Take a Deep Breath: FCPA Criminal Prosecutions Will Continue
The FCPA paparazzi is at it again — overreacting to the recent DOJ setbacks in several high-profile FCPA prosecutions. Will these setbacks cause the Justice Department to alter its FCPA enforcement program. No way. Everyone is dreaming. Call it wishful thinking.
What will the Justice Department do in reaction to the recent collapse of the Africa Sting cases, the O’Shea case and the Lindsey Manufacturing case? They will bring strong cases, adopt greater scrutiny and assessment of potential cases, and continue to prosecute companies and individuals aggressively. There is no reason to think that the Justice Department will change its course; none at all.
What will FCPA enforcement look like in 10 years? Will voluntary disclosures still fuel FCPA enforcement actions?
The crystal ball in FCPA enforcement is starting to look more and more like criminal antitrust enforcement. While the theoretical underpinnings of the criminal antitrust program which is premised on joint cartel conduct do not apply to FCPA cases, there are some apt analogies.
Criminal antitrust enforcement is fueled by its well-established leniency program which awards a complete pass to the first company to report a cartel violation, and reductions to each succeeding company which cooperates. The Justice Department then takes evidence gathered by the companies and prosecutes individual officers and employees. The company assembles the evidence, including the witnesses and the documents, and the Justice Department puts together very strong criminal cases against individual officers and employees.
The Justice Department is beginning to apply this same model to FCPA enforcement. This is a good or a bad development depending on your perspective. The indictment of eight individuals at the end of 2011 demonstrated how this process will work and how the Justice Department will use a company’s cooperation to indict individuals.
The Justice Department has suggested that it is now going back to cull through prior corporate settlements to identify individuals who may be indicted. The Justice Department will have to act quickly since there is a five year statute of limitations for FCPA criminal offenses.
The Antitrust Division argues that prosecuting individual officers and employees is an important deterrent to criminal cartel conduct. The Antitrust Division routinely indicts an average of three individuals for each company which settles its criminal case. In 2011, the Antitrust Division indicted and/or agreed to guilty pleas for 82 individuals and indicted or settled cases against 27 companies.
In 2012, the Justice Department indicted or agreed to guilty pleas from 16 individuals in and 16 companies in FCPA criminal cases. That is a ratio of 1:1. Ten years from now the numbers will look very different and much like the Antitrust Division’s ratio of companies to individuals. It is easy to imagine that in any given year 30 companies could settle criminal FCPA cases and 90 individuals could be indicted for FCPA violations.
There is no doubt that individual prosecutions will deter foreign bribery. Of course it will not eliminate the problem but by raising the stakes for officers and employees there will be another sea change in the world of FCPA enforcement.