Archive for the ‘Non-Prosecution Agreement’ Category

Friday Roundup

Friday, June 19th, 2015

Roundup2Scrutiny alerts and updates, quotable, and for the reading stack.  It’s all here in the Friday Roundup.

Scrutiny Alerts and Updates


As highlighted here, in 2012 Net1 UEPS (a South African telecommunications company with shares traded on a U.S. exchange) disclosed that it had received information requests from the DOJ and SEC following South African media reports concerning civil litigation in that country by an unsuccessful bidder of a telecommunications contract.

As highlighted here, in 2013 Net1 announced: “[A] full bench of the South African Supreme Court of Appeal (“Appeal Court”) unanimously ruled that the tender process followed by the South African Social Security Agency (“SASSA”) in awarding a contract to Net1’s wholly owned subsidiary Cash Paymaster Services (Proprietary) Limited (“CPS”) was valid and legal.”

Recently, the company disclosed as follows.

“[We have] received a letter from the Foreign Corrupt Practices Act unit of the Division of Enforcement of the U.S. Securities and Exchange Commission (“SEC”), advising the Company as follows:

“We have concluded the investigation as to Net 1 UEPS Technologies, Inc. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Net 1 UEPS Technologies, Inc. We are providing this notice under the guidelines set out in the final paragraph of Securities Act Release No. 5310, which states in part that the notice “must in no way be construed that the party has been exonerated or that no action may ultimately result from the staff’s investigation” [...]

“The investigation commenced in December 2012 following the award of the SASSA national contract to us in January 2012,” said Dr. Serge Belamant, Chairman and CEO of Net1. “It commenced largely as a result of one of the losing bidders for the contract, Barclays Africa’s subsidiary AllPay, referring unsubstantiated South African press articles alleging irregularities in the tender process to the U.S. Department of Justice. We believe that AllPay was responsible for instigating those media allegations. This resulted in the DOJ and SEC initiating investigations into alleged FCPA and disclosures violations. This letter from the SEC is an important step in the Company clearing its name and is in line with the total absence of any findings of irregularities against Net1 by any South African Court or Regulator resulting from actions pursued by AllPay over the past three years,” he concluded.

The separate investigation into these matters initiated by Net1 itself with the South African Police’s Commercial Crimes unit is expected to be concluded shortly.

It is the Company’s understanding that the DOJ investigation remains open at this time.”


As noted here:

“Brazil’s state-run power company Centrais Eletricas Brasileiras SA has hired U.S. law firm Hogan Lovells to assess possible cases of corruption in some of the projects the company is involved in. Eletrobras, as the company is known, said in a filing to the Brazilian market regulator that the law firm will check whether there were practices which violated the U.S. Foreign Corrupt Practices Act. The projects to be scrutinized will be selected based on their financial relevance to the company and on their relationships with construction companies already being investigated by Brazilian authorities in the so-called Operation Car Wash, focused on state-run oil company Petrobras. Eletrobras also said that internal units assigned to investigate possible wrongdoings are progressing with evaluations and that it will inform investors of their findings as soon as they are available.”

SOCO International

The British oil and gas company with ADRs traded on a U.S. exchange was recently the subject of this New York Times article:

“[A]ccording to documents obtained by Global Witness, an advocacy group, SOCO appears to have paid tens of thousands of dollars to a Congolese Army officer who has been accused of leading a brutal campaign against those objecting to the company’s oil exploration in the nature reserve, Virunga National Park. Over the course of two weeks during the spring of 2014, according to the documents, the officer, Maj. Burimba Feruzi, received at least $42,250 in payments from a local bank account associated with SOCO. That is the equivalent of 30 years of salary for the army officer, according to Global Witness.”


Earlier this week Assistant Attorney General Leslie Caldwell spoke at the Annual Association of Certified Fraud Examiners Global Fraud Conference.  In pertinent part, she stated:

“The threats posed by international corruption cannot be overlooked.  Corruption renders countries less safe and less stable.  Corruption thwarts economic development, traps entire populations in poverty and undercuts credible justice systems.

International corruption also inhibits the ability of American companies—and others—to compete overseas on a level playing field.  Once bribery and corruption take hold, fair and competitive business practices are eliminated.

