CORPORATE CRIME REPORTER
Says Criminal Bribery Prosecutions Doubled in 2007
22 Corporate Crime Reporter 36(1), September 16, 2008
Mark Mendelsohn, the Justice Department’s chief prosecutor of foreign bribery, said last week that the number of criminal enforcement actions brought by the Department under the Foreign Corrupt Practices Act (FCPA) doubled in 2007.
The Department brought 16 criminal enforcement actions in 2007.
“On the one hand, in absolute terms, that’s a fairly small number of criminal prosecutions given the hundreds of thousands of federal criminal charges brought around the country by the Department of Justice,” Mendelsohn said. “On the other hand, that represents a 100 percent increase over the next largest number of cases prosecuted – eight – in the immediate previous year – 2006.”
Mendelsohn spoke last week at an American Bar Association panel on foreign bribery at the Capital Hilton in Washington, D.C.
Mendelsohn said the trend toward more bribery prosecutions is going to continue “given the significant number of matters that we have under investigation.”
And he said the trend toward more prosecutions of individuals – as opposed to corporations – is a result of explicit Department policy.
“The number of individual prosecutions has risen – and that’s not an accident,” Mendelsohn said. “That is quite intentional on the part of the Department. It is our view that to have a credible deterrent effect, people have to go to jail. People have to be prosecuted where appropriate. This is a federal crime. This is not fun and games.”
Mendelsohn ticked off a number of reasons for the uptick in foreign bribery prosecutions.
Front and center is Sarbanes Oxley.
“Sarbanes Oxley has played a key role,” Mendelsohn said. “It has brought a new focus on corporate internal controls. It made corporate officers and directors personally responsible for those controls. That in turn has brought increased attention and scrutiny by legal and accounting to foreign payments issues. That’s a big part of the story.”
Number two reason – the world is getting smaller.
“Globalization is moving apace even in difficult economic times,” Mendelsohn said. “It’s no longer simply the largest multinational companies doing business in emerging markets. It is now almost every public company. It’s now many private companies. It’s now many individual business owners. The flip side of that is that the world is smaller from a communications and media perspective. Problems in a faraway country are more likely to be learned by us – sitting here in Washington – than ever before. People in Bangladesh can e-mail me directly with an allegation that a company in Bangladesh paying bribes to a government official there. Information about our work is now known around the world. The media is paying a great deal of attention to corruption issues. There is a lot more English language media reporting around the world. It’s more difficult to hide. That’s part of it.”
And finally, the Department of Justice and the Securities and Exchange Commission have ramped up enforcement.
“We have come up some creative ways to try to resolve cases involving companies so that we are no longer faced with a binary decision to either charge a company or not charge a company,” Mendelsohn said. “We have crafted resolutions – non prosecution agreements, deferred prosecution agreements, corporate compliance monitors – we have come up with tools that provide positive incentives for responsible companies to self-disclose, to self- investigate, to remediate appropriately. And that has had an enormous impact on the number of companies that have been willing to come in an talk to us about the problems they are identifying in their operations.”
“Another factor is that we have been increasingly effective in gathering evidence overseas through treaties as well as informal arrangements with law enforcement in other countries. That has made our work easier. Foreign law enforcement authorities are beginning to investigate and prosecute their own cases. That has had a positive effect on our efforts.”
Mendelsohn said the Department of Justice’s relationships with foreign counterparts vary depending on the country.
“We have very good relations with our counterparts in certain jurisdictions,” he said. “We have nascent but developing relationships in other jurisdictions. And we have poor relationships in other jurisdictions.”
Mendelsohn said that while the Europeans recognize the concept of “international double jeopardy,” the United States does not.
“On the other hand, as a discretionary matter, we do pay attention to what our foreign counterparts are doing, particularly where a company may be headquartered in a foreign jurisdiction, but is acting at least in part in the US,” he said. “That doesn’t necessarily mean we are going to defer to that jurisdiction. It may mean that we would reflect on what’s going on in that jurisdiction in some way.”
“For example, I can think of two cases off the top of my head in which we have done that. We brought a case against Statoil, which is an issuer here, but a Norwegian company. We prosecuted the company and the Norwegian authorities prosecuted the company for paying bribes in Iran. We credited Statoil for the penalties that they paid in Norway. They pled guilty in the US, they were given a deferred prosecution agreement. But at least on the sanctions side, we credited them with the penalty that they paid in Norway.”
“In another case, one of our Oil-for-Food prosecutions involving AkzoNobel, a Danish company, we entered into an agreement with the company to resolve the matter. The Justice Department agreed to not take any financial penalty whatsoever, provided that the company settled the case with the Danish authorities, which was pending at the same time. There was a Danish prosecution. There was an agreement with the Justice Department, but no additional penalty.”
“There are other cases that are not public where we have elected to do nothing in deference to ongoing foreign investigations – or to sit back and wait to see what the outcome of that foreign investigations will be,” Mendelsohn said. “One option we have is to enter into a tolling agreement with a company – to toll the statute of limitations while the foreign investigation progresses. If that foreign investigation results in some enforcement action, we may elect to do nothing. On the other hand, if for evidentiary reasons or legal reasons, that foreign prosecution never gets off the ground, we may step in and proceed with our investigation. So, we can preserve our options there.”
Mendelsohn also encouraged companies to avail themselves of the Department’s FCPA opinion program.
“The Department in almost any other arena is not going to give you an advisory opinion on whether what you are about to do is a crime or not,” Mendelsohn said. “They are just going to let you do it. If it’s a crime, we’ll bring charges. Under this program, you actually can come to the Department and get a binding legal opinion that will protect you and will give you some guidance as to how you can conduct your business.”
“We’ve issued four opinions this year, which is as many as we have issued in any previous year. And we have one or two more coming in. So, you can expect that we will have a few more this year. And increasingly they are not so much routine travel and entertainment questions, but more sophisticated questions. We did one not long ago for Halliburton for an acquisition of a UK company. Halliburton identified itself in the release. It can also be done anonymously. Typically it is. While these opinions are only binding on the requestor, they serve as a basis for legal advice that many attorneys provide to their clients.”
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