A post earlier this week (here) noted that since 2008, the DOJ has criminally charged 64 individuals with FCPA offenses. 60% of the individuals charged have been in just three cases and 78% of the individuals charged by the DOJ since 2008 have been in just six cases. Considering that there has been 42 “core” corporate DOJ FCPA enforcement actions (NPAs, DPAs, Pleas, or Convictions) since 2008, this was a rather remarkable statistic. The previous post also noted that of the 42 “core” corporate DOJ FCPA enforcement actions, 30 (or 71%) have not (at least yet) resulted in any DOJ charges against company employees. I noted that during this era of the FCPA’s resurgence, the DOJ has consistently stated that prosecution of individuals is a “cornerstone” of its FCPA enforcement strategy. Yet, the numbers paint a different picture – at least in certain enforcement actions.
Yesterday’s post (here) further crunched the numbers on DOJ prosecutions of individuals and exposed (what sure seems like) a public-private divide. Of the 64 individuals charged since 2008, 50 of the 64 individuals charged (78%) were employees or otherwise affiliated with private business entities. This was a striking statistic given that 37 of the 42 ”core” corporate DOJ FCPA enforcement actions since 2008 (88%) were against publicly traded corporations.
I concluded yesterday’s post by asking whether FCPA enforcement has resulted in two tiers of justice and/or whether other factors are at play? I do believe FCPA enforcement has resulted in two tiers of justice (see here for a prior post), but I also believe that other factors are at play as well.
In connection with my testimony at the November 2010 Senate FCPA hearing, I submitted a written statement (here) in which I observed that a possible reason for the absence of individual FCPA criminal charges in many corporate enforcement actions “may have more to do with the quality of the corporate enforcement action than any other factor.” I noted that given the prevalence of non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) in the FCPA context, and the ease in which DOJ offers these alternative resolution vehicles to companies subject to an FCPA inquiry, companies often agree to enter into such resolution vehicles regardless of the DOJ’s legal theories or the existence of valid and legitimate defenses. In many cases, it is easier, more cost efficient, and more certain for a company to do so than it is to be criminally indicted and mount a valid legal defense – even if the DOJ’s theory of prosecution is questionable. This dynamic contributes to what I have called the “facade of FCPA enforcement” (see here). Individuals, on the other hand, face a deprivation of personal liberty, and are more likely to force the DOJ to satisfy its high burden of proof as to all FCPA elements.
So the question is raised – what impact do NPAs or DPAs have on individual FCPA criminal prosecutions? The below numbers suggest a significant impact.
According to my analysis, since alternative resolution vehicles were first used in the FCPA context (December 2004 – an NPA as to InVison Technologies), there have been 61 “core” corporate DOJ FCPA enforcement actions. 47 of the 61 ”core” corporate DOJ FCPA enforcement actions (77%) have been resolved via an NPA (19 instances) or a DPA (28 instances). In these 47 “core” corporate DOJ FCPA enforcement actions, only 7 enforcement actions (15%) have resulted in any individual FCPA criminal charges against company employees.
In other words, when the DOJ resolves an FCPA enforcement action via a NPA or DPA, there is only a 15% likelihood that individual criminal charges will be filed against any company employee or those affiliated with the company. The 7 “core” corporate DOJ FCPA enforcement actions resolved through an NPA or DPA that have resulted in individual criminal charges are as follows:
Armor Holdings (NPA) / Richard Bistrong;
Alliance One International (NPA) / Bobby Elkin;
Alcatel-Lucent (DPA) / Christian Sapsizian and Edgar Acosta;
ABB Ltd. (DPA) / John Joseph O’Shea and Fernando Maya Basurto;
Omega Advisors (NPA) / Clayton Lewis;
Schnitzer Steel (DPA) / Si Chan Wooh; and
Willsbro Group (DPA) / Jim Bob Brown, James Tillery, Paul Novak and Jason Steph.
In contrast, in the 14 “core” corporate DOJ FCPA enforcement actions resolved (since invention of NPAs/DPAs in the FCPA context) through actual, prosecuted criminal charges, 10 of these actions (71%) resulted in related prosecution of company employees or those affiliated with the company. The 4 DOJ FCPA enforcement actions that resulted in actual, prosecuted criminal charges, yet no individual prosecutions of company employees are Siemens, BAE (recognizing that this was an FCPA-related prosecution), DPC Tianjin, and ABB Vetco Gray. In short, when a corporate entity is actually prosecuted for FCPA violations, there is a 71% chance that a company employee will also be prosecuted.
In summary, when the DOJ resolves an FCPA enforcement action via a NPA or DPA, there is only a 15% likelihood that individual criminal charges will be filed against any company employee or those affiliated with the company. On the other hand, when the DOJ files actual, prosecuted criminal charges against a company, there is a 71% chance that a company employee will also be prosecuted.
So are there other factors at play? Yes, there are and I believe a contributing factor to the lack of individual prosecutions in many corporate DOJ FCPA enforcement actions has to do with the quality of the corporate enforcement action in the first place. As Reynolds Holding recently stated in a Reuters BreakingViews column (here) the current era of enforcement and the dynamics at play “encourage prosecutors to pursue what they can punish, not what the law prohibits.”
Perhaps the question should not be why do so few DOJ corporate FCPA enforcement actions result in individual prosecutions, but rather do many DOJ corporate FCPA enforcement actions actually evidence proof beyond a reasonable doubt that FCPA violations occurred?