Tag: DOJ

DOJ’s New Evaluation of Corporate Compliance Programs

The Justice Department released a refreshed set of guidelines on how prosecutors should evaluate corporate compliance programs.

The Principles of Federal Prosecution of Business Organizations in the United States Attorney’s Manual describe factors that prosecutors should consider in conducting an investigation of a corporate entity, determining whether to bring charges, and negotiating plea or other agreements. One of these factors is “the existence and effectiveness of the corporation’s pre-existing compliance program” and the corporation’s remedial efforts “to implement an effective corporate compliance program or to improve an existing one.” The Guidelines are meant to assist prosecutors in making informed decisions as to whether, and to what extent, the corporation’s compliance program was effective.

For those of us involved in compliance for high-regulated companies in finance, I take the guidance with a word of caution. Regulators are the first line of compliance program creation. If you screw up badly, they pull in the agency’s lawyers. It’s only when you end up in the super serious list, like criminal charges, that you end up with the Department of Justice where these Guidelines are operative.

So what has changed in the Guidelines document?

It’s bigger. The original guidance was only four pages. The new guidance blossoms up to 19 pages.

It’s written for non-compliance people. The previous guidelines were written more like a checklist for those with a compliance background. I heard the new guidelines were released in a training session for DOJ attorneys. I guess it will be the front-line prosecutors using these guidelines to help in their decision-making process.

I need to take a deeper dive into the guidelines. More to come.

Sources:

U.S. DoJ Asst. Attorney General, Criminal Division, Lanny Breuer Speaks at Compliance Week

Lanny Breuer, selected by President Obama to head the Criminal Division of the Justice Department in January 2009, will discuss practical matters for companies dealing with the Justice Department, including topics such as cooperation, attorney-client privilege, and the importance of pre-existing compliance programs. Breuer will also discuss the Department’s increasing use of proactive law-enforcement strategies and tools, such as wiretaps, to combat financial fraud.

These are my notes, live from the keynote:

Prosecutions promote the rule of law, deter future bad behavior and punish wrong-doers. Compliance is largely the opposite of criminality.

He wants a new era in white collar crime prosecution.

The Obama administration is giving great attention to financial fraud and the establishment of the Financial Fraud Enforcement Task Force. Over 2 dozen state and federal agencies are part of the group. A companion is the deployment of additional resources. The budget has increased allowing the hiring of additional prosecutors and support.

They using more aggressive law enforcement techniques, including wire taps and undercover stings. They will continue to look toward innovative techniques and existing techniques used against organized crime and blue collar crime. (Is there a meaningful distinction anymore?)

He is looking to continue strengthening their partnership with the SEC.

Foreign bribery is a law enforcement challenge.  Since 2004 the DOJ has filed 37 FCPA cases, with fines over $1.5 billion. Over 80 individuals have been charged under the FCPA. Aggressive enforcement is meant to deter others from engaging in bribery.

He cited the new UK Bribery Act and the need for a company to have “adequate procedures” to detect and prevent bribery.

There are benchmarks. The principles of federal prosecution of business entities are the OECD guidance on effective compliance are key standards. But you need to customize these to your company. Direct reporting lines are important. Testing effectiveness is important.

If you come forward, cooperate with the investigation and institute meaningful remediation, the DOJ is committed to giving you meaningful credit. But not amnesty.

He used the Siemens case as a benchmark for the value of cooperation and remediation. The Siemens fine was huge at over $400 million. However, the sentencing guidelines called for a fine of over $1.4 billion. (He didn’t mention whether taking federal contracting debarment off the table was part of the discussion with their cooperation credit.)

As for compliance monitors, he would want one in place when the corporation needs to implement or significantly redesign a compliance program. Largely, it sounds like a monitor would be more likely if there is still significant remediation to be done.

He then sat down with Compliance Week‘s Matt Kelly.

Complying with the FCPA is harder in some countries is harder than others (China versus Belgium)?

You don’t get a free pass. They expect a more robust compliance program when entering into markets where bribery is more common. They would want to see new tools to detect and try to prevent bribery.

Now that the UK Bribery Law has banned facilitating payments will they be prohibited under the FCPA?

It will take an act of Congress, but he is looking forward to the evolution of law in the area of bribery of government officials.

Interpreting “Tone at the Top”, does firing someone and not supplying legal fees a bad tone?

