Employing much of the same lofty rhetoric former Assistant Attorney General Lanny Breuer frequently used to describe the DOJ’s Foreign Corrupt Practices Act enforcement efforts (see here for my prior article), Deputy Attorney General James Cole delivered this speech yesterday before an FCPA audience.
This post contains excerpts of Cole’s speech as well as certain commentary.
As to the DOJ’s general fight against corruption, Cole stated:
“[C]orruption is no less harmful when it is perpetrated abroad. In many ways, the consequences of public corruption can be even more severe in developing countries. In the U.S., we have a long history of democratic and economic stability. In nascent democracies, however, public corruption can undermine the very existence of the types of democratic institutions that we take for granted. The fruits of corruption can help prop up autocratic and oppressive rulers. In emerging economies, corruption can stifle the economic development that would lift people out of poverty, improve infrastructure, and better people’s lives. And as the beneficiaries of the blessings of a stable democracy and a robust economy, we, as Americans, have an obligation to ensure that our corporations– and their officers, directors, and employees– are not undermining the promise of democracy and economic development in other parts of the world by paying bribes. But make no mistake, fighting public corruption abroad is also good for the U.S. at home. Just because we do not feel the repercussions of foreign corruption– the hospitals left unbuilt, the roads still unpaved, the medicine undelivered– as personally or as immediately as the citizens of those countries, it does not mean that corruption abroad does not affect us in real and tangible ways. In today’s global economy, the negative effects of corruption inevitably flow back to the United States. Corruption contributes to economic crises that destabilize the global financial system, opens borders for terrorists to cross, it raises the price of the goods we buy, and costs American jobs because American companies are denied the ability to compete in an open and fair marketplace. We all eventually suffer the negative impact of transnational corruption. Given that the stakes are so high, it should be no surprise that the Department of Justice is every bit as committed to fighting corruption abroad as it is to fighting corruption at home. [...] [Using the FCPA, the Department helps ensure that U.S. companies and individuals, as well as foreign companies and individuals where appropriate, are held accountable when they pay bribes to foreign government officials in order to get business."
As to the FCPA's legislative history, Cole stated:
"[L]et us take a moment to consider the origins of the FCPA. The FCPA has its roots in one of the most notorious domestic corruption events in recent times: the Watergate scandal. Obviously,Watergate had a tremendous impact on our domestic politics and governmental institutions. But Congress realized that the problems uncovered during the Watergate investigation did not stop at our borders. Indeed, in the aftermath of Watergate, our colleagues at the SEC discovered that more than 400 U.S. companies had paid hundreds of millions of dollars in bribes to foreign government officials to secure business overseas. In enacting the FCPA, Congress recognized the harm that foreign bribery causes to both our domestic interests and foreign interests. Congress recognized that foreign bribery had tarnished the image of U.S. businesses, impaired public confidence in the financial integrity of U.S. companies, and had hampered the functioning of markets, resulting in market inefficiencies, market instability, sub-standard products and services, and an unfair playing field. Clearly, outlawing foreign bribery was the right thing to do. But that does not mean it was the easy thing to do. From the beginning, there was a vocal chorus of critics who claimed that taking a stand against foreign bribery would harm American businesses, put U.S. companies at a competitive disadvantage, and cost American jobs, because foreign bribery was “just how business is done overseas.” But that didn’t make paying bribes right, and it didn’t mean that we should tolerate it. As Americans, we have a long history of taking the right path, not the expedient one. And we expect more from ourselves–and our institutions– than pursuing the path of least resistance. And, frankly, throughout our history, that philosophy has proven to be right.”
For a more complete – and accurate – description of the FCPA’s legislative history, see “The Story of the Foreign Corrupt Practices Act.”
As to the “current fight against foreign bribery,” Cole stated:
“In the nearly 36 years since the passage of the FCPA, the modern world has begun to embrace our fight against foreign bribery and to follow our lead. From the 1999 OECD Anti-Bribery Convention to the 2005 UN Convention Against Corruption, from the Council of Europe’s Group of States Against Corruption to the Organization of American States’ Inter-American Convention Against Corruption,a common legal standard has emerged over the last 36 years that rejects the notion that bribery in international business transactions is lawful, much less inevitable. It is true that this common standard has emerged slowly, and that at times it has faced challenges, but the tide of history has turned and is now on our side.”
U.S. federal court judges of course live in the “modern world” and when the DOJ’s FCPA enforcement efforts have been subjected to judicial scrutiny, “embrace” is not one word that immediately comes to mind. See here for the article “What Percentage of DOJ FCPA Losses Is Acceptable?“ The short version is as follows.
- “This appears to be the end of a long and sad chapter in the annals of white collar criminal enforcement.”
