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A Different Perspective on Breuer’s New Position

Tuesday, April 2nd, 2013

The goal of FCPA Professor, as reflected in the Mission Statement, is to foster a forum for critical analysis and discussion of the FCPA (and related topics) among a broad audience, including those who disagree with me on certain issues.

This post last week highlighted former Assistant Attorney General Lanny Breuer’s new job and another recent post highlighted my recent article “Lanny Breuer and Foreign Corrupt Practices Act Enforcement.”

Today’s post is from Thomas Fox who runs the FCPA Compliance and Ethics Blog. After Fox’s perspective, I offer a few concluding remarks.

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A Different Perspective on Breuer’s New Position

Thomas Fox

Last week there was much a-buzz in the FCPA world and, indeed, the greater legal community about the move of former Assistant Attorney General, Department of Justice (DOJ) Criminal Division, Lanny Breuer to the law firm Covington & Burling LLP. Several commentators raised questions about Breuer’s move in light of his work as the former No. 2 at the DOJ. The first of these concerns fall into the category of the “revolving door” issue, the second is a more focused criticism.

The Revolving Door

Dennis Kelleher, a former partner at Skadden Arps in Washington, D.C., and current president of the public interest group Better Markets, Inc., was quoted in a Corporate Crime Reporter article titled “Lanny Breuer Back to Covington” that “nothing is more corrosive to the American people’s trust in government than the revolving door where too many officials turn their so-called public service into multi-million dollar riches unimaginable to most Americans.” Further, Kelleher said that “This blatant cashing-in is destroying faith in government and government officials.” Lastly, Keller said that “Lanny Breuer’s spinning through it is only the latest example: “partner at big DC law firm representing corporate clients before the Department, then becomes a senior official at the Department making decisions whether or not to prosecute those same or similar corporate clients, then leaves to go back to private practice representing those same or similar corporate clients with legal issues before, bingo, the Department of Justice”.

Multi-million dollar salaries are not only unimaginable to most Americans; they are also unimaginable to most lawyers. From my experience, the only lawyers who command such earnings are: (1) plaintiff’s lawyers who work on a contingency and receive a percentage of any settlement or judgment as their fee or (2) lawyers who are very, very good at what they do and clients are willing to pay a very high rate for their services because these lawyers are very, very good at what they do. I believe that Breuer falls into category 2.

Breuer had quite a career before he became the No. 2 at the DOJ. Indeed his bio on the Covington and Burling website has the following information.

Prior to his service at the Justice Department, Mr. Breuer co-chaired the firm’s White Collar Defense and Investigations Practice Group. Over nearly 20 years in private practice, Mr. Breuer maintained a wide-ranging practice that included white-collar criminal and complex civil litigation, internal corporate investigations, congressional investigations, and antitrust cartel proceedings.

Representative Matters

Represented the Special Litigation Committee of the Hewlett Packard Board of Directors.
Represented the former Minister of Atomic Energy for Russian Presidents Yeltsin and Putin in a case alleging theft of tens of millions of dollars.
Represented many major corporations before Congress, including a leading Internet company in a hearing concerning its foreign business activities, major pharmaceutical companies targeted in oversight investigations, the Los Alamos National Laboratory in a national security investigation, and a large Wall Street firm in the Enron hearings.
Represented leading telecommunications investors in a billion-dollar False Claims Act lawsuit.
Represented former National Security Advisor Samuel Berger in an investigation of documents at the National Archives.

In addition to the above, Breuer was Special Counsel to President Clinton (1997-1999), where he represented President Clinton and the White House staff in the presidential impeachment hearings and trial, independent counsel investigations, a Justice Department task force investigation, and numerous congressional oversight investigations. Breuer was also an Assistant District Attorney in Manhattan from 1985-1989. In other words, Breuer had quite a bit of experience in government and representing companies before the government before he went back to the DOJ in 2009.

What about the claim that Breuer went back to the DOJ, where he worked for four years so he could ‘cash in’ by going back to private practice? Public service is just that – public service. I am reasonably certain that Breuer did not go back into government service for the salary he received at the DOJ. I think his record demonstrates that he is one of the lawyers committed to serving our country in government. To say that anyone would put up with four years of taking all the shots that Breuer took during his tenure at the DOJ, both from Congress and from others, so he could cash in seems to me to be a little far-fetched. From my perspective, to criticize him for leaving and going back to his former firm does not hold merit.

