Archive for the ‘Double Standard’ Category

Friday Roundup

Friday, November 7th, 2014

Roundup2A double standard dandy, scrutiny alerts, when the dust settles, quotable, asset recovery, protection money, and for the reading stack.  It’s all here in the Friday roundup.

Double Standard Dandy

Numerous prior posts have highlighted the double standard between enforcement (or lack thereof) of the U.S. domestic bribery statute (18 USC 201) and the FCPA.  (See here for the double standard tag with approximately 40 posts).

A leading FCPA practitioner sent me the following lead paragraphs in reaction to this recent New York Times article about alleged corruption in connection with state attorney generals offices.

“Media reports this week exposed widespread practices in which U.S.-based issuers have allegedly retained paid lobbyists to wine, dine, and make huge campaign contributions to the chief prosecutors in numerous foreign countries in hopes of obtaining favorable prosecutorial decisions in those countries, often with apparent success.  The DOJ and SEC have immediately launched one of the largest investigations in history to determine whether these activities violated the FCPA, which forbids U.S. companies from giving or promising anything of value to a foreign official in order to gain an improper advantage.  If found guilty, these companies could face multi-million-dollar fines and any implicated executives could face years of incarceration.

Oh wait.  Never mind.  It turns out the chief prosecutors work only for domestic U.S. state governments rather than foreign governments, and thus any tainted decisions would betray U.S. citizens rather than non-citizens living in foreign locations.  Nothing to worry about here after all – just keep moving along, citizens.”

Well said.

Scrutiny Alerts

Qualcomm

Qualcomm’s FCPA scrutiny has been interesting to follow as it represents a rare instance of a company receiving a Wells Notice from the SEC.  In its annual report, the company disclosed:

“Securities and Exchange Commission (SEC) Formal Order of Private Investigation and Department of Justice Investigation : On September 8, 2010, we were notified by the SEC’s Los Angeles Regional office of a formal order of private investigation. We understand that the investigation arose from a “whistleblower’s” allegations made in December 2009 to the audit committee of our Board of Directors and to the SEC. In 2010, the audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. This internal review into the whistleblower’s allegations and related accounting practices did not identify any errors in our financial statements. On January 27, 2012, we learned that the U.S. Attorney’s Office for the Southern District of California/Department of Justice (collectively, DOJ) had begun an investigation regarding our compliance with the Foreign Corrupt Practices Act (FCPA). The audit committee conducted an internal review of our compliance with the FCPA and its related policies and procedures with the assistance of independent counsel and independent forensic accountants. The audit committee has completed this comprehensive review, made findings consistent with our findings described below and suggested enhancements to our overall FCPA compliance program. In part as a result of the audit committee’s review, we have made and continue to make enhancements to our FCPA compliance program, including implementation of the audit committee’s recommendations.

As previously disclosed, we discovered, and as a part of our cooperation with these investigations informed the SEC and the DOJ of, instances in which special hiring consideration, gifts or other benefits (collectively, benefits) were provided to several individuals associated with Chinese state-owned companies or agencies. Based on the facts currently known, we believe the aggregate monetary value of the benefits in question to be less than $250,000, excluding employment compensation.

On March 13, 2014, we received a Wells Notice from the SEC’s Los Angeles Regional Office indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against us for violations of the anti-bribery, books and records and internal control provisions of the FCPA. The bribery allegations relate to benefits offered or provided to individuals associated with Chinese state-owned companies or agencies. The Wells Notice indicated that the recommendation could involve a civil injunctive action and could seek remedies that include disgorgement of profits, the retention of an independent compliance monitor to review our FCPA policies and procedures, an injunction, civil monetary penalties and prejudgment interest.

A Wells Notice is not a formal allegation or finding by the SEC of wrongdoing or violation of law. Rather, the purpose of a Wells Notice is to give the recipient an opportunity to make a “Wells submission” setting forth reasons why the proposed enforcement action should not be filed and/or bringing additional facts to the SEC’s attention before any decision is made by the SEC as to whether to commence a proceeding. On April 4, 2014 and May 29, 2014, we made Wells submissions to the staff of the Los Angeles Regional Office explaining why we believe we have not violated the FCPA and therefore enforcement action is not warranted.

