Archive for the ‘FCPA Reform’ Category

Compliance Defense Rebuttals Are Unpersuasive

Tuesday, December 17th, 2013

In early 2012, I published “Revisiting an FCPA Compliance Defense.”  As far as I know, it is the most extensive article written specifically about an FCPA compliance defense, how an FCPA compliance defense is not a new or novel idea, and how an FCPA compliance defense can accomplish a host of policy objectives that can best advance the FCPA’s objective of reducing bribery.

While some (such as the Chamber of Commerce) are proposing a compliance defense as an affirmative defense, I am not proposing an affirmative defense.  Rather, and as detailed in the article, I have proposed that compliance is best incorporated into the FCPA as an element of a bribery offense, the absence of which the DOJ (or SEC) must establish to charge a substantive bribery offense.

Some have called this proposal unprecedented and radical.

This is simply not true.

For starters, such a proposal is consistent with the FCPA-like laws of several other peer nations which, like the U.S., are parties to the OECD Convention.  Just as importantly, the FCPA already has features that must be negated by the enforcement agencies to prove a violation of the FCPA’s anti-bribery provisions.  As detailed in this prior post, in SEC v. Jackson et. al, the court ruled, in an issue of first impression, that the government must bear the burden of negating the FCPA’s facilitation payment exception.

As evidenced from the November 2010 Senate FCPA hearing and the June 2011 House FCPA hearing, based on member comments, there appeared to be bipartisian support for an FCPA compliance defense.  As noted in the “Revisiting an FCPA Compliance Defense” article and here, a compliance defense is supported by a host of former U.S. attorney generals, and other former high-ranking DOJ officials including the former Chief of the DOJ’s FCPA Unit (here).

At every FCPA event I have attended over the past few years in which an informal straw poll or show of hands took place, an FCPA compliance defense enjoyed strong majority support.

Yet, there are those who remained unpersuaded that an FCPA compliance defense is wise.

In September, Thomas Fox (FCPA Compliance and Ethics Blog) published a roundtable of sorts on the merits of an FCPA compliance.  My former colleague at Foley & Lardner, David Simon, supported an FCPA compliance defense, while Fox and William Athanas (Waller Lansden Dortch & Davis) rejected an FCPA compliance defense.  Both Fox and Athanas rebutted the compliance defense as an affirmative defense, not a compliance defense as I have proposed.

Fox opined that a compliance defense “could seriously downgrade the effectiveness of anti-corruption programs” and the general thrust of his rebuttal was that a compliance defense would be “useless” because “corporations do not and will not go to trial in FCPA cases because it is not in their interest to do so.  So if a corporation will not go to trial, a compliance defense has as much use as a trial lawyer afraid of the courtroom, in other words it is useless.”  Fox stated that an FCPA compliance defense is “only useful if it is raised as an affirmative defense at trial” and rhetorically asked “do you want to be the first GC to got to trial … or do you want to settle and play it safe.”  In conclusion, Fox stated, “at the end of the day, the compliance defense will not help a company because no company will go to trial and face a fraud finding from a jury … it is always better to settle and obtain certainty than to risk everything.”

Athanas opined that a compliance defense “would actually cause harm to those companies who take seriously the FCPA’s obligations and endeavor to ensure compliance with its mandates, making it more difficult for them to operate in this enforcement environment.”  Like Fox, Athanas stated that a compliance defense is “unnecessary” because “the notion of enabling corporations to raise a defense at trials that will never occur is essentially meaningless.”

As noted in “Revisiting an FCPA Compliance Defense”:

“The present incentives [to adopt pro-active FCPA compliance policies and procedures] represent “baby carrots” [in that they merely lessen the impact of legal exposure] when what is needed to better incentivize more robust FCPA compliance are real “carrots” [that can reduce legal exposure].  An FCPA compliance defense is a real “carrot” that will better incentivize compliance across the business landscape. Organizations with existing FCPA compliance policies and procedures will be incentivized to make existing programs better. Likewise, organizations currently without stand-alone FCPA policies and procedures—and … statistics indicate there are many—will be incentivized to spend finite resources to implement FCPA compliance policies and procedures. By better incentivizing organizations to implement more robust FCPA policies and procedure, an FCPA compliance defense can reduce instances of improper conduct and thereby advance the FCPA’s objectives.”