With regards to one of the issues raised by Kelleher regarding whether a partner in a law firm who represents “corporate clients before the Department, then becomes a senior official at the Department making decisions whether or not to prosecute those same or similar corporate clients”, I do not believe that Breuer made any decisions “not to prosecute those same…corporate clients” while he was at the DOJ. Simply put, he would have been conflicted out. What about “similar corporate clients”? That seems to me to stretch the point way too far.

As to his new work in the private sector, what about another question posed by Kelleher, “Isn’t much of his new multi-million dollar pay package due to the high level connections, high-profile and intimate knowledge of the Department of Justice he gained while doing his ‘public service’ at the Department?”

Breuer himself appears to have answered that question directly in an interview with the Wall Street Journal (WSJ) Law Blog, which quoted him as saying, “Certainly, if I’m not ethically barred,” he told Law Blog. “I would certainly represent clients and anticipate representing clients in all different sectors, and I think that’s the majesty of our system.” But the Law Blog noted that, “Under federal ethics rules, Mr. Breuer has to abstain from matters that he was involved in while at the department, and he can’t approach Justice Department officials on behalf of clients during his “cooling off” period.” This means that he cannot work for Covington on any case he handled at the DOJ and must wait two years before facing off with the agency.

What about clients? If I am a corporation under a serious federal investigation, who do I want advice from? I want advice from someone who knows the ropes. Breuer obviously understands the law from a prosecutor’s perspective and that is of great value to a client. In fact, understanding how a prosecutor thinks and will react is one of the most important pieces of information that a client can have because it provides information on how to respond. Breuer was involved with far more than FCPA cases, and, while I do not know all of them, the one that sticks in my mind was when he had to postpone his talk at the 2012 ACI FCPA conference in Washington to attend the announcement of the US government settlement with BP over the Macondo oil spill. Not only did he have a lot on his plate at the DOJ, he has far-ranging experience in a large number of federal matters.

From FCPA Enforcement to FCPA Defense

The FCPA Professor, in a post titled “Former Assistant Attorney General Lanny Breuer Joins FCPA Inc.”, had a more focused criticism that he has consistently articulated, with the following statement. “Breuer’s departure from the DOJ to a private law firm is just the latest example of a high-profile FCPA enforcement attorney joining a law firm to provide FCPA defense services.” The Professor said:

“That Breuer (and other former DOJ FCPA enforcement attorneys who also moved to private practice) played a supervisory role as a DOJ enforcement attorney in helping create the current FCPA enforcement landscape and in setting the “priorities” and the “benchmarks” is precisely the reason why I have long argued that it is in the public interest (recognizing the niched nature of both the DOJ and SEC FCPA units) that all FCPA enforcement attorneys should be prohibited, when leaving the government, from providing FCPA defense or compliance services for a five-year time period.”

This is a more focused criticism. The Professor believes that DOJ lawyers who set FCPA “priorities” and “benchmarks” should be barred for a period of at least five years from providing FCPA compliance or defense services. While I believe that many of the arguments I made in the above Kelleher critique apply to this criticism, I also disagree with the Professor for a couple of other reasons.

First there were many, many voices in the DOJ and Securities and Exchange Commission (SEC) who set priorities and benchmarks for FCPA enforcement while they were in government service. I do not believe that there is anyone person who sets them, the best example of the benchmarks is the DOJ/SEC FCPA Guidance, which I understand was reviewed by several other government departments in addition to the DOJ and SEC.

Nevertheless to say that benchmarks are set, at least in the form of best practices, fails to acknowledge that best practices can evolve. The clearest example of this is the time frames set for post-acquisition integration of a FCPA compliance program by an acquiring company of an acquired entity. In April 2011, the Johnson & Johnson (J&J) Deferred Prosecution Agreement (DPA) had such time frames in its ‘Enhanced Compliance Obligations’. By 2012, these times frames had become minimum best practices. Another example is last year’s Opinion Release 12-01, which found that under certain circumstances, a royal family member is not a foreign government official for FCPA purposes. There are many such situations which make clear that best practices evolve. So even if Breuer had some hand in creating such benchmarks when he was at the DOJ, I do not think that should preclude him from representing clients going forward.

