Foreign corporate prosecutions can involve headline-grabbing multimillion dollar fines, international corporate scandals, and even diplomatic intrigue. Over the past two decades, federal prosecutors have focused their attention on international antitrust cartels, bribery of foreign governments, ocean dumping, and other crimes that involve corporate conduct abroad. As prosecutors have set their sights on conduct outside the United States that affects us, we have seen more foreign corporations ensnared in their nets.
In an article I just published in the Virginia Law Review, titled Globalized Corporate Prosecutions, I describe how foreign corporate convictions involve bigger average fines and larger firms — perhaps the kinds of cases worth pursuing despite the practical difficulties of pursuing foreign companies.
To study U.S. prosecutions of foreign firms, I assembled a database of over 1,000 publicly reported corporate guilty plea agreements from the past decade. It is intended to be useful as a resource - all of the plea agreements located are available here.
(And a request for help - if you come across any plea agreements that are missing from the website, which is still being completed, we would certainly appreciate it if you let us know so that we can add them.)
I also analyzed U.S. Sentencing Commission data archives on federal corporate prosecutions and data concerning federal deferred and non–prosecution agreements with corporations. Not only are large foreign firms prosecuted with some frequency, but they typically plead guilty, are convicted, and then receive far higher fines than otherwise comparable domestic firms.
Of the corporate convictions I examined, 14 percent were foreign firms. They had far higher average fines than domestic firms (an average fine of $38 million as compared with $7.5 million for domestic firms). This occurred across the decade that I examined, from 2001 to 2010. Foreign firms are prosecuted for very different crimes and in a different mixture of cases than domestic firms. The foreign corporate convictions were concentrated in antitrust, Foreign Corrupt Practices Act (FCPA) and environmental cases. That was not a surprise; in each of those areas, prosecutors have described their goal to more aggressively pursue foreign corporate violators. In some areas, foreign corporations may dominate the industry — or most violators may be foreign, perhaps because they had thought they could avoid U.S. regulations. Many foreign firms are under investigation. Some are related, as prosecutors identify industries in which violations seem pervasive, and use cases to leverage industry compliance. The enforcement patterns may change over time as new priorities emerge.
Prosecutors increasingly reward firms that voluntarily self-report, cooperate and improve their compliance programs. However, I observed how foreign firms routinely did not receive the benefit of those deferred and non-prosecution agreements, but instead plead guilty and are convicted. I wondered why. While some have called a conviction the "death penalty" for a firm, that is plainly not always the case. As it turns out, most foreign firms are prosecuted in areas where the DOJ does not always offer deferred and non-prosecution agreements.
I also describe a story of convergence in key areas in which foreign firms are prosecuted. Federal prosecutors coordinate far more with enforcers in other countries, and this would have not occurred to the same degree in the past. After all, corporate criminal liability has long been a form of American Exceptionalism, where other countries do not generally hold corporations criminally accountable for actions of their employees. These foreign corporate prosecutions may be starting to change that as other countries begin to prosecute corporate crime more like we do in the United States. Perhaps we will not remain so exceptional in the area of corporate crime.
Brandon L. Garrett (pictured above) is the Roy L. and Rosamund Woodruff Morgan Professor of Law at the University of Virginia School of Law. His article, "Globalized Corporate Prosecutions," 97 Va. L. Rev. (2011) can be downloaded from SSRN here. Professor Garrett can be contacted here.