May 10th, 2013

Friday Roundup

Enforcement agency speeches, “foreign official” delay, and for reading stack. It’s all here in the Friday roundup.

Enforcement Agency Speeches

This prior post detailed comments by Mary Jo White prior to becoming SEC Chairman.

Last week, White spoke before the Investment Company Institute on the general topic of the SEC’s role in an increasingly global financial and regulatory system. She stated as follows (see here) concerning the SEC’s enforcement of the FCPA.

“Of course, misrepresentations and other unlawful actions travel in both directions across borders, which is another reason why our partnership with our regulatory counterparts abroad is so important. Among the most prominent concerns in this regard is bribery by U.S. companies overseas, which not only undermines international markets and governments but also simultaneously undermines the reporting and disclosure integrity of our own markets. Thus, strong and fair enforcement of the Foreign Corrupt Practices Act, which forbids U.S. companies from bribing foreign officials, has been and will continue to be a priority for us. Our first objective is to help companies avoid FCPA violations by educating them. And so our staff along with our colleagues at the Department of Justice recently published a comprehensive Guide to the FCPA to give clear guidance and clear up some myths. Of course, the other side of education is deterrence. Deterrence can mean strong enforcement actions with tough disgorgement and penalties. But it can also mean the tangible benefits that come with cooperation – as demonstrated by the Non-Prosecution Agreement with Ralph Lauren Corporation we announced in April. In this particular case, the corporation’s Argentine subsidiary paid bribes to government and customs officials to improperly secure the importation of their products into the country. The bribes occurred during a period when the U.S. parent company lacked meaningful anti-corruption compliance and control mechanisms over its foreign subsidiary. The misconduct came to light as a result of the company’s efforts to improve internal controls and compliance. And the company immediately reported the problem to the SEC and provided exceptional assistance to our investigation. Successful FCPA cases also increasingly require assistance from foreign law enforcement authorities. That is why we recently partnered with the DOJ and FBI in conducting a foreign bribery training program that provided intensive training to 130 foreign investigators and prosecutors from 30 countries, many on which the SEC staff relies for mutual legal assistance in FCPA cases.”

Yesterday, Daniel Suleiman (DOJ Deputy Chief of Staff for the Criminal Division) spoke at the Minnesota Bar Association’s Annual International Business Law Institute. (See here). Suleiman offered “some views from the U.S. Department of Justice on the topic of anti-corruption enforcement” and “what the Justice Department is doing in the area of criminal enforcement to fight corruption at home and abroad.” He stated, in pertinent part, as follows.

“I think of our anti-corruption efforts as falling into three principal buckets: number one is criminal prosecution; number two is assisting foreign countries to build up their judicial, prosecutorial, and investigative institutions; and number three is the pursuit, through civil actions, of the proceeds of foreign official corruption. I will discuss each of these buckets in turn.

First and foremost, the Criminal Division is a litigating operation. We investigate and prosecute cases. Our corruption prosecutions are of two kinds: we prosecute corruption by domestic officials, and we prosecute foreign bribery offenses under the Foreign Corrupt Practices Act, or FCPA.”

[...]

“[W]e have an incredibly strong team of prosecutors who focus exclusively on enforcing the FCPA. Depending upon how familiar you are with FCPA enforcement, you may know that the Criminal Division is the entity in the United States with primary responsibility for criminal enforcement of the Act. It is Justice Department policy that no FCPA prosecution can be brought without authorization from the Criminal Division, which distinguishes FCPA prosecutions from most other kinds of federal criminal cases. The Securities and Exchange Commission, which is a few blocks up the street from us, has primary responsibility for the Act’s civil enforcement.”

“Foreign bribery enforcement has for a long time been an important aspect of U.S. policy. The FCPA was enacted roughly 35 years ago, around the same time that our Public Integrity Section was created to focus on public corruption prosecutions, and it was the first effort of any nation to specifically criminalize the act of bribing foreign officials. The statute was enacted in the wake of the Watergate scandal, but it took more than 20 years for the Act to become a strong enforcement tool. And, over the past several years, the Justice Department has substantially increased its enforcement of the Act.”