How about ‘priorities’? I have to assume this means priorities in FCPA enforcement. If so this would seem to suggest that Breuer either (1) ramped up FCPA enforcement so that he could get clients from this newly enforcement law or (2) directed enforcement at certain industries or sectors so that he could represent them. As to point 1, I think that, notwithstanding the DOJ’s Press Release on Breuer’s departure that “At the Justice Department, Mr. Breuer increased enforcement of the FCPA, overseeing more than 40 corporate resolutions and eight of the top 10 largest penalties in U.S. history”; these cases were long in the pipeline before Breuer arrived. While I do not know the reason that FCPA enforcement ramped up, it did so long before Breuer arrived at the DOJ. What about direction at certain industries? Here again the way enforcement operates would seem to belie this claim. Most of the FCPA enforcement directed at the energy industry was a result of Panalpina and its related cases. Pharmaceutical cases seem to follow J&J. The aerospace industry has all come after the BAE settlement. To borrow a line from the book and movie “All the President’s Men”, the point is that the DOJ (and SEC) seem to ‘follow the money’.

As you may have ascertained by now, I do not believe that there is a problem in Lanny Breuer going from the DOJ back to his old firm of Covington & Burling. Is $4 million per year salary a huge salary, of course it is. But he has the experience to merit it if clients will pay his hourly rate and for his new duties as Vice Chair of the law firm.

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Fox’s post of course demonstrates that Breuer has a plethora of legal skills and experience beyond the FCPA. Thus, my suggested prohibition would not have a material impact on his future career prospects.

Nor would my suggested prohibition affect many people. Here, it is important to recognize the highly centralized nature of FCPA enforcement – per the U.S. attorney manual.

9-47.110 Policy Concerning Criminal Investigations and Prosecutions of the Foreign Corrupt Practices Act states, in pertinent part, as follows.

“No investigation or prosecution of cases involving alleged violations of the antibribery provisions of the Foreign Corrupt Practices Act (FCPA) or of related violations of the FCPA’s record keeping provisions shall be instituted without the express authorization of the Criminal Division. Any information relating to a possible violation of the FCPA should be brought immediately to the attention of the Fraud Section of the Criminal Division. Even when such information is developed during the course of an apparently unrelated investigation, the Fraud Section should be notified immediately.”

Billy Jacobson (former assistant chief of DOJ FCPA enforcement) said it best in this article.

“[T]he FCPA has been recognized and treated as different by the U.S. government since its passage in 1977. [...] [The FCPA] is one of just a few, select statutes to be prosecuted centrally from one DOJ office. The over-whelming majority of federal criminal statutes may be brought by each of the country’s U.S. Attorney’s Offices, but FCPA actions may be brought only by the Fraud Section of the Criminal Division within Main Justice.”

In short, per DOJ policy, from a supervisory and discretionary standpoint, very few people control FCPA enforcement. These people largely “enforce” the FCPA behind closed doors in Washington, D.C. via non-prosecution and deferred prosecution agreements in the general absence of judicial scrutiny. This highly-centralized enforcement behind closed doors in the general absence of judical scrutiny further takes place without much caselaw of precedent setting the parameters (something which of course can not be said about many other laws the DOJ enforces such as antitrust, securities fraud, etc.)

It is these unique attributes (most of which are the DOJ’s own making) of FCPA enforcement that warrants special rules. A prohibition on DOJ (or SEC) FCPA enforcement attorneys with supervisory and discretionary authority from providing FCPA defense or compliance services for five years upon leaving government service is a special rule, but one that is in the public interest.

Lanny Breuer And Foreign Corrupt Practices Act Enforcement

Monday, March 25th, 2013

Lanny Breuer stepped down as Assistant Attorney General of the Justice Department’s Criminal Division on March 1st after nearly four years on the job. Word of Breuer’s departure began circulating soon after the airing of a PBS Frontline program that examined the general lack of prosecutions of Wall Street executives in the aftermath of the so-called financial crisis. While much of the public scrutiny of Breuer and his Criminal Division focused on the financial services industry, the substantive law of most interest to Breuer appeared to be the Foreign Corrupt Practices Act. This article examines FCPA enforcement and related issues during Breuer’s tenure, demonstrates that his tenure was not as glowing as DOJ suggests, and shows that FCPA enforcement under Breuer raised significant public policy issues that need to be addressed by his successor.