A timely example of how corruption can infect international business practices is the FIFA case recently charged by the U.S. Attorney’s Office of the Eastern District of New York.  In that case, nine FIFA officials and five corporate executives have been charged with various offenses, including racketeering conspiracy, in connection with a 24-year scheme to enrich themselves through the corruption of international soccer.  The Criminal Division’s Office of International Affairs has worked closely with the lead FIFA prosecutors to obtain evidence from numerous countries across the globe.  Swiss authorities have opened a separate, parallel probe into FIFA, relating to the selection of World Cup hosts.  We are sharing evidence and collaborating closely with governments around the world in connection with the ongoing investigation.  This worldwide effort is a profound illustration of the success that can be achieved through a truly global coalition.

In many ways, the FIFA case is very much like the Foreign Corrupt Practices Act (FCPA) cases the Criminal Division is regularly investigating and prosecuting to attack illegal conduct in the global marketplace.  These cases protect markets from corruption and the artificial influences of bribery, and ensure that American companies—indeed, all companies—can compete fairly and freely across international boundaries.

But make no mistake: fighting corruption is not some service we provide to the global community; this is a fight in which we have critical international allies.  Far from acting as the world’s corruption police, the United States is part of a formidable and growing coalition of international enforcement partners who together combat corruption around the world—at home as well as abroad—that threatens each of our nations.

It is not just the United States that is recognizing the importance of foreign bribery laws.  There is a growing chorus of countries voicing support for the fight against this type of corruption.  More and more countries are joining international bodies—like the Organisation for Economic Co-operation and Development—that provide uniform standards for the criminalization of bribery of foreign public officials in international business transactions.  This type of collaboration is critical if we are going to have a meaningful impact on international corruption.


At the same time that we work to combat corruption overseas, we are also increasing our efforts to ensure that American borders do not protect criminals or their assets.  In this regard, the Justice Department launched the Kleptocracy Asset Recovery Initiative in 2010.  The initiative relies on the use of U.S. civil forfeiture actions to recover the proceeds of foreign official corruption that pass through the United States.

More simply, it takes the monies and assets stolen by foreign despots and kleptocrats and returns them to the people harmed.  This initiative protects the integrity of the U.S. financial system from use by corrupt officials and denies those officials the ability to enjoy luxuries purchased in the United States at the expense of the populations they purport to serve.

In many ways, the Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are really two sides of the same anti-corruption coin.  We bring those who pay bribes to justice, no matter how rich and powerful they are.  But by itself, that is not enough.  We also attack corruption at its source, by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.”


The United States is not going to overcome the threat posed by global corruption and international organized crime by going it alone.  The Department of Justice is never going to serve as the world’s global police force.  But we can—and I believe we should—lead by example: by vigorously investigating and prosecuting international corruption and organized crime when it violates U.S. laws, and by sustaining and increasing our commitment to international collaboration in our nations’ shared struggle to safeguard our markets, our networks and our citizens.

Under my leadership, the Criminal Division will remain steadfastly committed to forging and growing our international partnerships as we fight the scourge of international corruption and organized crime.”


This recent Global Investigations Review article highlights comments made by Matthew Queler ( assistant chief of the DoJ’s FCPA unit) concerning the hiring of so-called princelings (a hiring practice that has resulted in FCPA scrutiny of a variety of companies in the financial services sector).  Queler’s comments reminded me of reading an article from the Onion in that he basically said its OK to hire princelings so long as it is legal and we at the DOJ determine what legal is.

For the Reading Stack

From Morrison & Foerster’s most recent Anti-Corruption Developments alert.