“One important aspect of our FCPA enforcement involves, of course, our corporate resolutions. We have collected billions of dollars in criminal fines and penalties to resolve FCPA investigations against companies doing business abroad, including BizJet International Sales and Support Inc., a Lufthansa subsidiary; Alcatel-Lucent; Johnson & Johnson; and many others.”

“But another, critically important aspect of our enforcement regime involves holding individuals responsible for FCPA offenses. There is no greater deterrent to corporate crime than the prospect of prison time. As many have recognized, if people don’t go to prison, then enforcement can come to be seen as merely the cost of doing business. In the past four years, the Criminal Division’s FCPA Unit has obtained over three dozen criminal convictions of individuals, including of people who have been sentenced to as many as 15 years in prison.”

“We are as active today in this area as we have ever been. In the past month alone, we have announced charges against several key defendants in ongoing, active FCPA investigations. In mid-April, in a case that we are prosecuting with the U.S. Attorney’s Office in Manhattan, we secured the arrest of a defendant in connection with an alleged bribery scheme to secure mining rights in the Republic of Guinea. In a separate case, which we are prosecuting with the U.S. Attorney’s Office in Connecticut, we also secured the arrest last month of a defendant in connection with an alleged bribery scheme to secure power contracts in Indonesia. And just two days ago, together with the U.S. Attorney’s Office in Manhattan, we announced charges against two broker-dealer employees and a senior Venezuelan banking official for engaging in a multi-million dollar bribery scheme.”

[...]

“Finally, I want to tell you about a relatively new Justice Department initiative. About three-and-a-half years ago, Attorney General Holder gave a speech in Qatar, at which he pledged to increase the United States’ commitment to recovering foreign corruption proceeds. Since that time, the Criminal Division has led the charge in developing what we refer to as the Kleptocracy Asset Recovery Initiative.”

“The initiative’s purpose is to identify the proceeds of foreign official corruption – in other words, the spoils – forfeit them through civil actions, and, to the extent possible, repatriate the forfeited funds for the benefit of the people harmed. In most criminal prosecutions, a court can order forfeiture, upon conviction, as part of the defendant’s sentence. Often, however, it may be impractical or impossible to bring a criminal prosecution against a particular person – because that person is immune from prosecution, for example, beyond our jurisdiction, or otherwise unavailable. In these circumstances, we have begun bringing civil forfeiture actions to recover the stolen property.”

“We have brought several Kleptocracy cases in the past couple of years, and forfeited millions of dollars in corrupt proceeds. The most high-profile of our Kleptocracy cases to date involves two civil actions we have brought against approximately $70 million in assets allegedly belonging to a government minister in Equatorial Guinea who is also the son of that country’s president. According to court papers, despite an official government salary of less than $100,000 per year, this minister amassed wealth of over $100 million. Among the items we are seeking to forfeit are nearly $2 million worth of Michael Jackson memorabilia (including the white glove), a Gulfstream G-V jet worth $38.5 million, and a $30 million house in Malibu. These are hard, and hard-fought, cases, but we believe strongly that foreign officials who amass wealth through corruption should not be permitted to use the United States as a haven for their ill-gotten gains.”

“Foreign Official” Delay

Oral argument in the “foreign official” challenge pending in the 11th Circuit – originally scheduled for later this month, has been postponed until the week of October 7th.

This is a historic appeal in that it will be the first instance in which a circuit court directly confronts the enforcement theory that employees of alleged state-owned or state-controlled entities are “foreign officials” under the FCPA (see here for a prior post, including embedded links).

Scrutiny Alerts

For more on Barclay’s scrutiny, on both sides of the Atlantic, see this recent article in Middle East Monitor concerning the bank’s relationship with the Abu Dhabi government, including Sheikh Mansour, the deputy prime minister of the United Arab Emirates.

Samuel Rubenfeld (Wall Street Journal Risk & Compliance Journal) has the latest (here) regarding BSG Resources Ltd. a Guernsey-based company in the news after Frederic Cilins, a French citizen associated with the company, was recently arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea. (See here for the prior post). As noted in the WSJ article, BSG recently released this detailed statement concerning its conduct in Guinea.