We are continuing to cooperate with the SEC and the DOJ, but are unable to predict the outcome of their investigations or any action that the SEC may decide to file.”

Cobalt International

The other instance of FCPA scrutiny involving an SEC Wells Notice is Cobalt International.  Earlier this week, the company disclosed:

“As previously disclosed, the Company is currently subject to a formal order of investigation issued in 2011 by the SEC related to its operations in Angola. On August 4, 2014, the Company received a Wells Notice from the Staff of the SEC with respect to such investigation. On September 24, 2014, the Company responded to the Wells Notice in the form of a Wells Submission. The Company is unable to predict the outcome of the SEC’s investigation or any action that the SEC may decide to pursue.”

When the Dust Settles

It is always interesting to see what happens when the dust settles from an FCPA enforcement action (see here for the prior post). The recent Bio-Rad enforcement action concerned conduct in, among other places, Vietnam.

According to this source:

“The [Vietnam] Ministry of Health has called on police to investigate an American medical equipment manufacturer that has admitted to bribing Vietnamese officials. Health Minister Nguyen Thi Kim Tien filed a formal request on Wednesday with the Ministry of Public Security that asked investigators to determine whether anyone had accepted kickbacks from Bio-Rad Laboratories, Inc. On the same day, the ministry’s inspectors instructed government hospitals to review any purchases from from Bio-Rad since 2005 and submit a report on the issue by November 15.”

Quotable

Earlier this week, the Supreme Court heard oral argument in Yates v. United States, the case involving a fisherman who was criminally charged with violating the anti-shredding provisions of Sarbanes-Oxley (i.e. “altered, destroyed, mutilated, concealed, covered up, falsified, or made a false entry in a record, document, or tangible object with the intent to impede or obstruct an investigation”) for disposing of some fish.

In this Wall Street Journal op-ed, Bill Shepherd, a partner in Holland & Knight LLP and lead counsel for the National Association of Criminal Defense Lawyers which filed an amicus brief in the Yates case, states:

“[C]reativity in law enforcement should be confined to new strategies for undercover operations, not new, tortured interpretations of laws on the books. [...]  Congress is often criticized for overregulating and overcriminalizing. But the Yates case is a dramatic example of executive branch overreaching. Just because a prosecutor can file a charge doesn’t mean it is the right thing to do. Prosecutors everywhere struggle with the burden of teaching new prosecutors how to recognize the appropriate use of their authority. Professional groups like the American Bar Association Criminal Justice Section work to help foster that dialogue. Success among colleagues in prosecutors’ offices is measured, as it should be, by the number of convictions and the length of sentences handed down. But the other part of success—more difficult to measure—is the courage to close unfounded investigations or dismiss cases because they are not supported by the evidence, or don’t match an American sense of justice. The ultimate measure of success is the ability to live, work and raise a family in a safe environment—secure in the knowledge that government will not abuse that power with which we entrust it. This must be our universal goal.”

For coverage of oral argument in the Yates case, see here from the New York Times.

Asset Recovery

Deputy Attorney General James Cole recently delivered this speech at the Third Annual Arab Forum on Asset Recovery.

“Corruption undermines and weakens that which is the basis of modern society – the rule of law.  Corrupt officials who put their personal enrichment before the benefit of their citizenry create unstable countries.  Corruption siphons precious resources away from those in need at a time when such resources could hardly be more scarce and when the world economy could hardly be more vulnerable.  The repercussions of corruption – the hospitals left unbuilt, the roads still unpaved, the medicine undelivered – undermine the integrity of democratic institutions, creating gaps in government structures that organized criminal groups exploit.  And as we have seen time and again, countries plagued with corruption become breeding grounds and havens for other criminals and terrorist groups who threaten global security.”

[...]

