On November 30, 2010, the US Senate Judiciary Committee, Subcommittee on Crime and Drugs held a hearing examining the enforcement of the US Foreign Corrupt Practices Act (FCPA). Chairman Arlen Specter expressly called for increased criminal prosecutions against executives of companies that are alleged to violate the FCPA’s anti-bribery provisions. At the same time, Chairman Specter and other members of the subcommittee sought to define vague statutory language, urged the US Department of Justice (DOJ) to clarify compliance guidelines and considered proposals from the panel—including Mayer Brown partner, Michael L. Volkov—on how to better incentivize corporate compliance.
Heightened Criminal Focus Against Individuals
Companies doing business with foreign officials should be aware that the DOJ, at the instruction of the Congress, may increasingly target executives for criminal prosecution.
Chairman Specter made his position clear from the outset of the hearing: “the only effective deterrent is a jail sentence.” The Senator took this position despite—or perhaps because of—record-breaking civil sanctions against companies accused of violating the FCPA. Chairman Specter noted that in 2008 Siemens paid civil settlements of $450 million to the DOJ, $350 million to the US Securities and Exchange Commission (SEC) and, including international enforcement, ultimately doled out $1.6 billion.
Chairman Specter was most troubled that in the face of such egregious violations resulting in unprecedented fines, the DOJ did not charge even a single individual with violating the FCPA. This sends a message, according to the Chairman, that FCPA fines are merely “the cost of doing business.”
Greg Andres, acting Deputy Assistant Attorney General for the Criminal Division, defended DOJ’s record but agreed that criminal prosecutions should be a “critical part” of FCPA enforcement strategy.
Need for FCPA Clarity
Amid the threat of executive criminal prosecution, the hearing called for clarity in FCPA compliance and guidelines. Subcommittee members agreed that the FCPA term “foreign official” needs to be legislatively clarified. For example, government investment or partial ownership of a corporation currently meets the DOJ’s expansive definition of the term. There is evidence that this interpretation is contrary to Congress’ intent in enacting the FCPA or at least, does not fit in today’s global economy.
Maximizing Incentives to Comply
Senators considered various proposals for how to increase and incentivize corporate compliance with the FCPA. There was a consensus among Subcommittee members and all panelists—excluding the DOJ spokesman—that current guidance is inadequate and that, as a result, companies cannot make informed commitments to compliance. Importantly, the majority of panelists argued that increases in individual accountability should be accompanied by heightened credit to a company’s good-faith compliance efforts.
During his testimony, Volkov, a member of Mayer Brown’s global anti-corruption practice, suggested a program that would meet the government’s interest in increasing FCPA compliance as well as global business’s interest in controlling FCPA-enforcement risk. The plan, modeled on a proposal by Judge Stanley Sporkin, seeks to enable companies to avoid the uncertainty of litigation. It is, therefore, unlike calls for a trial-defense to corporate liability resulting from a rogue employee’s actions. The proposal consists of the following elements:
- A participating company agrees to conduct a full and complete review of the company’s compliance with the FCPA for the five previous years.
- The internal review is conducted jointly by a major accounting firm or specialized forensic accounting firm and a law firm.
- The company further agrees to disclose the results of the legal-accounting audit to the SEC, the DOJ, its investors and the public.
- If the company discovers any violation in the audit, it agrees to take all steps to eliminate the problems and implement appropriate controls to prevent further violations.
- The company would subject itself to an annual review for five years to ensure that compliance is being maintained.
- The company would retain an FCPA compliance officer who would annually certify to the SEC and DOJ that the company is in compliance.
- In exchange for these actions, the SEC and DOJ would agree not to initiate an enforcement action against the company during this period except that such an agreement would not apply to flagrant or egregious violations.
Whether the DOJ will act on legislative pressure remains to be seen. In the meantime, companies engaged in global business should carefully review their anti-bribery compliance programs to avoid this potential next phase of aggressive FCPA enforcement.
To learn more about our FCPA capabilities, please visit or contact the following:
White Collar Defense & Compliance (Vince Connelly or Lynn Neils)
Securities Litigation & Enforcement (Joseph De Simone or John Tharp)
Global Trade (Duane Layton)