- The instances of misconduct were so varied and occurred over such a long period of time “that they add up to an unusual and extreme picture of a prosecution gone badly awry.”
- ‘‘The problem here is that the principal witness against [the FCPA defendant] . . . knows almost nothing.” [...] [The DOJ] shouldn’t
indict people on stuff [they] can’t prove.”
As to enforcement statistics and resources, Cole stated:
“I am proud to say that the United States, and DOJ in particular, has played a leadership role in this global effort to combat transnational bribery. I have seen this firsthand in my nearly three years as Deputy Attorney General. Since I took office in January 2011, the Department has reached 27 corporate resolutions and publicly announced that 28 individuals have been charged with FCPA and FCPA-related violations. This is a remarkable record. Those corporate cases resulted in penalties of $785 million and there is more to come. These results are the product of the skill, hard work, and determination of our talented prosecutors in the Criminal Division’s FCPA Unit, working in tandem with federal prosecutors across the country at many of the 94 U.S. Attorney’s Offices. Working with our partners like the FBI, the Department of Homeland Security, the Department of Commerce, the SEC, and IRS-Criminal Investigations, we have made enforcement of the FCPA a priority. Together, we are pursuing more cases than ever before, and we are using allof the investigative tools available to us from subpoenas to search warrants, from body wires to wiretaps.”
As to the FCPA Guidance, Cole stated:
“Now, despite this impressive enforcement record, there is always room for improvement. Many thoughtful people — from the OECD lead examiners who conducted our Phase 3 examination, to the media, to many of you in this room — have provided valuable feedback on our efforts. Based on that feedback, we have made adjustments and come up with some new innovations. For example, at this very conference one year ago, we announced the publication of the Resource Guide to the U.S. Foreign Corrupt Practices Act. The Guide had its origins in suggestions made during the OECD Phase 3 examination. The lead examiners determined that the U.S. could do a better job in explaining the way that we understood the FCPA and our enforcement policies, and we, along with our SEC colleagues, committed to doing that. Along the way, we made sure to listen to and take into account your comments and concerns. We reached out to the business community, to civil society, to compliance professionals, and to the legal community. We heard your concerns, took to heart your suggestions, and incorporated many of them into the Guide. And, if the public reaction to the Guide is any indication, I think we did so fairly successfully.”
See here for what is believed to be the most extensive collection of commentary concerning the FCPA Guidance.
As to compliance, voluntary disclosure, and cooperation, Cole stated:
“But the Guide was not the end. We continue to engage with the business and legal communities, and continue to find ways to communicate with them about how we interpret the FCPA, what they can do to prevent violations, and what they should do if they discover that a violation has occurred. Believe me when I say that FCPA enforcement is not a game of “gotcha.” We prefer prevention to prosecution and we want companies to successfully recognize and resist demands for bribes and to comply with the law. But we understand that even the best compliance program will not prevent every violation of the FCPA. So when a violation does occur, we frankly expect you to tell us about it and cooperate in investigating it. And one of the questions we’ve repeatedly heard over the years is: “What is the benefit of voluntary disclosure and cooperation?” We fully understand that companies will act in their own best interest. So we have sought to incentivize companies with tangible benefits for their voluntary disclosure and cooperation– beyond the reductions already built into the Sentencing Guidelines. Such benefits have taken the form of declinations like that in the Morgan Stanley case [see here for the post "Stop Drinking the Kool-Aid" regarding Morgan Stanley's so-called declination], resolutions short of a guilty plea like deferred prosecution agreements and non-prosecution agreements, and allowing companies to self-report their remediation efforts instead of being subject to the oversight of a corporate monitor. We have also, in appropriate cases, supported reduced penalties below those suggested by the Sentencing Guidelines. Because your role in the enforcement of the FCPA is vital to its success, I want to assure you that we are committed to demonstrating the benefits of your working cooperatively with us. But, this does not mean that we will blindly accept the conclusions of internal investigations. To the contrary, we will continue to actively pursue our own investigations in order to pressure test the results of your internal investigations and be able to identify those companies that are truly cooperating. It also does not mean that companies that claim to be cooperating, but that are, in fact, engaging in gamesmanship, will reap such benefits. Indeed, just as it is important to reward true voluntary disclosures and actual cooperation, it is critical that we hold companies accountable when they choose to conceal misconduct, obstruct investigations, and attempt to mislead investigators. For those companies, there will be serious consequences. Put simply, we want to work with you, and we will continue our efforts to provide tangible benefits to reward you for doing so. But we will also be unrelenting in holding you accountable if you choose not to do so. This is a two-way street, and you can be sure that your choices regarding cooperation, either way, will have real consequences.”