Reading Stack

Several articles of interest to pass along from last week’s Corporate Crime Reporter conference. This article details comments made by Denis McInerney (DOJ Criminal Division Deputy Assistant Attorney General) regarding non-prosecution and deferred prosecution agreements. This article details comments made by McInerney concerning my suggested two-step reform plan (see here for the prior post) and also details McInerney’s response to my question concerning the definition of a declination. Articles here and here concern corporate monitors.

*****

Over the years, Bloomberg’s David Glovin has written some excellent articles concerning Viktor Kozney, Frederic Bourke, et al. With Bourke soon to report to prison, Glovin pens another great article here.

*****

This prior post discussed the NY Times recent “With Bags of Cash, CIA Seeks Influence in Afghanistan” story and how the story put our stark double standards in the headlines once again. More recently, the NY Times reports (here) as follows. ”[Afghan President] Karzai said he had called a meeting [...] with the CIA’s Kabul station chief. “I told him because of all these rumors in the media, please do not cut all this money, because we really need it,” he said. “We want to continue this sort of assistance, and he promised that they are not going to cut this money.” For more on the situation, including the views of others, see here from Alison Frankel’s On the Case column.

*****

See here from Josh Goodman (an attorney at the Federal Trade Commission) titled “The Anti-Corruption and Antitrust Connection.”

*****

A good weekend to all.

Posted by Mike Koehler at 12:04 am. Post Categories: Antitrust • Asset Recovery • Barclays • Bourke • BSG Resources Ltd • Compliance Defense • Declination Decisions • Deferred Prosecution Agreements • Double Standard • Enforcement Agency Policy • Enforcement Agency Speeches • FCPA Appeals • FCPA Reform • Monitor • Non-Prosecution Agreement

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May 9th, 2013

Former DOJ FCPA Enforcement Attorney Blasts Ralph Lauren Enforcement Action

This prior post summarizing the recent Ralph Lauren enforcement action noted that there was no allegation or suggestion that Ralph Lauren Corporation (RLC”) was aware of, or participated in, the alleged improper conduct. The same could be said of many FCPA enforcement actions against a parent company - resolved via a non-prosecution and deferred prosecution agreement – based on foreign subsidiary conduct.

Respondeat superior corporate criminal liability is broad, but not this broad. Absent an “alter ego” / “piercing the veil” analysis, legal liability of any kind does not ordinary hop, skip, and jump around a multinational enterprise as the DOJ or SEC see fit.

In this prior post, I collected RLC enforcement action commentary hits and misses. Contrary to many, I found nothing to trumpet in the RLC enforcement action, but much to lament.

There has been another “hit” when it comes to RLC enforcement action commentary, and this one is a home run.

It comes from former DOJ Assistant Chief of the Fraud Section Philip Urofsky (currently a partner at Shearman & Sterling). Urofksy has always been one of the best, most insightful, FCPA commentators. His writings were cited in my article the “Facade of FCPA Enforcement,” his critiques of DOJ enforcement theories (such as jurisdictional issues and obtain or retain business) have frequently been highlighted on these pages – see here for instance.

In short, when Urofsky writes, given his prior experience and insight, we really ought to read and take notice.

His latest is “The Ralph Lauren FCPA Case: Are There Any Limits to Parent Corporation Liability?” recently published in Bloomberg BNA’s Securities Law Daily.

Urofsky and his co-author state, in pertinent part, as follows.

“The facts of the case … point to the steady entrenchment of a more ominous prosecution theory: an approach that appears to approximate strict criminal and civil liability of parent corporations for their subsidiaries’ corrupt acts. Although this disregard of corporate structures has been hinted at in previous SEC matters – and the theoretical underpinnings discussed in last year’s DOJ/SEC Resource Guide – the RLC case puts both agencies firmly in the camp of this aggressive and unprecedented expansion of corporate liability.”

“This approach, however, fails to honor the corporate form and the black-letter rule that to ‘pierce the corporate veil’ the government and other litigants must show that the parent operated the subsidiary as an alter ego, and itself paid no attention to the corporate form. Moreover, it is contrary to the language of the [FCPA's] original history.”

