Once Again, Not The Media’s Finest FCPA Moment

Once Again, Not The Media’s Finest FCPA Moment

 This article was reprinted with permission from FCPA Professor

As readers no doubt know, I have my fair share of concerns regarding this new era of Foreign Corrupt Practices Act enforcement.  (See here for my article “The Facade of FCPA Enforcement,” and here for my 2010 Senate testimony, among other things).

Peter Schweizer has concerns about this new era of FCPA enforcement as well.

However, attributing various aspects of FCPA enforcement to the Obama administration is just simply off-base.

That is what Schweizer, author of the new book “Extortion:  How Politicians Extract Your Money, Buy Votes and Line Their Own Pockets,” recently did on CNN’s Lou Dobbs Tonight.  Set forth below is what he said – see here for the video.

DOBBS: The Obama administration has a long history of  rewarding its friends and punishing its political enemies. Joining me now to  explain the administration’s — well, what he calls extortion tactics and  maneuvers, Peter Schweizer, president of the Government Accountability Institute  and author of the explosive new best-seller “Extortion: How Politicians Extract  Your Money, Buy Votes and Line” — of course — “Their Own Pockets.” I added the  “of course.”

Peter, great to have you back with us.

SCHWEIZER:  Thank you, Lou. It’s  great to be on with you.

DOBBS: You know, last night  here, we talked about Congress and the ways in which it is lining its pockets,  doing business, and in fact, institutional corruption is what much of it appears  to be. The executive branch is certainly — certainly in every bit the same  league, and its — its favorite device, you write, is the Foreign Corrupt Practices Act.

What are some — what are some of the companies that it  has attacked with this?

SCHWEIZER: Well, here’s what’s  interesting about the Foreign Corrupt  Practices Act. It was created in 1977. It was actually written by  attorneys at Covington and Burling, which is the law firm that Eric Holder  and a lot of top DOJ people came from.

And for 30  years, Lou, it was pretty much a dormant law. You had on average three cases a  year. When President Obama came into office, it exploded. And what’s concerning  about how this law has been used is it’s been targeted against companies or  entities that the administration deemed to be anti-Obama or not supportive of  his policies.

So over the last several years, you saw  everyone from Koch Industries to News Corp., your parent company, to HP, who’s  headed by a Republican, to Las Vegas Sands, which, of course, is — is largely  owned by a gentleman who’s funneled tens of millions of dollars into Republican  causes…

DOBBS: Sheldon Adelson, the billionaire.

SCHWEIZER: Exactly. And you’ve also seen industries that  were very, very supportive in 2010 of the Republican takeover of Congress,  namely the independent oil and gas industry and the hedge fund industry were  targeted with so-called search — sorry, with sweep letters where they basically  said, We’re going after your industry. And so it’s a major intimidation tool.

DOBBS: An intimidation tool and an intimidation tool to be  used as intimidation often is any  part of life to — to raise money…

SCHWEIZER: Yes.

DOBBS: …  whether it be contributions, whether it is to line the pocket of a specific  friend of this administration, correct?

SCHWEIZER: Yes,  that’s exactly right. And actually, there — there is academic evidence,  statistical studies that have been done that shows that if you are a company or  an individual who gives campaign donations, if your corporate PAC gives campaign  donations to the right people, you basically are going to cut in half the  chances that you are going to have the book thrown at you and face criminal  charges and civil charges.

So there’s evidence that  this works. And the timing is also very, very disconcerting. For example, days  after the 2010 election, and only a couple weeks after President Obama had said  in a radio interview, we’re going to punish our political enemies, that’s when  they send out the industry sweep letters to the independent oil and gas industry  and they said we are now coming after you. And the oil and gas industry in 2010  had basically gone four to one for Republicans as opposed to Democrats so the  timing is very, very suspect as well.

DOBBS: Let me –  let me share with our — with our viewers that quote from — from the President  telling an audience, quote, “We’re going to — we’re going to punish our enemies  and we’re going to reward our friends who stand with us on issues that are  important to us” — a blatant declaration of purpose and intent of which as you  document they seemed to have fulfilled.

By the way I do  want to point out 120 of those investigations under the Foreign Practices Act in  2009 about the same number in 2010 then it drops to about half of that in 2011  and 2012 does that the extortion rate is declining that there is some constraint on the administration?

