In 2010, I published an article titled “The Facade of FCPA Enforcement.”
This article discussed various pillars that contribute to the facade of FCPA enforcement and highlighted that the FCPA, during its decade of resurgence, was being enforced like no other law. This article did not argue, or even suggest, that every FCPA enforcement action is unwarranted or that no company or individual has never violated the FCPA. Rather, the article demonstrated that a significant majority of FCPA enforcement actions are a facade” including those that allege clear instances of corporate bribery” yet are resolved without FCPA anti-bribery charges.
According to this site, it is one of the most read articles specifically about the Foreign Corrupt Practices Act.
A decade later, I happy to see that others still notice the article and have continued to expose the facade of FCPA enforcement.
For instance, Joshua Ray (a London-based Partner at Rahman Ravelli Solicitors who leads the Firm’s U.S.-facing business crime practice group) recently published this article titled “The Continuing Facade of FCPA Enforcement: A Critical Look at the Telia DPA.” Of note, Ray serves as defense counsel for Bekhzod Akhmedov in connection with criminal charges filed against him in 2019 related to the Telia FCPA enforcement action (see here for the prior post).
Set forth below is a summary of Ray’s article.
“In a 2010 article, Professor Mike Koehler drew attention to the remarkable fact that every Foreign Corrupt Practices Act (FCPA) enforcement action against corporate entities over the previous twenty year period was resolved through a negotiated settlement or plea agreement. His analysis revealed that many of these settlements did not reflect a factually or legally supported FCPA case. Instead, he concluded that many corporate defendants were not settling FCPA cases because the evidence against them proved a violation, but rather because the cost/benefit analysis of mounting a challenge versus acquiescing to law enforcement’s allegations skewed heavily toward the latter. Given the net effect of the various “carrots and sticks” offered by the government to incentivize settlement, Professor Koehler argued that FCPA defendants are often pushed to accept liability despite dubious enforcement theories or the existence of legitimate defenses. In his view, the overwhelming incentives to settle unsupported FCPA cases distort how the statute is interpreted and create a “facade” of enforcement.
This Article tests Professor Koehler’s thesis through an examination of the 2017 deferred prosecution agreement (DPA) between the Department of Justice (DOJ) and Swedish telecommunications firm Telia Company AB. This case is unique because, unlike virtually every other corporate FCPA resolution, the facts underlying Telia’s DPA have been subjected to meaningful ex ante substantive challenge in Swedish courts. The company also made the atypical decision to publicly release its outside counsel’s full investigative report, providing an unusually rich source of objective information about the purported foreign bribery scheme. An examination of these materials exposes what appears to be a clear instance of a company folding to DOJ pressure not because of the strength of prosecutors’ case, but because of a business decision to avoid the unpredictability and expense of a contested proceeding.
While this conclusion is not intended to suggest Telia and its legal advisers made a strategic error, it highlights that in this case, and most likely in a good number of others, the existence of a corporate resolution does not necessarily mean that there was in fact an FCPA violation. Instead, the Telia case indicates that the “carrots and sticks” identified by Professor Koehler continue to strongly incentivize companies to more or less admit to the version of facts proposed by law enforcement to make an investigation go away. Whether this dynamic will allow the U.S. government to indefinitely extend its extraordinary win streak in corporate FCPA cases depends on how long the foreign companies that are most often targeted choose to accept it.”