Koehler Reforms Challenge FCPA Inc.

Mike Koehler is known on the web as the FCPA Professor.

He has ruffled feathers in the field by laying out the case against what he calls FCPA Inc. — the lawyers, accountants and consultants who make millions on the prosecution and defense of a Foreign Corrupt Practices Act (FCPA) action.

Koehler is a professor at Southern Illinois University School of Law.

He teaches the only law school class in the United States focused exclusively on the Foreign Corrupt Practices Act (FCPA). He also teaches, corporations, international business transactions and related business law classes.

And Koehler is just out with a new book – The Foreign Corrupt Practices Act in a New Era (Edward Elgar, 2014).

In it, he lays out a three pronged reform proposal that will surely not sit well with FCPA Inc.

Koehler would slow the revolving door that sends enforcement officials into the big corporate law firms.

“Under my proposal, anyone at the Securities or Exchange Commission (SEC) or the Department of Justice who has supervisory or discretionary control over FCPA enforcement would be prohibited over a five year period from offering FCPA compliance and defense services in the private sector,” Koehler told Corporate Crime Reporter in an interview last week.

Koehler would also allow for a corporate compliance defense.

“If a company did not have pre-existing compliance policies and procedures and was not acting otherwise consistent with best practices — and there is a general consensus as to what best practices means in the FCPA context — that type of company would not be able to avail itself of a compliance defense,” Koehler said.

And he would eliminate deferred and non prosecution agreements.

“Deferred and non prosecution agreements expand the market for legal services,” Koehler said. “Every one of these agreements has a one to three year reporting requirement to the government. Many of them have corporate monitors connected to them. They are problematic across the broad spectrum. One problem is that they allow egregious instances of corporate bribery to be punished too leniently. But the bigger problem is that they facilitate the over prosecution of corporate crime.”

“The people who say that a compliance defense is corporate immunity have it all wrong,” Koehler said. “As to that type of company that doesn’t have compliance and doesn’t act consistent with best practices — they are deserving of criminal punishment. They are not deserving of a deferred or non prosecution agreement. That type of company should suffer the fullest extent of consequences under the criminal law — a criminal indictment or plea.”

“For the other type of companies — most companies — who are literally spending millions, if not hundreds of millions of dollars on good faith compliance efforts, who have thousands of employees in the global marketplace, who have thousands of third parties in the global marketplace — for that type of company, making good faith efforts to comply with the FCPA — a compliance defense would be available to the company if a non executive officer or employee acted inconsistent with the company’s compliance policies or procedures.”

“For that type of company, there would not be an enforcement action. That company could avail itself of a compliance defense.”

“You would couple the compliance defense with abolishing non prosecution and deferred prosecution agreements. You would make the FCPA consistent with many peer nations, like the UK, which has compliance defense concepts in their laws. And you would take America back to a system of justice that has served our country well for the first 200 years — you would either charge someone with a crime or you don’t charge someone with a crime.”

What’s the public policy reason for slowing the revolving door?

“Under the Justice Department policy, all FCPA enforcement actions have to come from Main Justice,” Koehler said. “That is a unique Department of Justice policy. “That means that from a supervisory and discretionary standpoint, about three to five people control FCPA enforcement.”

“And it is also undeniable that the self declared architects of this new era of FCPA enforcement are now making millions of dollars in the private sector in the landscape that they helped create. I’m not suggesting that this is a primary reason. I’m suggesting that it at least be part of the conversation.”

“So, the FCPA is unique in that enforcement is centered at Main Justice. The second thing about FCPA enforcement is that non prosecution agreements and deferred prosecution agreements are used in this area more than any other area of law. The third thing is that you now have three to five people resolving enforcement actions around conference room tables around Washington, D.C. in the absence of judicial parameters of law.”

“Think of a Department of Justice enforcement attorney enforcing an antitrust case with a non prosecution or a deferred prosecution agreement. There are dozens of U.S. Supreme decisions and hundreds of appellate decisions about antitrust law. Imagine a Department prosecutor resolving an insider trading case with a non prosecution or a deferred prosecution agreement. There are dozens of decisions setting the parameters of insider trading law.”

“But when it comes to FCPA enforcement, you have very few people resolving enforcement actions in the absence of judicial scrutiny and doing so in the general absence of legal parameters.”

“And I’m not the only one who has suggested that in many cases, the FCPA means what prosecutors say it means. Former Attorney General Michael Mukasey has said the same thing. Other high level Department of Justice officials have said the same thing.”

“Is this a good system of justice? Is this good public policy?” Koehler asks

“Imagine you have a foreign country in which three to five people control an area of law. And they enforce this area of law in the absence of judicial scrutiny. And they aggressively enforce this law and make various public policy announcements in their positions. And then, they immediately turn around and represent companies that are caught up in that enforcement that they create.”

“If that were happening elsewhere, wouldn’t the vast majority of people say — that’s interesting, this doesn’t seem right, there are some issues here, maybe there is something we could do to eliminate the incentives that rational human actors have?”

“But that is FCPA enforcement in this new era.”

“It’s a rather long winded way of me saying that this five year period is warranted given the unique attributes of FCPA enforcement.”

“I’m perceived as a person who is rocking the boat,” Koehler said. “But much of what I say has been said by former FCPA enforcement attorneys.”
“You are not going to find more of a vocal critic of non prosecution and deferred prosecution agreements than Mary Jo White before she became the chair of the SEC. You are not going to find greater support for the idea that much of FCPA enforcement is a facade than former Attorney General Michael Mukasey.”

[For the complete transcript with Mike Koehler, see 28 Corporate Crime Reporter 30(12), July 28, 2014, print edition only.]

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