CORPORATE CRIME REPORTER
Foreign Firms Plead Guilty More, Fined
More than US Firms, Study Finds
26 Corporate Crime Reporter 5, January 23, 2012
Federal prosecution of foreign based corporations
is on the rise.
And foreign firms are treated on the whole differently
than U.S. based multinationals.
Big U.S. based corporations tend to get deferred and
non prosecution agreements.
Foreign firms, on the other hand, tend to plead guilty
to their crimes.
And on the whole, foreign firms pay higher fines.
That’s the take of University of Virginia Law Professor
Brandon Garrett in a just released law review article titled
“Globalized Corporate Prosecutors” published in the Virginia
“Foreign firms, unlike domestic firms, often do not receive
a deferred prosecution,” Professor Garrett writes. “The
deferred prosecution approach, as it turns out, is
dominant in certain types of prosecutions but not in others.
One might expect that different types of corporate crime
would be handled differently, and as it turns out, this affects
foreign firms. Foreign firms typically plead guilty and
receive a conviction.”
“Foreign firms pay, on average, higher fines than otherwise
comparable domestic firms,” Garrett writes.
Why are foreign firms being convicted more and
paying higher fines?
“I do not suggest that prosecutors treat foreign firms differently
than similarly situated domestic firms,” Garrett writes. “Several
reasons may explain the number and type of foreign corporate
convictions and the higher average fines. One would expect
prosecutors to pursue only more substantial foreign firms and
only in more serious cases, given the practical obstacles to
investigating foreign violations. Convicted foreign firms are
also disproportionately public firms and large firms. Foreign
firms may also be disproportionately among the more serious
violators. Foreign firms in some instances may be more willing
to self-report or accept a conviction – making such cases relatively
low-hanging fruit for federal prosecutors. Particularly in the more
serious cases, prosecutors may view not just foreign criminal
penalties, but also foreign civil penalties, as inadequate. . .. Again,
my goal is not to suggest differential treatment, but to describe
foreign corporate prosecutions and the need to assess their newly
prominent role.”
Professor Garrett argues that corporate criminal liability is a form of
“American Exceptionalism.”
“Most countries in Europe and the world lack corporate criminal liability
generally and only recently have enacted a handful of specific corporate
crime statutes,” Garrett writes. “Foreign countries impose civil regulatory
fines and individuals may be prosecuted, but firms rarely face prosecution.
Corporations have some incentive to cooperate with local regulators, but
cooperating with U.S. prosecutors is imperative. Not only is there broad
respondeat superior liability for corporations in the United States for
criminal acts of employees, but federal criminal law is also broader
and far more punitive than that in other countries. Federal prosecutors
possess extraordinarily wide discretion as compared to their counterparts
around the globe. The consequences of a criminal indictment or a
conviction in the United States can sometimes be significant, though
certainly not always. Firms may be debarred by regulators or from
government contracting, they may face high fines, and they can suffer
harm to their reputations. As a result, foreign firms often negotiate
settlements when misconduct is self-reported or exposed by competitors
or employees.”
Corporate Crime Reporter
1209 National Press Bldg.
Washington, D.C. 20045