Archive for the ‘FCPA Reform’ Category

Billy Jacobson’s Various Vantage Points

Wednesday, October 8th, 2014

Billy Jacobson has experience with the Foreign Corrupt Practices Act from a number of vantage points few can claim.  He has been an Assistant Chief for FCPA enforcement in the DOJ fraud section.  He has been a Senior Vice President, Co-General Counsel and Chief Compliance Officer for Weatherford International Ltd., a large oil and natural gas services company that does business around the world.  Currently, he is a lawyer in private practice at Orrick and was previously a lawyer in private practice at other firms.

This Q&A explores Jacobson’s unique FCPA insight and experience.

Q: What specific vantage point of a DOJ FCPA enforcement attorney do in-house FCPA counsel and outside FCPA counsel fail to understand or appreciate?

One issue that often gets misunderstood is the notion of “trends” within FCPA enforcement.  While certain actions can be grouped together by those looking to categorize, each case is handled by a Fraud Section prosecutor on its own merits as opposed to being thought of as part of a larger trend.  For sure, there have been, for example, “industry sweeps” in the pharma and medical device industries and there have been many prosecutions of oil and gas companies, but I don’t describe those enforcement actions as trends.

Rather, the prosecutors go where the evidence leads them: if that is to conduct in China, so be it; if it’s to several medical device companies because one has been caught and there is reason to believe others are going about their business in the same fashion, so be it.  And, of course, with oil and gas companies operating in the world’s most important industry and in the world’s most corrupt countries, one will unfortunately find corruption. The term “trend” to describe these enforcement actions is a misnomer, in my opinion.

Q:  What specific vantage point of an in-house FCPA counsel do DOJ FCPA enforcement attorneys and outside FCPA counsel fail to understand or appreciate?

One thing that attorneys other than in-house counsel fail to appreciate sometimes is the level of effort required to create and then maintain a truly robust anti-corruption compliance program.  When I was about to begin at Weatherford, someone told me that my entire perspective would change once I was in-house.  I thought was that was overstated as I tried to be empathetic to the demands on in-house counsel in my other roles over the years.  But, I distinctly recall looking up from my desk at the end of my first week in-house and thinking, “my entire perspective has changed.”  It was true.  Outside counsel gives recommendations about a company’s compliance program and the government (often) criticizes a program, but it’s the in-house counsel that actually has to make the program a reality and maintain the program.  This requires daily coordination with other functions within the company and political negotiations with senior management and the Board in a way that is not always appreciated by those outside.

Q:  What specific vantage point of an outside FCPA counsel do DOJ FCPA enforcement attorneys and in-house FCPA counsel fail to understand or appreciate?

In-house counsel have to work hard to maintain a “world view” and not become so enmeshed in just their company that they lose sight of what’s going on around them.  This can be extremely challenging given the various things going on within a company at any one time.  It is helpful for in-house counsel to attend events sponsored by associations of other in-house counsel, compliance conferences, government presentations, etc., so as to maintain this broader perspective.   FCPA enforcement attorneys, for their part, should appreciate that in-house counsel are dealing with many, varied legal and compliance issues in a given day and it’s not all about the FCPA 24/7.  Outside counsel may have a good perspective in this regard given their role in assisting companies with a variety of different legal and compliance challenges and the many different areas of expertise brought to bear by any one law firm.

Q: Which job category of the three is the most difficult and why?

Without question, in-house counsel has the hardest job of the three.  First, if it ever was true that lawyers went in-house to relax and work 9 to 5, it certainly is not true anymore.  Given the myriad risks faced by companies and the every-expanding reach of regulators, in-house counsel is constantly juggling many responsibilities.  And, increasingly, they are doing so with fewer and fewer resources at their disposal.  “Do less with more,” has become a cliché only because it is a mantra being constantly repeated in every C-suite in the country.

Q:  Which job category of the three can best advance the objectives of the FCPA?

I’m really showing a certain bias here, but I think it is in-house counsel that can best advance the objectives of the FCPA.  It’s with in-house counsel and corporations generally where the rubber meets the road.  DOJ can bring all the cases it wants and outside counsel will do their best to defend those cases, but unless corporations live and breathe their anti-corruption program, corruption will remain a problem.  Incidentally, I think we’ve seen tremendous strides in that direction in the past decade, at least in the US.

