Mike Koehler on Eliminating FCPA Deferred and Non Prosecution Agreements and Slowing the Revolving Door

For the first twenty six years of the Foreign Corrupt Practices Act (FCPA), from 1978 to 2004, enforcement was a matter of bringing a case against a corporation, forcing a guilty plea, taking a case to trial, or just not bringing a case.

Mike Koehler

Then, by fiat, the Justice Department decided that the cases would be settled, for the most part, with deferred and non prosecution agreements.

Mike Koehler is a law professor who teaches the FCPA at a number of law schools around the country. He also actively writes about it on his web site – FCPA Professor.

“For over a decade I’ve called for these agreements to be abolished,” Koehler told Corporate Crime Reporter in an interview last month. “In 2004, the Department of Justice, not by statute but on their own initiative, introduced deferred and non prosecution agreements to the FCPA context. And now it’s even more of a buffet. You have NPAs, DPAs and declinations with disgorgement.”

Was that a victory for the corporate criminal defense bar?

“I don’t think so. It was the so-called Arthur Andersen effect and the notion that upon near indictment, Arthur Andersen imploded even though the Supreme Court ultimately overturned that conviction. It was the fear of collateral consequences. I don’t view NPAs, DPAs and declinations with disgorgement as a victory for the defense bar. I don’t believe that a meaningful percentage of these resolutions even represent violations of the FCPA.”

“But rather they are driven by risk aversion and the company paying money simply to make the Department of Justice and the Securities and Exchange Commission go away.” 

“In 2015, I wrote an article measuring the impact of NPAs and DPAs on FCPA enforcement. (Measuring the Impact of Non-Prosecution and Deferred Prosecution Agreements on Foreign Corrupt Practices Act Enforcement, UC Davis Law Review, 2015). And it is rather telling that when the Department of Justice resolves an FCPA through an NPA or a DPA, there is a very small likelihood that any human being is ever going to be charged. But when the Department of Justice actually criminally charges a company and the company is forced to plead guilty, in a very high percentage of those cases, real human beings are charged.”

If you were to survey corporate criminal defense attorneys who handle FCPA cases and ask them – should we get rid of these settlement agreements and go back to the pre-2004 practice, it would be overwhelmingly in favor of keeping these settlement agreements.

“Are they answering the question from their perspective or the perspective of their corporate clients? Is this survey going to be anonymous or public?” 

“But you are absolutely right, NPAs and DPAs are great for FCPA Inc. because most every resolution document requires anywhere from an 18 month to a three year period of reporting to the government. That might sound simple and straightforward. But anytime a company has an 18 month to a three year reporting requirement, that’s an additional period of time of legal work.”

Are you troubled by the revolving door that goes on within FCPA Inc.?

“Yes, we talked about this a decade ago. (“Mike Koehler Takes on FCPA Inc.,” Corporate Crime Reporter, April 12, 2010). Of course I am. The FCPA is uniquely enforced like few other laws. All FCPA prosecutions must originate or be approved by Main Justice. That’s not the case with most other criminal laws.”

“At any given point in time, there are six to eight supervisory officials who control FCPA enforcement. How do these individuals enforce the FCPA?” 

“Do they do it against the backdrop of lots of FCPA case law? No. Do they do it in a courtroom? No. They do it in the absence of much FCPA case law and in the absence of judicial scrutiny.” 

“Then you have those same six to eight individuals leaving the government for multi-million positions in law firms, often with guaranteed salaries. And they help business clients navigate an enforcement climate they helped create. I just don’t think that is a good recipe.”

“If we were to recast these circumstances in an African country or an Asian country, that’s how their justice system works, we would all probably say – wait a minute. That just sounds a little odd. But we have come to accept it when it comes to the enforcement of the FCPA and many other criminal laws.”

What would you do about the revolving door problem?

“My proposition was to prohibit FCPA enforcement lawyers from having an FCPA practice for five years after leaving government. And if your only concern about that is the time period, if you think it should be three years or one year, fine. You agree there is a problem. We are just quibbling about the time frame.” 

“This proposal is not seeking to prohibit people from earning a livelihood. This proposal is focused on literally six to eight people.”

And those people are high ranking officials at the SEC and the Department of Justice?

“Yes. The SEC and the Department have FCPA units. I’m not talking about the junior lawyer. I’m talking about the people with supervisory and discretionary responsibility for those units. Whether it’s six to eight or eight to twelve, we are talking about a very small group of people.”

There has only been one FCPA corporate enforcement case brought by the Justice Department under President Biden. Can we read anything into that?

“There was one last month and it was the first corporate FCPA enforcement action. There have been some individual ones. But I don’t make heads or tails of that. The Biden Administration has been in office for seven months. Many month gaps in FCPA enforcement in the Trump administration and Obama administration and Bush administration have been relatively common. We are still in a Covid environment in which everything including law enforcement has been slowed down.” 

“I don’t make much of anything regarding the amount of FCPA enforcement thus far in the Biden administration. You can’t just look at this through the lens of seven months or even one year. There is a lot left in this year and there is a lot left in the Biden administration. You are going to see the same general level of enforcement activity as there has been over the last seven to ten years.”

“Let’s face it. Many of these FCPA enforcement actions are not the result of pro-active government investigations. Many of them are the result of corporate voluntary disclosures. Many of these enforcement actions, regardless of administration, are simply hopping on to a foreign law enforcement investigation. In the last five years, there have been many FCPA enforcement actions concerning conduct in Brazil. Those cases did not start with the Justice Department.” 

“The point I’m trying to make is that much FCPA enforcement activity is the result of fortuitous events that the Department of Justice and the Securities and Exchange Commission don’t control.”

[For the complete q/a format Interview with Mike Koehler, see 35 Corporate Crime Reporter 30(12), Monday July26, 2021, print edition only.]

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