FCPA Survey Results From The Classroom

December 3, 2014

Call them green, inexperienced, and naive as to how things really work.

I call them good Foreign Corrupt Practices Act survey respondents because they are immersed in learning: (i) about black letter legal principles; (ii) legal authority as opposed to non-legal sources of information; and (iii) how the law and the adversarial system functions in other areas of law.  I call them good FCPA survey respondents because their answers are not influenced by client concerns, maintaining their own practice, or maintaining good will with the enforcement agency officials who possess the “carrots” and “sticks” relevant to FCPA enforcement.

The below survey data was collected – anonymously – this semester from students in my FCPA class at Southern Illinois University School of Law.  As noted in this prior post, the class is one of the only law school courses of its kind in the country.  (See here for media coverage of the class).  The prior post sets forth the learning objectives of the class and during the semester students had the opportunity to engage with FCPA lawyers in private practice, an FCPA violator and government cooperator, and in-house FCPA compliance attorneys at leading companies.

The survey results are set forth below.  (Next to each survey result, in ( ) is the response to the same question from last year’s class.  Note, in a few instances new questions were asked this year compared to last year, thus the reason for no previous response).

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(1)  In enforcing the FCPA, or any law for that matter, what is the best definition of success? 

The number of settlements the DOJ or SEC is able to secure = 15% (17%)
Instances in which the DOJ or SEC is put to its burden of proof and prevails = 85% (83%)
(2) Rank, in the order of importance (with 1 being most important and 4 being least important) what the FCPA means?
Judicial decisions construing the FCPA = average = 2.9 (3.1)
The FCPA’s statutory language = average = 1.2 (1.3)
Enforcement agency guidance, including resolved enforcement actions = average = 3.4 (3.4)
Congressional intent in enacting the FCPA = average = 2.4 (2.3)
(3)  You are the general counsel of ABC Inc.  A whistleblower has contacted the DOJ and SEC regarding potential FCPA violations in your China operations and the agencies have opened up an investigation.  After an internal review conducted by outside counsel, outside counsel advises you that based upon the factual evidence and relevant FCPA legal authority, should the enforcement agencies bring an action and be put to its burdens of proof in an adversarial proceeding, there is only a 30% chance that the enforcement agencies would prevail.  Should the enforcement agencies bring an action (i.e. the DOJ criminally charges the company and the SEC civilly charges the company), it is likely that the company’s stock price would fall at least 3% (and perhaps more) eclipsing $750 million in shareholder value.  Outside counsel advises you that during its negotiations with the DOJ and SEC, the agencies are willing to offer the company non-prosecution agreements in which the company will be required to pay $75 million in aggregate fine and penalty amounts to resolve its alleged FCPA scrutiny.  The non-prosecution agreements are unlikely to have any impact on the company’s stock price.  As general counsel, what course of action are you going to suggest to the company’s board of directors?
Put the DOJ and SEC to its burden of proof at trial = 15% (11%)
Agree to resolve the alleged FCPA scrutiny via the NPAs = 85% (89%)
(4) Are foreign policy implications present in most current FCPA enforcement actions given the alleged “foreign officials”?
Yes = 21% (18%)
No = 79% (82%)
(5) In your opinion, the 11th Circuit’s Esquenazi “foreign official” decision:
Provides clarity to the FCPA’s “foreign official” element = 71%
Results in less clarity as to the FCPA’s “foreign official” element = 29%
(6) Given the DOJ and SEC’s enforcement theories – most notably in enforcement actions involving foreign licenses, permits, etc. – does the FCPA’s facilitating payment exception have any real meaning in this new era of enforcement?
Yes = 27% (32%)
No = 73% (68%)
(7) Given the “carrots” and “sticks” relevant to resolving a corporate FCPA enforcement action, do statute of limitations have any real meaning in this new era of enforcement?
Yes = 8% (16%)
No = 92% (84%)
(8) FCPA enforcement actions often involve companies that are otherwise viewed as selling the best product or service for the best price.  With such companies, can it truly be said that the alleged improper payments were the sole reason the company secured the contract or other benefit received?  In other words, does a “but for” analysis have a place in arriving at FCPA fine and penalty amounts?
No – the full value of the benefit allegedly received should be the starting point for calculating fine and penalty amounts regardless of the type of company resolving the enforcement action = 33% (56%)
Yes – by using the full value of the benefit received, the calculation ignores the fact that the company may have secured the benefit regardless of the alleged improper payments = 67% (44%)
(9) Is disgorgement an appropriate remedy when the SEC charges only FCPA books and records and internal controls violations?
Yes = 17% (25%)
No = 83% (75%)
(10)  In an FCPA enforcement action involving both a DOJ and SEC component, the value of the benefit allegedly received by the company from the improper payments is a key factor in determining the criminal fine amount under the advisory Sentencing Guidelines.  The same figure is also likely to comprise the disgorgement amount in an SEC enforcement action.  This is:
Inappropriate “double-dipping” and thus unfair to the company and its shareholders = 92% (88%)
Appropriate, this is not “double-dipping” and even if it was it is still appropriate = 8% (12%)
(11) Is there a double standard when it comes to enforcement of the FCPA and the U.S. domestic bribery statute (18 USC 201)?  In other words, are corporate interactions with “foreign officials” subject to greater scrutiny and different standards of enforcement than corporate interactions with U.S. officials?
Yes, there is a double standard = 100% (94%)
No, there is no double standard = 0% (6%)
(12) Are you uncomfortable with “bribery, yet no bribery” cases such as Siemens and BAE where the enforcement agencies allege facts suggesting violations of the FCPA’s anti-bribery provisions, yet neither entity was actually charged with such violations?
Yes = 80% (56%)
No = 20% (44%)
(13) Since 2008, approximately 75% of corporate DOJ FCPA enforcement actions (and approximately 80% of corporate SEC FCPA enforcement actions) have not (at least yet) resulted in any related enforcement actions against company employees?  This is likely due to:
The quality and legitimacy of the corporate enforcement action that was resolved via an NPA or DPA = 56% (29%)
Other factors not calling into question the quality and legitimacy of the corporate enforcement action = 44% (71%)
(14)  Given the conduct at issue in the respective cases, does the disparity between the sentences of Joel Esquenazi and Carlos Rodriguez (180 months and 84 months), two individuals who tested their innocence, and Albert Stanley and Jeffrey Tesler (30 months and 21 months), two individuals who pleaded guilty, concern you?
Yes = 100% (79%)
No = 0% (21%)
If yes, were
Stanley and Tesler sentenced too lightly = 38% (27%)
Esquenazi and Rodriguez sentenced too harshly = 62% (73%)
(15) Do you believe that the following reasons have merit in terms of a possible explanation for the general increase in FCPA enforcement?