Q: In April 2012, while an in-house attorney, you wrote an article (previously highlighted in this post) in which you stated:  ”Current FCPA enforcement policy punishes rather than rewards companies that do all they can reasonably be expected to do to deter corruption and to cooperate with the government.”  More than two years has passed.  Comment on your previous comment – have things gotten better or worse?

I don’t think things have changed in that regard.  I still believe the sort of reform I described in my Bloomberg piece is the best approach to FCPA enforcement reform.  It wouldn’t require any legislation or formal rule making and would result in tangible benefits for the government.  DOJ’s main priority should be prosecuting individuals involved in corruption and my proposal furthers that end while also stressing the importance of a robust corporate compliance program.

How The DOJ Can Better Achieve Its FCPA Policy Objectives

Wednesday, September 24th, 2014

Last week the DOJ’s Principal Deputy Assistant Attorney General for the Criminal Division, Marshall Miller, delivered this speech focused on how the DOJ is “addressing criminal conduct when it takes place at corporations and other institutions.”  While not specific to the Foreign Corrupt Practices Act, Miller did reference the FCPA several times during the speech.

The post is not about the DOJ’s empty rhetoric when it comes to individual FCPA prosecutions – that post was published last week the same day that Miller carried forward DOJ talking points on individual prosecutions.

Nor is this post about Miller carrying forward the DOJ’s talking points on Morgan Stanley’s so-called declination.  That post was published here in 2012.

Nor is this post about Miller’s suggestion that PetroTiger did not face any charges “of any kind [...] and no non-prosecution agreement was entered” because the company voluntarily disclosed and cooperated.  As highlighted in this post regarding the charges against the former PetroTiger executives, the core DOJ allegations concerned self-dealing by the executives and not disclosing conflicts of interest to their employer and other investors involved in a business deal.  To be sure, there have been several companies – ADM, Diebold, Ralph Lauren, Maxwell Technologies, and Tyson Foods to name just a few –  that have voluntarily disclosed and cooperated yet received NPAs or DPAs in the FCPA context.

Nor is this post about the “wow” factor of Miller’s speech – as termed by the FCPA Blog – because contrary to the suggestion by the FCPA Blog, the FCPA information in Miller’s speech was not new – all was previously mentioned in original source documents and/or previously highlighted in prior FCPA Professor posts or by others (see herehere, and here).

Rather, this post highlights for the DOJ (and others) how an FCPA reform proposal can help the DOJ better achieve its policy objectives, as sensibly articulated in Miller’s speech,. in the FCPA context.

For starters, I realize – based on reliable information – that I am a persona non grata within the DOJ’s FCPA Unit.  Nevertheless, I share an interest in advancing policies to make FCPA enforcement more effective so that the laudable objectives of the FCPA can best be achieved.

I’ve written about the below issue several times (see here for “Revisiting a Foreign Corrupt Practices Act Compliance Defense” and see here for the prior post “Seeing the Light From the Dark Ages”).

In his speech, Miller stated the following sensible policy objectives.

“[W]e would like corporations to cooperate.  We will ensure that there are appropriate incentives for corporations to do so.

[...]

I want to focus today on an aspect of [The Principles of Federal Prosecution of Business Organization and/or the DOJ's internal "Filip" factors]  that I believe, at times, receives insufficient attention – but that lies at the heart of our approach at the Criminal Division.   And that is what the factors have to say about the importance of individual prosecutions to the decision on how to approach a corporation.

[...]

[In analyzing cooperate cooperation], companies are always quick to tout voluntary disclosure of corporate misconduct and the breadth of an internal investigation.   What is sometimes given short shrift, however, is in many ways the heart of effective corporate cooperation: whether that cooperation exposed, and provided evidence against, the culpable individuals who engaged in criminal activity [...].

The importance of cooperating regarding individuals is set forth, in black and white, in the text of the [Principles of Prosecution] itself.   Factor Four expressly states that prosecutors should evaluate a corporation’s “willingness to cooperate in the investigation of [its] agents.”   This key point is fleshed out later in the guidance section, where prosecutors are directed to consider the corporation’s “willingness to provide relevant information and evidence and identify relevant actors within and outside the corporation, including senior executives.”