“To underscore the U.S.’s commitment to asset recovery, Attorney General Holder established a Kleptocracy Initiative in the Department of Justice.  The Kleptocracy Team includes dedicated prosecutors working to forfeit corruption proceeds and, whenever we can, return those proceeds to benefit the people harmed by the corruption.  The Kleptocracy prosecutors are soon to be paired with a dedicated Kleptocracy squad of FBI agents and analysts, and this squad will enhance the capacity of the United States to respond rapidly in investigating and locating corruption proceeds.

The Kleptocracy Initiative seeks to deliver on our responsibility to protect the integrity of the U.S. financial system and its institutions from the destructive influence of corruption proceeds and to deny kleptocrats safe haven to hide and enjoy their ill-gotten gains.”

Speaking of asset recovery, the DOJ announced that it filed a civil forfeiture complaint seeking the forfeiture of $106,488.31 in allegedly laundered funds traceable to a $2 million bribe payment made by a Canadian energy company to Chad’s former Ambassador to the United States and Canada and his wife.

According to the release:

“From 2004 to 2012, Mahamoud Adam Bechir, 49, served as Chad’s Ambassador to the United States and Canada.  According to the forfeiture complaint, Bechir agreed to use his position to influence the award of oil development rights in Chad in exchange for $2 million and other valuable interests from Griffiths Energy International Inc., a Canadian company.  In order to conceal the bribe, Bechir and his wife, Nouracham Niam, 44, allegedly entered into a series of agreements with Griffiths Energy that provided for the payment of a $2 million “consulting fee” if the company secured the oil rights in Chad.  After securing these oil rights in February 2011, Griffiths Energy allegedly transferred $2 million to an account located in Washington, D.C. held by a shell company created by Niam.  In 2013, Griffiths Energy pleaded guilty in Canadian court to bribing Bechir. The complaint further alleges that, after commingling the bribe payment with other funds and laundering these funds through U.S. bank accounts and real property, Bechir transferred $1,474,517 of the criminal proceeds traceable to the bribe payment to his account in South Africa, where he is now serving Chad’s Ambassador to South Africa.  The current action seeks forfeiture of $106,488.31, which is the current balance of Bechir’s accounts in South Africa.  Those funds have been seized pursuant to the complaint unsealed today.  The Department of Justice is also seeking additional assets from Bechir and Niam.”

See here for the prior post highlighting the Canadian enforcement action against Griffiths Energy and pondering whether there would be a U.S. enforcement action.

Protection Money
Is paying “protection money” to tribal leaders in Egypt an FCPA issue?  (See here from National Geographic).
“No US firm will speak publicly of the measures they take to avoid open appeasement of Bedouin claims, but in private conversations, employees of American and European oil giants have spoken of hiring tribesmen for non-existent or unnecessary jobs. Usually they’re listed as security guards or dump truck drivers ferrying sand and gravel, but they seldom turn up to except to collect their monthly salaries. This arrangement has afforded most energy firms a largely hassle-free hand to work in the vast, poorly policed expanses that flank the Nile river.”
Reading Stack
Professor Brandon Garrett’s – “Too Big to Jail: How Prosecutors Compromise with Corporations.”
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A good weekend to all.

As Foreign Scrutiny Grows, Dollars Continue To Flow In The U.S.

Wednesday, October 22nd, 2014

This 2012 post highlighted the origins and prominence of an enforcement theory in this new era of Foreign Corrupt Practices Act enforcement.

The enforcement theory is that employees (such as physicians, nurses, mid-wives, lab personnel, etc.) of various foreign health care systems are “foreign officials” under the FCPA.  The prior post detailed eleven corporate enforcement actions in which the enforcement theory was used, in whole or in part, and since then four additional corporate enforcement actions (Stryker, Philips Electronics, Tyco and Eli Lilly) have been based, in whole or in part, on the same enforcement theory.  Perhaps telling, the DOJ has never charged an individual based on this FCPA enforcement theory.