“DOJ Revokes Non-Prosecution Agreement (NPA). As we previously reported, Assistant Attorney General Leslie Caldwell publicly stated last month that DOJ would “not hesitate to tear up a DPA or NPA and file criminal charges” if a company breaches its agreement. AAG Caldwell’s statement was likely intended to foreshadow DOJ’s May 20, 2015 announcement that it had revoked an NPA with a corporate defendant, the first action of this kind since the revocation of a DPA with Aibel Group Limited in November 2008. In 2012, DOJ entered into an NPA with UBS AG in which DOJ declined to prosecute the bank for any crimes related to its submission of interest rates for LIBOR and other rate benchmarks. In return, the company was required to abide by several conditions during the pendency of the NPA, including the requirement that it “commit no United States crime whatsoever.” DOJ revoked the NPA after (according to the factual statement attached to the guilty plea) the company “engaged in deceptive FX trading and sales practices.” Although not an FCPA case, the revocation of the NPA in this case is relevant to FCPA enforcement because DOJ’s Fraud Section, which has exclusive authority to bring criminal FCPA cases, was involved in the decision. There are a number of reasons to find this action unfair to companies where, as here, the company implemented an enhanced compliance program, and once it found issues, it brought them forward voluntarily to the Antitrust Division (indeed, qualifying for immunity under the Leniency Program). In other words, the company undertook an enhanced compliance program as it promised to do and then it brought the matter forward, as DOJ has repeatedly encouraged companies to do, only to be punished for it. DOJ’s action, thus, presents a potential disincentive to well-meaning companies to report problems discovered as a product of the enhanced compliance program implemented in the wake of a DOJ resolution.”

Friday Roundup

Friday, April 24th, 2015

Roundup2Really no big deal, scrutiny alerts, across the pond, quotable, and for your viewing pleasure.  It’s all here in the Friday roundup.

Really No Big Deal

Lockheed’s request (which the SEC does not oppose) to be relieved of an SEC permanent injunction stemming from a 1976 (pre-FCPA) enforcement action has been receiving some recent ink (see here and here ”Lockheed Wants Out of 40-Year Old Disclosure Demand”).

I don’t really see this as a big deal given that Lockheed’s reporting obligation is not disappearing, it’s just now subject to a more specific law.

As stated in the unopposed motion:

“On April 13, 1976, the Commission filed a Complaint against Lockheed Martin for violations of Sections 10(b), 13(a), and 14(a) of the Securities Exchange Act of 1934 (and the Commission’s Rules promulgated thereunder) arising out of alleged payments to foreign government officials in the early 1970s. Simultaneous with the filing of the Commission’s Complaint, Lockheed Martin consented to the entry of a final judgment of permanent injunction (the “Final Judgment”) without admitting or denying the Commission’s non jurisdictional allegations.

The Final Judgment was entered by the Court that same day. The Final Judgment incorporated by reference a “Consent and Undertaking” entered into and filed by Lockheed Martin (the “Consent”), pursuant to which Lockheed Martin agreed to undertake several remedial actions. [...] Those actions included (a) the creation of an independent Special Committee to conduct an investigation into the matters alleged in the Commission’s Complaint; (b) the preparation and submission of a full report of the Special Committee’s investigation to the Court, the Commission, and Lockheed Martin’s Board of Directors; and (c) the adoption of a “Statement of Policies and Procedures” regarding “unlawful payments to government officials” (hereinafter “Anti-Corruption Policies and Procedures”).  In addition, Lockheed Martin agreed that it would file a Form 8-K with the Commission at least 10 days in advance of any future changes to its Anti-Corruption Policies and Procedures.  This prospective requirement—which Lockheed Martin has now complied with for nearly four decades—is the only aspect of the Final Judgment at issue in this motion.

In 2003, the Commission issued a final rule implementing Section 406 of the SarbanesOxley Act of 2002 (the “Sarbanes-Oxley Act”), which directed the Commission to devise and promulgate requirements for the disclosure of “codes of ethics” by public companies. The final rule defines a “code of ethics” as “written standards that are reasonably designed to deter wrongdoing and to promote,” among other things, “[c]ompliance with applicable governmental laws, rules and regulations.”  The Commission’s final rule requires public companies to disclose their codes of ethics to the public by either (i) filing them as an exhibit to an annual report (on Form 10-K), or (ii) posting them on the company’s website. The final rule also requires that certain types of changes to a company’s code of ethics must be disclosed within four business days of the change where the company elects to disclose its code of ethics on its website.

