The Best Offense Is a Good Defense: How the Adoption of an FCPA Compliance Defense Could Decrease Foreign Bribery

By Cassin, Shaun | Houston Journal of International Law, Winter 2014 | Go to article overview

The Best Offense Is a Good Defense: How the Adoption of an FCPA Compliance Defense Could Decrease Foreign Bribery


Cassin, Shaun, Houston Journal of International Law


  I. INTRODUCTION  II. BACKGROUND      A. History of the FCPA      B. Corporate Criminality and the FCPA  III. SHOULD A COMPLIANCE DEFENSE BE ADOPTED?      A. Arguments Against a Compliance Defense      B. Arguments For a Compliance Defense   IV. A POTENTIAL SOLUTION: EXAMINING WILLIAM         JACOBSON'S PROPOSAL      A. Explicit, Affirmative Defense or Procedure for DOJ         to Follow?      B. How this Solution Could Further the Goals of the         FCPA    V. HOW TO MAKE A COMPLIANCE PROGRAM EFFECTIVE      A. Analyzing the Top Fifty Fortune 500 Companies      B. What the DOJ Considers an Effective Compliance         Program      C. Additional Sources that Provide Guidance as to         What a Robust Compliance Program Is     VI. CONCLUSION 

I. INTRODUCTION

In the 2005 film Syriana, a U.S. oil company, Connex, initiates a merger with a smaller oil company, Killen, after Connex lost natural gas drilling rights in the Middle East to a Chinese company. (1) Killen had recently been awarded drilling rights in Kazakhstan. (2) However, an internal investigation quickly revealed, as the U.S. Department of Justice (DOJ) had suspected, that Killen did so by bribing Kazakh officials. (3) This conduct implicates the U.S. Foreign Corrupt Practices Act (FCPA or the Act), which prohibits bribery of foreign officials. (4) Although it was suggested in the film that both companies knew and approved of the conduct, in order to avoid prosecution by the DOJ, the companies denied knowledge about the bribe and used the employee who initiated the bribes as a fall guy. (5) When the employee was informed he would be given up to the DOJ, he ridicules the FCPA, stating: "Corruption charges! Corruption?! ... We have laws against it precisely so we can get away with it. Corruption is our protection. Corruption keeps us safe and warm.... Corruption is why we win." (6)

Of course, because top-level managers were involved and the companies knew about the bribes yet took no action to remedy the situation, nobody would feel sorry for the companies if they were subjected to criminal penalties under the FCPA. But few FCPA cases have such egregious facts as presented in Syriana. (7) In fact, many FCPA violations are not due to executive management or a board of directors approving the bribes. (8) Rather, "[a] typical FCPA enforcement action involves allegations that a small group of people (or perhaps even a single individual) within a subsidiary or business unit of a business organization engaged in conduct in violation of the FCPA." (9) Yet because of respondeat superior principles, the company is exposed to FCPA liability even if the employee's conduct is contrary to the company's pre-existing FCPA policies and procedures. (10)

Despite the employee's statements in Syriana, most would agree that corruption is an enormous problem in our growing global economy. In 2004, a study by the World Bank Institute found that over $1 trillion in bribes are paid each year worldwide. (11) Sadly, the victims of bribery are often trapped in poverty, despite living in developing countries with considerable resources and wealth. (12) "Corruption impedes economic growth by diverting public resources from important priorities such as health, education, and infrastructure." (13) Accordingly, the DOJ and SEC have ramped up enforcement efforts of the FCPA in recent years. (14)

However, this has led to increased scrutiny of the Act. Although critics of the statute recognize that a U.S. anti-bribery law is necessary to prevent this conduct from occurring, they argue the statute is flawed and should be improved. (15) Supporters, on the other hand, applaud the aggressive enforcement of the FCPA, believing that aggressive enforcement is the only way to prevent substantial bribery that has crippled economies and damaged the reputation of governments. (16) Some have even called for increased enforcement against companies. (17)

One of the most frequent proposals offered to improve the FCPA is to add a compliance defense to the statute.

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The Best Offense Is a Good Defense: How the Adoption of an FCPA Compliance Defense Could Decrease Foreign Bribery
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