Results matching “fcpa”

Opposing FCPA Overcriminalization - PointOfLaw Forum

Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

As the overcriminalization problem has garnered more and more attention, the calls for reform have become increasingly audible in various aspects of federal, state, and local governments. The latest example comes to us from the Texas Public Policy Foundation. Vikrant Reddy, TPPF's Senior Policy Analyst for the Center for Effective Justice, has just released a report detailing salient changes that should be made to the Foreign Corrupt Practices Act to make it more reliable and efficient. Ostensibly, the purpose of the statute is to minimize U.S. complicity in international corruption, but its ancillary effects tend to stifle any beneficial effects of the additional regulation:

The act is emblematic of all the worst aspects of creeping federal overcriminalization, the tendency of Congress to use criminal law to regulate behavior not traditionally considered criminal. The FCPA's most important terms are vague and provide limited guidance for potential defendants; it is enforced in a way that limits critical mens rea protections; and the law does not provide for a "compliance defense" that would allow corporations to demonstrate that violations were a result of rogue employees, rather than inadequate compliance regimes.

The general problem stems from the fact that the premise of the legislation does not account for the creation of a skewed incentive structure. In theory, the FCPA will deter U.S. corporations from using potentially illegitimate means to court business in countries that are deemed "high risk" by using the threat of exorbitant fines and penalties. In order for this linear-style logic to hold, legislators either did not consider the negative externalities involved, or simply deemed them minimal in relation to the benefits of the legislation. Either way, the FCPA has proven to cause significant problems in terms of increasing the uncertainty involved in a given investment, and thus diverting U.S. resources from economically and socially productive uses:

Ironically, in fact, there is evidence that the FCPA has had the counter-productive effect of discouraging American firms from investing in impoverished nations. There is also evidence that the FCPA has stunted the growth of U.S. companies by forcing them to maintain costly compliance regimes. Ironically, these regimes may not even be useful becasue prosecution ultimately depends on how a particular U.S. Attorney will choose to interpret a particular term.

An improved piece of legislation would take into account these proven negative effects, while maintaining the core corruption-preventing purpose of the FCPA.

In other overcrim news, the Manhattan Institute's Center for Legal Policy will soon be releasing a report detailing the changing nature of Deferred and Non-Prosecution Agreements, especially in relation to the increasing number of agreements being utilized by the DOJ and, recently, the SEC. It will also examine the scope and adequacy of judicial review over these agreements.

Is Volcker the New FCPA? - PointOfLaw Forum

The long-in-the-making Volcker Rule was finalized this week. Under the rule, banks and affiliated entities, will not be permitted to engage in proprietary trading and their relationships with hedge funds and private equity funds will be limited. The rule--a five-agency, nearly thousand-page effort--is a reflection of the difficulty of distinguishing prohibited from permissible activity. Volcker compliance programs will be large and complex, and frequent unintentional missteps across Volcker's hazy lines are likely. Consequently, the rule promises to be a plentiful supplier of cases for regulators and a great source of enforcement risk to the companies subject to it.

Colin Hedrick
Legal Intern, Manhattan Institute's Center for Legal Policy

Given the recent slew of negative press (e.g. Daily Beast, Frontline) about the government's failure to prosecute executives for their alleged role in the 2008 financial crisis, it is unsurprising that the Justice Department is making high profile moves against big banks. However, the strategy the Justice Department is pursuing, as recently reported by Ben Protess of the New York Times' Deal Book, raises serious concerns. Many of those concerns are all too familiar, especially to those following the ongoing saga of the Foreign Corrupt Practices Act and its enforcement.

The Justice Department's new strategy more or less consists of the old strategy of fines and reforms but with the added twist of encouraging guilty pleas from the companies accused of wrongdoing. In recent years, the Justice Department was hesitant to push for guilty pleas or actual court proceedings for fear of irreparably injuring companies, and as a result, the economy at large. However, under this new strategy, the Department is attempting to avoid this pitfall by eliciting the guilty pleas out of subsidiaries as opposed to the parent banks. The idea is that focusing on the subsidiary will not destroy the entire company, yet still allows the Justice Department to take meaningful action.

It is easy to criticize this strategy on multiple fronts; however, the most common criticism leveled against this approach is that it amounts to little more than a PR campaign by the Justice Department to make it seem like they are doing something. It is much easier for the Department to point to a guilty plea than a deferred prosecution agreement or a non-prosecution agreement. A guilty plea is something that can be easily sold to the press and an angry public. This sentiment is perfectly expressed by former federal prosecutor Evan T. Barr in Protess' article, "Extracting a guilty plea from a wholly owned subsidiary finally enables the Justice Department to look tough on financial institutions while sparing them from the corporate death penalty." The idea that "looking tough" is the actual goal of this strategy is worrisome for both those looking for actual punishment and those seeking meaningful reform.