The notion that this “real carrot” as opposed to the present “baby carrot” will “seriously downgrade the effectiveness of anti-corruption programs” - in the words of Fox – or “actually cause harm” to companies – in the words of Athanas - are unpersuasive for the same reason it is unpersuasive to say that the greater incentive a parent provides a child to clean her room will result in fewer clean rooms or that the greater incentive a teacher provides a student to do well on an exam will result in worse exam scores.

The notion that an FCPA compliance defense is “useless” or “meaningless” because it could only be invoked at trial is a red herring because it does not address the merits of a compliance defense, but is rather a general comment as to the current state of government enforcement dynamics.  The implication is that reforming any law enforced by the DOJ or SEC is “usless” and “meaningless” because corporations are risk averse, and because of this risk aversion, legal elements that must be proven at trial will not matter.

On a related note, in opposing a compliance defense, Fox also raised the point that if a company under FCPA scrutiny raises “compliance defense” issues it might agitate a DOJ prosecutor and make the “DOJ even more aggressive in negotiations.”  If the FCPA were to be amended to include a compliance defense, and if company under FCPA scrutiny would in good faith raise this legal issue but risk agitating a DOJ prosecutor, gosh – we have more fundamental problems concerning our criminal justice system that just one statute – the FCPA – could possibly address.

More fundamentally, opposing an FCPA compliance defense for the reason that it is “useless” or “meaningless” because it could only be invoked at trial improperly views a compliance defense only through the narrow prism of hard enforcement, wholly ignoring the soft enforcement effect of an FCPA compliance defense.

As distinguished from “hard” enforcement of a law by enforcement agencies, “soft” enforcement generally refers to a law’s ability to facilitate self-policing and compliance to a greater degree than can be accomplished through “hard” enforcement alone.   In passing the FCPA, Congress anticipated that the “criminalization of foreign corporate bribery will to a significant extent act as a self-enforcing preventative mechanism.”  Likewise since the FCPA’s earliest days, the DOJ has recognized that the “most efficient means of implementing the FCPA is voluntary compliance by the American business community.”

This voluntary compliance can be better achieved by increasing the incentives to comply – a fundamental logic recently recognized by a host of SEC officials – see here, here and here.

My two-fold FCPA reform proposal (a compliance defense coupled with abolishing NPA and DPAs) – see here for a prior post – will result in the following enforcement landscape.

If a payment is made in violation of the FCPA’s anti-bribery provisions within a business organization, two issues will be relevant.

First, if the payment was made, authorized or condoned by a director or executive officer, the business organization will not be able to avail itself of an FCPA compliance defense.  Second, if the payment was made by any employee or agent in the absence of pre-existing FCPA compliance policies consistent with the best practices, the business organization will not be able to avail itself of an FCPA compliance defense.  In these scenarios involving corrupt directors or executive officers or business organizations without a commitment to FCPA compliance, the enforcement agencies will have two choices:  do not prosecute or prosecute the business organization for violating the FCPA.  This is a just and reasonable result and the third option of an NPA or DPA is not needed in such a scenario. As even the DOJ has acknowledged and empirical research has demonstrated, it is extremely unlikely that actual criminal prosecution of such a business organization will result in its demise.

Conversely, if the payment at issue is made by a non-executive employee or agent contrary to the business organization’s pre-existing FCPA compliance policies, the organization will be able to avail itself of an FCPA compliance.  Thus, as a matter of law, no FCPA prosecution of the organization will be able to proceed.  This too is a just and reasonable result and aligns FCPA enforcement with enforcement regimes in several other peer countries.

The above FCPA reforms will take courage, both by Congress in amending the FCPA and by the enforcement agencies in abolishing the resolution vehicles they created.  The reform proposals may indeed result in less hard FCPA enforcement actions as certain business organizations will be able to avail itself of the compliance defense and as enforcement agencies are once again mindful of their burdens of proof in prosecuting alleged FCPA violations.