In light of the Commission’s final rule, Lockheed Martin—like many other public companies—has elected to make its code of ethics (as well as certain other corporate policies) available to the public by posting them on its corporate website. Among other things, Lockheed Martin’s “Code of Ethics and Business Conduct”—which applies to anyone “conducting business on behalf of Lockheed Martin” (including, but not limited to, its employees), and is made available in 16 different languages—requires strict compliance with all applicable anticorruption laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”). Lockheed Martin also makes its more detailed policy on “Compliance with the Anti-Corruption Laws” available on its website. By virtue of the Final Judgment, however, Lockheed Martin must continue to file a Form 8-K before making any change to its Anti-Corruption Policies and Procedures, notwithstanding its compliance with the Commission’s final rule.”

Scrutiny Alerts

Interpublic Group

The bribery and corruption news from Brazil continues to flow.  First it was Petrobras-related bribery, then it was various corporate interactions with tax authorities, and now it is advertising industry.

Advertising Age reports

“A former executive at Lowe & Partners’ Brazilian agency, Borghi/Lowe, was detained by police last Friday and a federal judge authorized the agency’s financial and other records to be searched … Ricardo Hoffman, Borghi/Lowe’s former VP and head of the agency’s office in the nation’s capital Brasilia, is said by Federal judge Sergio Moro [...] to have instructed third parties to make payments to then-Congressman Andre Vargas in connection with two government accounts handled by Borghi/Lowe.”

Lowe & Partners is a unit of The Interpublic Group of Companies, Inc., a New York based company.

See here for a 1989 FCPA enforcement action against an advertising agency and various executives.

SOCO International

Voice of America highlights allegations of bribery and corruption in the Democratic Republic of Congo (DRC) by London-based SOCO (a company with ADRs registered with the SEC).

According to the article:

“A member of DRC’s Parliament allegedly admitted to taking monthly payments from SOCO to lobby for the oil company and a high-level SOCO official and a company contractor allegedly admitted that the company paid rebels.


SOCO has “categorically denied” corruption allegations.

“The company operates in accordance with the [British] Bribery Act of 2010, and any allegation to the contrary is categorically denied,” SOCO said in a statement [...]. “Payments to rebel groups have never been, or will ever be, sanctioned by SOCO.”

Across the Pond highlights the 5th birthday of the U.K. Bribery Act (from the date passed, not the date the law went live – July 1, 2011) and asks – “the Bribery Act has moved from crawling to walking.  Anyone for cake?”  The post notes:

“The Bribery Act was born amid a huge public fanfare, plenty of hype and lots press coverage. Prosecutions would be imminent and UK PLC would be seriously disadvantaged on the global stage as a result of the ‘red tape’ of the Bribery Act. In 2015 it is hard to square the reality of what happened with what the naysayers forecast.  A handful of individual prosecutions under the Act but none of them are ‘Bribery Act’ cases in the true sense of the word. Put another way, the hype around the Bribery Act focussed on the potential enforcement of new UK anti-corruption laws against corporates UK and foreign who fell under the long arm jurisdiction of the Act. To date, there has been no corporate prosecution launched and no Deferred Prosecution Agreement disposing of a Bribery Act case. Five years on the UK economy is the strongest in Europe and predictions of the the demise of UK PLC turn out to have been premature. So.  What was all the fuss about?”

Precisely.  Here was my two cents on the date the Bribery Act went live in 2011.

“As with any new law, there is likely to be a learning phase for both the enforcement agencies and those subject to the law. That was certainly the case in the U.S. in the years following passage of the FCPA in 1977. Thus, it very well may be the case that there are no enforcement actions for some time (recognizing that it often takes a few years from beginning of an inquiry to resolution of an action). Thus the greatest immediate impact of the Bribery Act is sure to be the compliance ethic it inspires. I expect that the enforcement actions that may develop over time to focus on egregious instances of corporate conduct on which no reasonable minds would disagree. I do not get the sense, based on public comments of the Ministry of Justice and the Serious Fraud Office, that the envelope will be pushed too far in the early years of the Bribery Act.”


In this recent Q&A on the FCPA Compliance and Ethics Blog, James Koukios, a lawyer who recently left the DOJ’s FCPA Unit for private practice, states:

“Because the Fraud Section has the exclusive mandate for FCPA prosecutions, we were able to formulate—and execute—policy decisions in a manner that, I believe, had a significant impact on corporate compliance programs and the global anti-corruption movement.”