Committing bribery without knowing it - PointOfLaw Forum

In an op-ed in today's Washington Examiner, Paul Enzinna follows up on his recently published report on the Foreign Corrupt Practices Act (mentioned in the WSJ,, Main Justice,

In today's globalized economy, more and more U.S. businesses operate overseas. As such, they fall under the strictures of the U.S. Foreign Corrupt Practices Act, or FCPA, which forbids payments to "foreign officials" -- the idea being to prevent bribes.

U.S. companies should not be permitted to bribe foreign officials, but U.S. prosecutors have pursued ever more expansive theories to bring conduct within the statute's ambit, while resolving most cases with settlements that preclude judicial review. The result is an uncertain landscape for U.S. businesses.

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New Report: The world's policeman in FCPA enforcement - PointOfLaw Forum

The 35-year-old Foreign Corrupt Practices Act (FCPA) is well-intentioned legislation designed to root out bribery abroad by U.S. businesses, but in recent years, the Department of Justice (DOJ) has stretched the statute in an effort to become the world's policeman. A new Manhattan Institute report released today and authored by Paul Enzinna, chronicles how FCPA enforcement has exploded over the past decade thanks to expansive interpretations by the DOJ that are both unjustified by the statute and lacking in judicial oversight. The report makes a strong case for legislative reform in clarifying the statute's reach.

The DOJ has aggressively expanded the FCPA by:

(1) Interpreting the statute's jurisdiction to include foreign companies for foreign activities linked to the U.S. only by use of dollars in foreign transactions or the routing of foreign web-based communications through U.S.-based e-mail servers;

(2) Interpreting "foreign official" to include individuals employed by market enterprises with state ownership, including doctors and other health providers in countries with national medical systems;, and

(3) Interpreting the statute's prohibition on payments "to obtain or retain business" to include picayune payments which the plain language of the statute clearly exempts.

The broad sweep of liability under the DOJ's interpretation of the FCPA, along with the high costs associated with potential criminal conviction (including pressure on stock prices and impairment to obtaining credit) have ensnared many U.S. and foreign businesses and led them to enter into "deferred-prosecution agreements" (DPAs) or "non-prosecution agreements" (NPAs) with the DOJ--including hundreds of millions of dollars in fines and significant changes to business practice--rather than fight controversial FCPA cases in court. NPAs typically are not filed with a court., and DPAs may be, but generally receive little judicial oversight.

Interpreting the Foreign Corrupt Practices Act - PointOfLaw Forum

Yesterday, the staffs of the Securities and Exchange Commission and the Department of Justice published a 130-page guide about the Foreign Corrupt Practices Act, an anti-bribery statute. The fact that it takes so many pages to explain to companies how to comply with the complicated statute is troubling enough. Even with the lengthy "non-binding, informal, and summary" guide, however, a lot of compliance questions remain.
One example is the question of who constitutes a foreign official for purposes of the statute. The FCPA's reach is not limited to payments made to government officials working at government agencies. The guide includes a list of eleven "non-exclusive factors" for consideration in determining whether a company is a government instrumentality under the statute and thus whether its employees are considered to be foreign officials. Depending on how these factors are applied, normal business practices with a seemingly non-governmental business partner could end up constituting FCPA violations. A company might be considered a government instrumentality even if the government is only a minority shareholder.
The FCPA has generated large settlements for the government and is likely to be an area of continued focus by the SEC and DOJ. Many FCPA cases are not based on bribes, but rather on a failure to maintain proper books and records or internal controls. Even immaterial reporting errors are enough to trigger the FCPA. Some companies find themselves in trouble after they acquire another company that has committed FCPA violations in the past.
The FCPA has become a trap for the unwary. Perhaps this staff guidance will help well-intentioned companies in their compliance efforts, but enforcement actions rooted in the FCPA's many gray areas could be distracting government agencies from pursuing violations of greater societal concern.

