Posts Tagged ‘Mark Mendelsohn’
Monday, May 10th, 2010

The following commentary is by Main Justice CEO  Mary Jacoby.

Forbes magazine published a cover story this week accusing Justice Department prosecutors of ginning up Foreign Corrupt Practices Act cases to enrich themselves.

A valid story questioning the high costs to corporations of FCPA investigations and compliance was marred by innuendo and unsupported allegations that Justice Department lawyers had ramped up anti-bribery enforcement merely to make big bucks when they leave government.

“What are these prosecutors accomplishing? Maybe they are fighting for truth and justice,” Forbes reporter Nathan Vardi wrote. “Maybe, that is, it makes sense for the U.S. to hold its corporations to a higher standard of integrity than the French or Chinese outfits they compete against when trying to win business abroad.”

So, Forbes is saying that U.S. competitiveness is enhanced by operating on the same low ethical plane as corrupt Chinese companies? Interesting argument.

Yes, it is true that U.S. businesses can lose contracts to foreign companies with no constraints on bribing public officials. That’s a really old debate — as old as the 1972-74 Watergate scandal whose revelations of corporate slush funds for bribing overseas officials helped lead to enactment of the FCPA in 1977.

The Forbes magazine spread depicts Former Justice Department FCPA Chief Mark Mendelsohn as part of a bribery "racket." (Forbes)

It’s also true that some former DOJ Criminal Fraud Section lawyers have gone on to lucrative FCPA-related jobs in the private sector. (Stop the presses, there’s a revolving door in Washington!) But the Forbes piece becomes unhinged in its portrayal of increased FCPA enforcement as nothing but an extortion racket intended to make millionaires of prosecutors.

Prosecutors are “creating a lucrative industry – FCPA defense work – in which they will someday be prime candidates for the cushy assignments,” Forbes wrote. “[T]here is nothing to stop prosecutors from ginning up cases that will feed the lawyers who used to have their jobs or from looking forward to a payday in the private sector that will be made possible by their busy successors at Justice.”

This analysis ignores the long history of U.S. anti-corruption efforts, the consensus among developed countries about the corrosive effect that public corruption has on living standards in poor countries, and the distorting effects on markets when contracts are awarded not on merit, but on the basis of who paid the biggest bribes to government officials.

We won’t get into this history – a terrific multimedia primer can be found here on PBS’s website, as a sidebar to journalist Lowell Bergman’s Frontline documentary on international bribery, “Black Money.”

To be sure, large companies with complex operations in many countries face a daunting task in keeping their noses clean. If an employee in a far-flung locale makes a grease payment to get a shipment through customs, or wines and dines officials to get business, it can bring the hammer of U.S. law enforcement down. It’s a genuinely tough position for a general counsel. Having a robust – and expensive – compliance program in place wins a company points if it ever does come under DOJ scrutiny.

Moreover, the wisdom of self-reporting violations in exchange for leniency from the government is increasingly being questioned, as relatively minor issues can spiral into situations where millions of dollars are paid to outside law firms and consultants to prove to the government the company has rooted out its problems.

Case in point: Avon. The cosmetics company voluntarily disclosed to DOJ bribes paid by employees in China. It expects to spend $28 million cleaning up after the disclosure, Forbes wrote. We expect to see much more debate about self-reporting in the future.

But the Justice Department portrayed by Forbes isn’t the one I know. Most prosecutors love their jobs. They’re making under $200,000 a year. Why do many stay well into their working primes, when they could make millions outside the government? Many are idealists who believe they’re making the world a better place. Their work is fun and mostly rewarding.

The Forbes story opens with an anecdote about former Criminal Fraud Section prosecutor Billy Jacobson. In 2007, when Jacobson was an assistant chief enforcing the FCPA, oil services firm Weatherford International informed the DOJ  that its employees may have paid bribes in Europe. Weatherford hired Fulbright & Jaworski LLP to assist in the FCPA probe. Jacobson left DOJ to join Fulbright as a partner working on Weatherford’s compliance. Then, he left for Weatherford itself, making something short of $4 million a year, Forbes reported. Weatherford, in turn, paid Fulbright and other firms $106 million in connection with the bribery probe and other issues, Forbes reported.

Nailed, right? While it would be naïve to dismiss the lure of a staggering salary, there are other explanations for Jacobson’s departure from government. People who know Jacobson said he wanted to rise to deputy chief overseeing the FCPA. That wasn’t happening, because Mark Mendelsohn – the FCPA chief since 2004 – wouldn’t budge.

