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The Use Of Overblown And Inherently Inconsitent Rhetoric In Connection With FCPA Enforcement Continues

This post is not about whether the Foreign Corrupt Practices Act is a fundamentally sound statute.  It is, even though the FCPA and FCPA enforcement policies and procedures could be improved.

This post is not about whether FCPA enforcement by the DOJ and SEC – when facts legitimately satisfy FCPA elements – is in the public interest.  It is, for a variety of reasons.

Rather this post is about overblown and inherently inconsistent government rhetoric in connection with FCPA enforcement.

As highlighted in this post, there is seemingly little connection between the bulk of FCPA enforcement actions and U.S. national security.  Indeed, as further highlighted in this post, U.S. national security is, as a matter of law and seemingly as a matter of practice, a reason not to enforce the FCPA.

Last week, Assistant Attorney General Leslie Caldwell delivered this speech.

The general topic was “about the enforcement of our nation’s federal criminal laws in the 21st Century, and how the Justice Department constantly is adapting its approach to new challenges presented by the global economy and expansion of crime beyond national borders.”

As to the FCPA, Caldwell stated:

“The Foreign Corrupt Practices Act, or FCPA, is a law that prohibits the paying of bribes to foreign government officials to assist in obtaining or retaining business.

You may be asking yourself why the U.S. Justice Department is involved in the fight against corruption abroad.  In fact, there are people who claim that taking aim at foreign bribery puts U.S. companies at a competitive disadvantage in countries where bribery is just business as usual.

The threats posed to the United States by international corruption, however, cannot be overlooked.  Foremost, corrupt countries are less safe.  Corruption thwarts economic development, traps entire populations in poverty, and leaves countries without a credible justice system.  Corrupt officials who put their personal enrichment before the benefit of their citizenry create unstable countries.  And as we have seen time and again, unstable countries become the breeding grounds and safe havens for terrorist groups and other criminals who threaten the security of the United States.

International corruption also inhibits the ability of American companies to compete overseas on a level playing field.  Once bribery and corruption take hold, fair and competitive business practices are eliminated.  Nobody but the corrupt official benefits from bribery.

For all of these reasons, fighting foreign corruption is not a service we provide to the global community, but rather a necessary enforcement action to protect our own national security interests and the ability of our U.S. companies to compete on a global scale.

And, it is not just the United States that is recognizing the importance of foreign bribery laws.  There is an ever growing chorus of countries voicing support for the fight against this type of corruption.  More and more countries are joining international bodies that provide uniform standards for the criminalization of bribery of foreign public officials in international business transactions.  This type of collaboration is critical if we are going to have a meaningful impact on international corruption.”

The notion that FCPA enforcement is “necessary” to “protect our own national security” causes me to once again ask the question: do high-ranking DOJ officials actually read the allegations in most FCPA enforcement actions?  (See here for the prior post).

Recent DOJ FCPA enforcement actions have included the following.

  • Against HP related entities concerning conduct that occurred 7-14 years in which alleged improper payments were made in selling telecommunications, computer equipment, and other technology products in Russia, Poland and Mexico.
  • Against an Alcoa entity concerning conduct that occurred  15-20 years in which alleged improper payments were made in connection with an aluminium smelter project in Bahrain.
  • Against ADM concerning alleged improper payments made in Ukraine in connection with value added tax (VAT) refunds, notwithstanding the fact that the company was legitimately owed the VAT refunds.

Moreover, in the past several years approximately 15 corporate FCPA enforcement actions have concerned business relationships with foreign physicians, lab personnel and yes even a mid-wife.

Moreover, during this new era of enforcement, a substantial percentage of FCPA enforcement actions concern alleged conduct in connection with obtaining foreign licenses, permits, certifications and the like.

Moreover, most of the large FCPA enforcement actions in the past several years have concerned alleged improper relationships between foreign companies and foreign officials in which the alleged conduct seemingly has little actual connection to the U.S.

Moreover, many FCPA enforcement actions have involved, to name just a few, allegations about a bottle of wine (see here), a Cartier watch (see here), a camera (see here), kitchen appliances and business suits (see here), television sets, laptops and appliances (see here), and tea sets and office furniture (see here).

I invite anyone to submit a guest post articulating a credible and direct link between the above enforcement activity and U.S. national security.

The implicit suggestion of course from Caldwell’s speech is that if one is critical of certain FCPA enforcement efforts, one is somehow against U.S. national security.

I reject that.

Indeed, U.S. national security is, as a matter of law and seemingly as a matter of practice, a reason not to enforce the FCPA.

The FCPA itself states:

“(3)(A) With respect to matters concerning the national security of the United States, no duty or liability under [the FCPA] shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such  matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this paragraph  shall set forth the specific facts and circumstances with respect to which the provisions of  this paragraph are to be invoked. Each such directive shall, unless renewed in writing,  expire one year after the date of issuance.

(B) Each head of a Federal department or agency of the United States who issues such a directive pursuant to this paragraph shall maintain a complete file of all such directives and shall, on October 1 of each year, transmit a summary of matters covered by such directives in force at any time during the previous year to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate.”

That the above provision specifically invoke the FCPA’s books and records and internal controls provisions, but not the FCPA’s anti-bribery provisions, would seem to be a scrivener’s error.

Moreover, U.S. national security also seems to be a reason not to enforce the FCPA as a matter of practice.

Consider the BAE enforcement action.  Despite the DOJ alleging conduct that clearly implicated the FCPA’s anti-bribery provisions, BAE (a large U.S. defense contractor) was not charged with violating the FCPA.  (To learn more about the BAE enforcement action, see “The Facade of FCPA Enforcement” pgs. 993-996).

Consider also the mysterious conclusion to the James Giffen enforcement action.  In 2003, James Giffen was criminally charged with “making more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan.” However, Giffen’s defense was that his actions were made with the knowledge and support of the CIA, the National Security Council, the Department of State and the White House. The DOJ did not dispute that Giffen had frequent contacts with senior U.S. intelligence officials or that he used his ties within the Kazakh government to assist the United States. With the court’s approval, Giffen sought discovery from the government to support his public authority defense and much of the delay in the case was due to the government’s resistance to such discovery and who was entitled to see such discovery.  In 2010, the enforcement action took a sudden and mysterious turn when Giffen agreed to plead guilty to a one-paragraph superseding indictment charging a misdemeanor tax violation.  The enforcement action ended with the presiding judge imposing no jail time on Giffen and stating that he was a Cold War hero and that the enforcement action should have never been brought in the first place. Giffen presumably prevailed over the DOJ not because of the facts or the law, but because he possessed significant leverage over the government in that he asserted his actions were taken with the knowledge and support of the highest levels of our  government. 

Consider also the fact that there has been no FCPA enforcement actions concerning contracts at the Manas airbase in Kyrgyzstan (which the U.S. used to route personnel and equipment headed for Afghanistan).  (To learn about the Manas contracts see here for a U.S. House hearing devoted to the subject and here, here and here for additional information).

In short, the DOJ’s recent “national security” rhetoric concerning FCPA enforcement was overblown and inherently inconsistent.


Ms. Caldwell of course did not invent overblown or inherently inconsistent rhetoric to describe FCPA enforcement.  Rather such rhetoric is a carry-over from former DOJ officials.   To learn more, read this article.

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