Larry Thompson (former DOJ Deputy Attorney General, former general counsel for PepsiCo, and currently a professor at the University of Georgia School of Law – see here) participated in last week’s “FCPA At Thirty-Five” symposium at The Ohio State University Moritz College of Law (see here and here for prior posts).
This post summarizes Thompson’s comments at the event regarding FCPA reform.
Thompson began his comments by noting his experience with the FCPA from various vantage points: as a lawyer in private practice representing business organizations in FCPA enforcement actions; as the DOJ’s Deputy Attorney General; as the general counsel of a large multinational; and currently as an academic. Thompson stated that there are things that can be done to make the FCPA more effective and he focused his remarks on M&A issues and an FCPA compliance defense.
As to M&A issues, Thompson noted that it is hard for U.S. companies to pursue legitimate business opportunities abroad when the “Sword of Damocles” hangs over their head because of potential legal liability for the pre-acquisition conduct by the target company. He called the DOJ’s Halliburton FCPA Opinion Release on M&A issues (see here) “too rigid” and “impractical.” The end result, according to Thompson, is a limited ability by the acquiring company to conduct pre-acquisition due diligence and thus often missed business opportunities for companies. More broadly, Thompson suggested that the DOJ’s current approach to FCPA M&A liability is not good for shareholders and harms worldwide efforts to reduce corruption.
Thompson suggested that there should be a defined period – a safe harbor period – in which an acquiring company, post-closing, be allowed to conduct FCPA specific due diligence, report any adverse findings to the DOJ, and implement remedial measures – all without fear of prosecution. Thompson noted that such a system would go “a long way to instill values around the world to foster the rule of law and make anti-corruption campaigns more effective.” [Thompson’s call for an M&A safe harbor provision is similar to an FCPA reform proposal from another former DOJ Deputy Attorney General, George Terwilliger, see here and here for prior posts].
As to an FCPA compliance defense, Thompson began by noting that the U.S. Supreme Court has taken steps in recent years to undercut respondeat superior theories of liability. Thompson noted that this doctrine often ”undercuts a corporation’s ability to do the right thing.” Thompson criticized the DOJ for not adequately recognizing a company’s pre-existing compliance policies and procedures. In doing so, Thompson invoked the 2003 DOJ memo titled “Principles of Federal Prosecution of Business Organizations” bearing his name – the so-called Thompson Memo (see here) – and stated that when the memo was re-issued in 2008 (see here, the so-called Filip memo currently found in the U.S. Attorneys Manual) it retreated from prior practice and “diminished credit for effective compliance programs.” Thompson stated that it was “unfortunate that the DOJ has retreated.”
According to Thompson, most companies that learn of improper conduct within its ranks “want to do the right thing,” but are faced with “uncertainty” in making the voluntary disclosure decision because of the DOJ’s current enforcement policies concerning respondeat superior. Thompson again invoked reference to the “Sword of Damocles” and renewed his call (see here for Thompson’s comments in 2011) for an FCPA compliance defense. As noted in my forthcoming article, “Revisiting A Foreign Corrupt Practices Act Compliance Defense” (here), Thompson is part of a growing chorus of former DOJ officials who support a compliance defense.