It used to be that corporate crime prosecutors in the United States were the only game in town.
No longer.
Over the past five years or so, prosecutors in the UK, China, Brazil, Germany and elsewhere have been ramping up their corporate crime staffs and opening investigations.
If you see the Department of Justice and Securities and Exchange Commission coming straight at you, look in your rearview mirror. Others might be following.
Crispin Rapinet is a partner at Hogan Lovells in London.
Rapinet says much of his corporate defense work now originates in enforcement action outside the United States.
What part of your practice is a foreign bribery practice — Foreign Corrupt Practices Act (FCPA), the UK Bribery Act or similar laws?
“Probably about sixty percent,” Rapinet told Corporate Crime Reporter in an interview last week.
Of that, is it predominantly US enforcement?
“No, not any more,” he says.
Where is the enforcement coming from?
“My partner in Sao Paulo is very concerned with enforcement by the Brazilian authorities. We have teams in Brazil assisted by teams in the US concerned with the Petrobras investigation. My partner sitting in Shanghai is concerned with investigations by the Chinese authorities. My partner sitting in Singapore is mostly concerned with investigations that may be US led but may not in relation to conduct in Indonesia or Malaysia. And that conduct may have implications in the UK or the US or both — as well as in Indonesia and Malaysia.”
“We have a strong French practice where we are dealing with white collar issues that are being tested and dealt with in the courts in France. And the same is true of our practices in Germany, Spain and Italy.”
That is the new development within the last five years or so and accelerating fast.
Have the US foreign bribery prosecutors lost a bit of their luster?
“I don’t think they have lost their luster, but they are no longer the only show in town. They are responding constructively to that in terms of the degree they are cooperating and seeking to cooperate with the regulators in other jurisdictions.”
“But as I say, it’s no longer the case if you have a problem on the other side of the world that your sole concern is negotiating a decent deal with the Department of Justice. You also have to make sure you get a decent deal with the regulator on the ground and think about whether the UK Serious Fraud Office might have an interest as well.”
The deferred and non prosecution practice in the US is quite controversial. Most corporate defense lawyers like it. The corporations would prefer that kind of settlement to a plea agreement with criminal guilty pleas. Do you like the deferred prosecution import?
“The danger of deferred prosecution agreements is the commercial temptation to deal with a problem that may or may not be in reality a real problem,” Rapinet says. “If you pushed the prosecutor to actually establish that it is a criminal offense, it may not be that straight-forward. But the temptation for any corporate to deal with that risk through a commercial settlement which involves a sum of money and living with someone looking over your shoulder for a period of time is understandably great.”
“Whether that, from a jurisprudential point of view, is the ideal world is questionable. You can see why people might take the view of — we don’t actually know whether these people have committed a criminal offense or not. But the power of the threat of the cost and time and management distraction associated with defending a claim, to say nothing of the ultimate risk if you are ultimately unsuccessful in your defense, is such that in the overwhelming majority of circumstances where these problems arise, the commercial temptation is to enter into a deferred or non prosecution agreement.”
Up until recently, the initial instinct of corporations was to lean toward self reporting, but there are signs that might be changing here. They might be leaning against. Is that the case in the UK?
“The prosecutors here at the Serious Fraud Office are desperately trying to persuade corporates to self report,” Rapinet said. “But they are saying things like — you need to come and talk with us before you have conducted an internal investigation. Clients will sometimes ask — do you always advise companies to self report? And the answer to that is — it depends on the circumstances. There are some companies who question whether adopting the self reporting route is in the best interests of the company. The risks associated with self reporting in terms of the size of the penalty can be quite substantial and some would say are disproportionate at the moment to the conduct in some cases. The fines in the US just get bigger and bigger. There seems to be a constant competition to beat the last fine.”
How did deferred prosecutions find their way to the UK? Was it a corporate import?