In conclusion, the article states as follows.

“It is disquieting [that in the RLC case] the DOJ appears to have jumped on the charge-the-parent bandwagon, bringing a bribery case against a parent without alleging any involvement by the parent in those violations. One can only speculate that it did so because it had no jurisdiction over the foreign subsidiary itself, given that it also did not allege any act by the subsidiary in U.S. territory. However, as always, the maxim that bad facts make bad law applies, and evidentiary weaknesses cannot excuse the distortion of the statute’s previously clear and reasonable allocation of responsibility.”

I can write about the “facade of FCPA enforcement,” legislative history, how many FCPA enforcement actions seemingly violate basic black-letter principles and the like until the cows come home.

But hopefully more people will finally pay attention to this new era of FCPA enforcement when someone like Urofsky uses terms like ”disquieting” “jump on the bandwagon” and “distortion of the statute.”

Posted by Mike Koehler at 12:02 am. Post Categories: Parent - Subsidiary Issues • Ralph Lauren Corp.

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May 8th, 2013

SEC Examination Leads To Criminal FCPA Charges Against Bond Traders

It is one of the more unusual origins of a Foreign Corrupt Practices Act enforcement action.

In November 2010, the SEC conducted a periodic examination of Direct Access Partners LLC (“DAP”), a broker-dealer registered with the SEC. DAP’s Global Markets Group (“DAP Global”) primarily executed fixed income trades for customers in foreign sovereign debt. One of its customers was Bandes, an alleged Venezuelan state-owned banking entity that acts as the financial agent of the state to finance economic development projects.

According to the DOJ and SEC, the SEC examination lead to the discovery of a “fraud that was staggering in audacity and scope” (see here for the SEC release). A component of the alleged fraud included payments by Tomas Clarke (a DAP Executive Vice President who worked out of the company’s Miami office) and Alejandro Hurtado (a back-office employee of DAP in Miami) to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes). According to this DOJ criminal complaint, Gonzalez oversaw Bande’s trading by DAP.

According to the criminal complaint, Clarke, Hurtado and others “directed kickback payments” to Gonzalez “in exchange for Gonzalez steering Bandes business to [DAP] and authorizing Bandes to execute bond trades with [DAP]. According to the complaint, between 2008 and 2010 “Gonzalez received at least $3.6 million in payments through insiders and affiliates of [DAP]. According to the complaint, during this time period, “with Gonzalez both acting as the authorized trading contact in regard to [DAP] and managing the relationship between Bandes and [DAP], Bandes directed substantial business to [DAP] and carried out bond transactions that resulted in [DAP] generating tens of millions of dollars in revenue.” The criminal complaint alleges various payments made or authorized by Clarke and Hurtado to an account in Switzerland held in the name of Gonzalez and/or a company owned in part by Gonzalez.

Based on the above core set of conduct, the criminal complaint charges Clarke and Hurtado with the following offenses: conspiracy to violate the FCPA, substantive FCPA violations, conspiracy to violate the Travel Act, substantive Travel Act violations, conspiracy to commit money laundering, and substantive money laundering violations.

Gonzalez, the alleged “foreign official,” was charged with conspiracy to violate the Travel Act, substantive Travel Act violations, conspiracy to commit money laundering, and substantive money laundering violations. (For other examples of “foreign officials” being criminally charged with non-FCPA offenses in connection with an FCPA enforcement action, see here and here).

In this DOJ release, Acting Assistant Attorney General Mythili Raman stated as follows. “Today’s announcement is a wake-up call to anyone in the financial services industry who thinks bribery is the way to get ahead. The defendants in this case allegedly paid huge bribes so that foreign business would flow to their firm. Their return on investment now comes in the form of criminal charges carrying the prospect of prison time. We will not stand by while brokers or others try rig the system to line their pockets, and will continue to vigorously enforce the FCPA and money laundering statutes across all industries.”

