This article was reprinted with permission
from FCPA Professor
As highlighted below, the DOJ recently acknowledged,
despite prior definitive statements by former Assistant Attorney General Lanny
Breuer to the contrary, that "measuring the impact of non-prosecution agreements (NPA) and deferred prosecution agreements (DPA) in deterring the bribery of
foreign public officials would be a difficult task, save providing certain
anecdotal and other circumstantial evidence."
As discussed in this previous
post, in September 2012 then Assistant Attorney General Lanny Breuer
passionately defended the DOJ's use of NPAs and DPAs. Among
other things, Breuer boldly stated that NPAs and DPAs "have had a
truly transformative effect on particular companies and, more generally, on
corporate culture across the globe" and that the result of DOJ's frequent use
of such agreements "has been, unequivocally, far greater accountability for
corporate wrongdoing - and a sea change in corporate compliance efforts."
Breuer further stated as follows.
"One of the reasons why deferred prosecution agreements
are such a powerful tool is that, in many ways, a DPA has the same punitive,
deterrent, and rehabilitative effect as a guilty plea: when a company
enters into a DPA with the government, or an NPA for that matter, it almost
always must acknowledge wrongdoing, agree to cooperate with the government's
investigation, pay a fine, agree to improve its compliance program, and agree
to face prosecution if it fails to satisfy the terms of the agreement."
Despite Breuer's rhetoric, the question of whether
NPAs and DPAs adequately deter future improper conduct has long been
As noted in this previous
post, in 2009, the Government Accountability Office ("GAO") released a
report regarding DOJ's use of NPAs and DPAs. The GAO Report was
not FCPA specific, although it does mention the FCPA as being
one area where NPAs and DPAs are frequently used. The
GAO Report stated as follows.
"DOJ cannot evaluate and demonstrate the extent to which
DPAs and NPAs-in addition to other tools, such as prosecution-contribute to the
department's efforts to combat corporate crime because it has no measures to
assess their effectiveness. Specifically, DOJ intends for these agreements to
promote corporate reform; however, DOJ does not have performance measures in
place to assess whether this goal has been met."
The GAO Report concluded as follows.
"[W]hile DOJ has stated that DPAs and
NPAs are useful tools for combating and deterring corporate crime, without
performance measures, it will be difficult for DOJ to demonstrate that these
agreements are effective at helping the department achieve this goal.
As noted in this
previous post, in the 2010 OECD
Phase 3 Report of U.S. FCPA enforcement, the evaluators
likewise noted that the "actual deterrent effect [of NPAs and
DPAs have] not been quantified." In the Report, the evaluators
sought information about the deterrent effect of DPAs and NPAs" and one of
the recommendations in the Report was for the U.S. to "make public any
information about the impact of NPAs and DPAs on deterring the bribery of
foreign public officials."
The DOJ recently responded to the OECD's
recommendation in its "Final
Follow-Up To Phase 3 Report and Recommendations." The DOJ
response, dated December 2012, states in full, as to the NPA / DPA issues as
"Scholars have recognized that quantifying deterrence is
extremely difficult. This is equally true for the deterrent effect of
DPAs and NPAs. Thus, as discussed at the time this recommendation was
made, measuring 'the impact of NPAs and DPAs in deterring the bribery of
foreign public officials' would be a difficult task, save providing certain
anecdotal and other circumstantial evidence.
One of the best sources of anecdotal evidence
demonstrating that DPAs and NPAs have a deterrent effect comes from
the companies themselves. The companies against which DPAs and
NPAs have been brought have often undergone dramatic changes. For
instance, prior to or following the entry of DPAs or NPAs, many companies
have terminated personnel, including senior managers, established new codes of
conduct and compliance policies and procedures, pledged not to use third-party
agents, withdrawn from bids tainted by corruption, provided new and substantial
resources to compliance and audit functions within their organizations, and
instituted new training regimes. These companies, through their remediation
efforts under DPAs and NPAs, have often fundamentally changed how they
conduct business. In addition, just like with individuals on parole or
probation, the monitor provisions or self-reporting requirements of DPAs and
NPAs are designed to deter future misconduct and, at the same time, ensure
that companies meet their obligations. In meetings with board members, chief
executive officers, chief financial officers, general counsel, and chief
compliance officers, DOJ and SEC have heard directly from these senior leaders
about the impact DPAs and NPAs have had on their companies for the better.
Beyond the companies themselves, DOJ and SEC have heard
anecdotal stories about the deterrent effect of NPAs and DPAs on
other companies and how those resolutions raise awareness of anti-corruption
laws. Often those stories come from other corporate leaders who have discussed
how their own practices have changed or even whole industries that have changed
their behavior for the better. For example, during the course of one
investigation, it was revealed that a major multinational corporation's DPA
caused another Fortune 50 company to implement an FCPA compliance program.
In addition, following DPAs in different cases, companies have come
forward to make voluntary disclosures of similar conduct. Many of our
DPAs and NPAs are publicized extensively and scrutinized closely by
the business community, the legal profession, and the compliance community,
among others. The 'lessons learned' from these DPAs and NPAs, for example,
help raise awareness of compliance risks and failures. The existence of
DPAs and NPAs also encourages companies to voluntarily disclose conduct,
by providing meaningful rewards to those companies, which enables DOJ and SEC
to ensure further specific and general deterrence."
Of course, what the DOJ says above as to the
deterrent value of NPAs or DPAs would equally apply to actual
But let's test the following statement made by
the DOJ "One of the best sources of anecdotal evidence demonstrating
that DPAs and NPAs have a deterrent effect comes from the companies
themselves. The companies against which DPAs and NPAs have been brought
have often undergone dramatic changes."
In 2008, the DOJ announced (here)
that Aibel Group Ltd. (Aibel Group) pleaded guilty to violating the
antibribery provisions of the FCPA. As noted in the DOJ release,
"Aibel Group admitted that it was not in compliance with a deferred
prosecution agreement it had entered into with the Justice Department in
February 2007 regarding the same underlying conduct." The DOJ release
further states as follows. "This is the third time since July 2004 that
entities affiliated with Aibel Group have pleaded guilty to violating the
As this previous
Wall Street Journal Corruption Currents post highlighted, Ingersoll-Rand, fresh
off its exit of a DPA in 2011, soon disclosed that it found other potential
violations of the FCPA. In a 2011 filing, the company stated as follows.
"We have reported to the DOJ and SEC certain matters
which raise potential issues under the FCPA and other applicable
anti-corruption laws, including matters which were reported during the past
year. We have conducted, and continue to conduct, investigations and have had
preliminary discussions with respect to these matters with the SEC and DOJ,
which are ongoing."
So the question remains, do NPAs and DPAs deter?
It turns out that not even the DOJ knows the answer.
Interested in NPA and DPA issues? On May 3rd, I
will be speaking at this
event at the National Press Club in Washington, D.C. hosted by
Corporate Crime Reporter.
Read more articles on the FCPA by Mike
Koehler at FCPA Professor.
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