Sen. Arlen Specter (D-Pa.) asked why the Justice Department doesn’t prosecute more individuals under the Foreign Corrupt Practices Act at a Senate hearing Tuesday.
“Fines come out of the corporation… but that doesn’t deal with the individual conduct violating the law,” Specter said during a Senate Judiciary crime and drugs subcommittee hearing, the first ever held to conduct oversight specifically of the FCPA.
Specter, who chairs the subcommittee, said his interest was piqued earlier this month when the DOJ and the Securities and Exchange Commission announced a blockbuster, seven-company foreign bribery settlement involving freight forwarder Panalpina World Transport (Holding) Ltd., which a combined total of more than $236 million in fines. Why, Specter wanted to know, were no individuals charged?
Greg Andres oversees the DOJ's Crminal Fraud Section (Photo by Christopher M. Matthews)
Acting Deputy Assistant Attorney General Greg Andres, who testified before the committee, kept mum, saying the investigation and litigation were “ongoing.”
Tuesday’s hearing comes at a time of ramped up FCPA enforcement. The Justice Department has levied more than $1 billion in criminal penalties in the past year to resolve foreign bribery cases. The SEC has imposed more than $600 million in civil sanctions.
But in some of the most high-profile FCPA cases, no inviduals were charged. In 2009, Siemens AG paid $1.6 billion to settle corruption allegations in several countries and BAE Systems plc. paid $400 million to settle FCPA-related charges. No employees of either company have been indicted. Likewise, no employees of Daimler AG were charged when the automaker agreed to pay $185 million in criminal fines and civil disgorement to settle FCPA violations in April.
Did anyone go to jail?
Specter previously grilled Assistant Attorney General Lanny Breuer in April on why no individuals were indicted in the Siemens case, a line of questioning he returned to Tuesday.
“Did anyone go to jail in those cases?” Specter asked.
Andres said that the Siemens investigation was also ongoing, but added there were “a number of challenges” to charging individuals in relation to some of those cases. Andres also defended DOJ’s record on individual FCPA prosecutions, saying the deparment had charged more than 50 people since January 2009. Specter wasn’t satisfied.
“I’ve heard that and I know what charges are,” Specter said. “My question is, who’s going to jail?”
Andres cited a number of cases in which FCPA defendants had received jail sentences, the stiffest of which was 87 months.
“With respect to the prosecution of individuals and corporations, its not an either-or proposition for the department,” Andres said. “We seek to prosecute both corporations and individuals who have violated the FCPA.”
FCPA enforcement has also generated criticism in the corporate community, prompting the business lobby to propose changes to the law and lawyers in private practice to call for an FCPA “amnesty program.”
Andres said there is no plan to adopt a leniency program for FCPA disclosures, because the department has other ways beyond self-disclosure to learn about violations. By contrast, he said, antitrust authorities often learn of criminal price-fixing only when a member of the cartel comes forward, making a clearly defined reward system more productive.
“We don’t believe that immunity is appropriate here, just as its not appropriate for a bank robber to get immunity just for disclosing the robbery,” Andres said.
Other Critics
The committee also heard from a trio of FCPA experts: Butler University business law professor Mike Koehler, who recently wrote a paper blasting the “facade” of FCPA enforcement; Jenner & Block LLP partner Andrew Weissmann, who co-authored a U.S. Chamber of Commerce paper calling for reforms to the FCPA; and Mayer Brown LLP partner Michael Volkov, who has represented a number of clients in foreign bribery cases, including a defendant in the high profile FCPA “sting case” against 22 executives in the law enforcement and defense products industry.
Mike Koehler (left) and Andrew Weissmann on CSPAN
Weissmann, who said he was testifying on behalf of the U.S. Chamber, highlighted one of the proposed reforms from his paper: adding a corporate compliance defense and clarifying the statute’s definition of a “foreign official.”
Several recent cases have involved bribes paid to people who were not foreign officials in a strict sense but rather employees of state-owned companies. According to Weissmann, this an overly broad interpretation of the statute.
The FCPA statute defines a foreign official as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”
Weissmann called for a clarification of the word “instrumentality,” which he said would help clear up to what extent employees of state-owned companies are covered by the law.
In its current form, the FCPA does not provide a so-called “compliance defense,” which would allow companies to rebut FCPA allegations by arguing that individual employees or agents circumvented compliance measures already in place to prevent foreign bribery. Weissmann said that such a defense would protect companies acting in good faith from “rogue” employees.
Defense lawyer Mike Volkov on CSPAN
Volkov countered that an amnesty program, which would reward companies that self-disclose FCPA violations with reduced penalties, is a better option because it would spare companies from going to trial, where they could face debarment from federal programs and other damaging outcomes. An amnesty program also would not require legislative action, Volkov said.
“[The Justice Department] could do it tomorrow” by making new policy, Volkov said.
Specter’s Parting Gift?
Specter, who lost in a Democratic primary earlier this year and will depart the Senate, appeared to have picked a hot topic for Tuesday’s hearing. A line stretched outside the door to the committee room before the hearing began and a number of reporters filled the media tables.
Sen. Patrick Leahy (D-Vt.), the chairman of the Judiciary Committee, who appeared briefly, took the opportunity to praise his colleague’s service during what may be Specter’s last hearing as chair of the subcommittee. Sens. Amy Klobuchar (D-Minn.) and Chris Coons (D-Del.) also commended Specter. None of the Republican members of the subcommittee attended the hearing.
Whether Specter hopes to prompt legislative amendments to the FCPA or changes in DOJ’s enforcement policies remains unclear.
Specter said that he would continue to press the Justice Department about why it had not charged individuals in some of its large cases. He asked Koehler, the outspoken FCPA critic, if he would be willing to help.
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