Mendelsohn finally left the Justice Department in April to join Paul, Weiss, Rifkind, Wharton & Garrison LLP as a partner earning as estimated $2.5 million a year.

Why did Mendelsohn leave? Word on the street is that he knew he didn’t have a chance of rising higher in the DOJ under the Obama administration. He started looking for a private-sector job in late 2008, but didn’t actually make the leap until this month. If Mendelsohn’s goal was to cash out, why did he delay a year? Many top law firms were vying for him. Is it possible he just loved his government job too much?

Other fraud section lawyers left this year because they were nudged out by Criminal Division Chief Lanny Breuer, who wanted to put his own team in place and bring new blood into the section. Yes, they went on to lucrative law firm jobs. But to say they pursued aggressive law enforcement over long DOJ careers simply to feather their nests strikes me as a pretty low blow.

Read the full Forbes story here.

Tuesday, March 23rd, 2010

NEW YORK — The two public faces of Foreign Corrupt Practices Act enforcement hammered home the well-worn messaging about their agencies’ commitment to the law at a conference Tuesday morning.

Mark Mendelsohn, a Deputy Chief in the Justice Department Criminal Division’s Fraud Section, and Cheryl Scarboro, an Associate Director in the Securities and Exchange Commission’s Enforcement Division, touched on a number of issues regarding the FCPA, but the overall message was nothing new: FCPA enforcement is now a priority and it will continue to be.

Deputy Chief Mark Mendelsohn (Christopher M. Matthews / Main Justice)

“There will be a coordinated and a more proactive approach to going out and finding violations,” Scarboro said.

“The department places a significant and high priority on its FCPA program,” Mendelsohn added. “You can see that commitment in the prosecutions we’re bringing and the resources we’ve dedicated to enforcement.”

The two FCPA chiefs appeared at the National Forum on the Foreign Corrupt Practices Act. The ubiquitous conferences offer the government a chance to spread the FCPA gospel to the corporate compliance officers, private practice lawyers and members of the media who attend such events.

After some opening remarks from Lucinda Low, a partner at Steptoe & Johnson LLP, Scarboro spoke about the SEC’s FCPA program.

In August, Robert Khuzami, the head of the SEC’s Division of Enforcement, announced the creation of specialized teams dedicated to specific enforcement areas. Scarboro was selected as the FCPA team’s head.

Cheryl Scarboro (SEC)

Scarboro said her FCPA team was up and running and the team’s assistant directors had already been hired. She said the team’s staff size would number between 25 and 30, and they will be in place in the next two weeks.

According to Scarboro, having lawyers dedicated solely to FCPA enforcement will be a marked improvement.

“This is a new thing for us, because in the past, staff attorneys investigated all kinds of things as they came through the door,” she said. “The dedicated staff involved in these cases will have a chance to learn the nuts and bolts.”

Scarboro said that members of the FCPA team would be located all over the country. Fort Worth, Texas; Boston; Los Angeles and San Francisco will receive substantial resources, though the FCPA team’s largest presence will be in Washington, D.C, Scarboro said.

Scarboro also indicated that the SEC would follow DOJ’s lead in targeting specific industries for enforcement, but she declined to specify which industries.

The Justice Department has already publicly said that it will scrutinize the pharmaceutical and telecommunications industries. After February’s announcement of the sting case — in which 22 executives in the defense and law enforcement industries were indicted for FCPA and other charges — many speculated the department had set its sights on another industry. Mendelsohn confirmed those suspicions this morning.

“We’re obviously taking a hard look at the defense and law enforcement products industry, and I think you can expect more [targeted enforcement] going forward,” Mendelsohn said.

As for the sting case itself, Mendelsohn said it would not be surprising if some of the cases went to trial in the next year.

Mendelsohn also discussed a number of trends in the department’s FCPA enforcement. He said the DOJ was targeting certain types of individuals for FCPA-related prosecution, among them — mid to high-level executives, third party contractors, and in some cases, the actual foreign officials who accepted the bribes.

In response to a question about the DOJ’s recent settlement with BAE Systems, Mendelsohn said that it does consider collateral consequences when structuring settlement agreements.

Earlier this  month, BAE pleaded guilty to failing to maintain an adequate anti-corruption compliance program. But the company did not plead to any FCPA charges, despite widespread allegations of bribes paid by the company. At the time of the settlement, many speculated that the FCPA charges were left out because BAE could face debarment in Europe. Mendelsohn also seemed to confirm that Tuesday.