So begins my article “Lanny Breuer and Foreign Corrupt Practices Act Enforcement” recently published by Bloomberg BNA’s White Collar Crime Report. (The article can be downloaded here).

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Interested in analyzing Breuer’s public FCPA statements and assessing the performance of his Criminal Division against such statements? Breuer’s FCPA speeches can be found here, here, here, here, here, here, here, here, here, here, and here.

An Equally Valid DOJ Press Release

Monday, February 4th, 2013

Last week the DOJ announced in this release the departure of Assistant Attorney General Lanny Breuer. Breuer’s position was obviously not FCPA specific, but he took a great interest in the DOJ’s Foreign Corrupt Practices Act enforcement program and frequently made speeches on the FCPA in which he – to use his own words – “spread the gospel” (see here).

Not surprisingly given the nature and purpose of the release, the DOJ touted Breuer’s enforcement record, including in the FCPA context. The release stated as follows.

“The Criminal Division has also substantially increased enforcement of the Foreign Corrupt Practices Act (FCPA), convicting three dozen individuals for FCPA-related offenses – a record number – and entering into more than 40 corporate resolutions involving eight of the top 10 largest FCPA penalties in history. The Criminal Division also partnered with the Securities and Exchange Commission to publish groundbreaking guidance on FCPA enforcement.”

In the abstract, there is nothing incorrect about the above information. However, against the backdrop of the numerous statistics I published in recent weeks (see here for a summary) a different picture emerges.

A different picture also emerges when one considers the following undeniable facts about FCPA enforcement under Breuer’s criminal division. In short, what follows would have been an equally valid DOJ release concerning Breuer’s departure.

In January 2010, Breuer called the arrest of 22 individuals in the military and law enforcement products industry a “turning point” in the DOJ’s FCPA enforcement program (see here). The DOJ’s “turning point” prosecution in the so-called Africa Sting cases ended the following way. In granting the DOJ’s dismissal of the charges, Judge Richard Leon stated as follows.

“This appears to be the end of a long and sad chapter in the annals of white collar criminal enforcement. Unlike takedown day in Las Vegas, however, there will be no front page story in the New York Times or the Post for that matter tomorrow reflecting the government’s decision today to move to dismiss the charges against the remaining defendants in this case. Funny, isn’t it, what sells newspapers? The good news, however, is that for these defendants, agents, prosecutors, defense counsel and the court we can get on with our professional and personal lives without the constant strain and burden of three to four more eight-week trials hanging over our heads. I for one hope this very long, and I’m sure very expensive, ordeal will be a true learning experience for both the department and the FBI as they regroup to investigate and prosecute FCPA cases against individuals in the future. Two years ago, at the very outset of this case, I expressed more than my fair share of concerns on the record regarding the way this case has been charged and was being prosecuted. Later, during the two trials that I presided over, I specifically commented again on the record regarding the government’s very, very aggressive conspiracy theory that was pushing its already generous elasticity to its outer limits. Of course, in the second trial that elastic snapped in the absence of the necessary evidence to sustain it. In addition, in that same trial, I expressed on a number of occasions my concerns regarding the way this case had been investigated and was conducted especially vis-a-vis the handling of Mr. Bistrong. I even had an occasion, sadly, to chastise the government in a situation where the government’s handling of the discovery process constituted sharp practices that have no place in a federal courtroom. Notwithstanding all of this water over the dam, and there has been a lot of water, I’m happy to see and I applaud the department for having the wisdom and courage of its convictions to face up to the limitations of its case as revealed in the past 26 weeks of trial and the courage to do the right thing under the circumstances. Having served at the higher levels of the department, I know that that was not an easy decision. They never are, when so much has been invested, and the agents and the prosecutors are so convinced of the righteousness of their position. I for one however am confident this will be in the end a positive, if not painful, lesson that results in better prosecutions of individuals in the future under the FCPA. As for the defendants, I hope the healing process is a swift one and that they get back to their normal lives in the very near future. Finally, I would be remiss if I did not comment on the tireless and spirited effort by the defense counsel from all over the country who came here to try these very lengthy and complicated cases under difficult circumstances and some even pro bono. Their hard work and effective advocacy are a testament to how strong our criminal defense bar is nationwide. And so without further adieu I grant the government’s motion to dismiss. The defendants are excused.”

