This article was reprinted with permission
from FCPA Professor
The latest double standard installment, a Rocky
Mountain Rakoff, interesting tidbits, save the date, and just in case you were
wondering. It's all here in the Friday roundup.
A pharmaceutical company faces pending government
restraints that could negatively affect its business. The company turns
to its lobbyists that include the former chiefs of staff to various
current government officials on a key government committee. Also, in
recent years the company indirectly gave thousands of dollars to the current
government officials and otherwise made large donations to groups favored by
the current government officials. The government officials insert a
paragraph into a massive spending bill that, while not specifically mentioning
the company, strongly favors one of the company's drugs. The effect of
the paragraph in the bill gives the company two additional years to
sell the drug without government price controls.
Having read the recent Eli Lilly FCPA enforcement action
(see here for
the prior post) and otherwise being an astute FCPA observer, your FCPA
antennas are going off.
The government officials were not "foreign officials" -
they were U.S. government officials!
See here for
the recent New York Times story on Amgen's courting of various members of
the Senate Finance Committee.
Scrap those internal investigation plans, forget about
voluntary disclosure, and slim chance there will be an enforcement action.
Nobody said our system was perfect, but that is just how the system works some
But why should corporate interaction with a "foreign
official" be subject to greater scrutiny and different standards of enforcement
than corporate interaction with a U.S. official? After all, there is a U.S.
domestic bribery statute (18 USC 201) with elements very similar to the
FCPA. Why do we reflexively label a "foreign official" who receives
"things of value" from private business interests as corrupt, yet generally
turn a blind eye when it happens here at home?
As you contemplate these questions, just
remember, as soon to be former Assistant Attorney General Lanny Breuer
recently declared (see here),
"we in the United States are in a unique position to spread the gospel of
For numerous prior posts concerning the double standard,
A Rocky Mountain Rakoff
We celebrate Mary
Jo White's appointment to be the next Chair of the SEC by focusing on
yet another federal court judge calling into question the SEC's signature
neither admit nor deny settlement policy. For more on that policy and how
it contributes to a facade of enforcement, see numerous prior posts here,
and here -
focusing mostly on Judge Jed Rakoff's (S.D.N.Y.) disdain of the policy.
In August 2012, the SEC brought a complaint (see here) against
Colorado-based Bridge Premium Finance LLC and certain of its executives for
allegedly perpetrating a Ponzi scheme. The SEC and defendants agreed to
resolve the matter and, as typical and as is frequently the case in SEC FCPA
matters, the defendants did so without admitting or denying the SEC's
Enter U.S. Senior District Court Judge John Kane (D. Co.)
who pulled a Rocky Mountain Rakoff. In a January 17th order, Judge Kane
stated as follows.
"I refuse to approve penalties against a defendant
who remains defiantly mute as to the veracity of the allegations against him. A
defendant's options in this regard are binary: he may admit the allegation or
he may go to trial. I also object to the language in the consents and the
proposed final judgments whereby the defendants waive their rights to the
entry of findings of fact and conclusions of law pursuant to FRCP 52 and their
rights to appeal. These findings are important to inform the public and the
appellate courts. I will not endorse any final judgments including such
Returning to Judge Rakoff, you may recall (see here
for the prior post) that his disdain for the SEC's settlement policy is
currently before the Second Circuit in SEC v. Citigroup. As
Professor Barbara Black notes on her Securities Law Prof blog, oral arguments
on the merits is scheduled for February 8th.
Alexandra Wrage (President of Trace International) writes
in a recent Forbes column (here)
"Whether they're stating it expressly or acting on it
quietly, governments are using corporations as their primary tool to reduce
international bribery. They alarm companies with vast fines and
terrify individuals with substantial prison sentences with the hope of ending
the payment of bribes because they cannot, in most cases, do much of anything
about those demanding them. This is not inappropriate.
Companies are regulated, subject to laws and answerable to shareholders.
The worst offenders demanding bribes, on the other hand, do so with impunity,
hiding behind sovereign immunity and, often, their own, complicit local law enforcement.
Abacha. Suharto. Marcos. Duvalier. It's a longstanding
tradition, still thriving in many countries today. US and some European
law enforcement agencies have been extraordinarily successful, with fines in
the United States now counted in the billions of dollars and other
jurisdictions promising to catch up soon. While these efforts have
done more than anything else to reduce bribery, they have yet to convince us
that companies are both the sole source and solution of all international corruption
- and that's insupportable. [...] The simple reality is that there
are just some things that companies can't do about corruption."
Wrage's comments remind me a similar spot-on
observation made during the middle of the FCPA's legislative history. See
the prior post regarding Milton Gwirtzman's dandy article published by the
New York Times Magazine in October 1975 in which he observes as follows - "it
would be unwise, as well as unfair, simply to write off bribery abroad to
corporate lust - it is a symbol of far deeper issues ...".
As to those deeper issues, an issue I frequently write
about is why do FCPA violations occur? Do companies subject to the
law have bribery as a business strategy? Or do companies subject to
the law encounter difficult and opaque business conditions abroad? To be
sure, FCPA enforcement actions have been based on both
scenarios, but my opinion (as well as that of the former chief of the
DOJ's FCPA unit - see here for
his previous guest post) is that the later scenario is the more
common reason for FCPA exposure.
For instance, a recent post on the China Law Blog by Dan
begins as follows.
"Got a call the other day from an American company
wanting to sell its food products into China. And fast. The problem this
company is facing is that one cannot "just" sell food into China
immediately. To sell food legally into China, Foreign companies must
first pass certification before China's General Administration of Quality
Supervision, Inspection and Quarantine, better known as AQSIQ. The food
company told me that its research had revealed that it typically takes around a
year to secure this certification, but that someone in China was promising they
could do it in "around six to eight weeks."
Also on the list of FCPA exposure risks, I would add
various trade distortions and barriers, such as central government
procurement policies. For this reason, I found this recent
Sidley & Austin alert interesting. It concern a new China "regulation
that subjects certain high-value medical devices to a centralized procurement
Save the Date
D.C. area readers may be interested in a February 12th
event hosted by American University Washington College of Law and presented by
the American University International Law Review. Titled "Bribes
Without Borders: The Challenges of Fighting Corruption in the Global
Context," the symposium will feature panels of academics, practitioners,
and civil society representatives and will touch upon a variety of bribery and
corruption topics including the FCPA. I will be participating on an
afternoon panel and will be speaking on FCPA enforcement and the rule of
law. Robert Leventhal (Director, Anti-Corruption and Governance
Initiatives, U.S. State Department) will deliver a keynote luncheon
address. The symposium is free, but registration is requested.
Just in Case
Just in case you were wondering about the U.K. SFO's
position on facilitation payments (see here
for a prior post), the Bribery
Library site shines light on a December 6, 2012 "to whom it may
concern" letter (here)
from SFO Director David Green in which he states that "facilitation payments
are illegal under the Bribery Act 2010 regardless of their size or frequency."
You can now head into the weekend confident in your
knowledge of the U.K.'s position.
A good weekend to all.
Read more articles on the FCPA by Mike
Koehler at FCPA
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