Voluntary disclosure of corporate misconduct does not constitute true cooperation, if the company avoids identifying the individuals who are criminally responsible.  Even the identification of culpable individuals is not true cooperation, if the company fails to locate and provide facts and evidence at their disposal that implicate those individuals.

This principle of cooperation is not new or unique to companies.   We have applied it to criminal cases of all kinds for decades.   Take, for example, organized crime cases.   Mob cooperators do not receive cooperation credit merely for halting or disclosing their own criminal conduct.   Attempted cooperators should not get reduced sentences if they refuse to provide testimony or fail to turn over evidence against other culpable parties.   A true cooperator – whether a mobster or a company – must forthrightly provide all the available facts and evidence so that the most culpable individuals can be prosecuted.

The importance of this principle is enhanced by a second Filip factor – Factor Eight – which states that, in deciding whether to charge a corporation, prosecutors must consider “the adequacy of the prosecution of individuals responsible for the corporation’s malfeasance.”   So, effective and complete corporate cooperation in the investigation and prosecution of culpable individuals is not only called for by Factor Four, but reinforced by Factor Eight.

[...]

Corporations do not act criminally, but for the actions of individuals.   The Criminal Division intends to prosecute those individuals, whether they’re sitting on a sales desk or in a corporate suite.

The prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list under Assistant Attorney General Caldwell.”

The above are all sensible policy statements from the DOJ and are consistent with Attorney General Eric Holder’s similar sensible policy statements articulated on the same day in a different speech.  As Holder stated:

“[T]he department recognizes the inherent value of bringing enforcement actions against individuals, as opposed to simply the companies that employ them.  We believe that doing so is both important – and appropriate – for several reasons:

First, it enhances accountability.  Despite the growing jurisprudence that seeks to equate corporations with people, corporate misconduct must necessarily be committed by flesh-and-blood human beings.  So wherever misconduct occurs within a company, it is essential that we seek to identify the decision-makers at the company who ought to be held responsible.

Second, it promotes fairness – because, when misconduct is the work of a known bad actor, or a handful of known bad actors, it’s not right for punishment to be borne exclusively by the company, its employees, and its innocent shareholders.

And finally, it has a powerful deterrent effect.  All other things being equal, few things discourage criminal activity at a firm – or incentivize changes in corporate behavior – like the prospect of individual decision-makers being held accountable.  A corporation may enter a guilty plea and still see its stock price rise the next day.  But an individual who is found guilty of a serious fraud crime is most likely going to prison.”

Again, sensible policy statements.

The problem is – at least in the FCPA context – the DOJ is not achieving its policy objectives.  This is the unmistakable conclusion from the following statistics.

  • As highlighted in this previous post (with statistics calculated through the end of 2013) since 2008 approximately 75% of corporate FCPA enforcement have not (at least yet) resulted in any DOJ charges against company employees.
  • As highlighted in this previous post, in the 20 most recent DOJ corporate FCPA enforcement actions, only one has resulted (at least yet) in any DOJ charges against company employees.

An FCPA compliance defense can help the DOJ better achieve its above-stated policy objectives.

As stated in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”

“An FCPA compliance defense will better facilitate the DOJ’s prosecution of culpable individuals and advance the objectives of its FCPA enforcement program. At present, business organizations that learn through internal reporting mechanisms of rogue employee conduct implicating the FCPA are often hesitant to report such conduct to the enforcement authorities. In such situations, business organizations are rightfully diffident to submit to the DOJ’s opaque, inconsistent, and unpredictable decision-making process and are rightfully concerned that its pre-existing FCPA compliance policies and procedures and its good faith compliance efforts will not be properly recognized. The end result is that the DOJ often does not become aware of individuals who make improper payments in violation of the FCPA and the individuals are thus not held legally accountable for their actions. An FCPA compliance defense surely will not cause every business organization that learns of rogue employee conduct to disclose such conduct to the enforcement agencies. However, it is reasonable to conclude that an FCPA compliance defense will cause more organizations with robust FCPA compliance policies and procedures to disclose rogue employee conduct to the enforcement agencies. Thus, an FCPA compliance defense can better facilitate DOJ prosecution of culpable individuals and increase the deterrent effect of FCPA enforcement actions.”

