This post continues the analysis by highlighting additional issues to consider.
As highlighted in this prior post, in 2018 the DOJ announced a non-binding policy discouraging “piling on” by instructing DOJ “components to appropriately coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company in relation to investigations of the same misconduct.”
This prior post discussed how discouraging “piling on” sounds great, but it all depends on what “piling on” means.
Specifically, one area in which the DOJ’s policy is FCPA relevant is due to the transnational nature of alleged FCPA violations against foreign companies which may be subject to U.S. law enforcement and foreign law enforcement as well.
As highlighted in prior posts here, here, here, much of the largeness of modern FCPA enforcement has resulted from corporate enforcement actions against foreign companies (based in many instances on mere listing of securities on U.S. markets and in a few instances on sparse allegations of a U.S. nexus in furtherance of an alleged bribery scheme).
A substantial majority of these enforcement actions have been against companies headquartered in countries that, like the U.S., are parties to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention). In other words, “peer” countries with mature FCPA-like laws governing the conduct of their companies coupled with reputable legal systems to prosecute such offenses.
Given this reality, as well as the specific provision in Article 4 of OECD Convention that “when more than one Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution,” is it “piling on” when the U.S. brings FCPA enforcement actions against such foreign companies for their interactions with non-U.S. officials?
After all, as highlighted in this prior post, in 2017 DOJ officials stated that they “are working harder than ever to coordinate with global partners and avoid what some have termed “piling on” in attendant global resolutions.” As stated by Sandra Moser (Principal Deputy Chief, Fraud Section, DOJ):
“Coordination with foreign countries will continue, and that number of coordinated resolutions will grow, including with new countries. This is important for several reasons. First and foremost, it is fair to companies. It encourages companies to cooperate across the board, because we understand that, at the end of a case, money paid out is derived from one pie. A resolving company should not have piled upon it duplicative fines via separate resolutions that do not credit one another. Although the “piling on” problem is not entirely solved by doing this (other countries may certainly try to reach additional resolutions), our efforts do mitigate this problem, and we are trying to do better in this regard.”
Granted, in most of these type of enforcement actions there were credits or offsets in terms of U.S. FCPA settlement amounts for related foreign law enforcement actions. However, the bigger question is whether these examples should have been instances in which the U.S. simply backed away because of the related foreign law enforcement action?
Which brings us to the FCPA enforcement action against Airbus (a company headquartered in the Netherlands with its main office in France).
As the DOJ candidly acknowledged, Airbus “is neither a U.S. issuer nor a domestic concern, and the territorial jurisdiction over the corrupt conduct is limited.” According to the DOJ’s allegations, on July 24, 2014, Airbus Executive 5 – while in the U.S. – (i) sent an e-mail responding to the head of Compliance at Airbus Group and directing him to alter meeting minutes of the Company Development and Selection Committee regarding a certain Consultant; and (ii) e-mailed other Airbus executives about the alteration. In addition, on February 14, 2014, Airbus Executive 5 – while in the U.S. – e-mailed his approval of certain of the leisure events to another Airbus Executive.
As the DOJ further acknowledged, both France and the United Kingdom (which also brought bribery enforcement actions against Airbus announced on the same day) have a “significantly stronger” jurisdictional basis for resolving related matters.
OECD Article 4 talks about the “most appropriate jurisdiction for prosecution” and in the Airbus enforcement action the DOJ acknowledged that the U.S. was not the most appropriate jurisdiction to resolve the corruption-related conduct of Airbus.
Yet, the DOJ brought a $294 million enforcement action anyway. In the minds of some, FCPA enforcement has become a convenient cash cow for the U.S. government. The Airbus enforcement action only amplifies these concerns.
OECD Article 5
Similar to when the United Kingdom resolved an enforcement action against Rolls Royce (see here for the prior post), the U.K. enforcement action – resolved through a deferred prosecution agreement – also violates OECD Convention Article 5.
Article 5 of the OECD Convention is titled “Enforcement” and states:
“Investigation and prosecution of the bribery of a foreign public official shall be subject to the applicable rules and principles of each Party. They shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.”