As I have long argued, special enforcement policies require special rules.  As to DOJ and SEC FCPA enforcement attorneys who have supervisory and discretionary positions and articulate government FCPA policies, it is in the public interest that such individuals be prohibited, upon leaving government service, from providing FCPA defense or compliance services in the private sector for a five-year period.

For Your Viewing Pleasure

Calling all Judge Jed Rakoff fans.  In this video of a recent speech, Judge Rakoff talks about corporate criminal liability and judicial review of NPAs and DPAs.


A good weekend to all.

Friday Roundup

Friday, April 17th, 2015

Roundup2In-depth, scrutiny alert, further Alstom-developments, quotable, and for the reading stack.  It’s all here in the Friday roundup.


In November 2014, Dutch-based SBM Offshore resolved an enforcement action in the Netherlands.  With a settlement amount of $240 million, the SBM Offshore enforcement action was one of the largest bribery-related enforcement actions of 2014 – regardless of country.

This recent article titled “The Cover-Up at Dutch Multinational SBM” in Vrij Nederland (a Dutch magazine) goes in-depth as to SBM’s scrutiny.  The article has largely escaped the attention of Western media and the FCPA-related blogosphere, but is worth the time to read.  The article begins as follows.

“The corruption scandal at Dutch multinational SBM Offshore, which in November reached a $240 million out-of-court settlement with the Dutch Public Prosecutor (OM), is much larger than thought, as testimony of a former employee now shows. The company has actively pursued a strategy of “containment” and has consistently misled the market. So why did the OM settle?”

Among other things, the article highlights the role of U.S. lawyers and law firms involved in the SBM representation.

Scrutiny Alert

In this recent article, the L.A. Times details, based on obtained documents, the expenditures involved in filming the movie Sahara. Among the expenditures, according to the article - ”local bribes” within the Kingdom of Morocco.  The article states:

“Courtesy payments,” “gratuities” and “local bribes” totaling $237,386 were passed out on locations in Morocco to expedite filming. A $40,688 payment to stop a river improvement project and $23,250 for “Political/Mayoral support” may have run afoul of U.S. law, experts say.


According to Account No. 3,600 of the “Sahara” budget, 16 “gratuity” or “courtesy” payments were made throughout Morocco. Six of the expenditures were “local bribes” in the amount of 65,000 dirham, or $7,559.

Experts in Hollywood accounting could not recall ever seeing a line item in a movie budget described as a bribe.


The final budget shows that “local bribes” were handed out in remote locations such as Ouirgane in the Atlas Mountains, Merzouga and Rissani. One payment was made to expedite the removal of palm trees from an old French fort called Ouled Zahra, said a person close to the production who requested anonymity.

Other items include $23,250 for “Political/Mayoral support” in Erfoud and $40,688 “to halt river improvement project” in Azemmour. The latter payment was made to delay construction of a government sewage system that would have interrupted filming.”

Further Alstom Developments

Yesterday, the U.K. Serious Fraud Office announced:

“Charges have been brought by the SFO against Alstom Network UK Ltd and an Alstom employee in phase three of its ongoing investigation.

Alstom Network UK Ltd, formerly called Alstom International Ltd, a UK subsidiary of Alstom, has been charged with a further two offences of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as two offences of conspiracy to corrupt contrary to section 1 of the Criminal Law Act 1977.

Michael John Anderson, 54, of Kenilworth in Warwickshire, who was working as a business development director for Alstom Transport SA in France, has been charged with the same offences.

The alleged offences are said to have taken place between 1 January 2006 and 18 October 2007 and concern the supply of trains to the Budapest Metro.

The first hearing in this case will take place at Westminster Magistrates’ Court on 12 May 2015.”


In this recent speech, DOJ Assistant Attorney General Leslie Caldwell stated:

“Through deferred prosecution agreements and non-prosecution agreements – or DPAs and NPAs – in cases against companies, we are frequently able to accomplish as much as, and sometimes even more than, we could from even a criminal conviction.  We can require remedial measures and improved compliance policies and practices.  We also can require companies to cooperate in ongoing investigations, including investigations of responsible individuals.  To ensure compliance with the terms of the agreements and to help facilitate companies getting back on the right track, we can impose monitors and require periodic reporting to courts that oversee the agreements for their terms.

