The Facade of FCPA Enforcement
Koehler, Mike, Georgetown Journal of International Law
TABLE OF CONTENTS I. INTRODUCTION II. THE FCPA A. Origin B. Anti-bribery Provisions 1. "Anything of Value". 2. "Foreign Official". 3. "Obtain or Retain Business". C. Books and Records and Internal Control Provisions III. FCPA ENFORCEMENT A. Relevance of "Carrots" and "Sticks". 1. Principles of Prosecution 2. Sentencing Guidelines 3. SEC Policy B. Prevalence of Resolution Vehicles Subject to Little or No Judicial Scrutiny 1. NPAs and DPAs 2. Pleas 3. SEC Settlements C. FCPA Resolution Vehicles Do Not Necessarily Reflect a Superior Legal Position 1. Lessons from SEC v. BofA 2. The Enforcement Agencies are Vulnerable in Contested Actions IV. THE FACADE OF FCPA ENFORCEMENT A. First Pillar: Bare-Bones, Uninformative Facts, and Legal Conclusions B. Second Pillar: What is the Legal Support? 1. The "Foreign Officials" All Around Us? 2. Just How Was that Business Obtained or Retained? 3. Strict Liability for Books and Records and Internal Controls Violations? 4. Disgorge What? C. Third Pillar: Same Facts, Different Results D. Fourth Pillar: Bribery, Yet No Bribery V. WHY THE FACADE OF FCPA ENFORCEMENT MATTERS A. The Absurdity of FCPA "Case Law' B. The Breeding of Overcompliance C. Modeling VI. CONCLUSION
The rise in Foreign Corrupt Practices Act ("FCPA") enforcement has been well-documented, as have the aggressive enforcement positions of the Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC")--the two government agencies responsible for enforcing the statute. (1)
Ordinarily, aggressive government enforcement of a statute based on untested and dubious legal theories invites judicial scrutiny in a transparent, adversarial proceeding. Such judicial scrutiny is particularly appropriate when enforcement theories result in multi-million dollar corporate fines and penalties, as is often the case in FCPA enforcement actions.
However, judicial scrutiny is virtually non-existent in the FCPA context given the frequency with which FCPA enforcement actions are resolved through DOJ non-prosecution agreements ("NPAs"), deferred prosecution agreements ("DPAs"), pleas, or SEC settlements. Each of these resolution vehicles is the result of private negotiations between the enforcement agencies and the alleged wrongdoer in the context of the enforcement agencies dangling substantial "carrots" for cooperating and agreeing to its version of the facts and interpretation of the law. At the same time, the alleged wrongdoer is cognizant of the enforcement agencies' substantial "sticks" should it disagree with the enforcement agencies.
Thus, in many instances, the FCPA means simply what the DOJ and SEC say it means. Accordingly, "FCPA law" has developed through privately-negotiated agreements, and not as in other areas of law, through transparent, adversarial proceedings in which a judge or jury, weighing the evidence and the parties' conflicting arguments, renders an impartial decision. It is this feature of the FCPA that distinguishes FCPA enforcement from nearly every other area of law. This feature is troubling enough in isolation. Even more troubling is that the enforcement agencies, in the absence of meaningful, substantive FCPA case law, urge those subject to the FCPA to view these privately-negotiated agreements as de facto case law and to conform conduct to the foggy legal signposts in these privately-negotiated agreements.
The end result is a facade of FCPA enforcement and, this article explores various pillars that contribute to the facade of FCPA enforcement. This article does not argue, or even suggest, that every FCPA enforcement action is unwarranted or that no company or individual has ever violated the FCPA. …