As noted in the DOJ release, “the government [also] filed a civil forfeiture action … seeking the forfeiture of assets held in a number of bank accounts associated with the scheme, including several bank accounts located in Switzerland. The forfeiture complaint also seeks the forfeiture of several properties in the Miami area related to Hurtado that were purchased with his proceeds from the scheme.”

The above core conduct also resulted in this SEC civil complaint against Clarke and Hurtado (and others) charging a variety of non-FCPA securities law violations.

Posted by Mike Koehler at 12:02 am. Post Categories: 2013 Enforcement Actions • Alejandro Hurtado • Direct Access Partners • DOJ Enforcement Action • FCPA Related Charges • Financial Services Industry • Individual Enforcement Action • Maria Gonzalez • Tomas Clarke • Travel Act • Venezuela

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May 7th, 2013

Seeing The Light From The “Dark Ages”

During the panel session on DOJ non-prosecution and deferred prosecution agreements last week at the Corporate Crime Reporter sponsored conference in Washington, D.C., I shared my belief that it seems like DOJ is clearly troubled, with good reason, by traditional notions of corporate criminal liability. (See here for the prior post when I said the same thing about Lanny Breuer’s NPA/DPA speech last September). However, rather than seek substantive solutions to this issue, the DOJ defends an alternate reality (NPAs / DPAs) that are equally problematic.

After listening to fellow panelist Denis McInerney (DOJ, Deputy Assistant Attorney General) describe the goals of DOJ prosecution – among other things, to better promote compliance and to hold individuals accountable – I offered a solution in the Foreign Corrupt Practices Act context that could help the DOJ achieve these laudable goals.

Have a compliance defense and abolish NPAs and DPAs.

A compliance defense, along the lines I outlined in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense,” would not eliminate corporate criminal liability. Far from it. Rather, a compliance defense would only apply when, notwithstanding a company’s pre-existing compliance policies and procedures and its good-faith efforts to comply the law, a non-executive employee or agent acts contrary to those policies and procedures in violation of the law.

If a company did not have pre-existing compliance policies and procedures, it could not avail itself of a compliance defense. Similarly, even if a company did have pre-existing compliance policies and procedures, the company could not avail itself of a compliance defense if executive officers or employees (a concept already used in the U.S. Sentencing Guidelines) were involved in the improper conduct.

If this were the framework governing corporate criminal liability, then NPAs and DPAs should be abolished and the DOJ would return to the historical choice of two options: charge or do not charge.

At the conference, I stated my genuine belief that such a two-step reform would better incentive more robust corporate compliance, reduce improper conduct, and thus best advance the FCPA’s objectives of reducing bribery. Such a two-step reform would also increase public confidence in FCPA enforcement actions and allow the DOJ to better allocate its limited prosecutorial resources to cases involving corrupt business organizations and the individuals who actually engaged in the improper conduct. (See the article for additional details).

In short, this two-step reform will better allow the DOJ to achieve many of the objectives McInerney articulated.

However, not surprisingly, McInerney’s response to my two-step reform was the comment that this would be like returning to the “dark ages.”

The question is why?

Presumably most countries have an incentive to better promote compliance and to hold individuals accountable for wrongdoing. Does this mean that the following OECD Convention countries that have a compliance-like defense relevant to their FCPA-like laws are living in the “dark ages” – Australia, Chile, Germany, Hungary, Italy, Japan, Korea, Poland, Portugal, Sweden, Switzerland, and the United Kingdom. (See here).

Are Stanley Sporkin (former Director of the SEC Division of Enforcement, among other positions), James Doty (current head of the PCAOB), and Andrew Weissmann (former Director of the Enron Task Force and current General Counsel of the FBI) all living in the “dark ages”? All have supported compliance-like defenses or concepts relevant to the FCPA. (See here, here, and here).

Are former Attorney Generals Michael Mukasey and Alberto Gonzales or other former high-ranking DOJ officials such as Larry Thompson living in the “dark ages”? (See here, here, and here). Is former DOJ FCPA Unit chief Joseph Covington living in the “dark ages.” (See here).

Or have all these individuals, and others who support an FCPA compliance defense, seen the light and it’s the DOJ who is living in the “dark ages”?

