Friday Roundup for Week Ending January 25

Friday Roundup for Week Ending January 25

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.

Double Standard

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.

But wait.

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 will say.

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 anti-corruption."

For numerous prior posts concerning the double standard, see here.

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, here, 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 allegations.

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 provisions."

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.

Interesting Tidbits

Alexandra Wrage (President of Trace International) writes in a recent Forbes column (here) as follows.

"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."

Spot-on.

Wrage's comments remind me a similar spot-on observation made during the middle of the FCPA's legislative history.  See here for 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 Harris (here) 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 regime."

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 Professor.

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