must identify every individual who was substantially involved in or responsible for the criminal conduct.”

Rosenstein, like other DOJ officials, can talk about individual FCPA enforcement actions until the cows come home, but facts are facts.

Since 2015, approximately 85% of DOJ corporate FCPA enforcement actions have lacked any related charges against company employees.

Rosenstein continued:

“In response to concerns raised about the inefficiency of requiring companies to identify every employee involved regardless of relative culpability, however, we now make clear that investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted. We want to focus on the individuals who play significant roles in setting a company on a course of criminal conduct.  We want to know who authorized the misconduct, and what they knew about it.

The notion that companies should be required to locate and report to the government every person involved in alleged misconduct in any way, regardless of their role, may sound reasonable. In fact, my own initial reaction was that it seemed like a great idea. But consider cases in which the government alleges that routine activities of many employees of a large corporation were part of an illegal scheme.

When the government alleges violations that involved activities throughout the company over a long period of time, it is not practical to require the company to identify every employee who played any role in the conduct. That is particularly challenging when the company and the government want to resolve the matter even though they disagree about the scope of the misconduct. In fact, we learned that the policy was not strictly enforced in some cases because it would have impeded resolutions and wasted resources. Our policies need to work in the real world of limited investigative resources.

Companies that want to cooperate in exchange for credit are encouraged to have full and frank discussions with prosecutors about how to gather the relevant facts.  If we find that a company is not operating in good faith to identify individuals who were substantially involved in or responsible for wrongdoing, we will not award any cooperation credit.”

Rosenstein then talked about civil cases which is not really FCPA relevant because even though the DOJ has authority to enforce the FCPA civilly, it stopped doing this long ago. (See here for a prior post).

Rosenstein concluded “by acknowledging that most companies want to do the right thing” and stated:

“Companies that self-report, cooperate, and remediate the harm they caused will be rewarded. Companies that condone or ignore misconduct will pay the price. These policy changes reflect a lot of deliberation and analysis by experienced government and private sector lawyers who understand the practical implications of our policies and how they sometimes help – but sometimes inhibit – efforts to achieve our goals. In summary, our corporate enforcement policies should encourage companies to implement improved compliance programs, to cooperate in our investigations, to resolve cases expeditiously, and to assist in identifying culpable individuals so that they also can be held accountable when appropriate. It is not always possible to achieve all of those goals, but the new policies strike a reasonable balance.”

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