It has been quite a week in the white collar criminal
defense world. It began with the convictions, on all counts, of all defendants
in the Lindsey Manufacturing case involving the Foreign Corrupt Practices Act
(FCPA) and yesterday with the conviction of Raj Rajaratnam on all counts in his
insider-trading trial. Sandwiched in between these two huge victories for the
Department of Justice was the acquittal of former GlaxoSmithKline in-house
attorney Lauren Stevens by the presiding Federal District Judge. As reported by
Blog, Judge Roger Titus granted an acquittal during a hearing and said,
"I conclude on the basis of the record before
me," Judge Titus said, "that only with a jaundiced eye and with an inference of
guilt that's inconsistent with the presumption of innocence could a reasonable
jury ever convict this defendant."
This post will focus on the Stevens case and its
implications for the compliance officer. One of the concerns I frequently hear
expressed by compliance officers is their risk of personal criminal liability,
particularly if they work at a company where a Deferred Prosecution Agreement
is in place. I believe that the Stevens case, contrasted with the Lindsey
Manufacturing case, demonstrates the parameters of the type of conduct which
will result in a criminal sanctions.
Stevens had been indicted on four counts of making false statements,
one count of obstruction of justice, and one count of falsifying and concealing
documents related to the company's promotion of the anti-depressant drug for
weight loss, which hadn't been approved by the Food and Drug Administration.
The Lindsey defendants were charged with conspiracy to violate the FCPA and
individual counts for violating the FCPA as well. One defendant was charged
with a count of violation of money laundering laws.
However in the Stevens case, she was providing legal
advice to her company and then was dealing with US government regulators in an
ongoing investigation. It is this prong which concerns compliance officers. As
noted in yesterday's
Wall Street Journal, "The government's defeat points to the difficulty of
prosecuting individuals over alleged wrongdoing at large corporations, where
teams of people may be involved in a matter and it is hard to show that
executives intended to break the law." In the Lindsey Manufacturing case, it
certainly appears that the government was able to demonstrate to the jury that
the Lindsey Manufacturing defendants intended to violate the FCPA by the
payment of bribes.
There is another obvious difference between the Lindsey
Manufacturing defendants and Stevens. It is that she was an in-house lawyer
(she left the company earlier this year) and the Lindsey Manufacturing
defendants were from the business side of the company. Indeed as reported in
Blog, the trial judge said that the time of acquittal, "There is an
enormous potential for abuse in allowing prosecution of an attorney for the
giving of legal advice. I conclude that the defendant in this case should never
have been prosecuted and she should be permitted to resume her career."
So what does all of this mean for the compliance officer?
I have heard my colleague; attorney Mike
Volkov say that no one is prosecuted for engaging in something less that best
practices, they are prosecuted for engaging in no practices in the
compliance arena. In Lindsey, it seems clear that the company had no compliance
program to fall back on as some type of defense that the defendants had not
engaged in bribery or did not have the intent to engage in bribery. In the
Stevens case, she was able to demonstrate that she had relied on the advice of
outside counsel in her legal work and she was not a rogue agent going off the
reservation. So if your company has a compliance program, you should follow it.
While as the compliance officer, you may well have to make some close or
difficult calls, do not do so in a vacuum, obtain some legal advice or other
assistance. One mechanism I have advocated is a Compliance Oversight Committee,
which can review compliance decision from the engagement and management of
foreign business partners to all facets of a company's compliance efforts. This
puts more resources in the hands of the compliance officer.
The differences and messages from the outcomes of Lindsey
Manufacturing and the Stevens case seem clear. Do not engage in intentional
conduct which violates the FCPA.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2011
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