SCHWEIZER: No there is not any constraint unfortunately the problem is that a lot of companies are  realizing you know what we’re not even going to fight this we’re basically going to cave and give them what they want because even if we end up winning in some sort of trial it’s going to be so costly to us in terms of legal fees, it’s also  going to affect our stock price.

And it needs to be  pointed out Lou that part of the problem part of what’s happen is that this Department of Justice is more politicized than really any I would say since the  Nixon administration. And you don’t have to look any further than the fact that  when Obama was elected in 2008 the Department of Justice was populated at top  with no less than five major campaign bumpers including — including the  attorney general himself Eric Holder. These are people that were raising huge  sums of money for President Obama’s election. That’s unprecedented — that has  not happened before.

DOBBS: Peter thanks so much for  being with us. It’s fascinating and if you want to know how your government  works, Peter Schweizer he’ll tell you in here. His book is “Extortion” it’s  available online at bookstores now. We recommend it to you highly. We need a lot  of people who understand how this government works. Peter thanks for being here  and thanks for your contribution to our knowledge. We’re coming right back.

Where to start?

FCPA enforcement has not exploded under President Obama.  For starters, this is yet another example why having accurate and reliable FCPA enforcement statistics is important because inaccurate and unreliable FCPA enforcement statistics muddy the conversational waters.  (See this prior post for more information on what is an FCPA enforcement action and how the “core” approach yields the most reliable answer).

Sure, if one counts the Africa Sting cases (announced in early 2010 – see here) as 22 enforcement actions instead of 1 core enforcement action, one can make it appear that FCPA enforcement has increased under Obama.  If you look at many FCPA Inc. enforcement statistics and see the “blip” for 2010 this is why.

Sure, if one counts the Siemens individual enforcement actions (announced in 2011 see here) as 15 enforcement actions (the DOJ charged 8 individuals and the SEC charged 7 individuals) instead of 1 core enforcement action, one can make it appear that FCPA enforcement has increased under Obama.  If you look at many FCPA Inc. enforcement statistics, this one core action comprises a meaningful chuck of 2011 FCPA enforcement.

Wholly apart from how one counts enforcement actions is the issue that very little FCPA enforcement activity since January 2009 (when Obama became President) can be attributed to his presidency.

For instance, the Africa Sting enforcement action (a manufactured FCPA case involving FBI agents posing as a representative of a Gabon “foreign official”) was set into motion before Obama became President.  Likewise, the Siemens individual enforcement actions are the direct result of the 2008 Siemens corporate enforcement action.

The most recent Stryker enforcement action from October happened during Obama’s presidency, but that enforcement action was set into motion in 2007 when SEC requested information from the company concerning its FCPA compliance.

Perhaps most importantly, the majority of corporate FCPA enforcement actions are the result of voluntary disclosures, not pro-active enforcement actions!

The above information is not complex nor difficult to learn about … if one wants to.

Another claim from the Schweizer interview is that Sheldon Adelson (the CEO of Las Vegas Sands) has somehow been targeted for FCPA scrutiny because he supports Republican causes.    As highlighted in this previous post, the origins of Las Vegas Sands’s FCPA scrutiny is a civil complaint filed in Nevada state court in 2010 by Steven Jacobs (the former President of Macau Operations for Las Vegas Sands).

Likewise, this information is not complex nor difficult to learn about … if one wants to.

Another claim from the Schweizer interview is that the oil and gas industry has been targeted by the Obama administration.  Sure, if you want to make that claim you could easily reference the 2010 enforcement actions against various oil and gas companies that utilized the services of freight forwarder Panalpina.  (See here - as well as posts under CustomsGate on the search feature of this website).  However, those enforcement actions were the direct result of the 2007 Veto Gray FCPA enforcement action (see here).

Once again, this information is not complex nor difficult to learn about … if one wants to.

In short, while I share Schweizer’s concerns about certain aspects of FCPA enforcement, his attempt to pin this on the Obama administration is completely off-base.

Having a proper perspective on FCPA enforcement statistics (see here for the prior post) is so very important as – once again – demonstrated by the Schweizer CNN interview.

The CNN interview – in providing a platform for an author to articulate completely off-base opinions – was once again not the media’s finest FCPA moment.  (See here and here for other examples).

Read more articles on the FCPA by Mike Koehler at FCPA Professor.

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