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Further Thoughts On A Compliance Defense

The day after Labor Day has always seemed like a second New Year.  In that spirit, let’s kick off the “new year” with further thoughts on a compliance defense.

For starters, I am pleased to share (here) the published version of my scholarship “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”  The published version in the Wisconsin Law Review (compared to the draft released last January) contains additional reasons and rationale for why the FCPA ought to be amended to make a company’s pre-existing compliance policies and procedures, and its good-faith efforts to comply with the FCPA, relevant as a matter of law when a non-executive employee or agent acts contrary to those policies and procedures.

In other developments relevant to a compliance defense and of particular note, a Senior Investigations Counsel with the SEC’s FCPA Unit published an article (here) in Standford’s Journal of Law, Business & Finance arguing that “the United States should adopt a compliance procedures defense for the FCPA similar to the adequate procedures defense under the Bribery Act.”  The typical “I am not speaking on behalf of the SEC” disclaimers applied to Jon Jordan’s article, but it is hard to ignore calls for reform from a current SEC official who spends his days investigating FCPA issues.

As noted in this previous post, William Jacobson (former assistant chief of DOJ FCPA enforcement and current co-general counsel and chief compliance officer at Weatherford International Ltd.) has joined the growing chorus of former high-ranking DOJ officials calling for reform.  The FCPA Blog recently (here) called for a revival of Jacobson’s plan for recognizing a company’s pre-existing FCPA compliance policies and procedures.  While I agree with much of what Jacobson says, I disagree that the solution to this important issue is non-binding DOJ policies and procedures.  I also disagree that a trigger for recognizing a company’s pre-existing FCPA compliance policies and procedures should be, as Jacobson suggests, a company’s voluntary disclosure to the enforcement agencies.

Over the summer, Alexandra Wrage (President of Trace International) compiled a list of antibribery and anticorruption resources (here) for in-house counsel to consult in developing and implementing compliance programs.  Separately, Transparency International announced here its “Assurance Framework for Corporate Anti-Bribery Programs” with the goal of “provid[ing] benchmarks in the form of control objectives for use by enterprises in designing and evaluating their anti-bribery programmes in anticipation of independent assurance.”  Ought not these quality resources and the benchmarking factors they contain matter other than in the opaque world of enforcement agency discretion?

Also over the summer, Ben Heineman (former General Electric Company senior vice president-general counsel and current senior fellow at Harvard) wrote here that “federal enforcement authorities should give much more systematic credit to effective corporate compliance programs when making decisions about criminal prosecutions …”.

In this post concerning a compliance defense, Michael Volkov states that my proposal to have compliance incorporated into the FCPA as an element of a bribery offense, the absence of which the DOJ must establish to charge a substantive bribery offense is “unprecedented.”  This is not true.   Such a concept is not unprecedented as several peer countries, as noted in my Revisiting article, have adopted this approach in their FCPA-like laws.  Volkov returned to the issue of compliance in this post arguing that “one alternative which is not discussed very often is to increase the benefit for an effective corporate compliance program under the US Sentencing Guidelines.”  Perhaps the Sentencing Guidelines could be tweaked, but revising non-binding guidelines that are only implicated after liability has been established is not a comprehensive solution to the issue.

I have debated an FCPA compliance defense with Howard Sklar (see here).  His main objection to a defense seems to be that if there is such a defense, an FCPA inquiry will turn into an investigation of the company’s overall compliance culture.  For starters, how is this any different from the current enforcement environment in which the “where else” question is typically asked (see here for the prior post) and in which instances of FCPA scrutiny typically lead to world-wide reviews of a company’s operations?  In addition. Sklar’s fears are overblown because a compliance defense ought to be situational.  The FCPA compliance defense that passed the House in the 1980’s was situational in that it focused on specific employees engaged in specific conduct and the specific officers and employees of the company who had supervisory responsibility of the specific employees and specific conduct.  Likewise, the adequate procedures defense in the U.K. Bribery Act is situational.  The statutory text itself references particular instances of bribery (i.e. “such conduct”) and Ministry of Justice guidance states that “the commercial organisation will have a full defence if it can show that despite a particular case of bribery it nevertheless had adequate procedures in place to prevent persons associated with it from bribing.” (emphasis added).

There will likely be no movement on FCPA reform until after the DOJ releases its guidance this Fall and until a new Congress begins after the elections.  When reform discussion begins anew, it will be against the backdrop of a growing chorus who do not believe that the enforcement agencies adequately recognize and credit pre-existing FCPA compliance policies and procedures.

There is disagreement as to the remedy, but I believe for the reasons stated in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” that the best solution is to make a company’s pre-existing compliance policies and procedures relevant as a matter of law when a non-executive employee or agent acts contrary to those policies and procedures.

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