In May 2011 Breuer stated, after a jury found Lindsey Manufacturing and its executives Keith Lindsey and Steve Lee guilty in an FCPA trial, as follows. These verdicts “are an important milestone in our Foreign Corrupt Practices Act (FCPA) enforcement efforts.” (See here). The”important milestone” ended when Judge Howard Matz vacated the convictions, dismissed the indictment after finding numerous instances of prosecutorial misconduct, and stated as follows.

“[The instances of misconduct were so varied and occurred over such a long time] that they add up to an unusual and extreme picture of a prosecution gone badly awry. [...] The Government team allowed a key FBI agent to testify untruthfully before the grand jury, inserted material falsehoods into affidavits submitted to magistrate judges in support of applications for search warrants and seizure warrants, improperly reviewed e-mail communications between one Defendant and her lawyer, recklessly failed to comply with its discovery obligations, posed questions to certain witnesses in violation of the Court’s order, engaged in questionable behavior during closing argument and even made misrepresentations to the Court.”

“Dr. Lindsey and Mr. Lee were put through a severe ordeal. Charges were filed against them as a result of a sloppy, incomplete and notably over-zealous investigation, an investigation that was so flawed that the Government’s lawyers tried to prevent inquiry into it. In some instances motives, statements and conduct were attributed to them that were wholly unfounded or were obtained unlawfully . . . [. . .] The financial costs of the investigation and trial were immense, but the emotional drubbing [Lindsey and Lee] absorbed was even worse. As for [Lindsey Manufacturing], the very survival of that small, once highly respected enterprise has been placed in jeopardy.”

In November 2009, Breuer’s criminal division criminally charged John Joseph O’Shea with FCPA offenses (see here). The case ended when Judge Lynn Hughes granted O’Shea’s motion for acquittal after the DOJ’s case. Judge Hughes stated as follows.

“The problem here is that the principal witness against Mr. O’Shea … knows almost nothing.”

“The government should have been prepared before they brought the charges to the Grand Jury. [...] You shouldn’t indict people on stuff you can’t prove.”

The approximate 25 individuals (individuals who had their real lives altered, their real careers sidetracked, their real reputations harmed, and their real wallets emptied) probably have a different perspective on FCPA enforcement under Breuer. And with good and valid reasons.

DOJ Prosecution Of Individuals – Are Other Factors At Play?

Tuesday, January 29th, 2013

Yesterday’s post (here) focused on DOJ FCPA individual prosecutions and highlighted the following facts and figures.

Since 2008, the DOJ has charged 77 individuals with FCPA criminal offenses.
61% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just four cases and 77% of the individuals charged by the DOJ since 2008 have been in just seven cases.
There have been 53 corporate DOJ FCPA enforcement actions since 2008 and of the 53 corporate DOJ FCPA enforcement actions, 39 (or 74%) have not (at least yet) resulted in any DOJ charges against company employees.

These statistics should cause alarm, including at the DOJ as it has long recognized that a corporate-fine only enforcement program is not effective and does not adequately deter future FCPA violations. For instance, in 1986 John Keeney (Deputy Assistant Attorney General, Criminal Division, DOJ) submitted written responses in the context of Senate hearings concerning a bill to amend the FCPA. He stated as follows:

“If the risk of conduct in violation of the statute becomes merely monetary, the fine will simply become a cost of doing business, payable only upon being caught and in many instances, it will be only a fraction of the profit acquired from the corrupt activity. Absent the threat of incarceration, there may no longer be any compelling need to resist the urge to acquire business in any way possible.”

Likewise, in 2010 Hank Walther (Deputy Chief Fraud Section) stated that a corporate fine-only FCPA enforcement program allows companies to calculate FCPA settlements as the cost of doing business.

In my 2010 Senate FCPA testimony (here), I noted that the absence of individual FCPA charges in most corporate FCPA enforcement actions causes one to legitimately wonder whether the conduct giving rise to the corporate enforcement action was engaged in by ghosts. Others have rightly asked the “but nobody was charged” question, including perhaps most notably James Stewart in a New York Times column highlighted in this previous post.

