This past year marked the 40th anniversary of the U.S. Foreign Corrupt Practices Act (“FCPA”). Since its enactment in 1977, the U.S. Department of Justice (the “DOJ”) has brought approximately 300 FCPA enforcement actions, while the U.S. Securities and Exchange Commission (the “SEC”) has brought approximately 200 cases. This anniversary year, the first year of the Trump administration, demonstrated that the FCPA continues to be a powerful tool in combating corruption abroad and encouraging compliance at global companies.
On September 19, Senator Chuck Grassley (R-IA) issued a press release stating that the bipartisan authors of a 2015 landmark criminal justice reform bill were preparing to reintroduce that legislation. The Sentencing Reform and Corrections Actof 2015 (PDF: 1,020 KB), to which Sen. Grassley will grant new life, was part of a widespread effort at criminal justice reform that appeared to have died with the 2016 election. A centerpiece of the effort would have clarified and enhanced the mens rea (or mental state) necessary for conviction: in the House version, a defendant could be convicted only if she knew she was engaged in criminal activity; the Senate version was even more defendant-friendly, requiring willful participation.
Criminal justice reform has a laudable overarching ambition—to reduce sentences and incarceration rates, especially for minor drug and firearms offenses. As Yale Law Professor Gideon Yaffe writes, this would benefit “those who are especially ill-treated by the criminal justice system: the poor and racial minorities.” But these efforts are being championed by some unusual suspects: Republican members of Congress, who don’t ordinarily vie for more leniency when it comes to street crime, and the Koch brothers, who also are notusually poster boys for the plight of the underclass, who are over-represented (PDF: 153 KB) in criminal prosecutions, convictions and America’s prisons. Continue reading →
Imagine a class of criminals that is growing year over year, whose members have higher than average recidivism rates, and for whom the public has very little sympathy. They would seem an unlikely group for judges and scholars to think are punished too severely. This, though, is the fortunate position of the white-collar fraudster.
To be sure, federal penalties for fraud can be quite burdensome. The base offense level for most frauds is 6, but this can climb as the loss caused by the fraud increases from $6,501 (add 2 levels) up to $550,000,001 (add 30 levels). The number of victims can also have a significant impact, ranging from an additional 2 levels if there are at least ten victims to an additional 6 levels if there are more than twenty-five. A first-time fraudster who causes more than $550,000,001 in losses to at least twenty-five victims is looking at a recommended sentence of thirty years to life. For most judges and scholars, that kind of punishment sounds disproportionate.Continue reading →
Among the flurry of resolutions in the final days of the Obama administration, two “repeat offenders” settled FCPA cases: Zimmer Biomet Holdings, Inc. (“Zimmer Biomet”) and Orthofix International N.V. (“Orthofix”). Zimmer Biomet and Orthofix are hardly the first such “repeat offenders.” In July 2016, Johnson Controls Inc. (“JCI”) settled an enforcement action involving activities of a Chinese subsidiary with the Securities and Exchange Commission (“SEC”), and the DOJ simultaneously “declined” to bring any charges. Each of these companies was a “repeat offender” in having previously settled FCPA-related allegations.
By analyzing and comparing these three recent resolutions, this Article highlights factors that may influence whether U.S. authorities bring follow-on FCPA enforcement actions and, if so, what penalties they seek to impose. As discussed below, companies are well advised to make concrete compliance enhancements in an effort to avoid recidivist status and the significant penalties that can accompany a second resolution. Continue reading →
On April 5, 2016, the Department of Justice’s Fraud Section announced a new Foreign Corrupt Practices Act (“FCPA”) enforcement pilot program (the “Pilot Program”) designed to “promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” The memorandum announcing the Pilot Program sets forth four prerequisites for corporations seeking to obtain credit under the program—voluntary self-disclosure of the misconduct, full cooperation with the investigation, timely and appropriate remediation, and disgorgement of all profits related to the violation—and describes the additional cooperation credit available to companies under the terms of the Pilot Program. Continue reading →
The pilot program is the first time that the DOJ has offered specific benefits to corporations that self-report that are unavailable to firms that fail to disclose detected wrongdoing and cooperate only when caught. This is an important reform. Yet closer examination reveals that the benefits detailed in the pilot program are not sufficient to lead corporations to disclose significant wrongdoing that will otherwise likely remain hidden. Continue reading →