Recently on his Forbes column (here), Howard Sklar paused to rethink some of his FCPA positions based on my recent post (here) and this recent article by former Attorney General Michael Mukasey.  On the theory (perhaps presumed) that others derive value from FCPA Commentariat (that’s Howard’s term, not mine) debates, this post discusses Howard’s hits and misses and encourages him to keep rethinking.

I agree with Howard (in fact, I know from my prior FCPA practice experience) that DPAs and NPAs seldom tell the complete story.  This truism seems to give Howard comfort that perhaps all DPA and NPAs represent actual, provable FCPA violations notwithstanding the conduct actually set forth in the resolution documents.  However, this truism causes me discomfort because, based on my experience, for every aggravating fact left out of the resolution documents there are also frequently two mitigating facts left out of the resolution documents.

Howard is spot on though when he says that “the DOJ must realize that the information they disclose forms the enforcement record they have to defend.”  Criticism as to the actual facts and conduct the DOJ sets forth in an NPA or DPA - and the resulting analysis as to the ultimate issue of whether the conduct actually violates the FCPA – are problems entirely of the DOJ’s own making.


Because the DOJ encourages those subject to the FCPA to look to these documents as evidence of conduct violating the FCPA and for guidance as to enforcement theories.  In “The Facade of FCPA Enforcement” (here at pgs. 998-1000) I called this the “absurdity of FCPA caselaw.”  For instance in this GAO report (Appendix III), the DOJ explained, in its view, why NPAs/DPAs ”are beneficial” including that “DPAs and NPAs benefit the public and industries by providing guidance on what constitutes improper conduct.”  Furthermore, in the aftermath of the November 2010 Senate FCPA hearing, the DOJ was asked various ways about FCPA uncertainty and lack of guidance. The DOJ responded (see here) that it “provides clear guidance to companies with respect to FCPA enforcement through a variety of means” including “charging documents, plea agreements, deferred prosecution agreements and non-prosecution agreements, press releases, and relevant pleadings and orders.”  The DOJ stated that “these documents are lengthy and detailed.”  You might want to re-read the Lufthansa Technik NPA (here) at this point – the last words that should enter your brain are lengthy and detailed.

Howard next admits to his “true bias” (as a former SEC attorney) and is confident in his ability to size up people and is confident that prosecutors would never bring bad cases even if the “asynchronous information can make it seem that way.”  I’ll let Judge Richard Leon and Judge Alex Kozinski respond to that issue.  When granting the DOJ’s motion to dismiss the Africa Sting cases, Judge Leon spoke of how prosecutors can become ”so convinced of the righteousness of their position.” (See here for the prior post).  As noted in this recent post, the Ninth Circuit recently addressed the DOJ’s “trust us” position and stated as follows.  “The government assures us that, whatever the scope of the CFAA, it won’t prosecute minor violations.  But we shouldn’t have to live at the mercy of our local prosecutor. [...] And it’s not clear we can trust the government when a tempting target comes along.”

Howard next asserts that despite the temptation DOJ prosecutors may have to resolve cases via an NPA vs. doing nothing, he “suspects that is less of a problem that you’d think.”  Credible evidence suggests otherwise.  See e.g., Peter Spivak & Sujit Raman, Regulating the ‘New Regulators’:   Current Trends in Deferred Prosecution Agreements, 45 Am. Crim. L. Rev. 159, 176 (2008) (“we heard from colleagues in the defense bar of prosecutors who, in their haste to compel the company’s cooperation in pursuit of individuals, have pressed the entity to enter into a diversion agreement before any particular’s guilty could definitely be established).  Even Mark Mendelsohn (former DOJ FCPA unit chief) has indicated that a ”danger” with NPAs and DPAs ”is that it is tempting” for the DOJ “to seek to resolve cases through DPAs or NPAs that don‟t actually constitute violations of the law.”  See Corporate Crime Reporter, Sept. 13, 2010.

The clincher, in Howard’s mind, that NPAs and DPAs have never been used to resolve cases that do not actually represent FCPA violations seems to be this – he has not heard any complaint “from any practitioners, on or off the record, in public or in private” of this being the case.

There is a very simple explanation for this.  These resolution vehicles muzzle the companies and their defense counsel.  The following template clause (from the recent BizJet International DPA – here) is common.

Public Statements by BizJet

BizJet expressly agrees that it shall not, through present or future attorneys, officers, directors, employees, agents or any other person authorized to speak for BizJet make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by BizJet set forth above or the facts described in the attached Statement of Facts.  Any such contradictory statement shall, subject to cure rights of BizJet described below, constitute a breach of this Agreement and BizJet thereafter shall be subject to prosecution as set forth in [this] Agreement.  The decision whether any public statement by any such person contradicting a fact contained in the Statement of Facts will be imputed to BizJet for the purpose of determining whether they have breached this Agreement shall be the sole discretion of the Department.

No FCPA lawyer representing a company party to an FCPA NPA or DPA is going to risk breaching the agreement just to make a splash on the FCPA conference circuit.

Another template clause in such resolution vehicles (as in the recent BizJet DPA) is the requirement that the company “shall first consult” with the DOJ to see if it has any objection before the company issues a press release or holds a press conference in connection with the resolution.

As noted in this prior post, when the U.K. Serious Fraud Office inserted such language into its Innospec settlement, it received a lashing from Lord Justice Thomas who stated as follows.  “It would be inconceivable for a prosecutor to approve a press statement to be made by a person convicted of burglary or rape; companies who are guilty of corruption should be treated no differently to others who commit serious crimes.”

Finally, the least persuasive of Howard’s points in favor of NPAs and DPAs is that without such agreements “our lowered enforcement would reflect in international efforts as well” and that Russia ”would certainly not take its responsibilities seriously – if it saw reduced enforcement in the U.S.”

I take Howard’s point and on this issue I largely blame civil society and monitoring organizations (who do good work in other areas) but put out misleading report cards when it comes to enforcement statistics.  For instance, as noted in this prior post concerning the OECD’s Phase 3 Review of the U.S., one of the many ironies of the review was that while loudly praising the U.S. for its “high level” of enforcement, the Report quietly criticized and questioned many of the policies and enforcement theories which yield the “high level” of enforcement.  More to the point, the OECD noted ”one of the reasons for the impressive FCPA enforcement record in the U.S.” is the use of NPAs and DPAs,  yet the report noted that these agreements are subject to little or no judicial scrutiny.

It is plainly obvious (as noted in this prior post) that a reason (there are other reasons as well noted in the post) for the divergent level of enforcement in OECD countries is due to the fact that, to the best of my knowledge, only the U.S. has three options in “prosecuting” such cases:  charge, don’t charge, or use an NPAs or DPA.  Given the, what at times seems like a new “global arms race” to see which country can move up the enforcement score cards, other countries – most notably the U.K. – want these agreement as well.  However, this is all the more reason to get things right in this country least our “facade of FCPA enforcement” be further exported.  Quality should matter more than quantity when it comes to criminal law enforcement.

Keep rethinking Howard.