However, as I stated in my Senate testimony, there is an equally plausible reason why no individuals have been charged in connection with many corporate FCPA enforcement actions. The reason has to do with the quality and legitimacy of the corporate enforcement action in the first place. Readers know well of the prevalence of non-prosecution and deferred prosecution agreements (NPA / DPA) in the FCPA context and how these agreements, not subject to any meaningful judicial scrutiny, are often agreed to by companies for reasons of ease and efficiency, and not necessarily because the conduct at issue violates the FCPA. For more on this dynamic, see my article “The Facade of FCPA Enforcement.” Individuals, on the other hand, face a deprivation of personal liberty, and are more likely to force the DOJ to satisfy its high burden of proof as to all FCPA elements.

In other words, perhaps the more appropriate question is not “but nobody was charged,” but rather do NPA and DPAs always represent provable FCPA violations.

I set out to test this with the following working hypothesis. Instances in which the DOJ brings actual criminal charges against a company or otherwise insists in the resolution context that the corporate entity pleads guilty to FCPA violations, represent a higher quality FCPA enforcement action (in the eyes of the DOJ) and is thus more likely to result in related FCPA criminal charges against company employees. Instances in which the DOJ resolves an FCPA enforcement action solely with an NPA or DPA, represent a lower quality FCPA enforcement action and is thus less likely to result in related FCPA criminal charges against company employees given that an individual is more likely to put the DOJ to its high burden of proof.

The below statistics provide a compelling datapoint concerning the quality and legitimacy of many corporate DOJ FCPA enforcement actions.

Since NPAs and DPAs were first introduced to the FCPA context in December 2004 (see here), there have been 69 corporate DOJ FCPA enforcement actions.

12 of these corporate enforcement actions were the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations. 10 of these corporate enforcement actions – 83% – resulted in related criminal charges of company employees.
46 of these corporate enforcement actions were resolved solely with an NPA or DPA. In only 3 instances – 6.5% – were there related criminal charges of company employees.
A third type of corporate FCPA enforcement action is what I will call a hybrid action in which the resolution includes a guilty plea by some entity in the corporate family – usually the relevant foreign subsidiary – and an NPA or DPA against the parent company. Since the advent of NPAs and DPAs in the FCPA context, there have been 11 such corporate enforcement actions. In 3 of these actions - 27% - there were related criminal charges of company employees. This percentage is what one might expect compared to the two types of corporate FCPA enforcement actions discussed above, although it is interesting to note the following regarding these three instances. The DOJ ended up dismissing the charges against Si Chan Wooh (Schnitzer Steel), John O’Shea (ABB) was not found not guilty, and Bobby Elkin (Alliance One) received a probation sentence after the sentencing judge questioned many aspects of the enforcement action (see here for the prior post).

If the above statistics do not cause you to question the quality and legitimacy of many corporate FCPA enforcement actions, no empirical data ever will. For those who believe NPAs and DPAs always represent provable FCPA violations, the ball is now in your court to offer credible explanations for following datapoints.

If a corporate DOJ FCPA enforcement action is the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations, there is a 83% chance that related criminal charges will be brought against a company employee. If a corporate DOJ FCPA enforcement action is resolved solely with an NPA or DPA, there is a 6.5% chance that criminal charges will be brought against a company employee.

[Note - the above data was assembled using the "core" approach as well as the definition of an FCPA enforcement action described in this prior post]

DOJ Enforcement Of The FCPA – Year In Review

Wednesday, January 9th, 2013

Yesterday’s post (here) highlighted facts and figures from the SEC’s enforcement of the FCPA in 2012.

In this post, I highlight facts and figures from the DOJ’s FCPA enforcement program in 2012. (See here for a similar post from 2011 and here from 2010).

In 2012, the DOJ brought 9 corporate FCPA enforcement actions. By comparison, in 2011 the DOJ brought 11 corporate enforcement actions and in 2010, the DOJ brought 18 corporate enforcement actions (including the FCPA-related enforcement action against BAE).

Fine Amounts

In the 9 corporate FCPA enforcement actions from 2012, the DOJ collected approximately $142 million in criminal fines. By comparison, in 2011, the DOJ collected approximately $355 million in corporate criminal fines ($504 million including the $149 million forfeiture in the Jeffrey Tesler individual enforcement action) and in 2010, the DOJ collected approximately $870 million ($1.27 billion including the $400 million FCPA-related enforcement action against BAE).