In most of the corporate enforcement actions based on the enforcement theory, the “things of value” provided to the alleged “foreign officials” have included consulting opportunities and services contracts and payment of travel and entertainment expenses such as  wine, speciality foods, visits to bath houses, card games, karaoke bars, door prizes, spa treatments and cigarettes.

The enforcement theory continues to be the reason certain companies are under FCPA scrutiny as evidenced by the on-going FCPA scrutiny of GlaxoSmithKline and Sanofi to name just a few (see here).

Yet as this foreign scrutiny of pharmaceutical and other healthcare related companies continues, the dollars continue to flow in the United States.

Recently, the Wall Street Journal ran articles here (“Doctors Net Billions From Drug Firms”) and here (“Payments Reveal Range of Doctors’ Ties With Industry”) based on information from “a new federal government transparency initiative mandated in the 2010 Affordable Care Act which required manufacturers of drugs and medical devices to disclose the payments they make to physicians and teaching hospitals every year.

In the words of the Wall Street Journal:

“The payments and so-called transfers of value to an estimated 546,000 doctors and 1,360 teaching hospitals include such items as free meals that company sales representatives bring to physicians’ offices, fees paid to doctors to speak about a company’s drug to other doctors at restaurants, and compensation for clinical trial research and consulting fees. Some doctors earned tens of thousands of dollars annual from drug companies by flying to various cities to give paid speeches, while some surgeons received even larger amounts from medical device makers, partly from royalties on products they helped develop.”

In short, many of the “things of value” are similar to those alleged in FCPA enforcement actions involving foreign physicians and other healthcare personnel.

Against this backdrop, it is interesting to note that in the United States approximately 20% of hospitals are owned by state or local governments (see here). In addition, approximately 150 more medical centers are run by the Veterans Health Administration (see here).

Presumably then, a healthy percentage of the “things of value” are going to U.S. officials – at least so long as one applies the FCPA enforcement theory to the U.S. context.

Yet, one should not hold their breath waiting for enforcement actions under 18 U.S.C 201, the U.S. domestic bribery statute with very similar elements to the FCPA’s anti-bribery provisions.  Nor should one hold their breath as to any books and records or internal controls enforcement actions regarding such payments by issuer companies.

But the question is why?

Assuming that foreign physicians and healthcare personnel are indeed “foreign officials” under the FCPA, why should corporate interaction with a “foreign official” be subject to greater scrutiny and different standards of enforcement than corporate interaction with a U.S. official?  Why do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet generally turn a blind eye when it happens here at home?

For numerous other prior posts on the “double standard,” see this tag.

Look In The Mirror Moments?

Thursday, October 16th, 2014

Looking in the MirrorFor some time, I have used the picture to the left in various public presentations when discussing certain public policy aspects of this new era of Foreign Corrupt Practices Act enforcement.

Two developments related to China caused me to ponder the picture once again.

The first concerns a letter recently sent by U.S. Treasury Secretary Jacob Lew to Chinese Vice Premier Wang Yang. The second concerns the general thrust of much “western” commentary concerning China’s recent enforcement action against GlaxoSmithKline.

Lew Letter

As highlighted in this recent Wall Street Journal article, Treasury Secretary Lew “warned his Chinese counterpart in a recent letter that a spate of antimonopoly investigations against foreign companies could have serious implications for relations between the two countries.”  As noted in the article, “the warning comes after international business lobbies have raised complaints over a string of monopoly and pricing probes that they say unfairly focus on foreign companies.”

Predictably, China reportedly responded to the letter and concerns by stating – as noted in the article – that foreign and domestic Chinese companies are treated equally, that foreign companies are “welcome to hire the most famous lawyers in the world” to dispute Chinese allegations, and that if foreign companies disagree with Chinese law enforcement interpretations any company is free to “take the discrepancies to court.”

Although outside the FCPA context, the trading of barbs between the U.S. and China has FCPA parallels as concerns have been raised about U.S. enforcement of the FCPA against foreign companies and similar “see you in court” type statements have been made by the DOJ in response.

It is a fact that the clear majority of the largest FCPA enforcement actions of all-time (based on settlement amounts) are against foreign companies.