Is the DOJ capable of viewing an FCPA compliance defense, not as a race to the bottom, but a race to the top?  Is the DOJ capable of viewing an FCPA compliance defense as helping it better achieve its FCPA policy objectives?

Let’s hope so.

*****

In his speech, Marshall also provided specifics as to what type of cooperation the DOJ looks for.  He stated:

“[I]f a corporation wants credit for cooperation, it must engage in comprehensive and timely cooperation; lip service simply will not do.

Corporations are often too quick to claim that they cannot retrieve overseas documents, emails or other evidence regarding individuals due to foreign data privacy laws.   Just as we carefully test – and at times reject – corporate claims about collateral consequences of a corporate prosecution, the department will scrutinize a claimed inability to provide foreign documents or evidence.   We have forged deepening relationships with foreign governments and developed growing sophistication and experience in analyzing foreign laws.   A company that tries to hide culpable individuals or otherwise available evidence behind inaccurately expansive interpretations of foreign data protection laws places its cooperation credit at great risk.   We strongly encourage careful analysis of those laws with an eye toward cooperating with our investigations, not stalling them.

Understand too, that we will use our own parallel investigation to pressure test a company’s internal investigation: to determine whether the company actually sought to root out the wrongdoing and identify those responsible, as far up the corporate ladder as the misconduct goes, or instead merely checked a box on a cooperation punch list.

Companies that have not conducted comprehensive investigations will not secure significant cooperation benefits.   Worse, companies that hamper the government’s investigation while conducting an internal investigation – for example, by conducting interviews that serve to spread corporate talking points rather than secure facts relating to individual culpability – will pay a price when they ask for cooperation credit.

A few final words: when you come in to discuss the results of an internal investigation to the Criminal Division and make a Filip factor presentation – expect that a primary focus will be on what evidence you uncovered as to culpable individuals, what steps you took to see if individual culpability crept up the corporate ladder, how tireless your efforts were to find the people responsible.

At the risk of being a little too Brooklyn, I’m going to be blunt.

If you want full cooperation credit, make your extensive efforts to secure evidence of individual culpability the first thing you talk about when you walk in the door to make your presentation.

Make those efforts the last thing you talk about before you walk out.

And most importantly, make securing evidence of individual culpability the focus of your investigative efforts so that you have a strong record on which to rely.”

Leading FCPA Practitioner Calls For An FCPA Compliance Defense

Tuesday, August 5th, 2014

Joseph Warin (Gibson Dunn) is a leading FCPA practitioner.  With the DOJ’s blessing, Warin has also served as a corporate monitor in connection with several Foreign Corrupt Practices Act enforcement actions.

In short, Warin knows the FCPA and FCPA compliance.

In this recent article in Corporate Disputes, Warin and his co-authors renew the call for an FCPA compliance defense.  In pertinent part, the article states:

“[This new era of FCPA enforcement] has wrought drastic change on the compliance landscape for transnational corporations, which devote significant resources to promoting FCPA compliance among their thousands of employees and contractors operating in international fora.  In particular, internal compliance, reporting and mitigation systems have grown significantly more robust in past years as companies seek to prevent corrupt practices and – when issues of noncompliance arise – to ferret them out and terminate them.  Even so, the lack of binding guidelines for framing compliance programs and the lack of assurances that robust programs will reliably mitigate the DOJ’s decisions to bring criminal charges leaves corporations in a state of uncertainty:  despite pouring millions into meaningful compliance regimes and sincere efforts to comply with the law, corporations are no more certain than they were 30 years ago that the actions of one, or a few, rogue employees will not bring debilitating criminal liability upon an entire entity.”

[...]

