Archive for the ‘FCPA Scholarship’ Category

A Comprehensive FCPA Resource

Wednesday, November 5th, 2014

The question was recently asked: ”will there ever be a classic treatise on the FCPA?”New Era

According to Webster’s, a treatise is a book, article, etc., that discusses a subject carefully and thoroughly.

With that definition in mind, I invite you to consider my new book “The Foreign Corrupt Practices Act in a New Era.”  Inside you will find:

  • A thorough telling of the story of the FCPA told largely through original voices of actual participants who shaped the pioneering law;
  • Foundational knowledge (such as DOJ and SEC policy and resolution vehicles and the realities of the global marketplace) that best enhance understanding and comprehension of specific FCPA topics;
  • A comprehensive analysis of the FCPA’s anti-bribery provisions and for each element, exception or affirmative defense discussion of all legal sources of authority (including all relevant substantive FCPA judicial decisions) as well as non-legal sources of information (including discussion of over 70 FCPA enforcement actions);
  • Discussion of other legal issues also relevant to FCPA enforcement;
  • A comprehensive analysis of the FCPA’s books and records and internal controls provisions including legal authority as well as non-legal sources of information;
  • Analysis of the typical origins of FCPA scrutiny and enforcement;
  • Discussion of FCPA settlement amounts, how they are calculated, and analysis of legal and policy issues relevant to settlement amounts;
  • Discussion of FCPA sentencing issues, how sentences are calculated, and an analysis of legal and policy issues relevant to sentencing decisions;
  • An extended discussion and analysis of an often overlooked topics, “FCPA Ripples,” and how settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement;
  • An exploration of practical and provocative reasons for the general increase in FCPA enforcement during this new era including a discussion of FCPA Inc. and the business of bribery;
  • Identification and discussion of FCPA compliance best practices and benchmarking metrics; and
  • An in-depth discussion and analysis of FCPA reform designed to ensure that the FCPA is best achieving the original goals of the law and that FCPA enforcement is transparent and consistent with rule of law principles.

Whether the above topics highlighted and explored in “The FCPA in a New Era” make it a classic treatise, well, I invite you to come to your own conclusion.  At the very least, you will have to agree that the cover of the book is more inviting than a typical treatise.

While I am certainly not going to ascribe labels to my own work, I am pleased to share what others have said about “The FCPA In a New Era.”

Michael Mukasey, former U.S. Attorney General

“Professor Koehler has brought to this volume the clear-eyed perspective that has made his FCPA Professor website the most authoritative source for those seeking to understand and apply the FCPA. This is a uniquely useful book, laying out systematically the history and rationale of the FCPA, as well as its evolution into a structure governed as much by lore as by law. It will be valuable both to those who counsel international corporations, whether in connection with immediate crises or long-term strategies; and to those who contemplate what the FCPA has become, and how it can be improved.”

Professor Daniel Chow, The Ohio State University Moritz College of Law

“This is the single most comprehensive academic treatment of the Foreign Corrupt Practices available. Professor Koehler’s book will become the authoritative standard for the field. The book not only treats the history of the FCPA, but analyzes the statute’s elements in detail, discusses current cases, and makes proposals for reforms where the current law is deficient. The book is written in a clear, accessible style and I will use it often as a resource for my own scholarly work.”

 Richard Alderman, former Director of the UK Serious Fraud Office

“An excellent and thought-provoking book by a great expert. Backed up by rigorous analysis of cases, Professor Koehler constantly challenges those involved in anti-corruption work by asking the question ‘why?’ He puts forward many constructive and well-argued suggestions for improvements that need to be considered. I have learned a lot from Professor Koehler over the years and I can thoroughly recommend this book.”

Thomas Fox, FCPA Compliance and Ethics Blog and FCPA Practitioner

“The Foreign Corrupt Practices Act in a New Era” should become one of the standard texts for any FCPA compliance practitioner, law student studying the FCPA or anyone else interested in anti-bribery and anti-corruption. It should be on your FCPA library bookshelf.”