However, more FCPA enforcement is not necessarily an inherent good and ought not be the singular goal of the FCPA.  The goal ought to be constructing an enforcement regime that best promotes compliance, reduces improper conduct, best advances the FCPA’s objective of reducing bribery, increases transparency and better aligns FCPA enforcement with rule of law principles.

The above FCPA reforms will accomplish these goals as well as increase public confidence in FCPA enforcement.  The proposals will also allow the enforcement agencies to better allocate limited prosecutorial resources to cases involving corrupt business organizations and the individuals who actually engage in the improper conduct.

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

Negotiating Bribery: Toward Increased Transparency, Consistency, and Fairness in Pre-Trial Bargaining Under The Foreign Corrupt Practices Act

Tuesday, November 5th, 2013

A guest post today from Peter Reilly (Associate Professor, Texas A&M University School of Law).  Professor Reilly, a negotiations expert, discusses his article “Negotiating Bribery: Toward Increased Transparency, Consistency, and Fairness in Pre-Trial Bargaining Under the Foreign Corrupt Practices Act,” forthcoming in the Hastings Business Law Journal.

*****

I would like to thank Mike Koehler for the opportunity to contribute to this ongoing conversation about the FCPA.

In the context of FCPA matters, the use of DPAs and NPAs is not guaranteed; rather, they are awarded to defendants through elaborate negotiations with the Department of Justice. These negotiations present an opportunity for accused parties to agree to clean up their respective acts, usually by (1) adopting or enhancing internal anti-corruption programs; (2) carrying out self-policing audits and investigations; and (3) voluntarily disclosing compliance issues and information to federal authorities.  In addition to agreeing to implement various rules, policies, and procedures to prevent bribery from taking place, the accused parties oftentimes agree to pay hefty monetary fines.  In exchange, the Justice Department agrees to hold off (perhaps forever) on prosecution.  Ultimately, if all aspects of the negotiated agreement are successfully carried out, the initially-accused party can move forward without fear of further legal consequences on the matter.

But here is the problem:  This ultimate negotiation between prosecutor and accused can sometimes be unfair to the point where any “bargaining” taking place is merely illusory.  This is because in many instances, the government has too much power, too much leverage, and too much discretion in presenting, negotiating, and implementing DPAs and NPAs.  Given its enormous leverage in the negotiation, DOJ can oftentimes negotiate quite favorable prosecution agreements, whose terms can include large financial penalties, significant internal business reforms, and cooperation in pursuing the company’s individually culpable directors, executives, managers, and/or employees.  This cooperation can include the company admitting liability, identifying wrongdoers within the organization, and sometimes even waiving work-product protection and attorney-client privilege pursuant to internal documents and internal investigations.

Moreover, while DOJ has complete discretion on whether or not to offer accused parties an NPA or a DPA, the consequences of not being offered one or the other can be devastating to a company.  Due to negative collateral consequences surrounding corporate prosecutions, accused companies tend to yield to whatever demands are made by DOJ during the negotiation.  This helps explain why, in the last twenty years, only a handful of companies have decided to go to trial in an FCPA case.[1] And while federal prosecutors enjoy wide, largely non-reviewable discretion regarding which corporate entities to target and what crimes to allege, the most effective way for any criminal justice system to test such prosecutorial discretion and to rein in overly-aggressive prosecutors—namely, the trial by jury[2]—is, for the most part, not being utilized to resolve FCPA cases.  Given that corporations cannot run the risk of going to trial, they essentially do not have a Best Alternative To a Negotiated Agreement (or “BATNA”)[3] in their negotiations with DOJ; in other words, they have little choice but to accept whatever terms are offered through the form of a DPA or NPA.