[The enforcement agencies] continued resistance to a compliance defense in light of a completely changed FCPA playing field is short-sighted.  The DOJ and SEC have strong interests in promoting self-policing within companies and turning them into corporate partners.  Where corporate compliance programs are functioning as they should – i.e. internally identifying employees who are operating outside of the bounds of company policy and extinguishing and mitigating illegal practices – companies should be rewarded with indemnification from the actions of those outsider employees, not punished with the threat of criminal and/or civil charges for actions that they took substantial steps to prevent.”

[...]

“It is time to reconsider the need for either an administrative or a statutory compliance defense.  The government’s focus on stemming corporate corruption has also raised the stakes for transnational corporations with ties to the United States.  The costs of internal investigations and compliance efforts are higher than ever before, and yet – as the DOJ and SEC acknowledge in their 2012 FCPA Resource Guide – ‘no compliance program can ever prevent all criminal activity by a corporation’s employees.’  Rather than continue to toe the anti-compliance defense line of a decade ago, the DOJ and SEC should acknowledge this changed landscape and give ethical companies that implement strong compliance programs assurance that they will not be punished for those occasional, inevitable acts by rogue employees who violate otherwise effective corporate policies.”

Warin’s call for an FCPA compliance defense mirror my own – see here for my 2011 article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (the most extensive article written on the subject).

Numerous posts on FCPA Professor have since returned to the issue of an FCPA compliance defense – see here, here, and here for the most recent posts.

An FCPA compliance defense is a not panacea, but it is the best positive incentive to achieve greater FCPA compliance. The goal of an FCPA enforcement program ought to be constructing an enforcement regime that best promotes compliance, reduces improper conduct, and best advances the FCPA’s objective of reducing bribery.  However, the DOJ and SEC have a “wooden attitude” when it comes to a compliance defense and are seemingly incapable of grasping the benefits of a compliance defense to their enforcement programs.  Can the enforcement agencies soften this “wooden attitude”?  Are the enforcement agencies capable of diverting attention from enforcement statistics, settlement amounts, and political statements filled with empty rhetoric?

The FCPA has witnessed courageous moments before and a courageous moment is once again presented.

Warin’s call for an FCPA compliance defense is an important contribution to the current dialogue.

“The FCPA Guide Presents A Classic Case Of Treating A Symptom While Ignoring The Disease”

Wednesday, April 9th, 2014

This recent post highlighted a Foreign Corrupt Practices Act article by former Deputy DOJ Assistant General Larry Thompson in a recent issue of the American Criminal Law Review (“ACLR”).  Thompson’s article was part of a symposium edition of the ACLR (Volume 51, Number 1, Winter 2014) titled “Reducing Corporate Criminality:  Evaluating Department of Justice Policy on the Prosecution of Business Organizations and Options for Reform.”

In addition to Thompson’s article, there was another FCPA article in the ACLR edition that should likewise make its way onto your reading stack.

Barry Pollack (Miller & Chevalier) was the lead author of an article focusing on DOJ guidance surrounding the FCPA, including the 2012 FCPA Guidance.  (See “Lone Wolf Or The Start Of A New Pack:  Should The FCPA Guidance Represent A New Paradigm In Evaluating Corporate Criminal Liability Risks?”).

Commenting on DOJ settlement documents (NPAs/DPAs, etc.) serving as “de facto agency ‘jurisprudence’ guiding corporate conduct”, Pollack observes, consistent with my own observations in “The Facade of FCPA Enforcement” (2010), as follows.

“While publicly available resources regarding settlement dispositions through plea agreements, DPAs, and NPAs are helpful in providing corporations with some insight into the DOJ’s enforcement priorities and practices, there are some very important differences and limitations which distinguish these settlement documents from case law. Most importantly, these settlements represent the results of privately-negotiated agreements between the DOJ and corporate defendants, which are subject to little or no judicial scrutiny. While plea agreements and DPAs are filed with the court and are technically subject to a judge’s approval, the DOJ and defendants are not generally required to present or defend the factual assertions or legal theories contained in such agreements. Furthermore, NPAs are subject to no judicial scrutiny because they are not filed with the court. Accordingly, these documents provide fertile ground for the prosecution to advance expansive enforcement theories based on bare-boned and undeveloped factual assertions without having to meet the burden of proof beyond a reasonable doubt, given that the promise of avoiding the costly and risky endeavor of litigation through settlement provides every incentive to corporate defendants to accept the prosecution’s position so long as the matter is resolved quickly and for the lowest fine possible.

