Another week, another FCPA reform bill (and again, no it’s not that bill). See here for last week’s post.
Representative Peter Welch (D-VT) once again demonstrated that he has very little understanding of how the Foreign Corrupt Practices Act is actually enforced, or if he does, that he is more interested in creating the illusion that he is addressing an issue. See here for the press release.
As reported by Samuel Rubenfeld on the Wall Street Journal Corruption Currents page (see here), yesterday Welch introduced the “Overseas Contractor Reform Act.” The bill (here) is a revised version of the impotent legislation Welch previously introduced in May 2010 – see this prior post, a bill that unanimously passed the House in September 2010 – see this prior post.
The bill Welch introduced yesterday, along with Representative Jason Chaffetz (R-Utah), states that “it is the policy of the United States Government that no Government contracts or grants should be awarded to individuals or companies who violate the FCPA after the date of the enactment of this Act.”
This is a sound policy statement. As I discussed in my November 2010 Senate testimony (here) a debarment penalty for egregious instances of corporate bribery that legitimately satisfy the elements of an FCPA anti-bribery violation involving high-level executives and/or board participation represents sound public policy.
However, the problem with the bill, as with the previous bill, is its trigger for debarment - “any person found to be in violation of the [FCPA - defined to include only the FCPA's antibribery provisions] shall be proposed for debarment from any contract or grant awarded by the Federal Government within 30 days after the judgment finding such person to be in violation becomes final.”
As silly as it may sound, in this “new era” of FCPA enforcement or this “facade era” of FCPA enforcement if you prefer (see here) few companies are actually ever “found to be in violation of the FCPA.”
The reason is because of how the DOJ is allowed to enforce the FCPA and it is two-fold. First, most corporate FCPA enforcement actions are resolved through a non-prosecution agreement (NPA) or deferred prosecution agreement (DPA). These resolution vehicles do not result in findings of FCPA violations or judgments of FCPA violations. Second, debarment under the bill is triggered only for violations of the FCPA’s anti-bribery provisions. In the most egregious cases of corporate bribery the DOJ rarely charges FCPA anti-bribery offenses, but rather FCPA books and records or internal controls violations or other non-FCPA offenses (see Siemens, Daimler, BAE, etc.). Why? For the stated reason (see here) of avoiding debarment considerations – both in the U.S. and elsewhere.
Thus, Welch’s new bill again represents impotent legislation despite the fact that there was extensive commentary and analysis of the previous bill’s shortcomings for the above reasons.
While substantively similar to the prior bill, the bill introduced yesterday is different in the following ways: the new bill contains a less restrictive definition of “person,” the new bill defines FCPA to include all three prongs of the statute (78dd-1, 78dd-2, and 78dd-3) and, most important, the new bill has an “exemption for self-reported violations” which specifically states “upon a determination by the head of a Federal agency that a person has reported a violation of the [FCPA] voluntarily to the Federal Government, the head of the agency may exempt the person from the applicability of this Act.”
As noted in this prior post, the DOJ is opposed to “mandatory, conduct-based, debarment remedy for companies that engage in egregious bribery.”