We're With You On This One, Prof Koehler

Scholarship at its best can change things. It can cause judges to take a fresh look and lawmakers to fix problems. We hope Mike Koehler's new scholarship will do just that.

Koehler, an assistant professor of business law at Butler University, writes the excellent FCPA Professor blog. His latest work tackles the good faith defense for FCPA offenses.

As things now stand, the good faith defense doesn't exist. Koehler thinks it should.

Current U.S. law holds that if an employee violates the FCPA, his or her company is automatically responsible. It's called the doctrine of respondeat superior. Even if the employee went rogue, broke the company's own rules, and hid everything from others, the company is still on the hook. It can't fight and win so it settles. It may get 'sentencing credit' in the settlement for its compliance program. But it still usually has to admit wrongdoing and pay a big penalty.

Koehler wants to change that. In his opening paragraph, he gets right to it:

This article asserts that the current FCPA enforcement environment does not adequately recognize a company’s good faith commitment to FCPA compliance and does not provide good corporate citizens a sufficient return on their compliance investments. This article argues in favor of an FCPA compliance defense meaning that a company’s pre-existing compliance policies and procedures, and its good faith efforts to comply with the FCPA, should be relevant as a matter of law when a non-executive employee or agent acts contrary to those policies and procedures and in violation of the FCPA. This article further argues that a compliance defense is best incorporated into the FCPA as an element of a bribery offense, the absence of which the DOJ must establish to charge a substantive bribery offense.

We agree with Prof Koehler on the need for the good faith defense. It would give companies the best incentive to work hard at compliance. And if there's a downside to more compliance, we don't see it.

Mike Koehler's "Revisiting a Foreign Corrupt Practices Act Compliance Defense" (January 10, 2012), Wisconsin Law Review, forthcoming, can be downloaded at SSRN here.