Archive for the ‘FCPA Scholarship’ Category

Friday Roundup

Friday, April 12th, 2013

The U.S. intervenes, I disagree, I agree, and say what.  It’s all here in the Friday roundup.

U.S. Intervenes in Wynn-Okada Dispute

Numerous prior posts (see here, here and here for instance) have highlighted the dispute between Wynn Resorts and its former board member Kazuo Okada.  Earlier this week, Bloomberg reported as follows.  “The U.S. asked to intervene in a lawsuit brought by Wynn Resorts Ltd., which accused Okada of making improper payments to Philippine gambling regulators. The Justice Department said in an April 8 filing in state court in Las Vegas that it doesn’t want the civil case to disrupt its criminal investigation into the same underlying allegations.”  According to Bloomberg:  “Okada’s lawyers have said they would probably oppose the request “in whole or in part,” according to the filing. Wynn Resorts won’t oppose its request, the Justice Department said.”  For additional coverage, see here from the Las Vegas Review-Journal.

I Disagree

Earlier this week a reader of the FCPA Blog (see here) posed the following question.  “One thing  that has not gotten much discussion is the possibility that the apparent slowdown in FCPA enforcement may be due to the spike in declinations.”

Putting aside the big-picture and highly relevant issue of what is a declination (see here as well as other embedded posts on this issue), when addressing the issue of FCPA enforcement statistics, it is important to keep in mind (as highlighted in this prior post) the following.

Just three unique historical events (Iraq Oil for Food, Bonny Island, Nigeria conduct, and Panalpina-related issues) served as the foundation for 35% of all corporate FCPA enforcement actions between 2007-2011 and resulted in 55% of settlement amounts in corporate enforcement actions between 2007-2011.  Adding just the 2008 Siemens enforcement action to the settlement amount calculation, results in just four unique historical events accounting for 77% of settlement amounts in corporate enforcement actions between 2007-2011.

Recognizing these events and how they impacted FCPA enforcement data is important to understanding why FCPA enforcement has declined in recent years.

Even though FCPA enforcement has declined in recent years, unique events giving rise to FCPA enforcement actions have remained relatively constant between 2007 and 2012.  In 2007, corporate FCPA enforcement actions were the result of 15 unique events.  In 2008, corporate FCPA enforcement actions were the result of 10 unique events.  In 2009, corporate FCPA enforcement actions were the result of 11 unique events.  In 2010, corporate FCPA enforcement actions were the result of 14 unique events.  In 2011, corporate FCPA enforcement actions were the result of 16 unique events.  In 2012, corporate FCPA enforcement actions were the result of 12 unique events.

I Agree

Dieter Juedes (who like me is a product of Sheboygan County, Wisconsin) recently published “Taming the FCPA Overreach Through an Adequate Procedures Defense” in the William & Mary Business Law Review.  Among other things, the article “proposes specific statutory language that Congress could use in adopting such a defense and it establishes precise factors to be promulgated by the DOJ and SEC for determining whether a firm’s procedure would be deemed “adequate.”

Given my prior article “Revisiting a Foreign Corrupt Practices Act Compliance Defense,” I agree with the general thrust of Juedes’s article.

Say What?

I don’t quite understand the logic or rationale of this op-ed piece in the South China Morning Post by Robert Precht (director of Justice Labs Limited, a Hong Kong think tank).

Precht argues that ”the efforts of some Western countries to enforce their own anti-bribery laws in China are more likely to produce false accusations and hinder democratic reform than reduce corruption.”  He states as follows.  “One of the unintended harms of enforcing the US anti-bribery law in China is that it may actually stifle efforts to end corruption. US journalists, human rights workers and university researchers play an important role in shining light on the darker recesses of Chinese politics. Preventing Americans from making gifts to Chinese to obtain information useful to promote democratic reform will hinder the disclosure role the Americans play.”

According to Precht, “the solution is simple.”  He argues that “the US Congress should amend the law, providing that it will only be applied in countries that meet certain minimum requirements of democracy and will not be applied in authoritarian regimes such as China.”

A good weekend to all.

Lanny Breuer And Foreign Corrupt Practices Act Enforcement

Monday, March 25th, 2013

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

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


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

The Most Extensive Collection Of FCPA Scholarship Between Two Covers

Monday, March 4th, 2013

Last March I was pleased to play a role, along with Professor Daniel Chow (here - Ohio State) and the staff of the Ohio State Law Journal, in organizing “The FCPA At Thirty-Five and Its Impact on Global Business.”  The full-day symposium at The Ohio State University Moritz College of Law included presentations from top DOJ officials, leading academics from both the U.S. and U.K., and experienced practitioners on various aspects of the Foreign Corrupt Practices Act and related topics.  (For instance, see here for a previous guest post regarding comments by Chuck Duross (DOJ – FCPA Unit Chief) at the event).

