In connection with the recent release of the FCPA Guidance, Assistant Attorney General Lanny Breuer stated (see here) that the DOJ is “focused on bribes of consequence – ones that have a fundamentally corrosive effect on the way companies do business abroad.”
Likewise, SEC Enforcement Division Chief Robert Khuzami stated (see here) that the DOJ and SEC “hope that it [the Guidance] will clear up some myths about the type of conduct that gets prosecuted under the FCPA — that it is not the $5 cup of coffee, or the one off $50 gift to a public official, that companies need to be concerned about, but payments of real and substantial value that clearly represent an unambiguous intent to bribe a foreign official to obtain or retain business.”
At the Guidance press conference (see here) Khuzami said that he was “interested in companies spending compliance dollars in the most sensible way” and he hoped that the guidance and the hypotheticals provided would help companies as to where they can “minimize investment and where they can maximize it.” Breuer added that the DOJ wants compliance programs “to address real matters of concern.”
Against this backdrop, the question must be asked: do Breuer and Khuzami actually read FCPA enforcement actions?
Recent Foreign Corrupt Practices Act enforcement actions have involved, to name just a few, allegations about a bottle of wine (see here), a Cartier watch (see here), a camera (see here), kitchen appliances and business suits (see here), television sets, laptops and appliances (see here), and tea sets and office furniture (see here).
To be sure, these were not the only allegations in the enforcement actions. However, one must assume (unless the DOJ/SEC enforcement attorneys were merely practicing their typing skills) that such allegations were included in the enforcement actions by design and for specific reasons.
By including such cursory and non-determinative allegations in FCPA enforcement actions, the DOJ and SEC are creating conditions that run completely counter to the sensible statements described above.
From time to time, I have the pleasure of moderating business roundtables on FCPA issues. I am always struck as to the extent of discussion and concern, and of learning of the enormous amount of compliance dollars devoted to, what can only be called minor and mundane issues – not “bribes of consequences” and not payments of “real and substantial value.” Yet I understand why there is this concern – because FCPA Inc. uses enforcement actions (and the allegations contained therein) in marketing compliance services. Do the DOJ and SEC not realize this?
If the DOJ and SEC are genuine in their message that they are only “focused on bribes of consequence,” on payments of “real and substantial value” and in companies spending compliance dollars in the “most sensible way,” there is something very easy and practical for the enforcement agencies to do.
Only allege conduct that actually determines the ultimate outcome of the enforcement action.
Related to the above issues, is what I’ve described as one of the most meaningful sentences in the Guidance (see here for the prior post).
In describing the FCPA’s books and records and internal controls provisions, the Guidance (at pgs. 39-40) rightly talks about the statutory language – namely “reasonable detail” and “reasonable assurances.” Among other things, the Guidance states that the “concept of reasonableness necessity contemplates the weighing of a number of relevant factors, including the costs of compliance.”
Here again, it is difficult to square this sensible language with several recent FCPA enforcement actions.
Such as the Oracle enforcement action. (See here for the prior post). In that SEC books and records and internal controls enforcement action, the only allegations against Oracle itself is that it failed to audit distributor margins against end user prices and that it failed to audit third party payments made by distributors. As noted in the prior post, it is common for large multi-national companies to have hundreds, if not thousands, of distributors. Because of this, audits Oracle was held liable for not conducting are not practical or cost-effective absent red flags suggesting improper conduct. However, the SEC did not allege any such red flag issues. In fact, the SEC alleges that Oracle’s Indian subsidiary “concealed” and kept “secret” the conduct from Oracle.
In short, in connection with the release of the Guidance, Breuer and Khuzami made several sensible statements. But have they read FCPA enforcement actions to realize how those sensible statements are undermined by actual FCPA enforcement actions? Further, the Guidance contained certain sensible statement as well. Yet here again, actual FCPA enforcement actions undermine the sensible statements.
As discussed above, if the DOJ and SEC are genuine in their Guidance related messages, there is something they can do consistent with those messages.
The question is, will they?