Before the Department of Justice had a specific Foreign Corrupt Practices Act Unit, it had the Multinational Fraud Branch. Joseph Covington (here - currently with Jenner & Block) joined the Branch in 1977 and served as Chief of the Multinational Fraud Branch from 1982 to 1985. Recently, I contacted the former DOJ FCPA Chief and posed the following question regarding a potential FCPA compliance defense. Covington’s response is set forth below with his permission.
Do You Support Creation of an FCPA Compliance Defense?
“Based on my experience as Chief of the FCPA unit up to 1985 and in my 25 plus years of private practice, I support the concept of an adequate compliance program defense to FCPA liability for corporate defendants. Such a defense would recognize and promote good corporate citizenship, and do nothing for corrupt companies. And from my perspective as a former prosecutor in the field, enforcement of those who engage in corruption would likely be enhanced.
In my almost 40 years of experience, I have rarely seen American companies affirmatively offering bribes in the first instance; rather they are typically reacting to a world not of their making. It is a fact that corruption in government remains endemic worldwide and that is not likely to change. As the world shrinks companies who seek to do the right thing can’t help but confront corrupt officials – as customers, regulators, and adjudicators – and confront them often.
The problem with current laws and enforcement policies is that they do not adequately reward companies for sincere (and expensive) efforts to stop the unwanted misbehavior of their employees. Indeed, under US law, the compliant corporation, try as they might, remains vicariously liable for the acts of any employee. With no possibility of avoiding liability, companies find themselves facing substantial criminal fines. Under current DOJ practice, the most that such a company can expect is a discount – some would say only a modest discount – from the criminal penalty as calculated under the federal Sentencing Guidelines. With the risks attendant to taking a case to trial, with no real ability to contest liability, too much power and discretion ends up in the hands of the government.
In this context, providing an adequate compliance program defense to FCPA liability would be manifestly reasonable. Companies that seek only to be good corporate citizens would have an opportunity to demonstrate not only to DOJ, but also to a federal district court, that they had in fact done everything reasonably required, and that despite that fact an errant employee avoided company policy and violated the law. Affording this type of defense to corporate liability would recognize and reward strong compliance programs; provide a powerful incentive for companies to develop and enforce such programs; may encourage more companies to come forward with voluntary disclosures; and yet still enable prosecution of the culpable individuals. It is time to stop punishing our good corporate citizens and start going after the guilty-both corrupt corporate employees and corrupt foreign officials. ”