Today’s post is from former Attorney General Alberto R. Gonzales.
The Impact of the New FCPA Guidance on Reform Efforts
Hon. Alberto R. Gonzales, Counsel at Waller Lansden
As Professor Mike Koehler noted in his recent post, the DOJ previously declined to issue FCPA guidance on numerous occasions, despite specific recommendations from Congress and the Organisation for Economic Co-Operation and Development. That position changed after the U.S. Chamber of Commerce issued a position paper in October 2010 identifying perceived faults in the statute and enforcement of it and proposing certain recommendations for reform. Under the title “Restoring Balance: Proposed Amendments to the Foreign Corrupt Practices Act,” the Chamber advocated five specific reforms:
• Adding a compliance defense;
• Limiting a company’s liability for the prior actions of a company it has acquired;
• Adding a “willfulness” requirement for corporate criminal liability;
• Limiting a company’s liability for acts of a subsidiary; and
• Better defining a “foreign official” under the statute.
In a speech approximately one year later, Assistant Attorney General Lanny Breuer specifically referenced the Chamber’s reform efforts, among those carried out by unnamed others. While AAG Breuer expressed a willingness to “work with Congress on ways to improve our criminal laws” he also took pains “to be clear about one thing with respect to these proposals: we have no intention whatsoever of supporting reforms whose aim is to weaken the FCPA and make it a less effective tool for fighting foreign bribery.” Later in the speech, he noted that the Department had recently taken “considered suggestions about FCPA enforcement into account,” referencing his personal involvement in discussions with industry representatives at a Department of Commerce sponsored roundtable. He then spoke of the Department’s ongoing efforts to prepare what would become the guidance, suggesting that such discussions would serve to inform that process.
While AAG Breuer touted the Department’s consideration of industry viewpoints in preparing the guidance, it is less than clear whether the efforts by reformers were causally, as opposed to merely temporally, related to the guidance’s formulation. A skeptic might conclude that the Department fashioned the guidance solely in an effort to derail reform efforts, which were beginning to gather support in Congress. One adopting that stance would view the guidance as less of a genuine attempt to increase transparency relating to the government’s enforcement approach or provide insight on how companies might structure suitably effective compliance programs, and more of a calculated bid to give the impression of compromising on reform efforts without actually conceding any ground.
While interesting to ponder, the question of whether the reform efforts triggered the guidance is far less important than the question of its effect upon reform efforts. That answer may depend on the responses to the following three questions:
1) does the guidance constitute a concession on any of the reforms sought?
2) if not, does the guidance refute, beyond all reasonable debate, the need for such reforms?
3) regardless of whether the guidance forecloses the contentions advanced by reformers, does it effectively overcome the perceived need for reform?
Answering the first question is relatively easy: nothing in the guidance reflects agreement with or constitutes a concession regarding proposed major reforms. While the guidance extols the virtues of an effective compliance program and catalogues general principles regarding its construction and maintenance, it offers no indication that the government believes that existence of a compliance program – even one that is unquestionably robust – should automatically shield the company from FCPA liability as a matter of law. (Any lingering uncertainty regarding the government’s position on this point was resolved when, during a panel discussion at the American Conference Institute’s 2012 National Conference on the FCPA, AAG Breuer made clear Department’s wholesale rejection of the need for any such modification to the statute). Similarly, the guidance details the underpinnings of the government’s views on parent-subsidiary liability and successor liability, but offers no indication of a perceived need for reform on either topic. The guidance compiles a list of “non-exclusive factors to be considered” in evaluating whether an individual may fairly be deemed associated with a “department, agency or instrumentality” of a foreign government, but offers nothing to suggest that a formal definition is necessary in the statute. Finally, the guidance dedicates a scant three paragraphs to the wilfulness issue, disregarding entirely reformers’ claimed deficiency regarding corporate prosecutions, much less their proposed solutions.
Resolving the second inquiry is more difficult. In some areas (particularly discussion of successor liability), the guidance makes a persuasive case against the need for reform simply by demonstrating the government’s commitment to a principled and logical approach. But this is unlikely to tamp out all dispute on those issues, so it becomes necessary to take a more holistic approach to evaluation of the guidance.
While the enforcement agencies have received near universal praise for their efforts in compiling the guidance, there has been almost equal uniformity in the belief that the guidance fails to break any new substantive legal ground. If one accepts that as true (and the recent public pronouncements by FCPA enforcers in the wake of the guidance have not suggested they disagree), it would seem difficult to suggest that the need for the substantive reforms sought has been alleviated. If nothing has changed in the way the government interprets and enforces the statute, how can previous calls for reform be deemed answered?
Nevertheless, the sheer bulk of the guidance – 120 pages, 418 footnotes – constitutes an imposing presence. In addition to its size, the guidance’s substance further undercuts the case for reform. The guidance represents an expansive defense of the legitimacy of the government’s FCPA enforcement methodology, operating to tether positions previously staked out to particular authorities. Although a good number of those “authorities” are simply prior enforcement actions brought, and pronouncements made by the government itself, the guidance nevertheless creates a compelling impression that the FCPA is enforced in a straightforward and consistent fashion.
It is this impression which informs and is likely to resolve the third question. The guidance itself emphasizes that many areas of FCPA enforcement are subject to multi-factor tests and not bright line rules. However, the guidance represents perhaps the most detailed articulation by the government of any area of criminal law enforcement. Regardless of whether it actually resolves (or even addresses) the specific reforms proposed by the Chamber and others, the guidance’s issuance effectively refutes the notion – implicit in the reform efforts – that FCPA enforcement is a black box which leaves exposed even those companies who undertake sincere efforts to comply with the statute’s mandates. Whether under the principles of the fair warning doctrine or otherwise, advancing the notion post-guidance that those subject to the FCPA lack meaningful notice about the types of conduct than can and will be prosecuted would seem challenging at best. It will likely take some systemic pattern of enforcement at odds with the guidance’s pronouncements, or sufficiently egregious anecdotal evidence, to overcome the image that the guidance fosters.
As noted previously by Professor Koehler, those advocating FCPA reforms already face the task overcoming the suggestion that they are “soft on bribery” (or worse, supportive of it) and are in fact seeking to weaken the government’s ability to deter and prosecute such conduct. The guidance’s issuance steepens the climb for reformers, because it has created the perception of removing the element of uncertainty upon which much of the reformers’ claims of unfairness were premised. While the guidance can hardly be deemed a death knell for FCPA reform efforts, it certainly delays and likely hinders those endeavors.