Papers presented at the event were recently published in Volume 73 of the Ohio State Law Journal and it likely represents the most extensive collection of FCPA scholarship between two covers.

Professor Peter Henning (Wayne State University School of Law) presented a keynote titled “Be Careful What You Wish For:  Thoughts on a Compliance Defense Under the Foreign Corrupt Practices Act.”

In this previous post, I shared my article “The Story of the Foreign Corrupt Practices Act.”

Professor Chow published “The Interplay Between China’s Anti-Bribery and the Foreign Corrupt Practices Act.”

Carter Stewart (U.S. Attorney, Southern District of Ohio) published “The FCPA Is Just As Relevant and Necessary Today As Thirty-Five Years Ago.”

D. Michael Crites (Dinsmore & Shohl) published “The Foreign Corrupt Practices Act at Thirty-Five: A Practitioner’s Guide.”

Professor Paul Rose (Ohio State) published “State Capitalism and the Foreign Corrupt Practices Act.”  See here for his previous guest post on the topic titled “Foreign Official and the Missing Link.”

Professor Barbara Black (Cincinnati) published “The SEC and the Foreign Corrupt Practices Act:  Fighting Global Corruption Is Not Part of the SEC’s Mission.”

Professor David Hess (Michigan) published “Enhancing the Effectiveness of the Foreign Corrupt Practices Act Through Corporate Social Responsibility.”

Philip Urofsky (Shearman & Sterling) was the lead author of “How Should We Measure the Effectiveness of the Foreign Corrupt Practices Act?  Don’t Break What Isn’t Broken – The Fallacies of Reform.”

Professor Peter Alldridge (Queen Mary, University of London) published “The U.K. Bribery Act: ‘The Caffeinated Younger Sibling of the FCPA.”

Professor Amy Deen Westbrook (Washburn) published “Double Trouble:  Collateral Shareholder Litigation Following Foreign Corrupt Practices Act Investigations.”

Professor Roger Alford (Notre Dame) published “A Broken Windows Theory of International Corruption.”

Professor Eric Chaffee (Dayton) published “The Role of the Foreign Corrupt Practices Act and Other Transnational Anti-Corruption Laws in Preventing or Lessening Future Financial Crisis.”

Professor Michael Van Alstine (Maryland) published “Treaty Double Jeopardy  The OECD Anti-Bribery Convention and the FCPA.”

In addition to the above articles, Furthermore, the on-line complement to the Ohio State Law Journal, also published the following articles.

Michael Diamant (Gibson Dunn) was the lead author of “Don’t You Forget About Me: The Continuing Viability of the FCPA’s Facilitating Payments Exception”

Professor Bruce Bean (Michigan State) published “Further to Professor Alldridge’s “Caffeinated” Article: What “Stuff” Did the Professor Have in Mind?

Happy reading.

FCPA Reform Related Scholarship

Monday, January 21st, 2013

Three articles of interest regarding various aspects of FCPA reform to pass along.

Choosing Governance In The FCPA Reform Debate

Joseph Yockey (University of Iowa College of Law) recently published the above article in the Journal of Corporation Law.

The abstract is as follows.

“The recent rise in enforcement under the U.S. Foreign Corrupt Practices Act (FCPA) has led to a vigorous debate about the need for reform. Critics say the statute is overenforced and harms shareholders. Regulators disagree and argue in favor of the status quo. This Article examines both sides of the FCPA reform debate and finds them wanting on several levels. First, a variety of factors suggest that critics’ fears of overenforcement are often exaggerated. That said, proponents of existing enforcement efforts who believe that nothing needs to change are also mistaken. Instead of overenforcement, there is a risk that the FCPA is being underenforced. Instead of encouraging firms to develop anticipatory and sustainable compliance programs, current enforcement policy incentivizes a focus on static programs that are incapable of addressing the dynamic risk of corruption. Finally, the present regulatory model fails to adequately address how gaps in international anti-corruption enforcement pose unique compliance challenges on the domestic front.

This Article seeks win-win solutions to these problems by recommending a shift of focus toward regulatory strategies designed around principles of collaboration and experimentation that fall within the category of “new governance.” Through a governance-based approach to regulation, firms are expected to better institutionalize context-specific compliance tools developed in consultation with the state and other actors. This approach — when ongoing and initiated outside the context of a specific enforcement action — ought to produce more effective and efficient self-regulation and fewer instances of bribery. The public−private learning process envisioned by new governance should also enhance the United States’ efforts to promote international anti-corruption norms and help level the playing field for American firms.”

