Foreign companies are becoming increasingly irritated with some corporate crime defense lawyers in the United States who are reluctant to stand up to the Department of Justice in Foreign Corrupt Practices Act (FCPA) cases.
According to Paul Hastings partner Robert Luskin, these foreign corporations have real concerns about “whether U.S. lawyers are really defense lawyers or former prosecutors in a better suit.”
Luskin’s practice is mostly FCPA cases and most of his clients are foreign corporations.
“I won’t name names, but I had a major representation in which I succeeded another firm,” Luskin told Corporate Crime Reporter in an interview last week. “When the client wanted the senior partner to take a position — not a dishonest or corrupt position, just a firm position — the partner said — I don’t know that I’m capable of being that adverse to the Department of Justice. He just wanted to do an internal investigation and cooperate. But he wasn’t willing to be adverse to the Department of Justice. And the general counsel kind of scratched his head and said — well then, I’m not sure you are really the right person to be my lawyer. If you are not willing to be adverse to the government, how can you be loyal to me? We had a change of counsel.”
You became counsel to the company?
“Yes.”
There are people who say that the Department of Justice has an unspoken bias against foreign firms – not just in the FCPA area, but in other areas as well, like antitrust. Do you place any credence in that?
“I don’t. There are cultural differences. There are legal differences. I end up explaining the company to the Department of Justice, but also explaining the Department of Justice to my clients. It’s like being a cultural translator.”
“There is a great deal of cynicism about whether or not they are being targeted by the Department of Justice in order to assist U.S. firms and tilt the economic balance of power — so much so, that after the Alstom case resolved, there was a parliamentary inquiry in France. The subject was essentially — why was it that the Department of Justice forced Alstom to sell itself to General Electric as a condition of the settlement? There is no truth to that whatsoever. But on behalf of Alstom, we had to respond to something that was a formal government inquiry, the premise of which is that the United States and the rest of the world are engaged in economic warfare and the Department of Justice is a soldier in that army.”
Was Alstom sold to GE?
“Yes. But I know as a matter of fact it was 100 percent bull. But that’s the level of cynicism and suspicion that the rest of the world views the Department of Justice.”
“They look at the top ten FCPA settlements and they see foreign companies. And the inference they draw is that those foreign companies were targeted. The FCPA has been in place for forty years. In France, the OECD convention was not adopted into the organic law of France until September 2001. American companies had a 25 year head start in learning to live with the FCPA and develop compliance programs that were likely to be effective. And if you look at the big foreign FCPA cases that have settled in the last five years, the majority of them concern conduct that began in the late 1990s and early 2000s and continued for several years thereafter. What you see in terms of the big companies on the FCPA big settlement list is a hangover from the fact that foreign companies are late to the game in terms of adopting the kinds of compliance standards that the Department of Justice expects. And I don’t see that being repeated in the future.”
“If we have this conversation ten years from now, I don’t think we will see a list of the top ten so heavily weighted with foreign companies. If we do, they will be different companies. Western European companies – Siemens, Total, Alstom, Rolls Royce – they all get it now and have compliance programs that are not going to generate those kinds of problems in the future.”
“But they are turning around and competing with companies from other developing countries. And those European companies are now asking — what about the Koreans, what about the Malaysians? We are competing in Africa and other places for infrastructure projects. We are now doing this the right way. We are not paying bribes. But they are. When are you, the Department of Justice, going to level the playing field? And that is an enormous sea change that has taken place in the last ten years.”
I’ve heard there are more FCPA cases out of Brazil than out of China. Why so few FCPA cases out of China?
“One of the things you will hear is that the Department of Justice and Brazilian prosecutors have incredibly close cooperation. The relationship between the US and Brazilian prosecutors is closer than between the Department of Justice and the UK’s Serious Fraud Office. I don’t think those relationships exist between the Department of Justice and the Chinese government. It’s very difficult to pull together evidence from abroad. If you don’t have relationships at that level, it’s very difficult to pull together those cases.”
According to the University of Virginia Law School’s corporate prosecution database, there have been 91 corporate FCPA settlements. Of the 26 FCPA plea agreements, 22 are with foreign companies. And only four are with US companies.
Does that show a bias against foreign firms?
“You would have to look at a lot of factors before you could determine whether there was some kind of bias there. It’s an interesting research project.”
“I would look at the level of senior management involvement, duration and extent of the wrongdoing, and extent of self-disclosure and cooperation. You would have to go through the resolutions and try and control for those factors. Then see whether you have foreign weighted resolutions. That’s doable.”
Do you think the SEC whistleblower program is having an impact in the FCPA field?
“It has not come up in any of my cases. But it is making companies more sensitive to responding in a timely fashion to internal complaints. The risk that someone can become a whistleblower and will have the protections and potential monetary rewards that come with it make companies much more sensitive to complaints than they were before. And I guess that was the goal.”
Where do you stand on self-disclosing?
“I am on the fence about whether or not that is a good idea. The question of whether a company should self-disclose is very much a factor and case by case inquiry.”
“My reflexive response is not — let’s get Dan Kahn on speed dial. One of the papers that a student in my class did a couple of years ago involved going through the settlement agreements to see if there were self-disclosures. They could find no meaningful difference in terms of the outcomes in those cases where there was self-disclosures as opposed to those cases where the government initiates the inquiry and the company cooperates. That may well have changed with the pilot program. The government may well be putting a greater weight on disclosure than before. But that data did not surprise me and was consistent with the way in which I have counseled companies.”
“You don’t ignore wrongdoing. You always investigate. You always remediate. When it is necessary, you discipline. And you make it right as best you can. But whether or not you take the additional step and disclose that wrongdoing to the Department of Justice is a decision that is very fact driven.”
“I have always felt that way. I’ve always felt the smartest thing for a company to do is to investigate thoroughly and make it right. But it always seemed to me it was a very close question as to whether or not to self-report. It’s a nuanced decision.”
There is litigation over whether monitor reports should be made public. Where do you stand on making monitor reports public?
“In representing companies, I’ve dealt with successful monitorships. Even though the company didn’t like to have a stranger in the house, and didn’t like the expense that went along with it, they genuinely believed at the end of the day that the experience left them a stronger, healthier, more compliant company.”
“But the soft chewy center of that relationship was a complete relationship of trust with the monitor. There was no reason for the company to feel that there should be any basis on which they would decline to share sensitive commercial information, information about potential wrongdoing, or potential personnel problems with the monitor. If those reports were made public, it would strike at the heart of what makes a good monitorship a successful monitorship. I say that as a former reporter. My instincts are all the other way.”
[For the complete q/a Interview with Robert Luskin, see 31 Corporate Crime Reporter 42(12), October 30, 2017, print edition only.]