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Justice Department Guidance — Some Suggestions

I am not anticipating that the Justice Department’s soon-to-be-released guidance is going to satisfy anyone.  However, DOJ has an opportunity to do some good, and I expect they will take it.  I have the utmost respect for DOJ, especially the career prosecutors (I was one for 17 years), and I know they will try and do the right thing.

There are a lot of issues to balance, and the stakes are very high.  On the one hand, DOJ cannot — and should not — weaken the US commitment to anti-corruption enforcement.  On the other hand, there are some issues that can be carved off in the  interest of good government.

Congress is not going to amend the FCPA anytime soon, and especially not in an election year.  The recent New York Times investigative report has made it politically impossible for Congress to act for the next several years.  That leaves only one solution — DOJ has to exercise its prosecutorial discretion and to adopt policies which provide greater clarity and certainty to enforcement and overall compliance.

With that background, here is a laundry list of issues which DOJ can — and should or should not  address.  Number 1 — Merger and Acquisition Policies — would be a significant change which should address some major concerns from the business community.

1.  Mergers and Acquisitions (“Successor Liability”) — DOJ has to modify its policy announced in Halliburton, Opinion Release 08-02.  The policy is far too strict and indefensible given business realities.  In its place, DOJ should announce a relaxed policy, initially outlined in several settlements, which requires the acquiring party to conduct a due diligence review of the target company, and  then to remediate any potential deficiencies or violations within 12 months (or 18 months) after closing.  The acquiring party would have to disclose to DOJ and the SEC any violations discovered during this period and the steps taken to remediate the problems.  Target companies would be given 12 months after the closing date to be integrated into the acquiring company’s compliance program and training.

2.  Declinations — I hate to come out against the overwhelming positions of FCPA commentators but there is no way DOJ should issue any declinations.  It is an important precedent to avoid.  Why?  There are a lot of factors that DOJ takes into account in its decisions whether to prosecute or not prosecute. The last thing DOJ needs to do is make these factors public.  I am not against transparency in government but issuing such decisions will only increase litigation over the exercise of such discretion.  Two cases which look similar on paper may, in reality, be very different when analyzed by DOJ for possible prosecution.   Defendants may challenge prosecutions on due process and equal protection grounds, and most likely lose; however, there is no public interest benefit from revealing such considerations.

3.  Plea Policies — DOJ should, however, adopt guidelines for cooperation.  If a company discloses and cooperates before any DOJ investigation has been initiated, the company should be eligible for a guaranteed percentage (50%) reduction in its fine, assuming it provides substantial assistance and extraordinary cooperation.  If a company cooperates after a DOJ investigation has been initiated, then it should receive a 30% reduction in its fine.  If the company cooperates at the very end of the investigation, or after indictment, the company should receive a 15% reduction in the fine.  Of course, there should be an “extraordinary” cooperation factor which can increase the basic guideline, and a factor to take into account unusual circumstances.

4.  Gifts, Meals, Entertainment and Travel — DOJ should provide some reasonable guidance on reasonable bona fide expenditures to provide relief to companies which are “stuck” in minute analysis and review of otherwise minimal expenditures.  DOJ should not adopt a “de minimis” exception because such an exception may be abused.  Instead DOJ could state as a policy that minimal expenditures by themselves would not normally fall outside the coverage of this affirmative defense, but that such expenditures would be outside the defense protection when the expenditures are part of a continuing series or common scheme to circumvent internal compliance policies and corruptly influence foreign government officials.

5.  Foreign Official definition — DOJ should adopt a policy restating the factor analysis outlined in court decisions.  To the extent they can try and square the factor analysis, DOJ should try and do so.  This would not eb hard for DOJ to do and would provide greater clarity as to how DOJ weighs such factors.

These are my top 5 issues — there are many more issues which can be addressed including subsidiary liability, extraterritorial jurisdiction, use of related counts such as Travel Act and other theories of liability.  However, I do not think these issues are ripe for any changes.  It is hard to anticipate how these issues will come up and DOJ needs to retain prosecutorial flexibility to assert claims and ustheories of prosecution which employ these tools.

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2 Responses

  1. April 27, 2012

    […] Some suggestions for DOJ’s impending Foreign Corrupt Practices Act guidelines (Corruption, Crime & Compliance) […]

  2. May 8, 2012

    […] the headlines.”  Likewise, Michael Volkov (Corruption, Crime and Compliance Blog) stated (here) that “Congress is not going to amend the FCPA anytime soon, and especially not in an […]