Some of these outcomes may resemble remedies that can be imposed by regulators. But these agreements have several features that cannot be achieved by regulatory or civil resolutions.

Criminal Division resolutions require that an entity admit to its misconduct.  Commerzbank, for example, admitted responsibility and agreed to a detailed statement of facts that was filed with the court.  Whereas some regulators permit “no admit, no deny” resolutions – for legitimate reasons of their own – we require that individuals and entities acknowledge their criminal culpability if they are entering into a NPA, DPA or pleading guilty.

Where we enter into DPAs, a criminal information is filed with the court and prosecution of the information is deferred for the time of the agreement.  Where a company fails to live up to the terms of its agreement, an information is already filed, and we can tear up the agreement and prosecute based on the admitted statement of facts.  That’s a powerful incentive to live up to the terms of the agreements.

When we suspect or find non-compliance with the terms of DPAs and NPAs, we have other tools at our disposal, too.  We can extend the term of the agreements and the term of any monitors, while we investigate allegations of a breach, including allegations of new criminal conduct.  Where a breach has occurred, we can impose an additional monetary penalty or additional compliance or remedial measures.  And let me be clear: the Criminal Division will not hesitate to tear up a DPA or NPA and file criminal charges, where such action is appropriate and proportional to the breach.

Obviously, not every breach of a DPA warrants the same penalty.  We are committed to pursuing an appropriate remedy in each case, and we will calibrate the penalty we pursue to fit the nature of the violation and the corporation’s history and culture.  And we will do so transparently, with an explanation of what factors led to the resolution in each case.


[C]riminal prosecution is the best manner in which to punish culpable individuals.  And the seriousness of potential or actual punishment for felony criminal convictions, including incarceration for individuals, and the stigma and reputational harm associated with criminal charges or convictions, serve as powerful deterrents.”

For the Reading Stack

This Wall Street Journal Risk & Compliance post suggests that the ongoing corruption investigations in Brazil are becoming full-employment events for FCPA Inc.  According to the article:

“Multinationals with operations in Brazil are making frightened calls to their lawyers, as the country’s spreading corruption scandal reaches more companies.


Attorneys say companies with operations in Brazil are scrambling to assess whether they could get swept up in the probe. “They are very worried,” said Ruti Smithline, an anti-bribery specialist at Morrison & Foerster LLP. “The investigation is so widespread. If you have business in Brazil, the likelihood that this is going to touch you in some way is very high.”

Companies are racing to discover questionable activities before authorities in Brazil do. “They are asking: ‘Is our house clean? If authorities look at these relationships what are they going to find?’” Ms. Smithline said.”

The WSJ post asserts:

“[Brazil's  new anti-corruption law, the Clean Companies Act] holds companies to even higher standards and stricter liability than the U.S. Foreign Corrupt Practices Act. For example, unlike the FCPA, under the Brazilian law a company can be prosecuted for corruption even if didn’t realize it was paying a bribe and had a great compliance program in place.”

This is a most off-target statement as Brazil law does not even provide for corporate criminal liability like the FCPA.  Moreover, business organizations are often the subject of FCPA enforcement actions even though the company had in place pre-existing compliance policies and procedures.


Miller & Chevalier’s FCPA Spring Review 2015 is here.


A good weekend to all.

“Without Law or Limits: The Continued Growth Of The Shadow Regulatory State”

Thursday, April 16th, 2015

ShadowJames Copeland and others at the Manhattan Institute have written some good pieces about the DOJ’s use of non-prosecution and deferred prosecution agreements.

See here for the 2012 post discussing “The Shadow Regulatory State:  The Rise of Deferred Prosecution Agreements.”

See here for the 2014 post discussing “The Shadow Lengthens:  The Continuing Threat of Regulation by Prosecution.”

If you are interested in NPAs and DPAs (and you should be if you follow the FCPA given that since 2010 approximately 85% of corporate DOJ enforcement actions have involved either an NPA or DPA), you should check out Copeland’s latest titled “Without Law or Limits: The Continued Growth of the Shadow Regulatory State.