As a result, the agreements do not necessarily contain all of the relevant facts that went into determining the outcomes. They may contain broader enforcement theories than what would result from fully litigated cases, they do not have precedential value and thus do not bind the DOJ to act consistently, and they may not represent cases where criminal FCPA violations would have been found had the cases actually been litigated.”

Regarding the 2012 FCPA Guidance, Pollack writes:

“Overall, while the Guide is comprehensive and represents an unprecedented undertaking, it marks no sharp departure from current practice. Rather, the Guide clarifies the statute and how it is applied by the enforcement agencies, expressly confirms pre-existing enforcement practices and policies apparent in settlement documents to practitioners in the field, and consolidates current agency thinking into a single, comprehensive reference source.”

Spot-on and consistent with my own observations in “Grading the Foreign Corrupt Practices Act Guidance.”

Further, Pollack states that the “FCPA Guide presents a class case of treating a symptom while ignoring the disease.”

Among the “facets” of the disease is that “the collateral consequences for contesting and litigating corporate criminal liability are far too great for a corporation of any size.”

The article then states:

“Unless and until at least one of these aspects of the disease is eradicated, the symptoms of the disease will continue to exist. The symptoms are over- and under-compliance based on a lack of clear understanding regarding what the law forbids, and the acceptance by risk-adverse corporations of criminal dispositions in cases that are eminently defensible.

In a world where the disease exists, the FCPA Guide makes perfect sense. It provides an authoritative source of information regarding current practice. Before the Guide was issued, practitioners could only cite to their own experience and the limited information available in negotiated settlements.”

[...]

“The FCPA Guide is not as novel as it might appear.”

[...]

“The authors hope that at some point, Congress will turn its attention to fighting the disease.”

I’ll second that, but add the DOJ and SEC to the mix (i.e. hopefully the enforcement agencies will turn its attention to better fighting the disease by reconsidering certain enforcement agency policies and procedures).  (See here among other posts for more).

Assignment: Read Former Deputy Attorney General Larry Thompson’s New Article

Thursday, March 27th, 2014

Larry Thompson has experience with the Foreign Corrupt Practices Act from a number of vantage points few can claim:  DOJ Deputy Attorney General, a lawyer in private practice, and a general counsel of a major multinational company.

For this reason, you should read Thompson’s new article -”In-Sourcing Corporate Responsibility for Enforcement of the Foreign Corrupt Practices Act,” 51 American Criminal Law Review 199 (Winter 2014).

In the article, you will find an informed and candid critique of many current aspects of FCPA enforcement.

Thompson laments the uncertainty of the FCPA and states:

“The uncertainty of precisely what the FCPA forbids and allows harbors frightening potential for prosecutorial abuse and over-criminalization – topics that have preoccupied me, both as a private attorney and as Deputy Attorney General of the United States, for many years.  This uncertainty in the FCPA is particularly troubling when one is dealing not just with individuals, who have control over all their own actions, but also with large corporations – artificial ‘persons’ consisting of hundreds, or thousands, or even hundreds of thousands, of individuals for whom the corporation can be held accountable.”

Referencing FCPA congressional hearings in 2010 and 2011, Thompson observes:

“DOJ was unperturbed by the uncertainty surrounding FCPA enforcement.  Indeed, one could be forgiven for suspecting that at least some federal prosecutors favor that uncertainty.  But we must never forget that uncertainty in the law is the antitheses of the rule of law.  There is reason that the Latin word for ‘uncertainty’ is arbitrarius.  That some FCPA enforcement attorneys might relish and exploit the arbitrary enforcement of a federal criminal statute is not merely unseemly – it is illegitimate.”

In short, you can add Thompson’s observation to my own (see here) in countering commentator suggestions that the FCPA is anything other than clear.

On the topic of the 2012 FCPA Guidance, Thompson cites my article “Grading the Foreign Corrupt Practices Act Guidance” and states:

“Its 130 pages appear impressive at first glance, but about two-thirds of that is routine recitation of background information:  the introduction and table of contents consume thirty-five pages, the reprinting of the statute itself accounts for another thirty pages, and a summary of previously issued (and by definition inadequate) guidance and discussion of other statutes fleshes out yet another twenty pages.”