Barry Vitou, thebriberyact.com and Compliance Practitioner

“If you only read one book on the US FCPA, read this one. [...] Mike Koehler’s new book is probably the best book we’ve read about the FCPA. [...] For those wanting a pair of ‘FCPA goggles’ no book is, in our opinion, better.”

To order a hard copy of the book, see here and here; to order an e-copy of the book, see here and here.

For media coverage of the book including Q&A’s, see here from Corporate Counsel, here from Global Investigations Review, and here from Corporate Counsel Weekly.

*****

Looking for even more information and analysis of the FCPA and FCPA enforcement?

I invite you to all also consider the following year in review articles.  Granted the below articles are not found between two covers, but you will find approximately 500 pages of FCPA statistics, trends and analysis over time.

For 2013, see here.

For 2012, see here.

For 2011, see here.

For 2010, see here.

For 2009, see here.

And The Apple Goes To …

Monday, September 22nd, 2014

applepicFitting of the season, the FCPA Professor apple award goes to Matthew Fishbein (Debevoise & Plimpton).

In this recent article titled “Why Aren’t Individuals Prosecuted for Conduct Companies Admit,” Fishbein (who previously served in the U.S. Attorney’s Office for the Southern District of New York as Chief Assistant U.S. Attorney and Chief of the Criminal Division, among other DOJ positions), picks an orchard. He writes:

“The public has every right to wonder how it can be that the government brings no charges against individuals in the wake of [corporate criminal settlements]. Companies act only through the conduct of individuals—if the conduct is as egregious as portrayed in these settlements, and if the massive penalties are appropriate, how is it that so often the government charges no individuals?

[...]

Prosecutors’ increasing appreciation of the leverage they enjoy over corporate entities, coupled with companies’ determinations that a “bad” settlement is likely better than a “good” litigation, has resulted in a greater number of corporate settlements in cases where the government would be unlikely to prevail if forced to prove its case in court. The result, increasingly common over the last 20 years, is that prosecutors can obtain what appears to be a monumental victory without needing to develop a theory, supported by evidence, that could survive a legal challenge or prevail before a jury.

Prosecutors have far less leverage over individuals. People, unlike corporations, often face the prospect of incarceration and financial ruin in the event of a criminal conviction. As a result, individuals are more likely to test the government’s legal theories and version of the facts. Of course, the government often does pursue complex cases against individuals where the legal theory is clear and the facts compelling (for example, the recent wave of insider trading cases). But in many of the recent settlements, prosecutors know from their interactions with lawyers for individuals that, unlike with the corporation, they are likely to have a fight on their hands if they bring charges. Prosecutors are under enormous pressure from Congress and the public to pursue cases against senior executives who are thought to have caused the financial crisis. If they thought they would prevail, is there any doubt that they would bring these cases?

[...]

As NPAs and DPAs have become increasingly common, the government’s leverage over corporations in negotiating these settlements has become more apparent. In addition to the tremendous risks associated with an indictment, prosecutors have several other powerful sources of negotiating leverage. These include: government suspension and debarment; the loss of key licenses, such as banking licenses; the drain on the time and energy of corporate executives and other witnesses; legal costs; and costs associated with the uncertainty of a criminal investigation and potential indictment.

Corporations are also reluctant to go to trial because they are risk averse. Regardless of the strength of the government’s case, the facts in corporate criminal cases are often complex or esoteric, and there is always a chance that a jury may not understand why a few problematic documents do not add up to criminal liability.

In light of these factors, companies often may view an admission of criminal conduct as preferable to a legal victory that clears the company’s name but requires years of uncertainty. By entering into a settlement, a company often confines its exposure to a press conference followed by writing a large check, after which the incident may be relegated to a paragraph in a 10-Q filing. By contrast, a company that goes to trial may receive negative—and unpredictable—news coverage for years.

From a business perspective, the preference to settle appears to be prudent: Even though DPAs often involve damaging admissions and massive fines, such negotiated resolutions tend to lead to an immediate increase in a company’s stock price. [...] The increase of a company’s stock price after it admits to often egregious criminal conduct and pays a multimillion dollar fine reflects the strong desire of shareholders and the market—and the consequent pressure on corporate executives—to resolve investigations by entering into settlements. The market appears to value the certainty of a resolution more than it is concerned by admissions of criminal conduct.

