FCPA Chief Duross to Corporate Crime Defense Lawyers: Don’t BS Us

It was a packed room. And the more than 400 attendees at the Gaylord Resort came early to hear Justice Department Criminal Division chief Lanny Breuer.

But Breuer had to cancel – urgent law enforcement matters – read, the BP criminal case.

So, the conference got right down to business.

As co-chair William Jacobson of Weatherford International put it, the just released Foreign Corrupt Practices Act guidance “doesn’t break new ground.”

And then he and his co-chair — Gibson Dunn partner Joseph Warin — found a handful of other ways to say the same thing.

Not surprising.

What we expected.

(Read: Been there. Done that.)

Warin quickly got down to the nuts and bolts.

Listening to the panels is one reason you are here.

But if you have a matter before the government, and you see a government official walking the halls, take them aside, speak with them.

“They don’t bite,” Warin said. “That’s the beauty of these conferences – to have those informal interactions. We’d be happy to be a conduit, if you wish.”

And the conference organizers of course don’t want reporters listening in.

So, the handful of reporters present were told they could attend only one panel in the morning and then would have to leave.

The stated reason – because many in house counsel who are on the close to twenty panels not open to the press don’t want what they have to say reported around the world.

And for the times the reporters were allowed in the room, no WiFi.

Wait a second – one of the fanciest hotels in the Washington, D.C. area and no WiFi?

But then there was the first panel, the one where reporters were allowed to attend.

And it was actually quite enlightening.

Try and get an interview with either Department of Justice FCPA enforcement chief Charles Duross or his counterpart at the SEC, Kara Brockmeyer.

Not possible.

But there they were, in front of more than 400 corporate criminal defense counsel, on a panel moderated by Steptoe & Johnson’s Lucinda Low.

Duross made clear that the Department doesn’t focus its FCPA enforcement on areas of the world or industries.

“We follow the evidence where it leads us” Duross said.

“We get anonymous e-mails and letters all the time. We determine which ones have validity and chase them down.”

Duross said he was proud of the work his team had done to improve the Justice Department’s FCPA website, which he said is now translated into 50 languages and has all of the FCPA opinions posted, searchable by topic.

The SEC’s Brockmeyer said that her office had “forged a close and unique relationship with the Department of Justice.”

“The SEC has better coorindation in the FCPA space than in almost any other area,” Brockmeyer said. “We are very good at reaching resolution at the same time.”

Brockmeyer said the SEC is seeing more cases coming out of China.

She said she’s seeing more cases of companies reporting to the SEC when their employees have been arrested in foreign countries for bribery.

And she emphasized that one of the best ways to control bribery is for a company to get control of its books and records.

“Bribery can’t happen if the company has control over where it’s money is going,” Brockmeyer said.

On the one FCPA cases where the government publically declined prosecution – the Morgan Stanley case – Low wanted to know how was it that the government decided in this case, but not in a myriad of others, that the former Morgan Stanley employee charged was a rogue employee.

Duross said that alone was “significant but not sufficient” to get a declination for Morgan Stanley.

“It’s not unusual for individuals involved in foreign bribery to also be involved in self dealing of some sort,” Duross said. “It’s not unusual to have circumstances where you have people involved in embezzlement and self dealing.”

“If all you had was an employee involved with self dealing and you didn’t have robust training, compliance programs, and internal controls, then that wouldn’t be enough” to get a declination.

During question period, a man identifying himself as “a non-US monitor” 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.

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.”

While Morgan Stanley was the first FCPA declination to be made public by the government, Brockmeyer said it was by no means the only case where a major company was given a declination because of a rogue employee.

Duross worried that “now we are going to get 500 companies coming in and saying – it’s a rogue employee.”

“Before you come in and do that, make sure there is some credibility,” Duross said. “We don’t want to get to the fifth country [where we find problems] and then we say — really, a rogue employee?”

“It has to be more than just good compliance program on paper,” Brockmeyer said. “If the tone at the top says – get business at all costs – a compliance program on paper is not going to be enough.”

Low raised settlements in cases where companies made voluntary disclosures – Bizjet (deferred prosecution agreement), Tyco (non prosecution agreement) and Morgan Stanley (declination).

Low wanted to know why those cases turned out the way they did.

Duross said “it’s always a challenge.”

“BizJet made a voluntary disclosure,” Duross said. “We otherwise would not have known about it. It was bad conduct. We wanted to reward the company in a meaningful way. In that particular case, while we would have been within our rights to require a guilty plea, we felt that the right thing to do, even in a case where there is pretty bad conduct, if a company comes forward, we will reward the company with something other than a guilty plea.”

“There are professors in New York who say that we give no benefit in these agreements,” Duross said.

“They say – where is the benefit?”

“All you do is look at the penalty and say – where is the benefit?”

“Is there a monitor? No.”

“Is there a guilty plea? No.”

“And of course, there is no declination, but it was pretty bad conduct,” Duross said.

Duross emphasized Brockmeyer’s point – that “we decline on a regular basis, but we don’t publicize it.”

“I don’t think the Department is going to change its historic position because of FCPA cases.”

Brockmeyer told the group that “you will always be in a better position if you come and tell us about it than if we hear it from a whistleblower or from the New York Times.”

And Duross emphasized that “the likelihood of you getting caught today is greater today than at any other time previously.”

Duross said that the assumption was that “if we don’t tell anybody, no one will find out about it” is starting to change.

Brockmeyer said that “less than half of our investigations began with self reporting.”

“We are starting to get referrals from other foreign regulators and whistleblowers,” Brockmeyer said.

Why only one FCPA whistleblower case?

“At some point, the other shoe will drop,” Brockmeyer said. “It takes a little while to investigate these cases. We are getting a pretty steady number of FCPA whistleblower complaints, some of them are quite good. These are people who are in the middle of it, people who have the documents, who have good information.”

“And in most cases, when it is an employee or third party agent, they have already tried to go internally within the company,” Brockmeyer said. “The best whistleblower for us is someone who feels passionately about it. And they will try and fix it through the company first.”

Duross agreed, adding that there is a steady stream of whistleblower reporting “and not all of it is actionable.”

“But the quality of the information is on the whole better as a result of Dodd Frank,” Duross said. “There are financial incentives and we are not naive. We are receiving information through lawyers – and getting that information is a force multiplier for us.”

“It will have a significant impact.”

In response to a question from the audience about a hypothetical multinational that was hit by false and bad press from overseas, Duross told a story about a case he came across recently.

“We declined a matter recently in which there was a lot of bad media in Farawaystan,” Duross said. “The company said there is no there there – and we looked at it and declined the matter.”

“You may not believe this, but we do have limited resources,” Duross said.

“You may not believe this either, but I actually think we are reasonable. There is a lot of misinformation out there about what we do and the perception of what we do – about the lattes. But nobody is feeling bad for companies that get it wrong.”

And he warned his audience – “don’t BS us.”

“If you tell us there is not much going on here, not much to see, and we find that’s not true, you have now lost all kinds of credibility,” Duross said.

“I can think of two matters, relatively recent that have been publicized, where companies lost credibility — when companies came in and tell us something that didn’t turn out to be the case. We trust but verify.”

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