It is also a fact that many of these enforcement actions have been based on spare jurisdictional allegations.  For instance and as highlighted in this prior post, the 2013 FCPA enforcement action against Total (the $398 million settlement amount was the third largest in FCPA history) was based on the following salient 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 ago prior to the enforcement action).
  • The sole U.S. jurisdictional nexus (a required legal element for an anti-bribery violation since Total is a foreign issuer) is a 1995 wire transfer of $500,000 (representing less than 1% of the alleged bribe payments at issue) from a New York based account.

Expansive FCPA enforcement theories against foreign actors made its way into the Senate’s 2010 FCPA hearing when Senator Christopher Coons stated:  ”Today we the only nation that is extending extraterritorial reach and going after the citizens of other countries, we may someday find ourselves on the receiving end of such transnational actions.”

As a matter of law, Senator Coon’s statement was technically inaccurate, there is no extraterritorial jurisdiction over foreign actors under the FCPA’s anti-bribery provisions, but the expansive jurisdictional theories are what I have called “de facto extraterritoriality.”

In any event, the concluding point is this:  aggressive enforcement of domestic laws against foreign companies raise various policy issues and can lead to “lawfare.”  At the very least, when the tables are turned it ought to cause U.S. law enforcement agencies and policy makers to look in the mirror because Secretary Lew’s recent warning letter may be viewed by some as the “pot calling the kettle black.”

China GSK Enforcement Action

As previously highlighted here, in September GSK announced that it had agreed to pay approximately $490 million to resolve a Chinese law enforcement investigation after a Chinese court ruled “that GSK China Investment Co. Ltd (GSKCI) has, according to Chinese law, offered money or property to non-government personnel in order to obtain improper commercial gains, and been found guilty of bribing non-government personnel.”

The general thrust of certain “western” reporting of the China action was critical in various respects as highlighted below.

  • “an opaque justice system ultimately controlled by the Communist Party” (here)
  • “after a one day closed hearing” (here)
  • “The bribery conviction of a GSK unit took all of one day in Chinese court” “Unlike the U.S. Department of Justice, which often allows the companies accused of bribery to spend years conducting their own internal investigations–often followed with non-prosecution agreements–these convictions came just 15 months after Chinese officials began their investigation.”  ”Chinese authorities moved very quickly to assess significant penalties in a forum that provided very little transparency”  (here)
  • “Many of us had wondered when the GSK investigation in China would end and we all found about the trial when it was announced in the newspapers last week. It certainly showed that the quality of justice in China is quite different than in the west. While it is not entirely clear how long the trial lasted, it appeared that it was [a one-day trial] …” (here)

Without in any way trying to comprehensively compare the overall U.S. legal system to the overall Chinese legal system, the following attributes of FCPA enforcement must at least be acknowledged.

The vast majority of corporate FCPA enforcement actions lack transparency and the resolution documents (whether a non-prosecution agreement, deferred prosecution agreement or civil administrative order) are the result of an opaque process ultimately controlled by the same office prosecuting or bringing the action.

As to the swiftness of FCPA enforcement actions, one can only assume that the majority of general counsels and board of directors of companies under FCPA scrutiny would be jumping for joy if the scrutiny – from start to finish – would resolve itself in 15 months rather than the typical 3-5 years (and in some instances more) of FCPA scrutiny lingering.

The concluding point is this:  before criticizing how other countries are enforcing their anti-corruption laws (something the U.S. government has been pleading for other countries to do for years), we should at least look in the mirror regarding various aspects of FCPA enforcement.

The White House Omits Several Facts And Other Information From Its “Fact Sheet”

Tuesday, September 30th, 2014

The White House recently released this “Fact Sheet: The U.S. Global Anticorruption Agenda.”

It is an informative read as it sets forth in one document the policy views of the White House on bribery and corruption topics.

The fact sheet also highlights that FCPA enforcement is merely one prong of the U.S. government’s multi-dimensional approach to fighting bribery and corruption.  Other prongs mentioned include asset recovery, denial of visas, money laundering, curtailing the use of shell companies, increasing transparency in certain industries, and other open government initiatives.