“It was something that the Serious Fraud Office was keen to introduce. They felt that deferred prosecution agreements were a good way to try and initiate a culture of self reporting. And if corporates in the UK had the opportunity to go and talk with a regulator and say — look, we found out we have a problem, we want to cooperate, we don’t think it’s indicative of an endemic issue across the organization, can we please negotiate a deferred prosecution agreement? – the thought was it would lead to a culture of self reporting. And in fact, the Serious Fraud Office is challenged in terms of its manpower and budgets, certainly compared to the US authorities. They felt that was a sensible and pragmatic road to take in terms of making the office a more effective regulator or prosecutor.”
A typical career path for a young lawyer interested in this field is to become an Assistant US Attorney, prosecute some of these cases for a couple of years, then jump over and become a defense attorney. There has been some criticism of the revolving door here. Do you see a similar path there in the UK?
“We don’t. And it’s one of the big cultural differences between the two systems. One of the challenges that the Serious Fraud Office faces is that financially it is far more challenged than the Department of Justice is in the States. And from the point of view of manpower, there isn’t this same culture of young lawyers wanting to join the prosecutor’s office and work and get experience as a prosecutor before they go into private practice. That means it is more difficult for the Serious Fraud Office to attract good quality people than is the case in the States. That is a quite a big difference.”
You went straight to Hogan Lovells out of law school. Is it the case in the UK that if a young lawyer becomes a prosecutor, they are prosecutor for life?
“Generally, it’s a very different career choice. There doesn’t tend to be as much movement between the two — or not as much as you see in the States.”
“One of the interesting things we have seen recently is US firms that are keen to build a white collar practice in their London office have come in and thought that the way you should do that is to try and hire people out of the Serious Fraud Office, which is not something historically that the larger commercial firms have tended to do.”
“We have seen three or four examples of US firms hiring people out of the Serious Fraud Office. I’m going to be interested to watch to see whether those people are able to succeed in private practice. It’s very different to the model that you see in the States.”
In the corporate crime practice, it doesn’t matter where you sit. It’s increasingly an international practice?
“That’s exactly right — save for this point. What matters is having people sitting in the right places who are focused and know about this area of practice. When you say it doesn’t matter where you sit — if you are a white collar lawyer sitting in Washington and your client has a problem in Indonesia, you would get on a plane and go to Indonesia, conduct the interviews, do the investigation, go back and report to the Department of Justice.”
“But what I believe in very strongly is that if you are going to do an investigation in Indonesia, you need someone on the ground who knows and understands preferably the language and secondly someone who has dealt with the regulators and prosecutors there, because you have as much of a problem there as you have back in the States.”
“The work I do can be all around the globe, but not necessarily because I jump on a plane and go and do the investigations everywhere. But rather, if a client comes to me with a problem in China, I can say to them — my partner in Shanghai will deal with this on the ground in China, I will coordinate any aspects that need dealing with the Serious Fraud Office, my partner in DC will coordinate any aspects that need dealing with the Department of Justice.”
“We can offer the client that one team service which offers genuine worldwide expertise.”
In a nutshell, what are you seeing in terms of corruption enforcement in China?
“The nutshell is we are seeing increased activity, increased strengthening of the anti-corruption laws, increased interest in extraterritorial activity by Chinese corporates. The Chinese authorities are beginning to take interest in what Chinese companies might be doing outside of China, as well as taking an active interest in what multinational companies from outside China might be doing on the ground in China.”
“It remains a very politically important aspect of the government’s whole message to the people of China. It’s a very popular measure — the anti-corruption measures they have taken and the promises they have made.”
And yet very few multinationals in China have been subject to enforcement there.
“There have been a few high profile ones. But there have been some industry sectors. And the life sciences sector is one of the key ones. A lot of the activity that takes place is at a local level in China. It isn’t necessarily as high profile. And a lot of it is dealt with as administrative action so it can be dealt with in quite a low key way. Every multinational operating in China is concerned about this issue.”
When you say — dealt with in a low key way — you mean — it goes unreported in the public press?
“Exactly. It may not hit the big press.”
[For the complete q/a format Interview with Crispin Rapinet, see 30 Corporate Crime Reporter 4(12), January 25, 2016, print edition only.]