Posted by Mike Koehler at 12:04 am. Post Categories: Compliance Defense • Deferred Prosecution Agreements • Enforcement Agency Policy • Enforcement Agency Speeches • FCPA Reform • Non-Prosecution Agreement

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May 6th, 2013

“Our Stellar FCPA Unit Continues To Go Gangbusters, Bringing Case After Case”

Last Friday, Acting Assistant Attorney General Mythili Raman delivered prepared remarks (here) at a Corporate Crime Reporter sponsored conference in Washington, D.C. The conference focused on DOJ and SEC resolution policies and procedures. While Raman’s remarks were broad in scope, a portion of her remarks focused on the FCPA, and in her first publicly released statements on the FCPA, Raman continued to employ much of the same FCPA rhetoric that defined Lanny Breuer’s tenure as Assistant Attorney General. (See here for an article summarizing Breuer’s many FCPA speeches).

Raman began her FCPA remarks by stating as follows. “Our stellar FCPA Unit continues to go gangbusters, bringing case after case.” [Note, Raman's delivered remarks deviated from her prepared remarks as to this sentence].

Stellar?

The last three times the DOJ has been put to its ultimate burden of proof in FCPA cases, the end results were either acquittals or dismissals, including for prosecutorial misconduct.

In the Africa Sting cases, Judge Richard Leon stated as follows. “This appears to be the end of a long and sad chapter in the annals of white collar criminal enforcement. . . . I for one hope this very long, and I’m sure very expensive, ordeal will be a true learning experience for both the [DOJ] and the FBI as they regroup to investigate and prosecute FCPA cases against individuals in the future.”

In the John O’Shea case, Judge Lynn Hughes stated as follows: ‘‘The problem here is that the principal witness against Mr. O’Shea . . . knows almost nothing … [ ] The government should have been prepared before they brought the charges to the Grand Jury. . . . You shouldn’t indict people on stuff you can’t prove.’’

In the Lindsey Manufacturing case, Judge Howard Matz stated as follows. “The instances of misconduct were so varied and occurred over such a long time that they add up to an unusual and extreme picture of a prosecution gone badly awry.”

[For more on the above cases, see my article "What Percentage of DOJ FCPA Losses Is Acceptable?"]

As to the FCPA, Raman further stated as follows [the remainder of the post is from the DOJ's release].

“Just in the last month, we announced charges against several key defendants in ongoing, active FCPA investigations, one case – with the U.S. Attorney’s Office in Manhattan – involving an alleged bribery scheme to secure mining rights in the Republic of Guinea, and another – with the U.S. Attorney’s Office in Connecticut – involving an alleged bribery scheme to secure power contracts in Indonesia.”

[...]

“In our FCPA prosecutions, too, we aggressively use all the tools available to us. As is evident in our many recent foreign bribery cases, individual targets all over the globe are being charged and arrested, and many companies across a variety of industries have entered into guilty pleas and exacting deferred prosecution agreements with the government. In reaching these dispositions, we can and do require companies to remediate their criminal practices – sometimes with the oversight of a corporate monitor. By demanding remediation as part of such a resolution, we can clean up the misdeeds at a corporation in a lasting way. Corporate leadership is often replaced. We frequently require businesses to implement and sustain rigorous internal controls and compliance programs. And the implementation of these sorts of internal controls by one company in a particular industry can often have a cascading, beneficial effect at other companies that follow suit. You need only look to the effects of our FCPA enforcement program on corporate compliance culture to see that this is true.”

“Additionally, it is important to note that no matter how we proceed in any particular case, we always put a premium on securing cooperation from corporate entities, because meaningful cooperation enables us to hold criminally accountable to the fullest extent possible the widest possible range of bad actors, from individuals responsible for the criminal conduct to other business entities. Simply put, a company’s cooperation – which can lead us to critical information about wrongdoing by executives and employees – can absolutely make the difference as we assess whether there is proof beyond a reasonable doubt sufficient to charge an individual. Moreover, the value of this cooperation is only enhanced when our investigations cross international borders, as they frequently do. We routinely face the reality that in many foreign jurisdictions there are legal roadblocks, including data privacy limits, to what U.S. law enforcement can obtain if it seeks to build a case; in those circumstances, the company’s cooperation can be the critical factor in our ability to hold individual wrongdoers to account.”

