Three cheers for SEC Chair Mary Jo White’s recent speech titled “The Importance of Trials to the Law and Public Accountability.”
Under the heading, “why trials are important,” White stated that “simply put, [trials] put our system of justice […] on display for all to see.” She stated as follows.
“The public airing of facts, literally in open court, creates accountability for both defendants and the government. How we resolve disputes and how we decide the guilt or innocence of an accused are the true measure of our democracy. Thomas Jefferson once said that he considered ‘trial by jury as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.'”
In the speech, White agreed that trials are the “‘crown jewel’ of our system of justice” and she focused on two “of the more important roles that trials play in our administration of justice: how they foster development of the law, and perhaps even more importantly how they create public accountability for both defendants and the government through the public airing of charges and evidence.”
As to the former, White stated that “trials allow for more thoughtful and nuanced interpretations of the law in a way that settlements and summary judgments cannot.”
As to the later, White agreed with the following statement. “The death of trials would … remove a source of disciplined information about matters of public significance. … It would mean the end of an irreplaceable public forum and would mean that more of the legal order would proceed behind closed doors. And it would deprive us, as American citizens, of an important source of knowledge about ourselves and key issues of public concern.”
White talked about the “near-sacred nature of the courtroom,” how “litigants are required to meet their burden of proof, and where there is up-close-and-personal accountability for whatever the trial is about,” how trials are where “victims and witnesses have the chance to tell their stories and where the public can hear the facts set forth in open court,” and how trials provide a place for “public closure on hotly disputed facts and legal issues.”
As White stated, “by the end of the trial, the full scope of the misconduct is laid before the fact-finder to decide guilt or innocence, liability or no liability.”
As to criminal trials, White, a former DOJ prosecutor, stated that the “scarcity of criminal trials means that the public does not often enough have this kind of public airing and adjudication that trials uniquely provide.”
Although White’s speech was general in nature, the topics addressed are relevant to Foreign Corrupt Practices Act enforcement and I completely agree with White, trials are indeed important.
In “The Facade of FCPA Enforcement,” under the heading “why the facade of FCPA enforcement matters,” I observed.
“As a matter of general jurisprudence, it is troubling when any area of law largely develops outside of the judicial process. The judicial process facilitates the thoughtful presentation of opposing views, mitigating facts and circumstances, and potential defenses in an adversarial proceeding culminating in an impartial decision-maker weighing the facts and applying the law in rendering a decision in a transparent manner. These fundamental hallmarks are largely missing in FCPA enforcement. Rather, the enforcement agencies, occupying positions of advocate, judge, and rule-maker, induce settlement through the “carrots” and “sticks” they possess even though many of the enforcement theories leading to these resolutions are untested and dubious, and in some case in direct conflict with the FCPA’s statutory provisions. The end result is resolution vehicles that do not facilitate the thoughtful presentation of opposing views, mitigating facts and circumstances, potential defenses, or testing of legal theories. Yet, these resolution vehicles largely define the FCPA. When the parameters of any law develop through such an opaque process, public confidence in that law, as well as the rule of law, suffers.”
The irony of course is that – notwithstanding White’s sensible statements – the SEC has never been put to its burden of proof in a corporate FCPA enforcement. The reasons are largely due to SEC enforcement policies that pre-date White’s tenure at the SEC, but policies that she continues to champion – namely the SEC’s neither admit nor deny settlement policy (notwithstanding its recent tweak) and the SEC’s more recent use of non-prosecution and deferred prosecution agreements.
As to the later, when the SEC announced its intention to use NPAs and DPAs, I called the development (see here for the prior post) a blow to those who prefer government law enforcement agencies to enforce a law in an open, transparent matter and in the context of an adversary proceeding … in other words the very same things White championed in her recent speech.
The further irony of course from White’s recent speech is that when the SEC has been put to its burden of proof in individual FCPA enforcement actions, the SEC has an overall losing record. (See this prior post detailing the instances).
The importance of trials and the issues addressed in White’s speech are of course also relevant to the DOJ’s overall losing record when put to its burden of proof in FCPA enforcement actions. (See here for “What Percentage of DOJ FCPA Losses Is Acceptable?”). And of course White’s comments about “behind closed doors” and how trials “allow for more thoughtful and nuanced interpretations of the law in a way that settlements” cannot is even more important to the DOJ’s enforcement of the FCPA given its prevalent use of NPAs and DPAs.
As I’ve offered a number of times in the FCPA context, success in enforcing a law, whether in the corporate context or individual context, is best measured by instances in which an enforcement agency is actually put to its burden of proof in an adversarial proceeding.
Thanks to White’s recent speech, we have been reminded of that.
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Much like this prior post in which a high-ranking SEC official acknowledged the underlying logic supporting a compliance defense, White did the same thing in this October speech before a broker-dealer compliance audience. In pertinent part, White stated:
“Your work is extremely important to us as well as to investors because you are positioned to prevent infractions from happening in the first place, rather than coming to our attention only after harm has been done.” […] “[W]e rely on you. We rely on you because as much as we strive to be everywhere we can be, our resources are limited and always stretched.”
Elsewhere, White stated that a question the SEC often asks is whether compliance professionals are “empowered by your firms to do what you need to do?” […] “We want to encourage companies to give you the recognition that you deserve, the resources that you need and the authority that your role demands, so you can succeed and, as a result, our markets are safe and can succeed.” […] “[W]e seek to promote the role of compliance and ensure that the firms recognize and acknowledge the importance we place on your role.”
For why these statements acknowledge the underlying logic supporting a compliance defense, see “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”