Much like U.S. resolution of certain FCPA enforcement actions (see my “homework assignment” here from the U.S. Senate in connection with its 2010 Senate hearing on this very issue), the Airbus DPA is in violation of Article 5 of the OECD Convention because resolution of the matter was clearly influenced by considerations of national economic interest and the identity of the legal person (Airbus) involved.
The approved judgment seems to recognize the obvious OECD Article 5 issues and notes that “no company is too big to prosecute” and that “national economic interest is irrelevant to the analysis of the question whether or not a DPA is in the interests of justice.” Nevertheless, Judge Sharp observed under the heading “Collateral Effects.”
“On the issue of the potential disproportionate consequences of a conviction, on behalf of Airbus, it has been said that a criminal conviction would have a number of materially adverse consequences. There is nothing I have seen in the evidence that has been placed before me which suggests that these consequences are not accurately described. These consequences include the following. A conviction for a section 7 bribery offence could result in discretionary debarment from tendering for UK public sector contracts under the Public Contracts Regulations 2015, which implement the EU Procurement Directive (it is not an offence which requires mandatory exclusion in the Regulations) thus excluding the company from participation in procurement procedures. It could also occur in other EU jurisdictions. Further, Mr Keith QC identified that it would be likely that a conviction would result in a mandatory debarment from tendering for public sector contracts in the Netherlands, India, Turkey and the UAE amongst other jurisdictions; and that discretionary debarment in this jurisdiction, would, in any event, increase the risk of discretionary debarment in many other jurisdictions.
What matters here is not the potential loss of contracts per se, but the effect this will have on the company financially and on its (innocent) employees, and the wider effects this will have on innocent third parties. Airbus has undertaken an analysis of the value of contracts which it might be precluded from tendering for if debarred, the effects of which could last up to fifteen years. On a worst case scenario, the estimated future revenue at risk globally across the Commercial, Defence and Space and Helicopter divisions could exceed €200 billion, which could decrease the value of production of Airbus in the United States, the UK, France, Germany, and Spain by over €200 billion.
Secondly, there are obvious associated risks to debarment on the scale contemplated, including to the financial position of Airbus, its financing arrangements, and to the internal health of the company caused by the loss of key revenue streams and the loss of market presence in the duopolistic marketplace in which Airbus operates. These would inevitably affect Airbus’ thousands of employees in the United Kingdom, its share price, and thus pensioners and the thousands of companies and jobs which rely on Airbus, as part of its supply chain. The collateral effects spread more widely, however. A Deloitte report, commissioned by Airbus, has estimated for example that if Airbus was debarred from public procurement for five years, the ongoing effects over fifteen years, could put many thousands of jobs at Airbus at risk. Across that time frame, and absent debarment, many thousands of jobs could be sustained, in the UK, the United States, Germany, France and Spain. The indirect impact on the economies of these countries could be substantial: Deloitte estimates it could lower the Gross Domestic Product in each of those countries by over €100 billion. In addition, there could be adverse consequences for the reduction in competition in future public tenders, leading to additional public spending of many billions of euros..”
In short, the U.K. resolution was clearly influenced by consideration of national economic interest and the identity of the legal person (Airbus) involved.
This prior post discussed how FCPA enforcement actions often involve “normal” activity. However, what makes the conduct a violation of the FCPA (in the eyes of the U.S. government) is who is involved in the “normal” activity.
The DOJ FCPA enforcement action against Airbus was based on alleged interactions with employees of Chinese state-owned or state-controlled airlines. According to the DOJ:
“[E]xecutives from certain Chinese state-owned and state-controlled airlines, as well as executives from other airlines, attended an event hosted at a luxury resort in Maui, Hawaii, from 28 July through 2 August 2013 with Airbus Executive 4, Airbus Executive 5, Airbus Executive 6 and other Airbus executives. The event in Hawaii included golf, scuba diving, snorkeling cruises, horseback riding, ocean kayaking, surfing lessons, and cocktail and luau dinner receptions. A daily half-hour business related presentation was scheduled in the early mornings, along with side meetings with individual customer airlines, while the rest of the agenda was dedicated to leisure and entertainment activities.”
Such corporate retreats or events are normal in many industries, yet few use the “b” word (that is bribery) to describe the conduct.
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