Get Rid of Corporate Deferred and Non Prosecution FCPA Agreements

Mike Koehler has an idea.

Get rid of corporate deferred and non prosecution agreements.

Koehler is a professor of business law at Butler University.

And he’s the FCPA Professor.

Koehler says the ubiquitous settlement agreements lead to underprosecution – and overprosecution.

“One on end of the spectrum, these agreements allow egregious instances of corporate bribery to go basically unpunished – other than the corporate fine,” Koehler told Corporate Crime Reporter in an interview last week.

“On one level, it is the underprosecution of corporate crime.”

“Look at the BizJet situation last week. Here you have a situation where three high level executives – we’re not talking about rogue employees – three high level executives were involved in systematic payments to foreign officials to get foreign government business.”

“Yes, they voluntarily disclosed. Yes, they cooperated. But what message does it send where a company whose senior executives were involved in the improper conduct, is not actually required to plead guilty to anything? So, in the BizJet example, the deferred prosecution agreement allowed for the underprosecution of corporate crime.”

“On the other end of the spectrum, it’s also clear that these agreements allow for the overprosecution of alleged corporate crime.”

“Look at the BizJet case with the parent – Lufthansa Technik. There is nothing in the non prosecution agreement that tells us why Lufthansa Technik got an NPA. What improper conduct were they engaged in?”

“Since NPAs and DPAs appeared on the FCPA landscape in 2004, only 15 percent of the cases against corporations resolved via these vehicles have resulted in related charges against company employees.”

“This is telling because it goes to the quality of the corporate enforcement action in the first place.”

“Many times entering into these agreements is often a cost/benefit, risk/reward type analysis for companies.”

“But at the end of the day, you are often left scratching your head wondering whether if the Department was put to its burden of proof, they would have ever been able to establish an FCPA violation.”

“My roadmap for FCPA reform abolishes NPAs and DPAs, but then also has a compliance defense,” Koehler said.

“So, where the FCPA liability is the result of low ranking employees, now companies are often offered NPAs and DPAs because there is a recognition that criminal prosecution of such a company would be unfair.”

“But if there is a compliance defense to the FCPA, those companies wouldn’t even be prosecuted because they were good corporate citizens and low ranking or rogue employees circumvented their policies and procedures.”

“You can get rid of NPAs and DPAs, and if the FCPA had a compliance defense, you could get better FCPA prosecutions that the public would have a higher degree of faith in. We now have this strange situation where you have numerous companies winning awards for being ethically sound companies, for being good corporate citizens, and yet are resolving cases with NPAs and DPAs for corporate bribery.”

“There seems to be something inherently inconsistent there.”

Koehler sees a parallel to the SEC neither admit nor deny settlements.

“The government doesn’t want to get rid of these alternative resolution vehicles either, because they maximize the government’s leverage,” Koehler said.

“And companies don’t want to get rid of them because they are cost effective, they are risk averse, and they are the easy way out.”

“This is a perfect parallel to the very strange dynamic we are finding now to the SEC’s neither admit nor deny settlement policy.”

“You had a situation where both the SEC and Citigroup and previously the SEC and Bank of America were in favor of the resolution policy.”

“It wasn’t adversarial in the least. That’s why when the SEC – Citigroup merits appeal is argued before the Second Circuit, they are actually going to have to appoint someone to take the opposite position.”

[For the complete question/answer transcript of the Interview with Mike Koehler, see 26 Corporate Crime Reporter 13(12), March 26, 2012, print edition only.]


Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress