CORPORATE CRIME REPORTER
Steve Fagell on Ramped up Corporate Crime Enforcement
24 Corporate Crime Reporter 41(12), October 27, 2010
More than 100 new FBI agents.
More than 100 new prosecutors.
A Financial Fraud Enforcement Task Force that meets regularly.
Increased focus on prosecuting individuals.
An increased use of wiretaps and undercover operations.
An FBI presence at the SEC.
A new SEC office dedicated to Foreign Corrupt Practices Act (FCPA) enforcement.
And a new FCPA whisteblower law.
Steve Fagell ticks off the indicators.
And he should know.
He’s just returned from an 18 month stint at the Criminal Division of the Department of Justice.
He’s back as a partner at Covington & Burling.
“It’s a climate of heightened enforcement,” Fagell told Corporate Crime Reporter in an interview last week. “And the FCPA is front and center.”
Isn’t all of it just a response to the public anger at Wall Street – and at Washington – for not effectively prosecuting corporate crime?
“I don’t think the government responds to public pressure in the way you are describing it,” Fagell says. “Criminal enforcement is about as apolitical as you can get. The fact is, there are federal statutes. And where there is evidence that a crime has been committed, the Department of Justice will investigate as appropriate.”
“What are the facts? Was there a crime committed? And what is the way forward?”
“Whatever the public pressure, one way or another, it doesn’t infiltrate down to the level of prosecutorial decision making.”
“What is happening in the country affects priorities. But that’s different from saying that it affects the way in which cases are prosecuted.”
What about the new FCPA whistleblower provision?
“The effect of this provision remains to be seen,” Fagell says. “The SEC is in a rule making process right now. They have announced that they intend to issue proposed rules between November and December and final rules between January and March.”
“The statute itself is fairly broad in certain areas. The challenge for the SEC right now will be to come up with rules that give clear guidance to folks – both whistleblowers and industry – on how this program is going to work in practice.”
“It increases the risk, certainly.”
”Are employees going to troll for violations? Is there going to be widespread reporting to the SEC? No.”
“But every corporation, if it hasn’t already tended to its compliance program, needs to attend to it. And they need to give serious thought about how to continue to encourage internal reporting by employees. Corporations need to be nimble and respond quickly when there are allegations, so the corporation can stay abreast of what is going on and take steps quickly to address whatever problem might have been reported.”
“One of the challenges for the SEC in the rulemaking is to strike a balance between what has been pushed by law enforcement and regulators over the past couple of years – strong corporate compliance and strong confidential internal reporting mechanisms on the one hand – and encouraging whistleblowing on the other.”
“Having this provision is problematic for corporations that would prefer, with good reason, to deal with misconduct internally – and to try to give the compliance programs that they have been encouraged to implement a chance to work.”
“Much remains to be seen with this provision. I’m not someone who believes that the sky is falling. Some have overstated how much of an impact the provision will have. But how it works and what effect it has will depend to a great degree on what kind of rules come out of the SEC.”
The Attorney General – Eric Holder – was a partner at Covington.
And the head of the Criminal Division – Lanny Breuer – was a partner at Covington.
So, how does affect that your practice?
“I’m actually recused and would not be able to go in for two years to advocate before the Criminal Division,” Fagell says. “Generally speaking, if Covington is involved in a matter, it’s going to lead to a recusal issue with Lanny and Eric. There could be waivers granted. But generally speaking, if Covington is involved, it will lead to recusal by Lanny and Eric. And that’s true for any of the law firms who have senior officials at the Department.”
[For a complete transcript of the Interview with Steve Fagell, see 24 Corporate Crime Reporter 41(12), October 25, 2010, print edition only.]
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