Should the Justice Department Prosecute More Individuals?

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2 Responses

  1. Michael,

    The answer to your question:

    Should the Justice Department Prosecute More Individuals (for violating the FCPA)?

    is Yes.

    The vast majority of business people who handle international business for US companies still do not take the FCPA seriously. The threat of prosecution is so extremely remote they do not have to care. This applies to both the US citizens and others working in the US and the employees and third parties on the ground overseas at all levels in companies.

    In virtually every FCPA case, company employees clearly know that bribery and falsification of records is happening – usually because they are involved in it. Senior management has preserved a comfortable level of plausible deniability, but would certainly know what was going on it they took a little time to look. From the few FCPA cases that are reported each year, it is easy to conclude that US prosecutors are powerless to find the facts about which individual company employees knew and participated in the violation and which executives ignored the red flags and provided cover.

    Prosecutions like Siemens and BAE and the rest of the top 10 gigantic fines are so remote from day to day business that they are not relevant to business people. The fact is business people see companies prosecuted then “let off” with cost-of-doing-business level fines and no executives prosecuted – and realize they have almost nothing to lose by violating the FCPA.

    There should be some way the DOJ and SEC and make the FCPA real to US business people. Maybe every DPA and other form of plea bargain should require the company to include a list of the names and titles of the individual employees of the company and at the company’s contractors, agents and intermediaries who participated in the violation, covered it up or was responsible but did nothing. If the government is not willing to allocate the resources to prosecute these people, at least compel the company to name and shame them.

  2. Rajat Soni says:

    Dear Michael:

    Very interesting. Now full disclosure, Tom Fox accused me of being a member of your mocked “FCPA Papparazi” and called me a fool recently, but I’d still like to answer your question as best as I can.

    Yes. I think the verdict exonerating Brian Stoker in the Citi case tells us the complexity of the calculus at issue here. The jury acquitted Stoker but told the SEC to keep digging and going after the higher-ups. I think the public feels that the justice system simply lets off the wealthy and well connected and thus the mid and low level employees targeted seem to be sympathetic scapegoats.

    I think prosecutors are open to the concerns of the public. Prosecutions of the likes of Rajat Gupta help to restore public confidence. But these most often happen in the realm of insider trading, where regulators have long felt far more confident. But there is so much more than insider trading and stock backdating cases. And that is a big blind spot for the SEC and other agencies.

    What about the mortgage crisis? MF Global? CDO deals? Massive bribery cases? In all those it seems the target is a monetary penalty because the entities are too powerful or well-connected.

    What message is really sent by saying that billions of dollars in legal violations have occurred and yet no one is accountable and everyone is being scape-goated? I think it sends a message that corporations will shield the senior executives from responsibiity. Most corporations are structured such that plausible deniability exists. Yet, the Stoker jury has spoken, perhaps for more than a few Americans, and their message to regulators is clear.

    Keep digging to get to the individuals responsible.

    I hope the LIBOR scandal offers an opportunity to target specific traders beyond merely the banks. This could be a barometer of whether the SEC, DOJ, SFO, etc. take up the jury’s encouragement to keep looking for the individuals responsible.

    Best Regards,
    R. Soni