The introduction states:

This report focuses on DPAs and NPAs reached between the U.S. government and businesses or individuals in 2014. [...]

Through specific case studies, this report explores three key issues that arise under the shadow regulatory state:

  1. Enforcement efforts can undermine compliance. As shown through a plea agreement, a DPA, an NPA, and a cease-and-desist settlement entered into between the U.S. government and Hewlett-Packard [see prior posts here and here] and its foreign subsidiaries, federal prosecutors often punish companies notwithstanding extensive compliance programs, even when the companies self-report offenses and even when “rogue” employees go to extraordinary lengths to hide misconduct from their employers. Such a “strict liability” enforcement strategy may deter companies from developing effective compliance regimes.
  2. The DPA-NPA process lacks definite terms and judicial oversight. As shown through the federal government’s decision to extend a two-year DPA with Standard Chartered Bank for an additional three-year term, without any proffered evidence of additional wrongdoing, federal prosecutors’ authority in the DPA-NPA process is supreme. These agreements typically grant prosecutors the sole authority to determine whether an agreement has been breached. Indeed, the Department of Justice argues that federal judges have no authority over DPAs, beyond ensuring that such agreements comply with the terms of the Speedy Trial Act. [For prior posts examining this issue, see here and here].
  3. The DPA-NPA process is ill-suited for application to individuals. One concern about the increased use of DPAs and NPAs by the federal government is that they give prosecutors broad powers over businesses, notwithstanding that, more often than not, no individual is ever prosecuted for any underlying offense alleged in the agreement. [For prior post containing FCPA-specifics on this issue, see here and here]. The recent decision of the Securities and Exchange Commission to apply DPAs and NPAs to individuals—acquiring significant authority over people’s lives and retaining the ability to prosecute, essentially at prosecutors’ discretion—is a troubling new application of this power. The NPA reached with an unnamed individual in a 2014 insider-trading investigation exemplifies these concerns, as the alleged misconduct itself most likely does not constitute insider trading under current law.

Notwithstanding the lack of judicial oversight in the shadow regulatory state, two judges asserted new authority over this process in 2014—continuing a trend observed in 2013. Ultimately, however, reforming the shadow regulatory state requires legislative action. Part IV of this report discusses one proposed solution, the Accountability in Deferred Prosecution Act, sponsored by U.S. Representative Bill Pascrell, Jr. (D-N.J.). Although this proposed legislation does not go far enough to address some of the serious problems with DPAs and NPAs, the legislation would add substantial clarity, transparency, and oversight, as compared with current practice, and is a great starting point for much-needed reform.”

Numerous posts have highlighted the problems of NPAs and DPAs in the FCPA context. (See here for example.  For a more comprehensive analysis see “The Facade of FCPA Enforcement“).

My long-standing, two-fold FCPA reform proposal is to amend the FCPA to include compliance defense and couple this with abolishing NPA and DPAs.  (Among other prior posts, see here).

Should this occur, the resulting enforcement landscape would look as follows.

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 defense.  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 two-fold FCPA reform proposal 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. (See here for the prior post).

In Rejecting A DPA, Judge Leon Refuses To Be A Rubber Stamp

Tuesday, February 10th, 2015

Rubber StampNon-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) are the predominate way in which the DOJ resolves Foreign Corrupt Practices Act enforcement actions against business organizations.  Indeed, as highlighted in this prior post, since 2010 86% of corporate DOJ enforcement actions have involved either an NPA or DPA.

NPAs and DPAs of course are used in other areas as well – which makes this recent opinion by U.S. District Court Judge Richard Leon (D.D.C.) of interest.  The action, U.S. v. Fokker Services, involved criminal charges against Fokker to unlawfully export U.S. origin goods and Services to Iran, Sudan, and Burma.  In resolving the case, the DOJ and Fokker agreed to an 18 month DPA in which the company agreed to forfeit $10.5 million and to pay an additional $10.5 million in a parallel civil settlement.

No so fast, Judge Leon said in rejecting the DPA. The analysis section of Judge Leon’s opinion states, in pertinent part, as follows (internal citations omitted).

