The legal standard by which a business organization can face criminal liability for the conduct (that of course must meet all the substantive elements of a crime) of employees or agents is based on a two-factor test: (i) the employee or agent acted within the scope of employment/agency; and (ii) the conduct, at least in part, benefited the organization.
Under this legal standard, the rank and title of the employee does not matter nor does it matter whether the employee or agent acted contrary to the organization’s pre-existing compliance policies and its good-faith efforts to comply with the law.
This U.S. principle stands in stark contrast to the standard of organizational criminal liability in other peer nations where an organization can only face criminal liability to the extent the conduct was engaged in by so-called “controlling minds” (such as board members or executive officers).
Moreover, as highlighted in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” most peer nations have compliance-defense concept relevant to their FCPA-like laws.
The Department of Justice appears, with good reason, to be uncomfortable with respondeat superior corporate criminal liability principles including in the FCPA context where the conduct at issue is often engaged by employees in foreign subsidiary and/or foreign third parties.
However, rather than advocate for substantive changes to the above standard (a standard of course that provides the DOJ substantial leverage over business organizations) the DOJ engages in public relations campaigns to mask its discomfort and to make it appear that the DOJ is addressing the core issue.
First it was non-prosecution and deferred prosecution agreements. In defending the DOJ’s frequent use of NPAs and DPAs, then DOJ Assistant Attorney General Lanny Breuer stated in 2012 (see here for the prior post):
“I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.”
When the FCPA reform movement heated up in 2011 (a component of FCPA reform was to amend the FCPA to include a compliance defense to make the FCPA consistent with the FCPA-like laws of many other peer nations), the DOJ once again stepped in with a public relations move and announced that it would issue FCPA Guidance – guidance that for years prior the DOJ said was unnecessary. (To read more about the relevant chronology of events see the article “Grading the FCPA Guidance“).
Still under pressure to demonstrate fairness in its FCPA enforcement program, in 2012 the DOJ marketed Morgan Stanley’s so-called declination and many drank the DOJ’s kool-aid. (To learn more see prior posts here and here).
The DOJ’s latest public relations move to hide its justified discomfort of respondeat superior criminal liability is the apparent appointment of “compliance counsel” at the DOJ. As reported here:
“The [DOJ] is hiring a compliance counsel who will help prosecutors determine whether companies facing corruption allegations are victims of rogue employees or willfully blind. […] The new compliance counsel, who has been selected and is undergoing vetting, will help authorities put these claims to the test and aid authorities in deciding whether to prosecute, said Andrew Weissmann, chief of the Justice Department’s fraud section in an interview. “Even if we do proceed, what should the appropriate resolution be, in other words what is the appropriate fine, [is] a monitor needed?” The as-yet unidentified compliance counsel will help prosecutors “differentiate the companies that get it and are trying to implement a good compliance program from the people who have a near-paper program,” said Mr. Weissmann, who was named to head up the fraud section earlier this year. The compliance specialist will also assist the fraud unit in other investigations including healthcare and securities fraud. […] The Justice Department’s compliance specialist will also give companies more specific guidance on what level of program is appropriate for the risk level of the business, Mr. Weissmann said. The compliance counsel will be “benchmarking with various companies in a variety of different industries to make sure we have realistic expectations….and tough-but-fair ones in various industries,” he said. “It doesn’t do anyone good to have people wasting their compliance dollars on areas that are low risk.”
As suggested by the above report, the DOJ’s new “compliance counsel” is presumably the brainchild of Andrew Weissman.
As first reported by FCPA Professor when Weissmann was appointed head of the DOJ fraud section in January 2015, Weissmann has been a vocal advocate of Foreign Corrupt Practices Act reform and more broadly reforming corporate criminal liability principles.
Yet, the DOJ’s new “compliance counsel” does not substantively address any of Weissmann’s prior concerns, and those of many others, regarding the DOJ’s FCPA enforcement program.
Rather, it is another instance of DOJ smoke and mirrors.
Among other reasons, in opposing a compliance defense DOJ officials have long maintained – including while testifying at both the Senate’s 2010 hearing and the House’s 2011 hearing – that prosecutors already take into consideration whether the conduct at issue was engaged in by rogue actors and whether the company had pre-existing compliance policies and procedures. (To read more about the specific DOJ statements, see this article). Indeed, such factors are outlined in the DOJ’s Principles of Federal Prosecution of Business Organizations. However, as highlighted in “Revisiting an FCPA Compliance Defense” the DOJ’s recognition of a “de facto compliance defense” is inadequate because it takes place in the opaque, inconsistent and unpredictable world of unreviewable DOJ decision making.
Thus, the DOJ’s new compliance position has no practical significance because decisions will still be made in an opaque manner behind closed doors in Washington, D.C.
Rather, the compliance counsel position is the DOJ’s latest public relations move. Indeed, a knowledgeable source informs me that that the position may not even be a full-time DOJ position, but rather a contract employee for a specified term.
This is not what FCPA enforcement needs. Rather, the FCPA needs transparency, consistency and predictably that can only be accomplished through a change to the actual statute. Moreover, an actual as a matter of law change to the FCPA will yield a host of public policy benefits as well as increase “soft enforcement” of the FCPA as highlighted here, here, here and here.
In short, the DOJ’s recent announcement of compliance counsel represents just the latest public relations move by the DOJ to hide its justified discomfort with respondeat superior corporate criminal liability principles and to make it appear that the DOJ is addressing the core issue.
To read similar reactions to the DOJ’s announcement:
see here (“It’s a clever move because it avoids the Justice Department having to confront a formal compliance defense, which I think can be seen as giving bad incentives. And it gives them a chance to push back on the criticism that they don’t place enough weight on compliance efforts.”);
and here (“I just do not buy this explanation. DOJ prosecutors have a long and valuable expertise in this area. To suggest that they need some assistance is just a little too politically cute for me. […] In the absence of some demonstrated need, I think we can put this move into the category of cynical political moves designed to rebut corporate claims that DOJ prosecutors inadequately review and credit corporate compliance programs. […] If Mr. Weismann believes that having a compliance counsel available at DOJ is going to quiet advocates for a compliance defense, he is certainly demonstrating his political “immaturity.”)
And yes of course FCPA Inc. is already marketing this development with the goal of attracting more compliance work. (See here – “With DOJ’s recent hire of a compliance expert, there has never been a more important time for a company to assess its compliance program and identify enhancements that are necessary to appropriately address the evolving global corruption risks.”)