As to the FCPA specifically, the White House Fact Sheet states:

“The United States has been a global leader on anticorruption efforts since enacting the first foreign bribery law, the Foreign Corrupt Practices Act (FCPA), in 1977.  [...]  The United States continues to apply the FCPA to prosecute those who pay bribes to foreign officials to obtain business benefits.  Since 2009, the United States has resolved criminal cases against more than 50 corporations worldwide with penalties of approximately $3 billion, and it has convicted more than 50 individuals, including CEOs, CFOs, and other high-level corporate executives, for FCPA and FCPA-related crimes.”

However, and consistent with prior examples of political actors or advocates describing FCPA enforcement – see here and here for instance), the White House “fact” sheet omits several salient facts or other relevant information concerning FCPA enforcement and/or the general fight against bribery and corruption.

Such as:

Since 2008 approximately 80% of DOJ/SEC corporate FCPA enforcement actions have not resulted in any related charges against company employees.  In other words, the U.S. government’s FCPA enforcement efforts are, to a large extent, corporate only and not achieving, as even the enforcement agencies recognize, maximum deterrence as only individual enforcement can achieve.

The U.S. government has an overall losing record – including during this so-called new era of FCPA enforcement – when put to its ultimate burden of proof in FCPA enforcement actions.  In other words, the White House is emphasizing the quantity of FCPA enforcement over the quality of FCPA enforcement.  However, in a legal system based on the rule of law, quality of enforcement should take priority over quantity.

The U.S. government largely enforces the FCPA through non-prosecution agreements, deferred prosecution agreements, and other vehicles (such as with increasing frequency SEC administrative settlements) not subjected to any meaningful judicial scrutiny.  These resolution vehicles – in the minds of many – are inconsistent with rule of law principles such as limited government authority, a system of checks and balances, and transparency in law enforcement.

The U.S. crusade against bribery suffers from several uncomfortable truths or double standards.  For instance, the U.S. government offers bags of cash to influence foreign leaders.  For instance, some of the most egregious FCPA violators, per the U.S. government’s own allegations, have involved U.S. government contractors or suppliers including of goods and services critical to national security, and because of this, those companies were not even charged with FCPA anti-bribery violations.  For instance, a notable example of FCPA enforcement (the Giffen case) ended with a whimper after the defendant asserted that the alleged bribery occurred with the knowledge and support of the highest levels of the U.S. government.  For instance, the general fight against bribery and corruption suffers from a double standard in that corporate interaction with “foreign officials” under the FCPA is judged by different standards than corporate interaction with U.S. officials under other U.S. laws.

In sum, the recent White House document is an informative read and to be sure the U.S. government does deserve credit for advancing certain of the policy objectives and initiatives described in the document.

However, the purpose of this post was to provide additional data points and information concerning the topics discussed in the recent White House document.

Attorney General Holder – “The Buck Needs to Stop Somewhere” – But Does It Stop With Him?

Tuesday, September 23rd, 2014

Buck Stops HereLast week U.S. Attorney General Eric Holder delivered this speech at New York University School of Law.  While focusing on financial fraud issues, the speech also touched upon several issues of general interest such as Holder’s statement that “the buck needs to stop somewhere where corporate misconduct is concerned.”  (emphasis in original).  Holder spoke of corporate structures that “blur lines of authority and prevent responsibility for individual business decisions from residing with a single person.”  Holder also highlighted that:

“[A]t some institutions that engaged in inappropriate conduct before, and may yet again, the buck still stops nowhere.  Responsibility remains so diffuse, and top executives so insulated, that any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of single individual.”

Recognizing that there are obvious differences between a government department and a business organization, the fact remains there are many similarities between the two when it comes to internal behavior, diffusion of responsibility and insulation of top leadership.

