Cooperation vs. capitulation, quotable, and for the reading stack. It’s all here in the Friday roundup.
Cooperation vs. Capitulation
A good read (here) from George Terwilliger (Morgan, Lewis & Bockius and a former Deputy Attorney General) regarding the difference between cooperation vs. capitulation in DOJ inquiries. All sound advice and worth noting.
However, when the DOJ publicly states that a foreign company declined “to cooperate with the DOJ based on jurisdictional arguments” – as it did in the JGC FCPA enforcement action – the message being sent is that indeed the DOJ expects FCPA counsel to roll over and play dead. (See here for the prior post).
When the DOJ publicly “warn[s] defendants facing charges under the foreign bribery law against contesting [the] definition [of foreign official]” – as it did in connection with the Carson enforcement action - the message being sent is to capitulate. (See here for the prior post).
Regarding JPMorgan’s recent $920 million to settle civil allegations brought by the SEC and other regulators in connection with a multibillion-dollar trading loss that’s come to be known as the London Whale case, the New York Times DealBook states:
“At first glance, it sounded like a lot of money and, frankly, it sounded as if the S.E.C. had a strong case and had exacted quite a settlement. But look closer and scrutinize the S.E.C.’s 15-page description of its findings. Then think about this: When the S.E.C. says that JPMorgan is ‘paying’ a record fine, where is the money actually coming from? The answer: shareholders. The same shareholders who were ostensibly the victims of the scandal that already cost them $6 billion. The victims, if you want to call them that, become victimized twice.”
The article then quotes Columbia University Law Professor John Coffee as follows.
“It is perversely inappropriate. You are adding injury to injury. All we’re doing is punishing the shareholders more,” said John C. Coffee Jr., a professor of securities law at Columbia Law School. “This is a case where the victims are the shareholders.”
If you’re wondering why the S.E.C. sought to settle with “the firm” — in truth, JPMorgan’s shareholders, who don’t have say in the matter — rather than bring cases against the individuals who were responsible for the admitted failures of “the firm,” Mr. Coffee has a skeptical, if not necessarily cynical, theory that bears repeating: “You could have tried to sue some individuals for negligence, but I don’t think those cases they would have easily won.”
Instead, he said, the S.E.C. pursued what he described as “the path of least resistance” by suing the firm itself.
“It is much easier for the S.E.C. to settle for very high penalties which are borne by the shareholders,” he said. “The S.E.C. often desperately needs a victory. This way you can get a victory that you can celebrate.”
But on the merits of the case, the settlement, Mr. Coffee said, begins to look a lot like bribery — to some degree, on both sides. Without a strong case against any individuals, the S.E.C. looks as if it held the firm for ransom. And on the other side, the firm’s senior management appears to have bribed the S.E.C., using shareholder money, not to bring cases against individuals.
“It’s a form of self-dealing,” Mr. Coffee said.”
See here for the upswing in white collar defense work among large Philadelphia firms. The article stated, “to promote its white-collar practice, [a firm] recently began showing a corporate training film to potential clients that depicts the travails of a multinational company whose share price crashed after employees were charged with bribery in a foreign jurisdiction. The takeaway: This is what can happen without good white-collar legal advice.”
For a better way to prosecute corporations, look overseas says Professors Brandon Garrett and David Zaring in the NY Times DealBook.
A good weekend to all.