According to this article, at a recent Global Lawyer Forum sponsored by InsideCounsel in Chicago, DLA Piper partner Tara Lee talked about the aggressive nature of U.S. regulators and stated as follows.
“I think, frankly, it comes at least in part from a profit motive. The Department of Justice, in the past three to six years, has made more money from two categories of enforcement — the FCPA and the False Claims Act — than they have in every kind of criminal fine combined. … They’re grading prosecutors on those kinds of recoveries.”
Regardless of what one thinks of Lee’s comment, one has to at least acknowledge the widely perceived opinion that FCPA enforcement is a government cash cow. For instance, this prior post collected numerous such statements (many from former DOJ enforcement attorneys).
The perception that FCPA enforcement is a government cash cow is driven by a number of factors including the theories of enforcement advanced in many large enforcement actions. For instance, this prior post regarding the $398 million Total enforcement action highlighted the following points.
- The enforcement action was against a French oil and gas company for making improper payments to an Iranian Official through use of an employee of a Swiss private bank and a British Virgin Islands company.
- The vast majority of the alleged improper conduct took place between 1995 and 1997 (that is 16 to 18 years prior to the 2013 enforcement action).
- The sole U.S. jurisdictional nexus (a required legal element for an anti-bribery violation since Total is a foreign issuer) was a 1995 wire transfer of $500,000 (representing less than 1% of the alleged bribe payments at issue) from a New York based account.
The perception that FCPA enforcement is a government cash cow is also driven by the undeniable fact that FCPA settlement amounts have come a long way in a short amount of time. (See here for the prior post). Indeed, as FCPA practitioners from Gibson Dunn rightly observed: “[a]n unmistakable characteristic of  FCPA enforcement is that the market rate for resolving a corporate FCPA enforcement action spiked precipitously in 2013.”
The perception that FCPA enforcement is a government cash cow is also driven – to a significant extent – by the apparent obsession the DOJ and SEC have with FCPA enforcement statistics.
- How did the DOJ describe FCPA enforcement under a recent former Assistant Attorney General? By the numbers (see here).
- How did another former Assistant Attorney General describe FCPA enforcement in her last speech in that position? By the numbers (see here).
- How did the former Chief of the DOJ’s FCPA Unit describe his tenure at the DOJ? By the numbers (see here).
- How did current Deputy Attorney General James Cole describe FCPA enforcement in his last FCPA specific speech? By the numbers (see here).
- How did current SEC Chair Mary Jo White describe FCPA enforcement in her recent Congressional testimony? By the numbers (see here).
Returning to the statement that began this post, Lee’s statement has merit and prosecutors and enforcement agencies seem to be grading themselves on quantitative metrics such as the number of enforcement actions and the settlement amounts collected.
However, by focusing on the quantity of FCPA enforcement, the quality of that enforcement is often left unexplored. The simplistic notion advanced by the enforcement agencies (and others) seems to be that more FCPA enforcement is an inherent good regardless of enforcement theories, regardless of resolution vehicles, and regardless of actual outcomes when put to its burden of proof.
This logic is troubling and ought to be rejected.
In a legal system founded on the rule of law, a more meaningful form of government enforcement agency success is prevailing in the context of an adversarial system when put to the burden of proof. As to this form of success, during this new era of FCPA enforcement, the DOJ and SEC have had far less “success” in enforcing the FCPA. (See here for instance).
(By the way, the InsideCounsel article contains, similar to most recent InsideCounsel articles about the FCPA, false and misleading statistics. For instance, contrary to the suggestion in the article, between 2009 and 2011 there have not been 162 DOJ and SEC FCPA cases. In addition, contrary to the suggestion in the article, the SEC did not collect $3.4 billion in FCPA penalties in 2013.)