For instance and to borrow corporate analogies, Attorney General Holder is the CEO of DOJ Inc. and even the DOJ describes itself as the “world’s largest law office, employing more than 10,000 attorneys nationwide.”  That employee headcount (obviously the DOJ also employs non-attorneys as well) is rather small compared to a typical corporation doing business in the global marketplace through employees and hundreds, if not thousands, of third parties.

Returning to an issue previously highlighted here and here, if the DOJ was a business organization and subject to the same legal principles its uses to prosecute business organizations, the DOJ would constantly be under scrutiny and the subject of numerous enforcement actions.

Why?

Because as highlighted in this recent report by the Project on Government Oversight (“POGO”) titled “Hundreds of Justice Department Attorneys Violated Professional Rules, Laws, or Ethical Standards:”

“An internal affairs office at the Justice Department has found that, over the last decade, hundreds of federal prosecutors and other Justice employees violated rules, laws, or ethical standards governing their work.”

[...]

“From fiscal year 2002 through fiscal year 2013, the Justice Department’s Office of Professional Responsibility (OPR) documented more than 650 infractions … In the majority of the matters – more than 400 – OPR categorized the violations as being at the more severe end of the scale:  recklessness or intentional misconduct, as distinct from error or poor judgment.”

Although not specifically discussed in the POGO report, Foreign Corrupt Practices Act enforcement actions have seen instances of prosecutorial misconduct.  For instance, as highlighted in this post, in the DOJ’s enforcement action against Lindsey Manufacturing and two of its executives, the judge in dismissing the case, stated that the instances of misconduct were “so varied, and occurr[ed] over so lengthy a period … that they add up to an unusual and extreme picture of a prosecution gone badly awry.” In the failed Africa Sting case, the judge in dismissing the cases, stated that certain of the DOJ’s conduct had “no place in a federal courtroom.”  (See here).

The DOJ’s Principles of Prosecution of Business Organizations state, among the factors prosecutors should consider in deciding whether – and how – to charge a business organization as follows.

“Among the factors prosecutors should consider and weigh are whether the corporation appropriately disciplined wrongdoers, once those employees are identified by the corporation as culpable for the misconduct.”

Against this backdrop, the POGO report stated that several “examples of misconduct” within the DOJ often result in lenient sanctions such as a 10, 14 or 30 day suspensions.  Moreover, if I am not mistaken, certain of the DOJ prosecutors in the above FCPA enforcement actions – far from being disciplined – were promoted after their conduct was called into question by the federal judiciary.

The policy question needs to be asked: as a matter of principle should not the prosecutor / regulator and the prosecuted / regulated be held to the same general standards?

As a matter of principle and borrowing Holder’s policy pronouncements, should not the buck somewhere in the DOJ when improper conduct occurs within its ranks?  Is responsibility so diffuse in the DOJ that top leaders are insulated from accountability?

As noted in the POGO report, “high-level DOJ officials have said in the past that given the context – tens of thousands of its attorneys working on tens of thousands of cases each year – the amount of misconduct is small.”  (See here).

Could not the same be said of a typical business organization doing business in the global marketplace?  After all, dig into the details of many corporate FCPA enforcement actions and you will quickly learn that the conduct at issue was engaged in by a “small fraction” of the company’s global workforce to borrow the phrase the DOJ used in the HP enforcement action.

To be clear, the point of this post is not to call (as some actually have) for Holder’s resignation or to insist that Holder ought to be personally responsible, legally or ethically, for the improper conduct that has taken place in the DOJ under his leadership.

Rather, the point of this post is to highlight from a policy perspective the similarities between the DOJ and a business organization when it comes to compliance, internal behavior, diffusion of responsibility and insulation of top leadership.

These similarities ought to make top government enforcement officials less confident and less sweeping in their policy statements and simplistic views of legal and ethical culpability.  And if not, the similarities should at least cause top government enforcement officials to recognize that the same statements and views can be appropriately used to shine a light on the organizations they are tasked with running.

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For additional views of Holder’s recent speech, see here from Debevoise & Plimpton and here from Professor Peter Henning at his White Collar Crime Watch column in the New York Times.