In Southern Union Co. v. U.S., the Supreme Court, in a decision authored by Justice Sotomayor, recently held that the rule of Apprendi (that the Sixth Amendment reserves to juries the determination of any fact, other than the fact of a prior conviction, that increases a criminal defendant’s maximum potential sentence) applies to the imposition of criminal fines.
In so holding, the court saw no principled basis under Apprendi for treating criminal fines differently because Apprendi’s ”core concern” is to reserve to the jury “the determination of facts that warrant punishment for a specific statutory offense.” The court observed that criminal fines are frequently imposed “especially upon organizational defendants who cannot be imprisoned” and “the amount of a fine, like the maximum term of imprisonment or eligibility for the death penalty, is often calculated by reference to particular facts.” Thus, the Court reasoned, “requiring juries to find beyond a reasonable doubt facts that determine the fine’s maximum amount is necessary to implement Apprendi’s ’animating principle’ – the ‘preservation of the jury’s historic role as a bulwark between the State and the accused at the trial for an alleged offense.”
The government objected to Apprendi being extended to criminal fines because fines are “less onerous than incarceration and the death sentence.” However, Justice Sotomayor noted that “the federal twice-the-gain-or-loss statute, in particular, see 18 U. S. C. §3571(d), has been used to obtain substantial judgments against organizational defendants” and she specifically cited, among other cases, the approximate $450 million fine against Siemens for violations of the FCPA.
What does the Southern Union decision mean in terms of FCPA criminal fine amounts?
For starters dig deep into most FCPA fine calculations and you will see reference to “facts” which increase the fine amount under the Sentencing Guidelines. For instance, in the recent Data Systems & Solutions DPA (here) the offense level was increased because of “multiple bribes” and because the “value of the benefit received was more than $2.5 million.” In addition, the company’s culpability score was increased because “an individual within high-level personnel of the organization participated in, condoned, or was willfully ignorant of the offense.”
Under the ruling in Southern Union any fact (such as those mentioned above in connection with Data Systems & Solutions) that substantially increases a criminal defendant’s fine amount must be provable to a jury beyond a reasonable doubt.
This is all great in theory, but will it even matter? It is rare for anything connected to a corporate FCPA enforcement action to be provable to a jury beyond a reasonable doubt. Indeed, in the FCPA’s 35 year history, only two corporate defendants are believed to have put the DOJ to its high burden of proof at trial. (The DOJ’s ultimate record in those cases is 0-2).
Professor Ellen Podgor over at the White Collar Crime Prof Blog asked here as follows. “The real question here is whether this decision will matter. As noted by the dissent, 97% of federal convictions result from guilty plea. But what went unnoticed is that very few companies – the object of many fines – go to trial. Often these cases are resolved with non-prosecution and deferred prosecution agreements. So will it really make any difference that juries can determine these fines, when the corporation in a post Arthur Andersen LLP world will seldom be going to trial.”
Yet, Southern Union may indeed have an impact in the negotiation stage of resolving corporate criminal enforcement actions, including in the FCPA context.
This Vinson & Elkins publication states as follows. “It is frequently the case that the government — with significant bargaining power over corporate entities seeking to avoid criminal convictions — takes overly aggressive positions concerning the amount of gain or loss that supposedly resulted from activity under investigation. Since gain or loss can be difficult to prove specifically, the new decision could alter the nature of negotiations with the U.S. Department of Justice in both contested matters and negotiated resolutions.”
This Perkins Coie update states as follows. “Southern Union has the potential to become a significant authority for any defendant facing government enforcement actions. Although Southern Union arose in the context of a criminal prosecution for violation of [the Resource Conservation and Recovery Act], its holding will apply to all criminal actions arising in a variety of contexts with heavy governmental regulation, including other environmental statutes, antitrust, healthcare, food and drug, labor, securities, and other white collar offenses.”
Foley & Lardner noted in this piece as follows. “The Southern Union case will no doubt add another level to the plea negotiation process by forcing the government, when seeking stiff criminal monetary penalties against corporate defendants, to establish the full amount of loss or financial wrongdoing by a defendant in the early part of a prosecution. This is typically a difficult and time-consuming undertaking, and the Court’s decision will likely restrict or hinder the leverage of prosecutors to obtain higher criminal penalties, at least in the plea bargain process.”
Whatever its ultimate impact, Southern Union’s holding should be included in the talking points memo of company counsel when resolving corporate enforcement actions with the DOJ, including in the FCPA context.