Professors Robert Mnookin and Lewis Kornhauser taught us in their seminal article, “Bargaining in the Shadow of the Law: The Case of Divorce,” that parties do not bargain “in a vacuum” and that two essential ingredients of power within the context of legal negotiations include:  (1) the option of going to trial should the negotiation fail to achieve agreement; and (2) knowledge of what the likely outcome would be, in accordance with legal precedent, should one ultimately choose to go to trial.  And yet, corporations facing FCPA charges lack both of these essential ingredients of power:  (1) as pointed out previously, going to trial would be so damaging to the company that it has little choice but to accept whatever terms are offered through the form of a DPA or NPA; and (2) because so few FCPA cases have gone to trial, it is very difficult for companies to accurately predict what the outcome at trial would likely be if they decide to pursue that avenue.  The end result is that the balance of power in the context of FCPA pre-trial negotiations is weighted significantly in favor of the government.

My article explores in depth the various factors that contribute to less-than-optimal transparency, consistency, and fairness in pre-trial bargaining under the Foreign Corrupt Practices Act, and it concludes with recommendations to strengthen the current system and make it more fair, including:

- DOJ should release to the public carefully redacted information regarding all FCPA declination decisions.

- FCPA Opinion Procedure Releases should have greater precedential value.

- The U.S. Congress should thoroughly investigate, in as non-partisan a manner as possible, the advantages and disadvantages of passing an FCPA compliance defense.

- Judicial supervision of the NPA and DPA negotiation processes should be mandated.

- Judicial review of NPAs and DPAs after they are drafted but before they are signed should be mandated.

- Judicial review regarding the issue of NPA and DPA breaches should be mandated.

Even if one disagrees with my recommendations or sees legislative, judicial, or political roadblocks to their adoption or implementation, my hope is that the article points out to readers that real and significant power imbalances exist when DOJ employs DPAs and NPAs to address FCPA enforcement matters.  This is not fair or just to the party sitting on the “accused” side of the negotiation table, and something should be done to address that unfairness


[1] See Mike Koehler, FCPA 101:  How Are FCPA Enforcement Actions Typically Resolved? (“Nearly every FCPA enforcement action against a company in this era of FCPA enforcement is resolved through a non-prosecution agreement (‘NPA’) or a deferred prosecution agreement (‘DPA’)”).

[2] See Taylor v. Louisiana, 419 U.S. 522, 530 (1975) (“The purpose of a jury is to guard against the exercise of arbitrary power—to make available the commonsense judgment of the community as a hedge against the overzealous or mistaken prosecutor and in preference to the professional or perhaps overconditioned or biased response of a judge” (citing Duncan v. Louisiana, 391 U.S. 145, 155-56 (1968))).

[3] Roger Fisher, William Ury & Bruce Patton, Getting to Yes:  Negotiating Agreement Without Giving In 100 (1991).

Yes As To A Certain Type Of Compliance Defense

Thursday, September 26th, 2013

Today’s post is from Marcia Narine (St. Thomas University School of Law).

*****

First, I would like to thank Mike Koehler for the opportunity to add to the debate about an affirmative defense for a corporate compliance program. Although I am now an academic, I write from the perspective as a former compliance officer and deputy general counsel, and as a current consultant to a boutique law firm that advises multinationals, startups and suppliers grappling with the Foreign Corrupt Practices Act on a daily basis. I vote “yes” for the defense, but not for compliance programs that would currently be considered “effective” under the Federal Sentencing Guidelines.

I believe that the current system provides a disincentive for optimal investment in compliance. It is no surprise to me that only 30-40% of SEC cases and less than 50% of DOJ cases come from voluntary disclosures, as was reported by the FCPA Professor here last week. Why voluntarily disclose wrongdoing by a rogue employee when doing the right thing may still subject your firm to fines, penalties, shareholder derivative suits, possible debarment, and potential loss of licenses?

