Last night, the Los Angeles Ram won the Super Bowl to cap off a successful season. By one measure, the Rams were the most successful team in NFL this year.
But what if the Rams were a business organization subject to the Foreign Corrupt Practices Act?
It is undisputed that the Rams failed many times this year.
For starters, the Rams were 12-5 in the regular season – meaning the Rams lost approximately 30% of its regular season games.
Numerous statistics evidence that the Rams had many flaws this year.
For instance, Quarterback Matthew Stafford threw 17 interceptions and was sacked 30 times. Perfect quarterbacks do not throw interceptions and perfect offensive lines do not allow sacks. More broadly, Rams wide receivers did not catch 201 pass attempts, Rams players fumbled the ball 12 times, and the Rams had 108 penalties (in other words a rule violation). With the benefit of hindsight, all would agree that the Rams could have done better.
Despite the Rams many failures this past season, the beauty of sports is that success is viewed holistically and not through a narrow lens of just one game, a discrete statistical category, or the specifics of a certain possession.
Yet the point of this post is to contemplate what would have happened to Los Angeles this season if it was a business organization subject to various criminal or civil laws such as the Foreign Corrupt Practices Act.
The short answer is that the Rams would have been prosecuted and criticized (by the DOJ/SEC and certain FCPA commentators) for its lack of internal controls. The enforcement theories / comments would have been along the following lines. That the Rams lost approximately 30% of its regular season games is evidence of ineffective internal controls; a team that throws interceptions, fumbles the ball, and commits rule violations has ineffective internal controls. If only the team practiced more, had a better “tone from the top,” trained its players better, or had better monitoring and supervision of its players on the field all would have been perfect – or so the theory goes.
After all, FCPA enforcement actions are often based on the enforcement agencies wearing rose-colored glasses and with the benefit of hindsight viewing a multinational business organization with thousands of employees through the lens of just a 1% overall fail rate, through the lens of just one business unit, or through the lens of just one business transaction.
An interesting clause in most corporate FCPA enforcement action resolution documents is that the company conducted a thorough review of its business operations in a number of jurisdictions other than the locus of the alleged FCPA violation. Yet, in most cases no other improper conduct is alleged in the enforcement action. This alone is suggestive of effective internal controls regardless of the discrete conduct alleged in the enforcement action.
This holistic view of internal controls is consistent with legal authority, legislative history and enforcement agency guidance.
The FCPA’s internal control provisions are specifically qualified through concepts of reasonableness.
Legislative history instructs that the internal controls provisions standard does not equate to an “unrealistic degree of exactitude or precision.”
A rare judicial decision to substantively address the internal controls provisions states:
“It does not appear that either the SEC or Congress, which adopted the SEC’s recommendations, intended that the statute should require that each affected issuer install a fail-safe accounting control system at all costs.”
And even the SEC has stated in internal controls guidance as follows.
“Inherent in this concept [of reasonableness] is a toleration of deviations from the absolute.”
“The test of a company’s internal control system is not whether occasional failings can occur. Those will happen in the most ideally managed company.”
Sports analogies are often useful in other contexts.
The sports analogy in this post demonstrates just how off-the-rails FCPA enforcement has become in certain instances.
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