The above factors all contribute to an environment in which the government can test the limits of its leverage in negotiating corporate settlements. In recent years, prosecutors have pushed those limits further, knowing that they often need not develop a theory of criminal liability that would likely survive a court challenge. A December 2013 NPA that Archer Daniels Midland (ADM) entered into to settle FCPA charges provides a telling example. Under the NPA, ADM agreed to pay $54 million in penalties for bribing foreign government officials. Although it was undisputed that officials of ADM indirect subsidiary ACTI Ukraine paid off foreign officials, they did so in order to receive tax refunds owed by the Ukrainian government.

According to FCPA expert and Southern Illinois University School of Law Professor Michael Koehler, “it is difficult to square [the elements of the FCPA] with the facts alleged in the [ACTI] Ukraine information, and anyone who values the rule of law should be alarmed by it.” The FCPA was designed to prevent companies from “corruptly” acquiring “business”—not receiving owed tax refunds. Moreover, the statute specifically exempts from its anti-bribery provisions “payments to a foreign official…the purpose of which is to expedite or to secure the performance of a routine government action by a foreign official.”

The ADM NPA appears to reflect what Mark Mendelsohn, former head of the Justice Department’s FCPA Unit, has described as the “danger” of NPAs and DPAs: “it is tempting for the [Justice Department] or the SEC…to seek to resolve cases through DPAs or NPAs that don’t actually constitute violations of the law.” But if a case turns out to be marginal, why would a prosecutor pursue it? My experience as a former prosecutor and current defense lawyer suggests that there are at least three reasons for this phenomenon.

First, competition between prosecutors’ offices and public demands for immediate investigations in the wake of high-profile stories place substantial pressure on prosecutors to investigate companies quickly and to pursue cases without having necessarily vetted their appropriateness for criminal charges.

Second, many of the subjects of corporate investigations are complicated, esoteric, and place a substantial burden on the limited resources of prosecutors’ offices. After a lengthy investigation, a prosecutors’ office may not be inclined to simply close a case, especially if it can induce the company to enter into a settlement.

Third, as a result of the leverage discussed above, prosecutors can obtain settlements and massive payments in even marginal cases. Corporate prosecutions represent a low-risk, high-reward opportunity: The risk inherent in pursuing a marginal case is blunted by the high likelihood that a corporation will settle because of the prosecutor’s superior leverage and the corporate defendant’s rational risk aversion. And as settlements increase and monetary penalties skyrocket, the government accumulates and issues press releases reporting record amounts in fines and forfeitures.

[...]

[F]ew prosecutions of individuals actually occur. The reason is simple: Prosecutors do not possess the same kind of leverage over individuals that they do over companies. Because an admission of wrongdoing by an individual has far greater consequences, individuals are more likely to test the prosecution’s case. In cases where the evidence of criminal conduct is weak, prosecutors may well succeed in inducing the corporation to settle, but fail to convince individuals to do the same. Consequently, we see DPAs, often accompanied by inflammatory statements of fact (drafted by prosecutors) documenting outrageous criminal conduct by the company through its employees, without any follow-up prosecution of individuals.

Prosecutors have long been able to charge companies for the criminal conduct of their employees. And in the appropriate case, it makes sense that the corporation, which is created by the laws of the state, should be held accountable to ensure that its employees follow the law. But it follows that if criminal conduct has occurred, the individuals responsible should also be pursued.

The leverage the government can exercise over companies has tipped the scales to a troubling degree. By using their considerable leverage to induce companies to enter into settlements in increasingly marginal cases and forcing them to admit to egregious conduct to settle charges that likely would not survive a legal challenge or be proved to a jury, prosecutors have created a situation where the public is deceived into thinking that the individuals involved in corporate criminal conduct are receiving a free pass.

If these cases were exposed to the light of day by the adversarial system, the public would learn that they are often far murkier than they appear in the DPA’s statement of facts. Instead, however, the public sees a fundamental disconnect between the prosecution of corporations and the prosecution of individuals—and is justifiably left to wonder why prosecutors do not pursue the individuals through whom all corporations must act.”