As I wrote here, the burden for corporations attempting to avoid deferred or nonprosecution agreements altogether should be high. I would require the prosecutor to rebut the affirmative defense posed by the firm, which would provide evidence that:

(1)      it has implemented a state of the art program approved and overseen by the board or a designated board committee, which receives comprehensive updates at least twice yearly on the program from the compliance officer;

(2)      elevated the compliance officer to report directly to the board or a designated committee and make the officer terminable only by the board (a suggestion rejected in the 2010 amendments to the Guidelines and which could eliminate potential conflicts when the general counsel does not want to disclose to the government but the compliance officer does);

(3)      clearly communicated the corporation’s intent to comply with the law and appropriate penalties for prohibited acts to employees, suppliers, agents, and partners;

(4)      has developed and provided position-specific training on legal and ethical obligations for employees and board members annually (at a minimum), which is revised as the law changes;

(5)      meets or exceeds industry standards and norms related to compliance and ethics;

(6)      provides the appropriate training and policies to agents, joint venture partners and others who can subject it to liability, requires them by contract to comply, receives annual compliance certifications, and audits their compliance with the same rigor as they audit their own processes;

(7)      has consistently applied anti-retaliation policies for whistleblowers, including terminating those who engage in retaliation;

(8)      is not a habitual recidivist, meaning that the company may have had rogue employees in the past but has endeavored to learn from the compliance failure rather than continuing the same conduct;

(9)      has voluntarily reported wrongdoing to authorities when appropriate;

(10)   is periodically audited and benchmarked by an independent third party that does not provide any other consulting or professional services to it or have any actual or perceived conflicts of interest (such as providing legal advice or external auditing for Sarbanes-Oxley or other purposes) and/or is pre-certified by the appropriate US government agency; and

(11)   has made modifications if necessary to the compliance program based upon the results of the audit.

The external compliance audit or pre-certification process should benchmark the company compared to peer companies and the general corporate population, reviewing, at a minimum, the following factors:

(1)     The corporate culture and tone at the top and throughout the organization. The higher up the level of the wrongdoer, the higher the burden for the company.

(2)     Incentive programs and compensation plans at all levels of the organization that encourage legal, ethical behavior. Companies that have financial incentives in place that either encourage unlawful or unethical behavior through goals that are impossible to reach or that fail to penalize bad conduct would fail this critical prong, which would disqualify them from using the defense.

(3)     Promotional practices and whether compliance and ethical behavior are considered prior to such decisions.

(4)     Adequacy, timeliness and comprehensiveness of training initiatives and the level of employee engagement and understanding of their compliance responsibilities (both position-specific and general).

(5)     The effectiveness of the anti-retaliation programs.

(6)     The effectiveness and usage rate of the anonymous reporting mechanisms.

(7)     The process by which complaints are investigated, including an audit of a random sampling of investigations for thoroughness.

(8)     The adequacy of the resources for the compliance function including continuing external education, appropriate salary and sufficient personnel commensurate with the size of the organization and the nature of the risks for that organization and that industry and

(9)     The level of board engagement and understanding of the compliance priorities of the company based upon the risks related to its business, geography, employee base and incentive structures.

My criteria –which make more sense after reading the longer article– incorporate research about behavioral economics, executive compensation, and best practices from around the world, and would likely disqualify Wal-Mart Mexico and a number of high profile companies that are alleged to have engaged in bribery.  It would also add a tool to the arsenal of beleaguered compliance officers who need ammunition every year around budget time. Most important, this defense would level the playing field between corporations and prosecutors, would provide the proper incentives for companies to prevent, detect and disclose criminal activity, and would allow both the private and public sector to allocate their resources more productively.

Attorney General Holder’s Speech Has Broad Application

Tuesday, August 13th, 2013

Yesterday Attorney General Eric Holder delivered this speech at the Annual Meeting of the ABA House of Delegates.

Below are snippets from his speech.

“It’s time – in fact, it’s well past time – to address persistent needs and unwarranted disparities by considering a fundamentally new approach.”

“[W]e must face the reality that, as it stands, our system is in too many respects broken.  The course we are on is far from sustainable.  And it is our time – and our duty – to identify those areas we can improve in order to better advance the cause of justice for all Americans.”

“[W]e need to examine new law enforcement strategies – and better allocate resources.”

“I’ve also issued guidance to ensure that every case [the DOJ] bring serves a substantial federal interest …”.

“As a society, we pay much too high a price whenever our system fails to deliver outcomes that deter and punish crime …”.