“Both of the parties argue, not surprisingly, that the Court’s role is extremely limited in these circumstances.  They essentially request the Court to serve as a rubber stamp [...].  Unfortunately for the parties, the Court’s role is not quite so restricted.


“One of the purposes of the Court’s supervisory powers, of course, is to protect the integrity of the judicial process.”


[T]he government has charged Fokker Services with criminal activity.  And it does not propose to dismiss the case at this point; rather, under the proposed resolution, this criminal case would remain on this Court’s docket for the duration of the agreement’s term.

The parties are, in essence, requesting the Court to lend its judicial imprimatur to their DPA.  In effect, the Court itself would ‘become an instrument of law enforcement.  The parties also seek to retain the possibility of using the full range of the Court’s power in the future should Fokker Services fail to comply with the agreed upon terms.  To put it bluntly, the Court is thus being asked to serve as the leverage over the head of the company.

When, as here, the mechanism chosen by the parties to resolve charged criminal activity requires Court approval, it is the Court’s duty to consider carefully whether that approval should be given.


I do not undertake this review lightly.  I am well aware, and agree completely, that our supervisory powers are to exercised ‘sparingly, and I fully recognize that this is not a typical case for the use of such powers.  The defendant has signed onto the DPA and is not seeking redress for an impropriety it has identified.  But the Court must consider the public as well as the defendant.  After all, the integrity of judicial proceedings would be compromised by giving the Court’s stamp of approval to either overly-lenient prosecutorial action, or overly-zealous prosecutorial conduct.”

After reviewing various specifics of the Fokker action and resolution (including by noting that “under the DPA no individuals are being prosecuted for their conduct at issue here”), Judge Leon stated:

“While I do not discount Fokker Services’ cooperation and voluntary disclosure or, for that matter, its precarious financial situation, after looking at the DPA in its totality, I cannot help but conclude that the DPA presented here is grossly disproportionate to the gravity of Fokker Services’ conduct …  In my judgment, it would undermine the public’s confidence in the administration of justice and promote disrespect for the law for it to see a defendant prosecuted so anemically for engaging in such egregious conduct for such a sustained period of time and for the benefit of one of our country’s worst enemies.  [...]  As such, the Court concludes that this agreement does not constitute an appropriate exercise of prosecutorial discretion and I cannot approve it in its current form.”

As referenced in Judge Leon’s opinion, his analysis was very similar to that of Judge John Gleeson (E.D.N.Y) who faced as similar issue in U.S. v. HSBC Bank (see here for the July 2013 post in which Judge Gleeson ultimately approved the DPA in that case).

However, Judge Leon’s opinion contains the following concerning statement similar to Judge Gleeson’s prior ruling.

“The Government, of course, has the clear authority not to prosecute a case.  Indeed, this Court would have no role here if the Government has chosen not to charge Fokker Services with any criminal conduct – even if such a decision was the result of a non-prosecution agreement.”

Such an observation elevates form over substance and gives the DOJ a green light – indeed a further incentive – to use NPAs to resolve alleged instances of corporate criminal liability and thereby bypass the judicial system altogether and insulate its enforcement theories from judicial scrutiny.

At the very least, Judge Leon’s recent order, along with Judge Gleeson’s 2013 order, has started an important legal and policy conversation as to the judiciary’s role in the alternate reality that the DOJ has created and championed through its use of alternative resolution vehicles.

Use of alternative resolution vehicles to resolve alleged corporate criminal liability in the FCPA context presents two distinct, yet equally problematic, legal and public policy issues.

The first is that such vehicles, because they do not result in any actual charges filed against a company – and thus do not require the company to plead guilty to any charges – allow egregious instances of corporate conduct to be resolved too lightly without adequate sanctions and without achieving maximum deterrence.

The second is that such vehicles, because of the same factors discussed above, nudge companies to agree to the vehicles for reasons of risk-aversion and efficiency and not necessarily because the conduct at issue actually violates the FCPA.

While the two instances of judicial scrutiny of DPAs have focused on the first dynamic rather than the second, Judge Leon did nevertheless state:

“[I]he integrity of judicial proceedings would be compromised by giving the Court’s stamp of approval to either overly-lenient prosecutorial action, or overly-zealous prosecutorial conduct.”