The DOJ and the SEC (the “Enforcement Agencies”) should either enforce the FCPA or not enforce the FCPA.
For instance, Team Inc. violated the FCPA, but in its August 2nd SEC filing (here) the company stated as follows regarding its previously disclosed FCPA issue. “In a letter to us dated July 12, 2011, the staff of the SEC informed us that it had completed its investigation and did not intend to recommend any enforcement action by the Commission or impose any fines or penalties against the Company. We have not received formal notification from the DOJ, however in July 2011, the staff of the DOJ informed us that it was likely that the staff would not recommend taking any further action or imposing any fines or penalties against the Company.”
How do we know that Team Inc. violated the FCPA? Because the company said it did. For instance, in this August 2010 SEC filing the company said as follows in reference to its previously disclosed internal review regarding its branch operation in Trinidad. “The report of the independent investigator was delivered to the Audit Committee in March 2010 and to the DOJ and SEC in May 2010. The investigation concluded that improper payments of limited size were made to employees of foreign government owned enterprises in Trinidad, but determined that the improper payments were not made, or authorized by, employees outside the one TMS Trinidad branch. The investigation of our other foreign operations did not result in any findings of significance and management has remediated or is undertaking remedial action on all matters identified in the investigation. Based upon the results of the investigation, we believe that the total of the improper payments to government owned enterprises over the past five years did not exceed $50,000. The total annual revenues from the impacted TMS Trinidad branch represent less than one percent of our annual consolidated revenues for all years presented. ” (emphasis added).
Accepting the Enforcement Agencies’ position that payments to government-owned enterprises fall under the FCPA, why didn’t the Enforcement Agencies bring an action? Sure Team Inc. did voluntarily disclose the conduct at issue and the results of its investigation, but that could also be said for nearly all corporate FCPA enforcement actions. Sure, Team Inc.’s “improper payments” appear to have been isolated, were relatively minor in scope, and were not (per the company) “made, or authorized by, employees outside the one TMS Trinidad branch.” But again, the same could also be said for a significant percentage of all corporate FCPA enforcement actions.
Using the Team Inc. standard, did Rockwell Automation deserve an FCPA enforcement action (see here for the prior post). Did Comverse (see here for the prior post) deserve an FCPA enforcement action?
If the FCPA contained a compliance defense (along the lines that a company would not be held vicariously liable for a violation of the FCPA’s anti-bribery provisions by its employees or agents, who were not an officer or director, if the company established procedures reasonably designed to prevent and detect FCPA violations by employees and agents) the end result in Team Inc. would have likely been the same and rightfully so.
But at least the result would have been grounded in law, not in the ad hoc, opaque, non-reviewable discretionary decisions of the Enforcement Agencies.