“Let me give you a recent example from the FCPA context. In March 2012, we announced that we had entered into a DPA with BizJet International Sales and Support Inc., an aircraft services company, and an NPA with its parent company, Lufthansa Technik AG. As part of the resolution, BizJet admitted to bribing Latin American officials in order to secure various services contracts. And, critically for our prosecutors, BizJet also agreed, together with Lufthansa, to cooperate in our ongoing investigation, continue implementing an enhanced compliance program and internal controls, and pay $11.8 million in criminal penalties. Our agreements with BizJet and Lufthansa laid the groundwork for us to bring felony charges against high-ranking corporate executives. Just last month, we announced charges against four former BizJet executives, including the former president and CEO, and the former sales manager. This example, among many others, proves that, no matter what form of criminal resolution we reach with a company, it decidedly does not mean immunity for its culpable employees – indeed, the opposite is true.”

*****

Despite several individual enforcement actions in April, the fact remains that since 2008 approximately 75% of DOJ FCPA enforcement actions, have not (at least yet) resulted in any DOJ charges against company employees. (See here for the prior post with statistics through 2012).

Moreover, as indicated in this prior post, contrary to Raman’s remarks regarding the “form of criminal resolution,” since NPAs and DPAs were first introduced to the FCPA context in 2004, only 6.5% of corporate DOJ FCPA enforcement actions resolved solely with an NPA or DPA have resulted in related criminal charges of company employees. This compares to 83% of corporate DOJ enforcement actions that were the result of a criminal indictment or resulted in a guilty plea by the corporate entity resulting in related criminal charges of company employees.

I presented these numbers at the conference during a panel on NPAs and DPAs. Denis McInerney (DOJ, Deputy Assistant Attorney General) was on the panel and I stated that the ball was now in his court to explain this wide gap. He described two enforcement actions resolved via an NPA or DPA in which there were indeed related individual prosecutions, but otherwise said that he did not know where these numbers are coming from.

The numbers are described in this prior post. It was really quite easy calculating the numbers. One simply takes all DOJ corporate enforcement actions since 2004 and then looks to see if there have been related individual actions against company employees.

During the panel, McInerney made an important acknowledgment. After I discussed Gabrial Markoff’s excellent article “Arthur Anderson and the Myth of the Corporate Death Penalty” (see here for the prior post), McInerney agreed that there is a very small chance that a company would be put out of business as a result of actual DOJ criminal charges. This was a notable acknowledgment in that the so-called “Arthur Anderson” effect has always been a central justification for the DOJ’s frequent use of NPAs and DPAs. For instance, see this prior post regarding Lanny Breuer’s September 2012 NPA / DPA speech. As fellow panelist Professor David Uhlmann (a frequent critic as well on DOJ’s use of NPAs and DPAs – see here) stated, the DOJ’s policy on NPAs and DPAs is a “policy is search of a rationale.”

*****

In other DOJ news, last Friday the DOJ announced (here) that Paul Novak (a former consultant for Willbros International who previously pleaded guilty – see here for the prior post) was sentenced by U.S. District Court Judge Simeon Lake (S.D.Tex.) to 15 months in prison and two years of supervised release.

Of perhaps greater note, Novak was ordered to pay a $1 million fine. This is among the top individual FCPA criminal fines in history.

The DOJ’s release states that in sentencing Novak, “the court took into consideration the assistance Novak provided the government in ongoing investigations.” Novak’s sentencing documents are under seal and not publicly available.

In May 2008, Willbros resolved parallel DOJ (here) and SEC (here) FCPA enforcement actions and agreed to pay approximately $32 million in combined fines and penalties.

Posted by Mike Koehler at 12:03 am. Post Categories: Deferred Prosecution Agreements • Enforcement Agency Policy • Enforcement Agency Speeches • FCPA Sentences • Non-Prosecution Agreement • Paul Novak • Willbros Group

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