Olson on Wal-Mart bribery allegations and the FCPA - PointOfLaw Forum

Walter Olson tackles well the controversy over Wal-Mart's Mexico problem and the Washington Post's misguided coverage. [Daily Caller; Cato; OL]

Blogroll - Links

Moving forward with FCPA reform efforts - PointOfLaw Forum

PointofLaw has been closely following the debate and reform efforts with regard to the Foreign Corrupt Practices Act. Passed in 1977, the FCPA prohibits companies from paying bribes to foreign officials in an attempt to win business. According to the WSJ, enforcement of the FCPA has led to approximately $4 billion in penalties against corporations in just the past 5 years. While proponents of staunch enforcement of the Act claim that the FCPA levels the playing field, opponents argue that the law is overly vague and detrimental to American businesses.

Some specific proposals to reform the FCPA include:

  • Allowing companies to avoid liability if they can prove they had robust measures in place to prevent bribes, such as training programs.
  • Offering companies a reduction in penalty--as much as 40%--if they self-report a possible violation. Companies could receive additional discounts for informing on other companies involved in corrupt practices.
  • Quantifying credit for real cooperation so companies and boards can make informed decisions.
  • A grace period allowing companies to investigate new acquisitions and disclose what they find without fear of prosecution.

This growing debate has gained some attention in light of reports that Pfizer is near an over $60 million dollar settlement to resolve investigations of alleged FCPA violations by the company in its efforts to win business overseas. And it seems support for FCPA reform cuts across many industries, even those which may come unexpected.

Promise of FCPA guidance prompts inquiries - PointOfLaw Forum

Two weeks ago, PointofLaw featured Assistant Attorney General Lanny Breuer's announcement that next year the Justice Department would release "detailed new guidance" on the Foreign Corrupt Practices Act. In his address however, Lanny Breuer did not specify in any detail the particular guidance to be offered. Therefore, there has been an active effort, like that made by Senator Charles Grassley (R-Iowa), ranking member on the Senate Committee on the Judiciary, to ensure that the Justice Department provide appropriate guidance which would sufficiently aid the business community.

Senator Grassley submitted questions to the Justice Department pressing for clarification among which were the following:

• Will the guidance include the Department's interpretations of ambiguous statutory terms such as "foreign official" and "government instrumentality"?

• Will the guidance clarify when a company may be held liable for the actions of an independent subsidiary?

• Will the guidance clarify the extent to which one company may be held liable for the pre-acquisition or pre-merger conduct of another?

• Will the guidance include an enforcement safe harbor for gifts and hospitality of a de minimis value provided to foreign officials?

Additionally, the Wall Street Journal reported yesterday that Pfizer is near an over $60 million dollar settlement to resolve investigations of FCPA violations by the company in its efforts to win business overseas. In response to these investigations, many major pharmaceutical companies are spending a great deal of time along with millions of dollars developing comprehensive compliance programs. It may be that effective FCPA guidance aimed to cure vagueness and ambiguities would be much needed relief for American businesses.

New Database Tracks FCPA Enforcement - PointOfLaw Forum

The James Mintz Group has created a new database "Where The Bribes Are" to track the penalties in U.S. government Foreign Corrupt Practices Act cases since its enactment in 1977. The database is showcased in the form of an interactive international map where each country is shaded respective to the amount of penalties assessed for FCPA violations in that country. The search could be filtered by industry with information available on the particular cases which correspond to the FCPA penalties.

According to the database, FCPA penalties across all sectors total $4.04 billion and energy leads the other sectors with $2.03 billion in penalties. China's corruption risk is high across all sectors while Nigeria leads all nations in the aggregate dollar amount of FCPA penalties.

Take a look at this valuable and easy to use resource.

SEC Reports First FCPA Enforcement Statistics - PointOfLaw Forum

The SEC has announced a record of 735 enforcement actions filed in fiscal year 2011 in total. In addition, since the formation of its Foreign Corrupt Practices Act Unit in 2009 to enforce the law which prohibits bribing foreign officials for business purposes, the SEC recorded its first 20 FCPA enforcement actions in the fiscal year.

These enforcement statistics come in light of Assistant Attorney General Lanny Breuer's announcement that DOJ's criminal division will "release detailed new guidance on the Act's criminal and civil enforcement provisions." There are many however, like Cato Institute's Walter Olson, who make the case that "clarification is not enough" advocating wider reform or even repeal.

Year-by-year SEC enforcement action statistics can be found here.