“There is a growing recognition that the [European Union] debarment requirement presents particular challenges for companies trying to settle cases,” Mendelsohn said.

Mendelsohn and Scarboro also faced questions about what companies can gain from having extensive compliance programs when they self-disclose FCPA violations to the government.

Mendelsohn said he could provide only anecdotal stories on the value of compliance programs, not statistical data.

“Our principal mission here is prosecuting cases, not announcing ones that we don’t prosecute,” he said.

Scarboro said she could not provide details on when the SEC does not pursue companies that self-disclose, but that compliance programs were the first thing they looked at.

Mendelsohn also said the Justice Department strives for consistency in its plea agreements.

“There are good arguments, and then there are just arguments,” he said. “If you want to hearken back to a 1982 prosecution and suggest that what we’re doing now ought to relate very directly to the way that case was resolved, circumstances change.”

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Wednesday, November 25th, 2009

Correction: An earlier version of this post said Tyrrell had decided on Weil, Gotshal & Manges.

Steven Tyrrell, the outgoing chief of the Justice Department’s Fraud Section, said in an interview Wednesday he has been in job talks with a number of law firms, including Weil, Gotshal & Manges. But he said he had not made a final decision.

“I have not received or accepted an offer from any firm. I’ve had extensive discussions with a number of top-tier firms, including Weil, and expect to make a decision very soon,” Tyrrell said.

Tyrrell, who has led the Fraud Section since 2006, announced his plans to leave over the summer. He’s also been in talks with seven other firms.

A 20-year veteran of the department, Tyrrell is expected to leave the department in late December. He has said he intends to help his successor make the transition.

Two people familiar with Tyrrell’s talks told Main Justice that the Fraud Chief was headed to Weil, Gotshal. Tyrrell did not respond to requests for comment on Tuesday and early Wednesday, but after our original story was posted, he clarified that he hadn’t made a final decision.

Denis McInerney, a partner at David Polk & Warwell in New York, accepted the section chief job last week. The Justice Department has not announced his start date.

Tyrrell joined the Justice Department in 1989 as an Assistant U.S. Attorney in the Southern District of Florida, where he handled securities, health care, government contracts, consumer and bank fraud cases. He transferred to the Northern District of New York in 1999, focusing on all manner of white-collar crimes, before coming to Washington. Tyrrell was a Deputy Chief in Counterterrorism Section from 2003 until he took over Fraud.

Tyrrell is leaving as the Fraud section is expanding its might. The department is in the midst of hiring 10 additional trial lawyers, five of whom will be devoted to ferreting out health care fraud. A Justice official said the department is waiting for Congress to pass the 2010 budget before filling some of the posts.

Two other Fraud Section supervisors are planning their exits: Deputy Chief Mark Mendelsohn, who oversees Foreign Corrupt Practices Act prosecutions, and Paul Pelletier, Principal Deputy Chief for Litigation.

Pelletier, the goverment’s lead lawyer in prosecution of Texas Financier R. Allen Stanford, reportedly plans to see the case to its conclusion. Mendelsohn is being courted by many law firms, according to current and former Justice officials, but it’s unclear when he’ll make his decision.

McInerney, a former prosecutor in Manhattan, comes to the job after about 15 years in private practice at Davis Polk, a white-shoe firm based in New York.

He was on the defense team that represented Arthur Anderson in the wake of Enron, taking the lead on law arguments during the six-week trial in Houston, and has represented numerous high-profile corporate clients, including CVS Caremark Corp. and Siemens AG.

He’s also represented victims of Bernard Madoff’s multi-billion dollar Ponzi scheme, and in 1994, he worked alongside Robert Fiske Jr., who served as special counsel in the Clinton-era Whitewater investigation before the appointment of Independent Counsel Kenneth Starr.

Fiske, who is a senior partner at Davis Polk, said McInerney was the second lawyer he recruited for the team. He charged McInerney with preparing a case against three Whitewater figures: Eugene Fitzhugh, David Hale and Charles Matthews.

Though McInerney had little lead time, all three men pleaded guilty — one of them before trial and two during.

“He’s a prodigious worker and he’s extraordinarily thorough,” Fiske said of McInerney. “He leaves no stone unturned.”

McInerney (Columbia, Fordham Law) was an Assistant U.S. Attorney in the Southern District of New York from 1989 to 1994. He was deputy chief of the office’s criminal division from 1993 to 1994.