DOJ FCPA enforcement in 2012 ranged from $54.6 million in criminal fines (Marubeni Corp.) to $2 million in criminal fines (NORDAM Group). Four FCPA enforcement actions in 2012 were DOJ only (Marubeni, BizJet/Lufthansa, Data System and Solution, and NORDAM Group).

Of the $142 million the DOJ collected in 2012 corporate FCPA enforcement actions, approximately $55 million (38%) was in one enforcement action (Marubeni). Of the $142 million, approximately $65 million (46%) were in enforcement actions against pharmaceutical or other health care related companies. All of these enforcement actions were based, in whole or in part, on the enforcement theory that employees of various foreign health care systems (such as physicians, nurses, mid-wives, lab personnel, etc.) are “foreign officials” under the FCPA. See this prior post which traced the origins and prominence of this enforcement theory.

In 5 of the 7 corporate FCPA enforcement actions where an analysis was possible, the DOJ agreed to a criminal fine below the minimum range suggested by the sentencing guidelines. In these 5 actions, the average was approximately 27% below the minimum guidelines range and the distribution range was 34% below the minimum guidelines range (Pfizer ) to 20% below the minimum guidelines range (Biomet and Smith & Nephew). In 2 corporate FCPA enforcement action in 2012 (Orthofix and Marubeni) the company paid a criminal fine within the guidelines range - in both cases the minimum amount suggested by the guidelines.

[Note - why are only 7 of the 9 corporate enforcement actions included in the above analysis? 2 corporate enforcement actions involved an NPA and the DOJ did not set forth a guidelines range in the agreement or related documents]

By way of comparison, in 2011 the average DOJ criminal fine in an FCPA enforcement action was approximately 28% below the minimum guidelines range and the distribution range was 55% below the minimum guidelines range to 18% below the minimum guidelines range. In 2010, the average was approximately 25% below the minimum guidelines range and the distribution range was 55% below the minimum guidelines range and 5% below the minimum guidelines range.

Corporate vs. Individual Prosecutions

How many corporate FCPA enforcement actions in 2012 have involved related individual prosecutions of company employees by the DOJ (recognizing that such prosecutions may be forthcoming in the future)? Of the 9 corporate DOJ enforcement actions in 2012, 0 (0%) have involved any related DOJ prosecutions of company employees. In 2011, 27% of corporate DOJ enforcement actions involved related DOJ prosecutions of company employees and in 2010, 30% of corporate DOJ enforcement actions involved related DOJ prosecutions of company employees. In short, since 2010 approximately 22% of corporate DOJ enforcement actions have involved related DOJ prosecutions of company employees.

NPAs / DPAs

What about non-prosecution and deferred prosecution agreements vs. old fashioned law enforcement (i.e., if a company committed a crime the DOJ charged it and if the company did not commit a crime the DOJ did not charge it)? In 2012, 100% of corporate DOJ enforcement actions involved either an NPA (Nordam Group) or a DPA (Marubeni, Smith & Nephew, Biomet, Data Systems and Solution, Orthofix, Pfizer). [Note, the BizJet/Lufthansa enforcement action involved both an NPA (Lufthansa) and a DPA (BizJet). Note, the Tyco enforcement action involved a plea agreement as to a subsidiary and an NPA with Tyco.] In 2011, 82% of corporate DOJ enforcement actions were resolved via an NPA or DPA and in 2010, 94% of corporate DOJ enforcement actions were resolved via such agreements. In short, since 2010, 92% of corporate DOJ enforcement actions have been resolved via NPAs or DPAs.

Voluntary Disclosures

Of the 9 corporate DOJ FCPA enforcement actions in 2012, 5 enforcement actions (56%) (Tyco, Pfizer, NORDAM Group, Orthofix, and BizJet) were the result of corporate voluntary disclosures. 2 enforcement actions (22%) (Smith & Nephew and Biomet) appear to have been based on corporate disclosures following an industry sweep (a sweep that may have been prompted by Johnson & Johnson’s voluntary disclosure – see here for the prior post). 1 enforcement action (Marubeni) was based on a previous foreign law enforcement investigation and 1 enforcement action (Data Systems and Solutions) appears to have been based on a DOJ subpoena.

