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Fear-Based FCPA Marketing


As is his occasional style, Mike Volkov began this post on his Corruption Crime & Compliance blog with a rant:

“Akin to politics (to a smaller degree), there is a fair amount of disinformation, some call it bloviating, put out by the FCPA Paparazzi. Some of this disinformation is motivated by immature attempts to “market” legal services; other sources of disinformation carry a readily apparent bias, one way or the other, and usually are supported by self-citations to one’s own “scholarship” to prove their points.”

When ranting, one can at least be a bit more specific and perhaps provide supporting links so that readers can decide for themselves the veracity of the assertions.

In any event, it was a bit ironic that a few days after the above rant a post was published on Corruption Crime & Compliance titled “Doing Business in China Should be “Scary.

As most FCPA-fear based marketing pieces do, the post begins with a current events hook (the recent Novartis enforcement action), contains the phrase a “perfect storm” and asserts that “companies should absolutely be scared of doing business in China.” And then of course, as most fear-based marketing pieces do, the post ended with a simplistic solution in this case with five generic steps (such as “train,” “communicate” and “be proactive”) to “make doing business in China a little less scary.”

Does business in China entail FCPA risk? Absolutely.

Have several FCPA enforcement actions (or instances of disclosed FCPA scrutiny) concerned alleged improper conduct in China? Yes, but FCPA enforcement actions and scrutiny tend to be directly related to the extent of business in any particular country and to state the obvious there are more business organizations subject to the FCPA doing business in China than in Ethiopia, Honduras, or Madagascar (to name just a few countries).

However, the notion that doing business in China is “scary” and that “companies should absolutely be scared of doing business in China” is ridiculous.

Tens of thousands, indeed likely hundreds of thousands, of companies subject to the FCPA do business in China and China is the most attractive market in the world for foreign direct investment (FDI). Indeed, according to World Bank figures foreign direct investment in China has generally increased during the FCPA’s new era of enforcement.

Against this backdrop, the fact that there tends to be 3-5 FCPA enforcement actions per year concerning alleged conduct in China (often enforcement actions that originated with voluntary disclosures and often enforcement actions based on dubious and untested legal theories) is unremarkable.

As Volkov himself previously observed:

“The FCPA Paparazzi has done a great disservice to the business community.  Call it a complete lack of credibility.  Legal marketing has become confused in this day and age – marketing has now been turned into the ‘Fear Factor,’ meaning that lawyers need to scare potential clients into hiring them.  That is flat-out wrong.   Each week, new client alerts, client warnings and other cries of impending disaster are transmitted through the Internet to businesses.”

Against the backdrop of ever-present “fear-based” FCPA marketing are the refreshing words of Pamela Marple:

“Over the past five years, the [FCPA] has solidified itself as an industry brimming with expert forums, company departments and substantial news coverage. Is this statute really the bear in the woods some say it is? […]  The existence of the FCPA industry (and professionals who are available to conduct internal investigations at a high price) does not mean that this reaction is what is always required. What is required first and foremost is reasonable judgment exercised by directors and professionals who seek both compliance and solutions—without assuming a bear is present at every turn.”


Speaking of bloviating, in this other recent post Volkov writes: “The doctrine of the “rogue” employee has been an artificial concept promoted by white-collar defense lawyers to minimize corporate client responsibilities.”

Last I checked, the Department of Justice is most certainly not comprised of white-collar defense lawyers. Yet even the DOJ recognizes the existence of rogue employees.

As stated in the DOJ’s Principles of Federal Prosecution of Business Organizations: “[I]t may not be appropriate to impose liability upon a corporation, particularly one with a robust compliance program in place, under a strict respondeat superior theory for the single isolated act of a rogue employee.”

As stated by then DOJ Assistant Attorney General Lanny Breuer: “There will always be rogue employees who decide to take matters into their own hands. They are a fact of life.” (See here).

Similar to the DOJ, the SEC is most certainly not comprised of white-collar defense lawyers. Yet even the SEC recognizes the existence of rogue employees. For instance, in announcing FCPA charges against Garth Peterson (a former Morgan Stanley executive),  Kara Brockmeyer (Chief of the SEC Enforcement Division’s FCPA Unit) stated: “As a rogue employee who took advantage of his firm and its investment advisory clients, Peterson orchestrated a scheme to illegally win business while lining his own pockets and those of an influential Chinese official.”

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