FCPA progress - PointOfLaw Forum

In a Tuesday speech, Assistant Attorney General Lanny Breuer spoke against "weakening" the Foreign Corrupt Practices Act, but promised to release "detailed new guidance" in 2012. Lisa Rickard responded to welcome the potential clarification, but reiterated ILR's desire to see legislative modifications. [Reuters; earlier]

Around the web, September 20 - PointOfLaw Forum

  • The problem of overcriminalization in the Foreign Corrupt Practices Act: does the UK handle bribery cases better? [Economist; Reuters]
  • More on Oasis patent troll case. [Frankel; earlier]
  • The two "kindergarten"-snark judges are each spanked. [Texas Lawyer; Delaware Online; earlier]

  • Reason settles several meritless libel lawsuits brought against it for $0 after much procedural wrangling, but is still on the hook for the cost of defending itself, demonstrating the need for national anti-SLAPP law. [Sullum; Techdirt; Public Citizen; Public Citizen; Volokh; Bennett]
  • Parent threatened by government for allowing child to ride bicycle to school. [BikeWalk Tennessee via Alkon]

  • The need for better teacher evaluation metrics. [Washington Examiner]
  • What media bias? A telling slur on libertarianism by Adam Gopnik of the New York Times. [Boaz]
  • Ford ad slams competitors for their role in taking bailout money. [USNWR]

Around the web, September 2 - PointOfLaw Forum

  • If the antitrust laws are to protect competition, rather than competitors, why is Sprint's stock surging upon news of DOJ's suit to block the AT&T/T-Mobile merger? [Wright @ TOTM; more; Manne @ TOTM]

  • The need for FCPA reform; government prosecutions show overreach. [National Law Review and Gibson Dunn via Reuters via CJAC]
  • Jon Huntsman plan proposes repeal of Dodd-Frank and part of Sarbanes-Oxley. [Huntsman; WSJ]
  • Devil's bargain: Wall Street and the Martin Act. [Olson @ NY Post via OL]

  • Iowa Supreme Court rejects proposal to keep lawyer discipline secret. [Des Moines Register; earlier @ OL]
  • "Congress Resiscitating Honest Services Fraud" [Right on Crime]
  • This "article argues that a symbiotic relationship exists between plea bargaining and overcriminalization because these legal phenomena do not merely occupy the same space in our justice system, but also rely on each other for their very existence." [J L Econ & Policy @ SSRN]
  • Erwin Chemerinsky was kind enough to represent attorney Stephen Yagman without pay in his criminal trial and appeal; now Yagman is claiming ineffective assistance of counsel. [Patterico; earlier at POL and OL]

  • What media bias? A telling Freudian slip in a New York Times story. [Mac Donald]
  • Bluetooth decision a "small blow for common sense." The "Hearing Health Matters" summary is incorrect, though: the settlement was for class members who didn't suffer any hearing injury. That's how ridiculous it was. [TMCNet; Hearing Health Matters]

Around the web, August 26 - PointOfLaw Forum

  • Yet another study debunking the vaccine-autism link myth, this from National Academy of Sciences. [WaPo]
  • Also not a surprise: no criminal charges in Justice Bradley's claim of being assaulted by Justice Prosser in Wisconsin Supreme Court hearings. Someone should be disbarred over this. [Adler @ Volokh; earlier]
  • The problem of "malfunction theory" in product liability. [Jackson]
  • Six million small businesses might be ensnared by little-publicized NLRB rule of questionable legality creating liability for failure to put up a sign about the NLRA. [NFIB]
  • Suit over closed-door "merit selection" of judges in Hawaii. [Pero]
  • New disclosure process in pending FCPA case will raise costs to criminal defendants. [BLT]
  • Interesting analysis of Minnesota case about third-party criminal liability for the acts of others. [Volokh]
  • Warren Buffett structures his investment in Bank of America to be tax-advantaged. So much for "stop coddling the billionaires." [Stoll; earlier]