Monitors

Of the 9 corporate DOJ FCPA enforcement actions in 2012, 3 enforcement actions (33%) (Biomet, Smith & Nephew, and Marubeni) involved a monitor. The monitor term ranged from 18 months (Biomet and Smith & Nephew) to 2 years (Marubeni).

This remainder of this post provides an overview of corporate DOJ FCPA enforcement in 2012.

Tyco International (September 24th)

See here for the prior post.

Charges: Tyco Valves & Controls Middle East Inc. – conspiracy to violate the FCPA’s anti-bribery provisions, Tyco International – none.

Resolution Vehicle: Criminal information against Tyco Valves & Controls Middle East Inc. resolved through a plea agreement and a non-prosecution agreement (three year term) as to Tyco International.

Guidelines Range: As to Tyco Valves & Controls $2.1 million – $4.2 million. As to Tyco International, not set forth in the NPA.

Penalty: Tyco agreed to pay a $13.68 million penalty (the $2.1 million penalty Tyco Valves & Controls agreed to pay pursuant to the plea agreement is included in this figure).

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Pfizer (August 7th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA’s anti-bribery and books and records provisions and a substantive FCPA anti-bribery violation.

Resolution Vehicle: Criminal information against Pfizer HCP resolved through a deferred prosecution agreement (two year term).

Guidelines Range: $22.8 – $45.6 million.

Penalty: $15 million (34% below the minimum amount suggested by the Guidelines).

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

NORDAM Group (July 17th)

See here for the prior post.

Charges: None.

Resolution Vehicle: Non-prosecution agreement (three year term).

Guidelines Range: Not set forth in the NPA.

Penalty: $2 million.

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Orthofix International (July 10th)

See here for the prior post.

Charges: FCPA internal controls violation.

Resolution Vehicle: Criminal information resolved through a deferred prosecution agreement (three year term).

Guidelines Range: $2.22 – $4.44 million.

Penalty: $2.2 million.

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Data Systems & Solutions (June 18th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and one substantive FCPA anti-bribery violation.

Resolution Vehicle: Criminal information resolved via a DPA (term 2 years).

Guidelines Range: $12.6 – $25.2 million

Penalty: $8.8 million (30% below the minimum amount suggested by the Guidelines).

Disclosure: DPA states as follows: “following the receipt of subpoenas in connection with the government’s investigation, DS&S initiated an internal investigation and provided real-time reports and updates of its investigation into the conduct described in the Information”

Monitor: No.

Individuals Charged: No.

Biomet (March 26th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA, three substantive FCPA anti-bribery violations, and FCPA books and records violation.

Resolution Vehicle: Criminal information resolved via a DPA (term 3 years).

Guidelines Range: $21.6 – $43.2 million.

Penalty: $17.3 million (20% below the minimum amount suggested by the Guidelines).

Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue, including a portion of which that was voluntarily disclosed.

Monitor: Yes (18 month term).

Individuals Charged: No.

BizJet International / Lufthansa Technik (March 14th)

See here for the prior post.

Charges: BizJet - conspiracy to violate the FCPA; Lufthansa – no charges.

Resolution Vehicle: BizJet – criminal information resolved via a DPA (term 3 years); Lufthansa – NPA (term 3 years).

Guidelines Range: $17.1 – $34.2 million.

Penalty: $11.8 million (30% below the minimum amount suggested by the Guidelines).

Disclosure: Voluntary disclosure.

Monitor: No.

Individuals Charged: No.

Smith & Nephew (Feb. 6th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA, FCPA’s anti-bribery violation, and FCPA books and records violation.

Resolution Vehicle: Criminal information resolved via a DPA (term 3 years).

Guidelines Range: $21 – $42 million.

Penalty: $16.8 million (20% below the minimum amount suggested by the Guidelines).

Disclosure: Industry sweep inquiry followed by disclosure of misconduct at issue.

Monitor: Yes (term 18 months).

Individuals Charged: No.

Marubeni (Jan. 17th)

See here for the prior post.

Charges: Conspiracy to violate the FCPA, and aiding and abetting FCPA anti-bribery violations.

Resolution Vehicle: Criminal information resolved via DPA (term 2 years).

Guidelines Range: $54.6 – $109.2 million.

Penalty: $54.6 million.

Disclosure: Enforcement action based on a previous foreign law enforcement investigation.

Monitor: Yes (2 year term).

Individuals Charged: No.