FCPA enforcement has become lucrative for the government – in the views of some – a “cash cow”

Yes, this reason has merit = 100% (83%)
No, this reason does not have merit = 0% (17%)

FCPA Inc. participants, who often serve as gatekeepers to FCPA enforcement actions and scrutiny, have a vested business interest in there being more FCPA enforcement and scrutiny?

Yes, this reason has merit = 81% (94%)
No, this reason does not have merit = 19% (6%)
(16) The typical career path of a DOJ or SEC enforcement attorney, after enforcing the FCPA, is to leave government service for the private sector to provide FCPA investigative and compliance services to business organizations subject to the FCPA enforcement climate.  This typical career path:
Concerns me and the issue ought to be addressed to a greater extent that it currently is = 63% (61%)
Does not concern me = 37% (39%)

(17) With increasing frequency, instances of FCPA scrutiny or enforcement are quickly followed by civil causes of action such as derivative claims or securities fraud claims brought by plaintiffs’ lawyers representing company shareholders.  Excluding the relatively rare situations in which a company’s FCPA scrutiny or liability is the result of board of director or executive officer conduct, such civil causes of action:

Have merit and provide shareholders the ability to recover for harm suffered as a result of the company’s FCPA scrutiny or liability = 46% (28%)
Lack merit and represent plaintiffs’ lawyers desire to feed-off this new era of FCPA enforcement = 54% (72%)

(18) Rank, in order of importance (with 1 being the greatest interest and 3 being the weakest interest) which law enforcement agency has the greatest interest in bringing an enforcement action when a foreign company or foreign national subject to the FCPA allegedly bribes a foreign official?
The “home” jurisdiction of the foreign company or foreign national = 1.5
The “home” jurisdiction of the foreign official allegedly bribed = 2.4
The U.S. = 2.1
(19)  Are you in favor of the FCPA being amended to include a compliance defense (meaning that a company’s pre-existing compliance policies and procedures, and its good-faith efforts to comply with the FCPA, would be relevant as a matter of law when a non-executive employee or agent acts contrary to those policies and procedures and in violation of the FCPA)?
Yes – 86%
No – 14%