The DoJ has changed their position on this. The key is removing the person from authority at the company, at least temporarily. The company has to make some real changes.

What about consistency throughout the DOJ and US Attorney Offices?

All FCPA has come in through the fraud unit, so that helps ensure consistency in that area. (It sounds like he recognized some inconsistencies.)

DOJ Nets 22 in FCPA Sting

“The largest single investigation and prosecution against individuals in the history of DOJ’s enforcement of the Foreign Corrupt Practices Act”

The Department of Justice has gotten serious about the FCPA.

“This ongoing investigation is the first large-scale use of undercover law enforcement techniques to uncover FCPA violations and the largest action ever undertaken by the Justice Department against individuals for FCPA violations,” said Assistant Attorney General Lanny A. Breuer. In connection with these indictments, approximately 150 FBI agents executed 14 search warrants in locations across the United States. Plus, the United Kingdom’s City of London Police executed seven search warrants.

According to the indictments, the defendants agreed to pay a 20 percent “commission” to a sales agent who the defendants believed represented the minister of defense for a country in Africa to win a portion of a $15 million deal. The “sales agent” was actually an undercover FBI agent. The defendants were told that half of that commission would be paid directly to the minister of defense. The defendants allegedly agreed to create two price quotes in connection with the deals, with one quote representing the true cost of the goods and the second quote representing the true cost, plus the 20 percent commission. The defendants also allegedly agreed to engage in a small “test” deal to show the minister of defense that he would personally receive the 10 percent bribe.

I have not gotten through all of the indictments, but the DOJ purposefully omitted the name of the employers of the indicted individuals. I would guess that he have not heard the end of this. People can run; companies cannot.

Sources:

FCPA Allegation Against McCain Fundraiser

Republican fundraiser Harry Sargent III is subject to a suit from Supreme Fuels that Sargent’s company International Oil Trading Company made illegal payments to Jordanian officials. IOTC has an exclusinve license to move military fuel through Jordan.

IOTC’s response, according to the NBC News Investigates story:

. . .in an email to NBC News, a spokesman said that there were no bribes and only a legitimate “fee” paid to the government of Jordan. “What Supreme [Fuels] calls a ‘bribe’ was a required fee for importing and transporting military fuel through Jordan,” a spokesman for Sargeant and IOTC said. “The fee was paid to an official agency of the Jordanian state and thoroughly documented. This and any other related charge have been shared with the Department of Defense (and to Congress) as part of our transparent disclosure of any and all costs related to the fuel delivery process.”

Under the Foreign Corrupt Practices Act, payments to agencies of a foreign government are not illegal. The FCPA is only applicable to payments to foreign officials. Foreign governments are free to extort as much money as they can. It is the personal gain by a government official that is a problem.

The other unusual part of the suit is that it is filed by a private party. There is no right for a private party to bring suit under the FCPA. Only the DOJ and SEC have the power to enforce the statue. The party is suing under RICO.

The leading case on private actions under FCPA is Lamb v. Philip Morris, Inc. (6th Cir. 1990) 915 F.2d 1024, cert. den. (1991) 498 U.S. 1086:

Since we find that no private right of action is available under the Foreign Corrupt Practices Act of 1977 (FCPA), 15 U.S.C. Secs. 78dd-1, 78dd-2, we affirm the dismissal of the plaintiffs’ FCPA claim.

Lay-Person’s Guide to the Foreign Corrupt Practices Act

fcpa-resource-download

The United States Department of Justice has put together a Lay Person’s Guide to FCPA on the the Department’s site on the Foreign Corrupt Practices Act.

The 1988 Trade Act directed the Attorney General to provide guidance concerning the Department of Justice’s enforcement policy with respect to the Foreign Corrupt Practices Act of 1977 (“FCPA”), 15 U.S.C. §§ 78dd-1, et seq., to potential exporters and small businesses that are unable to obtain specialized counsel on issues related to the FCPA. The guidance is limited to responses to requests under the Department of Justice’s Foreign Corrupt Practices Act Opinion Procedure (described below at p. 10) and to general explanations of compliance responsibilities and potential liabilities under the FCPA. This brochure constitutes the Department of Justice’s general explanation of the FCPA.

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UPDATE: The Layperson’s Guide to the FCPA has been replaced by  A Resource Guide to the US Foreign Corrupt Practices Act (.pdf)