For additional reading on the above topics see:

The Facade of FCPA Enforcement“ (2010)

My 2010 Senate FCPA testimony (“The lack of individual prosecutions in the most high-profile egregious instances of corporate bribery causes one to legitimately wonder whether the conduct was engaged in by ghosts. [...]  However, a reason no individuals have been charged in [most FCPA] enforcement actions may have more to do with the quality of the corporate enforcement action than any other factor. As previously described, given the prevalence of NPAs and DPAs in the FCPA context and the ease in which DOJ offers these alternative resolution vehicles to companies subject to an FCPA inquiry, companies agree to enter into such resolution vehicles regardless of the DOJ’s legal theories or the existence of valid and legitimate defenses. It is simply easier, more cost efficient, and more certain for a company … to agree to a NPA or DPA than it is to be criminally indicted and mount a valid legal defense – even if the DOJ’s theory of prosecution is questionable …”.

But Nobody Was Charged” (2011)

“DOJ Prosecution of Individuals – Are Other Factors At Play?” (2011) (2013) (2014)

Why You Should Be Alarmed by the ADM Enforcement Action” (2014).

*****

[The FCPA Apple Award recognizes informed, candid, and fresh thought-leadership on the Foreign Corrupt Practices Act or related topics. There is no prize, medal or plaque awarded to the FCPA Professor Apple Award recipient. Just recognition by a leading FCPA website visited by a diverse group of readers around the world. There is no nomination procedure for the Apple Award. If you are writing something informed, candid and fresh about the FCPA or related topics, chances are high that I will find your work during my daily searches for FCPA content.]

“The FCPA In A New Era” Continues To Generate A Buzz

Wednesday, September 10th, 2014

New EraMy new book “The Foreign Corrupt Practices Act in a New Era” has been in the marketplace for a few months and I am grateful that it continues to generate a buzz.

Thomas Fox over at the FCPA Compliance and Ethics Blog says:

“[The book] should become one of the standard texts for any FCPA compliance practitioner, law student studying the FCPA or anyone else interested in anti-bribery and anti-corruption. It should be on your FCPA library bookshelf.”

In addition, I recently chatted with Fox about the book during a two-part Q&A podcast on FCPA Compliance and Ethics Report. See here for Part I and here for Part II.  (As noted in the introduction of both parts, a technical glitch makes it difficult to hear Fox, but you can hear my responses just fine).

Over at thebriberyact.com, the headline reads “buy it” and the review states:

“Mike Koehler’s new book is probably the best book we’ve read about the FCPA. [...] For those wanting a pair of ‘FCPA goggles’ no book is, in our opinion, better.”

As previously noted in this post, here is what others are saying as well about the book.

Michael Mukasey (Former U.S. Attorney General – Partner, Debevoise & Plimpton)

“Professor Mike Koehler has brought to this volume the clear-eyed perspective that has made his FCPA Professor website the most authoritative source for those seeking to understand and apply the FCPA.  This is a uniquely useful book, laying out systematically the history and rationale of the FCPA, as well as its evolution into a structure governed as much by lore as by law.  It will be valuable both to those who counsel international corporations, whether in connection with immediate crises or long-term strategies; and to those who contemplate what the FCPA has become, and how it can be improved.”

Richard Alderman (Former Director of the UK Serious Fraud Office)

“An excellent and thought-provoking book by a great expert. Backed up by rigorous analysis of cases, Professor Koehler constantly challenges those involved in anti-corruption work by asking the question “why?” He puts forward many constructive and well-argued suggestions for improvements that need to be considered. I have learned a lot from Professor Koehler over the years and I can thoroughly recommend this book.”

Daniel Chow (Professor of Law, The Ohio State University Moritz College of Law)

“This is the single most comprehensive academic treatment of the Foreign Corrupt Practices available. Professor Koehler’s book will become the authoritative standard for the field. The book not only treats the history of the FCPA, but analyzes the statute’s elements in detail, discusses current cases, and makes proposals for reforms where the current law is deficient. The book is written in a clear, accessible style and I will use it often as a resource for my own scholarly work.”