Yockey’s other recent FCPA scholarship includes: FCPA Settlement, Internal Strife, and the ‘Culture of Compliance’ (Wisconsin Law Review) and Solicitation, Extortion and the FCPA (Notre Dame Law Review).  Yockey was previously an attorney at Sidley Austin LLP in Chicago.

The New Era of FCPA Enforcement: Moving Towards a New Era of Compliance

Thomas Gorman (Dorsey & Whitney) and William McGrath recently published the above article in Securities Regulation Law Journal.

The abstract is as follows.

“The DOJ and the SEC are aggressively enforcing the FCPA in what has come to be called the New Era of FCPA enforcement. Those efforts are reflected by expansive interpretations of the statute, the increasing use of industry sweeps, spiraling costs to settle corporate cases and a focus on individuals, coupled with demands for longer prison sentences. This has spawned increasing demands for amendments to the statutes. Congress has considered the question but not acted. Enforcement officials could spur compliance by amending their prosecution guidelines to include items such as a compliance defense but have not. Yet business organizations and their employees remain at risk. To avoid or at least mitigate liability, business organizations need to step-up and implement reasonable compliance systems and begin a new era of compliance.”

Gorman is a former SEC enforcement attorney and author of the site SEC Actions.

Dodd-Frank’s Whistleblower Provision Fails to Go Far Enough: Making the Case for a Qui Tam Provision in a Revised Foreign Corrupt Practices Act

Nathaniel Garrett, a student at the University of Cincinnati College of Law, recently published the above article in the University of Cincinnati Law Review.

The abstract is as follows.

“In the wake of the 2008 financial collapse, Congress enacted the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). Included within Dodd–Frank is a whistleblower provision that some businesses believe has gone too far. While Dodd–Frank’s reach is substantial, the whistleblower provision actually fails to go far enough as applied to the Foreign Corrupt Practices Act (FCPA). There are numerous statutory roadblocks and administrative hindrances that will prevent Dodd–Frank’s whistleblower provision from assisting in the enforcement of the FCPA. The solution I argue in this Comment is for Congress to amend the FCPA to include a qui tam provision, modeled after that found in the False Claims Act.”

Economic Analysis And FCPA Damages

Friday, January 4th, 2013

Although economic analysis is not my field, I have long been interested in basic economic theory as it applies to Foreign Corrupt Practices Act fine and penalty amounts, specifically disgorgement.

In my opening remarks at the World Bribery and Corruption Compliance Forum in London in September 2010 (see here), I observed as follows.

“Another issue in need of deeper analysis is the commonly held enforcement view that the contract (and thus net profits of the contract) at issue was secured solely because of the alleged improper payments made by the corporate. This ignores the fact that most of the companies settling enforcement actions are otherwise viewed as industry leaders presumably because they offer the best product or service for the best price. With such companies, can it truly be said that the alleged improper payments were the sole reason the company secured the contract at issue, thus justifying the company being forced to disgorge all of its net profits associated with the contract? Does a but for analysis have a place in bribery laws – in other words should the enforcement agency have to prove that but for the improper payment, the company would not have secured the contract at issue?”

In the context of the recent Pfizer enforcement action, I again highlighted here some basic economic issues when thinking about the disgorgement penalty in that case.

This previous post highlighted the work of Dr. Patrick Conroy (here) and Dr. Graeme Hunter (here) – both of Nera Economic Consulting.  In their thoughtful article titled “Economic Analysis of Damages under the Foreign Corrupt Practices Act,” the authors note that “to date there has been little consideration of the true benefit of the bribe,” but “with fines in the hundreds of millions of dollars and increasing enforcement, it is necessary to clearly understand what effect a bribe had on profits and to carefully establish what the but-for profits would have been without the bribe.”

I recently came across a similar article by Mark Gueck (here) and Jeff Armstrong (here) - both of Finance Scholars Group.  Their article “Competition Principles Applied to FCPA Damages” (here), rightly notes that “disgorgement is complex and may put the firm [resolving an FCPA enforcement action] in the position of forfeiting some legally earned profits as well.”  The authors “propose strengthening FCPA disgorgement with robust economic analysis, in particular, applying principles of market competition in ways that are accepted in other areas of government oversight so that the proper balance between penalty, incentive and opportunity is achieved.”  Among other things, the authors point out, as I frequently have as well, that “companies fined under the FCPA are industry leaders” and that “customers can be expected to purchase from the firm in the absence of a bribe.”

Even if a company is found to have violated the Foreign Corrupt Practices Act, the law nevertheless demands that fine and penalty amounts are fair and just.  The time has come for basic economic principles, accepted in other areas of law, to be accepted in FCPA enforcement actions.  FCPA counsel would be wise to consider such issues, and engage such expertise, when negotiating resolutions to FCPA enforcement actions with the DOJ and SEC.