A Little Less Conversation, a Little More Action: Evaluating and Forecasting the Trend of More Frequent and Severe Prosecutions under the Foreign Corrupt Practices Act

Article excerpt

In the wake of increasingly common, creative, and severe prosecutions under the Foreign Corrupt Practices Act ("FCPA"), scholars and practitioners must acknowledge that the time for talk-i.e., non-punitive voluntary disclosures and abstract debate-has given way to an era of aggressive enforcement actions by the Department of Justice and the securities Exchange Commission. The bare numbers tell much of the story: the Department of Justice has initiated four times more prosecutions over the last five years than over the previous five years.1 Also instructive are prosecutors' growing use of novel and ever more broad theories of liability under the FCPA.

This Article outlines and discusses in particular the anti-bribery provisions of the FCPA, then identifies recent controversial cases that illustrate the government's departure from its usual passive approach, and how the government has embraced a more aggressive, or legal, action position. In addition, this Article forecasts other forthcoming theories of FCPA-liability that, although not yet advanced by the Department of Justice, are likely forthcoming from prosecutors based on their recent zealous theories of liability.

I. INTRODUCTION TO THE FCPA

Based upon information regarding corporate corruption uncovered during the Watergate investigations, the securities and Exchange Commission conducted a series of investigations designed to evaluate how widespread the practice of corporate bribery to foreign officials had become.2 The securities and Exchange Commission's investigation resulted in disclosures by over 400 companies that had engaged in bribes or other corrupt payments.3 Of these, some 200 companies admitted to making bribe-type payments to foreign government officials.4 Following these investigations, Congress held hearings to assess the severity of the bribery problem, and possible solutions.5 Shortly thereafter, in December 1977, Congress, perceiving this to be an epidemic, responded by passing the FCPA.6

From its inception, the FCPA was a bold and unique piece of legislation in that it criminalized conduct that Congress itself deemed unethical, regardless of the customs and practices of the foreign country where the company was doing business.7 The Act's impact in early years was marred by controversies regarding the appropriateness of legislating morals,8 but corporate scandals in the 1990s readied the public for the government's taking a more direct role in enforcing ethical business practices.9 Taking advantage of the public interest in policing corporations more closely, the Department of Justice has demonstrated, both through prosecutions and public statements, a commitment to aggressively prosecute corporate bribery.10 Moreover, the unwillingness of many corporate defendants to challenge the Justice Department's theory of liability in court, opting instead to accept a quick plea agreement in order to minimize negative publicity, has left prosecutors with an almost unchecked authority to define the contours of FCPA liability. Accordingly, not until very recently has it become possible to appreciate just how drastic and far reaching the Department of Justice's use of the FCPA will be.

The short and relatively straightforward text of the Act belies the scope of liability sought by federal prosecutors. The Department of Justice's recent aggressive enforcement of the FCPA's provisions has served to illustrate numerous unanticipated theories of liability. This article argues that corporate defendants are now faced with a "Hobson's Choice": either accept the Department of Justice's broad and unprincipled application of the FCPA, or confront the prolonged negative press that is sure to accompany a legal challenge to various theories of FCPA liability. Specifically, in light of the recent upswing in prosecutions, and interpretations being made by the Department of Justice, parent companies, franchisors, non-U.S. residents, and other persons or entities with attenuated links to public officials face the risk of being charged under the FCPA. …