For media coverage of the book including Q&A’s, see here from Corporate Counsel, here from Global Investigations Review; here from Corporate Counsel Weekly; here from Corporate Crime Reporter; and here from Thomson Reuters. (Note, I have no input as to the title of the articles).

To order a hard copy of the book, see here and here; to order an e-copy of the book, see here and here.

Are You Ready For Some Football? How A Successful Football Organization Can Inform FCPA Compliance In A Business Organization

Thursday, September 4th, 2014

FBAre you ready for some football? The answer is likely yes as the football season is arguably the most anticipated sports season and one that transforms the weekends of many.

For Foreign Corrupt Practices Act compliance practitioners, understanding the game is not just a professional diversion, but one that can actually add professional value as well.  The reason is because understanding what makes a football organization successful can also inform FCPA compliance in a business organization.

In the spirit of the season, my recent article in Bloomberg BNA’s White Collar Crime Report titled “How a Successful Football Organization Can Inform FCPA Compliance In a Business Organization” highlights four attributes of a successful football organization that can also elevate FCPA compliance in a business organization.

Click here to download the article.

Gifts And The “Bribery Gaze”

Wednesday, September 3rd, 2014

[I originally published this post as a book review on Criminal Law and Criminal Justice Book (a joint project of Rutgers School of Law-Newark and Rutgers School of Criminal Justice) and it is republished below with permission.]

Throughout human history, gifts have been a respected and legitimate form of gratitude and generosity, serving as a social glue important to any cohesive society. Yet at the same time, gifts have been offered to seek influence, have compromised the integrity of the gift recipient, and have thus represented a form of bribery.

These divergent realities are the subject of Professor Malin Akerstrom’s engaging new book “Suspicious Gifts.” Professor Akerstorm, a Swedish sociologist by discipline, examines the everyday dilemmas faced by low-level professionals working in the public sector and the business persons who interact with such public officials to chart the ambiguity between legitimate gifts and illegitimate bribery.

Acknowledging the corrupting power of gifts, Professor Akerstrom is nevertheless critical of contemporary anticorruption efforts that seemingly label all gifts as blameworthy or even criminal. Invoking the phrase the “bribery gaze” on a number of occasions, Professor Akerstorm highlights the following warnings found in anti-corruption literature.

  • When you want to display hospitality – it could be bribery!
  • When you want to be generous – it could be bribery!
  • When you want to be friendly – it could be bribery!
  • When you take self-promoting measures – it could be corrupt marketing!
  • When you allow yourself to be invited – it could be a bribe!
  • When you accept a present or prize – it could be a bribe!
  • If you don’t say no thanks or decline a perk in time – it could be corruption!

These circumstances, of course, are not academic, but present in real-world bribery enforcement actions. While the Swedish examples Professor Akerstrom highlights may be foreign to most readers outside of that region, gifts are also frequently alleged as bribes in U.S. Foreign Corrupt Practices Act enforcement actions. For example, recent FCPA enforcement actions have involved: flowers, cigarettes, bottles of wine; karaoke bars; and tea sets.

As Professor Akerstrom rightly notes however, the current “bribery gaze,” in which everything seems to be transformed into a hazard, a trap or criminal bribery, is not without social and public policy consequences. She persuasively argues:

“Campaigns to eliminate these gift exchanges are at the same time campaigns to restrict the gamut of courtesy or ritual exchanges. The manifestations of courtesy, gratitude, and social bonds, which are so important as social glue in any cohesive society, are not just called into question, but criminalized.”

In this new era of enforcement of bribery and corruption laws, many are pounding the table for more enforcement, as if the quantity of enforcement was an inherent good regardless of enforcement theories, resolution vehicles, or collateral social and public policy considerations.

Regarding gifts as a form of bribery, Professor Akerstorm asks, “should the ideal society be gift-less?” With the current “bribery gaze,” expanding theories of enforcement, and risk-averse business organizations responding by eliminating most forms of gratitude and generosity, this appears to be where the winds are blowing.

Yet in “Suspicious Gifts” Professor Akerstorm reminds those in the anti-corruption space – whether practitioner, policy-maker or scholar – that bribery and corruption is seldom the simple and safe issue it appears to be at first blush.