Around the web, August 1 - PointOfLaw Forum

  • Even as left claims there is no such thing as voter fraud, honest Democratic prosecutors in Mississippi use DNA evidence to convict NAACP official stuffing absentee ballot boxes with dead voters. [Daily Caller; earlier on POL]
  • Montana Supreme Court: aluminum-bat manufacturer on hook for $850,000 for failure to warn—though the injured plaintiff wasn't the person who purchased the bat or would've seen the warning. [Wajert; Fisher @ Forbes; Patch v. Hillerich & Bradsby Co.; earlier on POL]
  • The problem of lack of demand-side regulation: Ribstein on Yockey on the FCPA: "The article paints a classic picture of over-criminalization in action and how a poorly designed and over-enforced law is crippling U.S. firms ability to compete internationally." [Ribstein; SSRN]
  • Related: ILR critical of WaPo denigration of FCPA reform efforts. [WaPo]
  • Government wants Internet providers to spy on your browsing history for them. [Sanchez @ NYPost]
  • Say what you will about Nancy Grace, but she's at least willing to file a Rule 11 motion; efforts in the House to return teeth to Rule 11 are probably doomed, though. [Frankel; OL]
  • Who's suing whom in the mobile phone market, graphically represented. [Lowering the Bar]
  • "Hilton guest makes federal case of 75-cent paper" [SF Chronicle (h/t N.M.); Gawker]
  • September 11 didn't create waves of PTSD; perhaps vindicating my 2008 testimony. [Bader; NYT]
  • Debt-ceiling bill not so much a "sugar-coated Satan sandwich" as a lot of sound and fury over nothing. [Barro; related: de Rugy]

So suggests Brian Walsh about the Supreme Court's decision in Global-Tech v. SEB:

A recent decision of the Supreme Court of the United States in a patent lawsuit may, somewhat surprisingly, have a major and destructive impact on federal criminal law. In Global-Tech Appliances v. SEB, the high court held that the "willful blindness" doctrine, which relieves a plaintiff of proving that the defendant actually knew that its actions were infringing, applies to certain patent infringement claims. The Court also implied that the doctrine properly applies in federal criminal cases, which would undermine traditional criminal-intent, or mens rea, protections against unjust criminal punishment. The result may be that more innocent Americans will face criminal conviction.

See also Debevoise (PDF, page 11).

Around the web, June 27 - PointOfLaw Forum

  • Some of the better Wal-Mart v. Dukes commentary and analysis—and don't miss my podcast. [Trask; Beck; Karlsgodt; Olson @ Cato; Olson @ Phil. Inquirer; Bloomberg; NYT; WSJ; Examiner; Bader; Omaha World-Herald; Entrepreneur; WLF; earlier; elsewhere on POL]

  • Best Buy employment-discrimination class-action settlement: $200,000 for plaintiffs, $10 million for lawyers. [Minn. Bus. J.]
  • The perils of vague criminal statutes. [Silverglate @ Reason]

  • More on Congressional hearing on FCPA. [Richer/Kendrick]

  • Louisiana narrowly rejects automobile forfeiture sanctions for littering. [OL]
  • Taiwan court imposes heavy damages on web reviewer who complained about salty food at restaurant. [MR]

  • DC-area Supreme Court roundups: WLF; Heritage
  • Corpus Christi Judge Longoria ignores Texas state law to impose felony conviction on mother who spanked her child. [Corner]

  • Not satisfied with ruining our toilets and light-bulb choices, environmentalists place New York Times story presaging campaign to save energy at the cost of it taking two minutes for our cable televisions to turn on. This seems awfully counterproductive: just as people now flush the toilet more often, people are going to respond to the inconvenience by keeping their televisions on all day. [NYT]

  • Our nation Depends on the TSA: Northwest Florida Regional Airport security officials keep us safe from 95-year-old invalid woman with leukemia by requiring her to remove her adult diaper. [NWF Daily News; CNN]

Around the web, June 16 - PointOfLaw Forum

  • Judge Bamberger, already removed from Kentucky bench for his role in the fen-phen scandal, faces disbarment. []
  • Sensenbrenner seeks reform of "impenetrable" FCPA law; DOJ opposes constraints on prosecutorial power. [NYT/Reuters; WSJ; House Judiciary hearing]

  • Mississippi high court hears Sears case on non-economic damages caps. [AP/Forbes; earlier]
  • Haggling over med-mal reform in North Carolina; product liability reform dead. [News-Observer]
  • Special-interest defendants victimized by business-method patent troll who has already collected $400 million seek targeted legislation from Chuck Schumer in patent-reform bill helping with their particular case, while leaving other business-method patents relatively unscathed. [NYT via Yglesias ("Can't they both lose?")]

  • Good news for the First Amendment from New York: message board not liable for pseudonymous comments, even when message board reposts one of the comments as a separate post. [Volokh; Shiamili v. The Real Estate Group of New York, Inc.]
  • Sixth Circuit finds another disingenuous reason to indefinitely postpone an execution; Judge Rogers persuasively dissents. [Adler @ Volokh; Carter v. Bradshaw]

  • 38 state AGs oppose class action settlement by Encore Capital Group. [WSJ]
  • Medicare recipients already face de facto rationing through queueing effects. [MR]
  • A modest proposal to increase both jobs and safety. [Murray @ CEI]

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