On the general topic of guidance and commenting on NPAs and DPAs used to resolve FCPA enforcement actions, Thompson cites my Congressional testimony and observes:

 ”The FCPA guidance … offered by the Justice Department [in NPAs and DPAs] is less helpful because it may include coerced settlements that record instances where even DOJ itself was not sure that a violation of the FCPA actually occurred.”

Thompson’s observation in this regard is similar to former Attorney General Alberto Gonzales’s observation as highlighted in this previous post.

The majority of Thompson’s article renews calls for an FCPA compliance defense.

I first highlighted Thompson’s call (along with several other former higher ranking DOJ officials) for a compliance defense in my article ”Revisiting a Foreign Corrupt Practices Act Compliance Defense” and in this previous post I further highlighted Thompson’s call for compliance defense at an FCPA symposium.

In short, a hard-to-ignore reality of the current compliance defense debate – against the backdrop of DOJ’s strong institutional opposition to compliance defense concepts – is the chorus of former DOJ officials who support compliance defense concepts.

In his new article, Thompson writes:

“[W]e must create an incentive structure that drives corporations to establish internal compliance programs and to root out foreign corruption within their own organizations.  Only those businesses themselves have the resources to conduct the global investigations that the FCPA requires.  To accomplish this end, I believe that we need to do two things:  first, we must give businesses clear and predictable guidance on what sort of compliance programs they must establish; second, we must give them powerful incentives to engage in self-investigation and self-reporting of the bribery they uncover or suspect.  The incentives I suggest are two:  (1) businesses must be assured that a strong compliance program and prompt and full self-disclosure will ensure that the company itself will not be subject to criminal prosecution under the FCPA; and (2) such self-disclosure will also prevent the company from being debarred from doing business with the federal government or being denied government permits or licenses necessary for the company’s operations.”

Adopting a similar “baby carrot” / “real carrot” analogy I used in “Revisiting an FCPA Compliance Defense“, Thompson writes:

“I propose two carrots.  First, if a corporation establishes a comprehensive, fully funded, adequately staffed and trained FCPA compliance program, then the rogue employee who circumvents it and violates the FCPA – and is caught and turned over to authorities by his employer – should be deemed to be acting outside the realm of his corporate responsibilities and the self-reporting corporation should not be held criminally liable for his conduct.  This would be an instance of a blameless corporation. For this incentive to work, of course, the carrot must be large and appetizing – hence the absolute necessity for transparency and predictability in FCPA enforcement.  The second carrot is that a genuinely cooperative, self-reporting company with a proper compliance program must be assured that it will not be debarred from contracting with the United States government or receiving the government permits required to run its operations.”

In my “Revisiting an FCPA Compliance Defense” article and elsewhere (see prior posts here, here and here) I have articulated – like Thompson – reasons why the DOJ should be in support of – not opposed to – a compliance defense.  A compliance defense is not a race to the bottom – as government officials have suggested – it is a race to the top.  Like Thompson, I have argued that a compliance defense will better facilitate DOJ’s prosecution of culpable individuals and advance the objectives of the FCPA.

I agree with Thompson when he says that the DOJ and SEC have an “almost wooden attitude” when it comes to the FCPA. Reflecting on the enforcement agencies sense of confidence and the billions of dollars collected in enforcement actions, Thompson states:

“But this supposedly shining vision of FCPA enforcement prowess is a Potemkin village, because without corporations’ own internal policing and self-reporting, the FCPA can accomplish little.”

I sincerely hope that Thompson’s article can renew a substantive – not rhetorical – discussion of a compliance defense and how it can help advance the laudable purpose of the FCPA.  To learn more about my proposal, and how it differs slightly from Thompson’s, see here.

Can the DOJ and SEC soften its “wooden attitude”?  Is the DOJ and SEC capable of diverting attention from enforcement statistics, settlement amounts, and political statements filled with empty rhetoric?

As I wrote in my most recent post about a compliance defense, the FCPA has witnessed courageous moments before and a courageous moment is once again presented..