The explosion in Foreign Corrupt Practices (FCPA) enforcement is a turning point for white collar practice to which many discussions on this blog owe their origins. For over two decades the FCPA rested mostly dormant. From 1977, when the statute was enacted, until 2000, the federal government pursued only fifty-two FCPA enforcement actions. No more than five such actions were brought in a single year, and in four of those years, zero actions were commenced. But then, at the beginning of the twenty-first century, U.S. prosecutors and securities enforcers eagerly embraced the statute, initiating 379 FCPA cases between 2001–2015, reaching an annual high of 56 cases in 2010.[1]
In a new paper in Law & Contemporary Problems, my colleague Rachel Brewster and I offer a broad theoretical accounting for this dramatic development. It is an outside-in, inside-out story, featuring international organizations, policy makers, prosecutors and regulators, and the defense bar as the central characters responsible for awakening the FCPA and creating the robust anti-corruption enforcement regime that exists today.
From the outside, the statute remained mostly unused shortly after its enactment because international thinking and institutions necessary to open pathways for U.S. enforcement abroad did not yet exist. Criminal statutes are not self-executing. Before effective enforcement could begin, people needed to start thinking differently about bribery. Such a shift in international thinking occurred between the 1970s and 1990s, led by changing attitudes within growing institutions such as the World Bank and the Organization for Economic Cooperation and Development (OECD). A consensus that corruption is a leading enemy of economic development eventually emerged, ensuring that the United States would find open pathways and cooperative partners as it ventured out to prosecute bribery beyond its borders.
From the inside, a number of professional forces strongly motivated U.S. prosecutors to pursue FCPA cases. Top down, the U.S. Department of Justice (DOJ) created unusual centrally managed guidelines and institutions to encourage and control enforcement of the FCPA. (The belief at the time was that these special measures were necessary prevent FCPA cases from interfering with foreign policy interests; that view seems less compelling today because so many corporate prosecutions that do not involve the FCPA implicate the same concerns.) White House and DOJ front offices, both Republican and Democratic, began talking tough about corruption and positioned the United States as a norm entrepreneur by declaring their intention to use U.S. law as leverage over large corporations and thus as a means of rescuing benighted populations from leaders bent on looting national assets.
Bottom up, federal prosecutors found the FCPA to be a highly congenial tool. The statute is broad and doctrinally underdeveloped, giving prosecutors strong leverage in negotiations. The underlying wrongdoing—bribery—was of the morally bad, knew-what-you-were-doing-was-wrong type of behavior that would likely appeal to juries and the public and fit with prosecutors’ sense of their mission to combat determined assaults on the rule of law. And FCPA prosecutions, with their complexity and international scope, offered prosecutors a field in which they could hone their skills in handling sophisticated corporate criminal investigations—skills that, by the early 2000s, had become highly marketable among large corporate law firms hiring former government officials.
Along the way, another player became an important contributor to this story, perhaps unintentionally or even ironically: the defense bar. As the government simultaneously ramped up FCPA enforcement and pursued a general strategy of using corporate criminal liability to lever evidence out of companies in complex investigations, the corporate defense bar practicing in the FCPA field became a supplier of cases. Once the pump got flowing—with its incentives and rewards for self-reporting and cooperation—a cadre of corporate counsel, many of them former prosecutors, began to advise their clients, more often than not, that they should disclose their bribery problems to the government in exchange for leniency, thus continually priming the FCPA case pump. (One can note, as we do, both benefits and worries about this symbiotic relationship within the bar without having to cynically conclude that it represents its own form of corruption.)
At present, the most interesting question about the market for anticorruption enforcement is whether the dramatic play of the United States into this space will begin to be checked, or at least competed with, by emerging efforts of other nations. (As I write this, President Trump’s nominee to head the SEC has, for whatever its worth, said he supports continued enforcement of the FCPA.) European countries, perhaps jealous of U.S. intrusion into their and others’ realms or admiring and emulating of the U.S. approach to business bribery, have begun to enact laws similar to the FCPA and build institutions to enforce those laws that mimic some behaviors of the DOJ and SEC. As we enter the next phase of the FCPA’s unusual story, the question is whether the dominance of the United States in the global market for anticorruption enforcement has peaked, and will in the future be restricted by resistance and competition from other nations, or whether a rising tide will lift all boats, with other nations joining and enhancing an even more robust collective effort to eradicate bribery in the developing world, at least as it involves large corporations.
The establishment of the current FCPA enforcement regime was driven by the confluence of numerous forces. The path that these forces take in coming years will determine what the future holds for global anticorruption efforts. New nationalist and territorial winds are blowing hard at the moment. But the effect and endurance of these movements remains uncertain, and so there can be no telling what lies ahead for the project of regulating corruption in international business dealings.
[1]. Stanford Law School, Foreign Corrupt Practices Clearinghouse (last visited June 1, 2016); see also U.S. Secs. & Exch. Comm’n, SEC Enforcement Actions: FCPA Cases (1978–2016). Not surprisingly, as the volume of cases has ballooned, settlement has become the norm. A recent study using an original data set found sharp upward trends, with a total of nearly 500 criminal resolutions of all types between the U.S. Department of Justice and public corporations between 1997 and 2011. See Cindy R. Alexander & Mark A. Cohen, The Evolution of Corporate Criminal Settlements: An Empirical Perspective on Non-Prosecution, Deferred Prosecution, and Plea Agreements, 52 Am. Crim. L. Rev. 537, 540 (2015) (The study’s authors included all plea agreements as well as all settlements with sanctions not including pleas: so-called non-prosecution and deferred prosecution agreements.). Overall annual corporate resolutions rose from ten in 1997 to a high of nearly eighty in 2010. Among the eighty-six FCPA settlements the authors examined, only three (all pleas) fell in the period from 1997 to 2002, while seventy-three resolutions were reached in the period from 2007 to 2011. Id.
Samuel W. Buell is the Bernard M. Fishman Professor at Duke University School of Law. Sam Buell’s research and teaching focus on criminal law and on the regulatory state, particularly regulation of corporations and financial markets. He is the author of Capital Offenses: Business Crime and Punishment in America’s Corporate Age (W.W. Norton & Co. 2016).
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