Mike Koehler on the Politics of FCPA Enforcement

He would abolish corporate deferred prosecution agreements.

Mike Koehler with Mike Mukasey

Mike Koehler with Mike Mukasey

He would abolish corporate non prosecution agreements.

He would pass into law a corporate compliance defense for the Foreign Corrupt Practices Act (FCPA).

Australia, the United Kingdom and other countries have it.

Why shouldn’t we?

He’s Mike Koehler.

The FCPA Professor.

Koehler is an assistant professor at Southern Illinois University School of Law.

He’s working on a new law review article about the impact of deferred and non prosecution agreements on enforcement under the Foreign Corrupt Practices Act.

“For most of the FCPA’s history — 1977 to 2004 — 85 percent of corporate enforcement actions resulted in individual prosecutions,” Koehler told Corporate Crime Reporter in an interview last week. “And that is what one would expect. A corporation can only violate the law to the extent some real human being engaged in conduct in violation of the law.”

“Since 2004, the number have flipped. Since 2004, 80 percent of corporate enforcement actions have not resulted in any individual prosecutions of company employees. You ask — what happened in 2004? Of course, in 2004, the Department of Justice brought to the FCPA alternative resolution vehicles — namely, non prosecution and deferred prosecution agreements. Now, one looks at the numbers since that happened. And the numbers are — when the Department of Justice resolves a corporate FCPA action with either a DPA or an NPA, there is a 91 percent chance — extremely high — that no individual is going to be prosecuted.”

“Contrast that with what happened in the relatively rare circumstances since 2004 where the Department of Justice insists on a corporate FCPA plea agreement. When that happens, there is a high probability that a company employee will be charged. That happens in 71 percent of those cases.”

Koehler says that politics are involved in FCPA enforcement. In what way?

“It’s quite clear in looking at the resolution documents and the sentencing memos that this is in part political,” Koehler says. “You look at the 2008 Siemens case. Siemens paid $800 million to resolve an FCPA enforcement action. But at the end of the day, the parent company was not charged with an anti-bribery violation. And when you look at the resolution, the Department is candid as to why not. It is because of the potential collateral consequences of debarment. Anytime the Department of Justice takes into consideration what type of company it has before it, of course it’s political. Siemens is a major government contractor.”

What would you have done? Would you have let Siemens be debarred from those government contracts?

“As the U.S. Attorneys’ Manual guides me to as a prosecutor — I would have charged the most serious crime that the facts alleged – and that was violations of the FCPA’s anti-bribery provisions.”

Doesn’t the U.S. Attorneys’ Manual require you as a prosecutor to take into account collateral consequences?

“That’s exactly how politics is embedded into the manual.”

If politics is embedded in that portion of the manual, should we get rid of it?

“Yes, we should get rid of it,” Koehler says. “Lanny Breuer, when he made that famous statement that sometimes he stays up late at night worrying about collateral consequences — of course that comment generated a lot of concern and commentary. Justice ought to be blind. You should not treat a particular company that makes a particular product different from another company that makes a different product.”

“Siemens is just one example. BAE clearly violated the FCPA. And that’s clear from the basic resolution documents in that case. Was BAE charged with violating the FCPA. It was not.”

Why not?

“In the resolution documents, the Department of Justice notes that BAE is a major defense contractor. And to prosecute BAE with an FCPA violation would have led to significant collateral consequences.”

That was a 2010 case. BAE paid $400 million. You would have in that case criminally prosecuted BAE?

“Yes I would have.”

You would have let the chips fall where they may on debarment?

“If the Department of Justice is at all consistent with what it is preaching, you cannot have certain companies that sell certain products to essentially be immune from anti-bribery violations.”

You would get rid of the collateral consequences section of the manual?

“Yes. And not in a vacuum. I’ve long suggested that a corporation should only face criminal liability under the FCPA to the extent the conduct was engaged in by high level executives and to the extent the conduct took place in the absence of any pre-existing compliance policies and procedures. The irony is that this is very consistent with what (Fraud Section Chief) Andrew Weissmann was saying both in his public writing and in the Senate FCPA hearing five years ago before he assumed his current position at the Department of Justice.”

Andrew Weissman, when he was at Jenner & Block, was representing the Chamber of Commerce. And the Chamber at the time was putting forth the idea of a corporate compliance defense, which you also favor. A corporate compliance defense is corporate, business friendly, right of center politics, right?

“My first point is that Andrew Weissmann was advocating a corporate compliance defense long before he testified on behalf of the Chamber of Commerce. Writing under his own name, he had written several public pieces, including one titled — Revisiting Corporate Criminal Liability. The notion that Andrew Weissmann only articulated these policies as a mouthpiece of the Chamber of Commerce is just not accurate.”

There are business interests and there are public interests. And the business interests — led by the Chamber of Commerce — want a corporate compliance defense and hired Andrew Weissmann to promote it. If you were doing a left/right spectrum on corporate crime politics, that would be on the right side of the dial?

“I don’t believe it would be. The greatest impact of a corporate compliance defense would be to minimize risks of FCPA violations in the first place. That ought to be the goal and indeed was the goal in Congress when it passed the FCPA in 1977.”

Why then would the Chamber of Commerce support this if the goal was merely to minimize the risk of FCPA violations?

“You would have to ask the Chamber of Commerce,” he says.

Should we preserve corporate criminal liability?

“Yes, corporate criminal liability should still exist in situations in which the conduct at issue was engaged in by high level executives –”

But the MO i major corporations is the wink wink/nod nod –

“I reject that notion. I spent ten years advising companies on FCPA risk conducting internal investigations — never once did I think that the only reason the company was hiring me was because of a wink wink/nod nod attitude.”

[For the complete 1/a format Interview with Mike Koehler, see 29 Corporate Crime Reporter 46(12), Monday, November 30, 2015,  print edition only.]

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