“The bottom line is that, while the aggressive enforcement of federal criminal statutes remains necessary, we cannot simply prosecute or incarcerate our way to becoming a safer nation.  To be effective, federal efforts must also focus on prevention and reentry.  We must never stop being tough on crime.  But we must also be smart and efficient when battling crime and the conditions and the individual choices that breed it.”

“Today – together – we must declare that we will no longer settle for such an unjust and unsustainable status quo.  To do so would be to betray our history, our shared commitment to justice, and the founding principles of our nation.  Instead, we must recommit ourselves – as a country – to tackling the most difficult questions, and the most costly problems, no matter how complex or intractable they may appear.”

“This is our chance – to bring America’s criminal justice system in line with our most sacred values.  This is our opportunity – to define this time, our time, as one of progress and innovation. This is our promise – to forge a more just society. And this is our solemn obligation, as stewards of the law, and servants of those whom it protects and empowers:  to open a frank and constructive dialogue about the need to reform a broken system.”

Holder’s speech focused primarily on the war on drugs, violent crime, and incarceration rates.

However, the above quotes have broad application, including in the FCPA context.

Disparity?  See here, here, here and here for previous posts.

Broken? As highlighted in this post, how many former high-ranking DOJ officials and/or former DOJ FCPA enforcement attorneys does it take before the current DOJ realizes that its FCPA enforcement policies and procedures are, in certain cases, broken?  See also here.

Better allocate resources?  There is a way to do that in the FCPA enforcement context while at the same time best advancing the laudable objectives of the FCPA.  See here.

Cases that serve a substantial federal interest?  Perhaps you’ve heard that a substantial majority of the top FCPA enforcement actions in terms of settlement amounts have been against foreign companies based on sparse U.S. jurisdictional allegations.  See here for instance.

A system that fails to deliver outcomes that deter and punish crime?  As highlighted in this prior post, the DOJ itself has acknowledged that it does not even know if NPAs and DPAs in the FCPA context deter.

As highlighted in this previous post, there is a way forward in the FCPA context - a system that will better promote compliance and hold wrongdoers accountable.

It will however require courage and bold leadership to – in the words of Holder “open a frank and constructive dialogue about the need to reform a broken system.”

*****

I also drew inspiration from the following in Holder’s speech.

“[T]o question that which is accepted truth; to challenge that which is unjust; to break free of a tired status quo; and to take bold steps to reform and strengthen America’s criminal justice system – in concrete and fundamental ways.”

These are among the reasons why I write about the FCPA and related topics.

DOJ’s Centralized FCPA Enforcement Policy

Thursday, June 27th, 2013

Yesterday’s post highlighted a 1979 speech by the DOJ’s Assistant Attorney General outlining the DOJ’s FCPA  enforcement priorities.  (See here).  In the speech, the Assistant Attorney General talked about DOJ’s centralized FCPA enforcement policy and stated as follows.

“To maintain consistency in enforcement policy and to keep close liaison with the  Department of State, SEC, and foreign law enforcement agencies, we have  concluded that enforcement responsibility under the Act should be substantially centralized. Unlike other law enforcement areas where primary responsibility for  prosecution rests with 94 different U.S. Attorneys around the country, most  prosecutions under the Foreign Corrupt Practices Act for payment activities will  be supervised by the Multinational Fraud Branch in the Criminal Division in Washington.”

The speech also referenced improper payments leading to the downfall of foreign governments and the foreign policy implications of such payments.  Indeed, as told in my article “The Story of the Foreign Corrupt Practices Act,” what primarily motivated Congress to enact the Foreign Corrupt Practices Act was payments to foreign government officials such as the Prime Minister of Japan, the President of Korea, the President of Gabon, and Italian political parties.  Congress really didn’t care (at least enough to legislate) about the many other questionable payments it learned of during its multi-year investigation and deliberation of the foreign corporate payments problem in the mid-1970′s.  We know this because Congress excluded from the original definition of “foreign official” government employees whose duties were ministerial or clerical.

In 1982, Richard Shine (Chief of the DOJ’s Multinational Fraud Branch, the name then given to the DOJ’s FCPA Unit) likewise spoke of the DOJ’s centralized enforcement policy and stated as follows (see here for the prior post).

