Alcatel-Lucent Monitor Questions Morgan Stanley FCPA Declination

You can scour the news reports about the Justice Department’s Foreign Corrupt Practices Act (FCPA) Morgan Stanley declination earlier this year.

And you will not find anyone questioning whether the Department did the right thing in not bringing a criminal charge against the Wall Street giant in that case.

In fact, the only debate seems to be between those like Davis Polk’s Greg Andres — who say the Department declined prosecution against Morgan Stanley primarily because it involved a rogue employee acting against the interests of a company with a robust compliance program — and critics like Southern Illinois Law Professor Mike Koehler who says there was no case against the company to begin with.

That’s why eyebrows were raised last month at an FCPA conference outside Washington, D.C. when a lawyer with a foreign accent stood up to question the Justice Department’s FCPA enforcement chief Chuck Duross.

In front of more than 400 white collar criminal defense lawyers and in-house corporate counsel in a massive ballroom at a posh resort hotel ten miles south of Washington, D.C., Duross was discussing the Morgan Stanley declination.

The lawyer with the foreign accent stood up and identified himself only as a “non-U.S. monitor.”

And he questioned whether the Justice Department had been “a bit generous” by declining prosecution of Morgan Stanley.

“The company could have done a better job,” the non-US monitor said.

Taken aback by the question, Duross first tried a joke – “that’s why we like to use monitors” – but then took the critique seriously and defended the declination as “the right thing to do.”

“No compliance program is going to be perfect,” Duross said. “There are going to be circumstances in which someone undermines it. The company made very pronounced purposeful efforts. We felt that there needed to be a statement that even in circumstances in which a one off happens, the company ought to be rewarded for its compliance.”

Turns out, the “non-U.S. monitor” who asked the question was a Harvard-educated, Paris-based, former Cleary Gottlieb partner, former Skadden partner, public intellectual, and author who has been compared to de Tocqueville.

Meet Laurent Cohen-Tanugi.

And, as it turns out, Cohen-Tanugi is also the court-appointed monitor in the Alcatel-Lucent FCPA case.

In December 2010, Alcatel-Lucent was charged with bribing foreign officials in Costa Rica, Honduras, Malaysia and Taiwan.

To settle the case, Alcatel-Lucent paid a $92 million criminal fine and entered into the deferred prosecution agreement which required the appointment of a monitor.

Three Alcatel Lucent subsidiaries each pled guilty to violating the FCPA.

In a separate settlement with the Securities and Exchange Commission (SEC), the company paid a $45 million civil penalty.

We wanted to know from Cohen-Tanugi what he meant when he told Duross that in declining prosecution in the Morgan Stanley case, the Justice Department was being “a bit generous” and “the company could have done a better job.”

We e-mailed him.

And it was clear from his response that he thought he was having a private conversation with Duross – in front of 400 lawyers – and a handful of reporters.

“The question I put to the panel at the FCPA conference was meant to solicit a response and was never intended for publication,” Cohen-Tanugi wrote. “I will not submit for publication any opinion on the interpretation or the enforcement of the FCPA pending my monitorship mandate.”

So, we’ll have to wait until 2014 to find out what Cohen-Tanugi meant when he said he thought Duross was being “a bit generous” in refusing to prosecute Morgan Stanley.

Cohen-Tanugi was a partner at Skadden in Paris until 2007 when, he says, he left Skadden “to head a French governmental task force in connection with France’s 2008 EU presidency, then founded my own boutique international law firm, which bears my name.”

Cohen-Tanugi appears in a video posted in May 2012 to Alcatel-Lucent’s web site talking about his monitorship.

“My role is to assess and evaluate the effectiveness of Alcatel-Lucent’s anti-corruption compliance system and I do this over three years,” Cohen-Tanugi says in the video. “Each year, I am submitting my report to both the board of directors of the company and to the U.S. authorities via the French Ministry of Justice.”

His conclusions so far?

“I’ve noted a very significant change in the tone at the top since the time of those events that led to this deferred prosecution agreement,” Cohen Tanugi says. “These changes are due to a number of factors – such as the merger between Alcatel and Lucent. Most of the facts predated the merger. But also the new leadership that came to the company – in the persons of Ben Verwaayen and Philippe Camus. I have noted that the company has in place the policies and processes that are generally expected to fight corruption. And that is very good news.”

“At the same time, the company is a global company. It’s a quite complex organization. It operates in a fairly risky environment. It operates in a very large number of countries. Therefore, the message is – there is a need to be vigilant. And anti-corruption compliance is a constant effort.”

Turns out that Cohen-Tanugi is more than just a corporate monitor, or a corporate criminal defense attorney practicing in Paris.

He’s considered a public intellectual in France.

In 1985, he published a book titled Law Without the State.

Harvard University’s Stanley Hoffman said this about the book: “Here is the most Tocquevillian of the works written about the United States since Tocqueville – and for this very reason, the best.”

In Skadden: Money, Power and the Rise of an Empire, author Lincoln Caplan, writes that Cohen-Tanugi received a masters degree from Harvard Law School, worked for Cleary Gottlieb in New York and then moved to the firm’s Paris office, where he became a partner in the firm.

He told Caplan: “I started writing fairly soon after coming back. The question I wanted to answer for my readers was – Why are law and lawyers so important in the United States and so unimportant in France?”

Caplan writes that Cohen-Tanugi argues that “in contrast to the United States, where the role of lawyers was assured by the complex legal machinery of constitutional government and by the distribution of rights and responsibilities throughout the society, the position of lawyers was limited in France because of the centralization of power in the state. It was run like a giant monopoly by a network of civil servants who had little need for legal counsel. To the French, the American system was a ‘pathology.’”

Cohen-Tanugi told Caplan: “My point was – if you really want to reduce the role of the state, then you have to increase the role of law and lawyers.”


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