"Either He's Dead or My Watch has Stopped"

The Marx Brothers have always been my favorite.  Even today, their movies stand out as the best.  One of Groucho’s best lines is particularly apt to FCPA reform.

In A Day at the Races (1937), Groucho passed himself off as Dr. Hackenbush, a doctor rather than a horse doctor, and quipped while taking Harpo’s pulse — “Either he’s dead or my watch has stopped.”

The same can be said for FCPA reform.  Either it’s dead or our political watches have stopped.  Whatever measure is used, FCPA reform is dead — not just for this year but for years to come. 

Politicians are not going to sacrifice themselves over this issue.  House Crime Subcommittee Chairman Sensenbrenner suggested that he would introduce legislation to reform the FCPA but he has not done so.  Senators Klobuchar and Koon suggested they would do so as well. They have not done so. 

Political opponents to the FCPA reform effort are lined up – DOJ, SEC, NGOs, the international community, and many others.  Politicians see the opposition and are reluctant to expend capital on such an effort.  The political climate is just not right for such measures to be introduced, much less passed by either the House or the Senate.

For the Chamber of Commerce, it is time to go back to the drawing board.  And this time they need to re-think its strategy.  Some of its ideas were ill-conceived, some will have no impact, and some are just plain misguided.

I trust that political debate can expose or refine the strengths or weaknesses of an idea.  Many have been arguing for a compliance defense.  There are some good arguments in support of such a defense, but the proposal suffers from one fatal flaw – no company can afford to be indicted and then raise the defense.  Such a defense has no practical benefit. 

I made this point when testifying before the Senate Judiciary Committee in November 2010.  Mark Mendelsohn made the same point when debating the issue with the FCPA Professor and former Attorney General Mukasey. 

Mark and I are right.  Arthur Anderson demonstrated how devastating the indictment of a publicly-owned company can be.  It is a death knell for the company and hits the employees and the community very hard.  For that reason, companies always settle. 

The Justice Department and the SEC recognize this reality.  The use of Deferred Prosecution Agreements and Non-Prosecution Agreements are tools that are used to avoid those catastrophic results to companies.

More important than this fundamental flaw in the Chamber of Commerce’s proposal, is the fact that there is little public support for companies that engage in foreign bribery.  The FCPA was passed nearly 35 years ago.  According to Judge Stanley Sporkin, every time business tried to relax the law, Senator Proxmire used to joke, that business wants Congress to enact the “Bring Back Bribery Act.”   There is a political grain of truth in this joke.

Contrary to many comments by the FCPA paparazzi, FCPA reform was not killed by recent events in Mexico as reported by the New York Times – it was dead from the beginning.  Bad ideas have no life and FCPA reform, as currently crafted, is a bad idea.