“Because of the obvious sensitivity both from a national security point of view  and a foreign policy point of view, the Department has administered the  enforcement of this statute quite differently than the enforcement of most of  the provisions of Title 18 of the United States Code.  Administration of the enforcement effort has been highly centralized.  Generally, FCPA cases, by the terms of the United States Attorney’s Manual, are not investigated and  prosecuted by the ninety-four United States Attorney’s Offices around the  country.  They are primarily investigated and prosecuted by the Multinational  Fraud Branch in the Criminal Division at the Justice Department.  Among other  reasons, that is being done to make sure that there is a nationally uniform enforcement policy.  Moreover, virtually any step that is taken in the  investigative process, even more than in the post-indictment process, has  potentially significant foreign policy and national security implications.”

The point is this.

As reflected in the above speeches, there was a time when the DOJ recognized Congressional intent in enacting the FCPA and based on this recognition the DOJ wisely implemented a centralized enforcement policy.

After all, did the country really want an Assistant U.S. Attorney in Seattle, Miami, you name it, bringing an enforcement action concerning payments to foreign government officials that could cause the downfall of a foreign government and raise a host of foreign policy and national security issues?

Centralized FCPA enforcement is still the DOJ’s policy and the U.S. Attorneys Manual states as follows.

“No investigation or prosecution of cases involving alleged violations of the [FCPA] 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.  [...] The investigation and prosecution of particular allegations of violations of the  FCPA will raise complex enforcement problems abroad as well as difficult issues  of jurisdiction and statutory construction. For example, part of the  investigation may involve interviewing witnesses in foreign countries concerning their activities with high-level foreign government officials. In addition, relevant accounts maintained in United States banks and subject to subpoena may be directly or beneficially owned by senior foreign government officials. For  these reasons, the need for centralized supervision of investigations and  prosecutions under the FCPA is compelling.”

According to the DOJ’s website, this Attorneys Manual excerpt is from 2000 and even then the DOJ still recognized that its FCPA enforcement efforts were targeted at high-level government officials and other senior foreign government officials.

Things have obviously changed with the DOJ’s FCPA enforcement program.

Most enforcement actions in this new era involve alleged payments to state-owned or state-controlled enterprises with many attributes of private commercial enterprises, employees of various foreign health care systems such as physicians, or actions based on payments to ministerial or clerical officials concerning mundane foreign licenses, permits or customs issues.

Can it truly be said that these enforcement actions concern payments that could lead to the downfall of foreign governments or payments that have “significant foreign policy and national security implications”?

Tracing the history of the DOJ’s centralized FCPA enforcement policy and its original policy justifications actually speaks volumes to how FCPA enforcement has changed in this new era.

There is another point to be made as well concerning DOJ’s centralized FCPA enforcement policy.

It is a special policy.

As noted in this recent post, before recently leaving the DOJ for FCPA Inc., then DOJ Deputy Chief of Staff for the Criminal Division Daniel Suleiman rightly noted as follows.  “It is Justice Department policy that no FCPA prosecution can be brought without authorization from the Criminal Division, which distinguishes FCPA prosecutions from most other kinds of federal criminal cases.”

Likewise, former DOJ Assistant Chief for FCPA Enforcement Billy Jacobson also rightly observed (see here for the prior post) as follows.

“The 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.”

What this special DOJ FCPA policy means is that FCPA enforcement is highly centralized and, from a supervisory and discretionary standpoint, very few individuals control FCPA enforcement.  Because of the DOJ resolution vehicles typically used to resolve FCPA enforcement actions, these few individuals largely “enforce” the FCPA behind closed doors in Washington D.C. often without any meaningful judicial scrutiny and in the general absence of case law of precedent setting the parameters of the FCPA.

The DOJ’s special policy warrants another special policy.

And that is, as I have long suggested, a prohibition on DOJ FCPA enforcement attorneys with supervisory and discretionary authority from providing FCPA defense or compliance services for five years upon leaving government service.