Mukasey Calls On Congress To Fix The FCPA

President George W. Bush listens to remarks by Michael Mukasey after announcing his nomination September 17, 2007, in the Rose Garden, to be the 81st Attorney General of the United States.In his testimony today before the House Judiciary Committee’s Subcommittee on Crime, Terrorism, and Homeland Security, former U.S. Attorney General Michael Mukasey said the FCPA is hurting businesses and needs reforms that will provide clarity and guidance to the business community. 

He appeared on behalf of the U.S. Chamber of Commerce, which has been campaigning to amend the FCPA.

Mukasey said, “Instead of serving the original intent of the statute, which was to punish companies that participate in foreign bribery, actions taken by the government under more expansive interpretations of the statute may ultimately punish corporations whose connection to improper acts is attenuated or, in some cases, nonexistent. The result is that the FCPA, as it is currently written and enforced, leaves corporations vulnerable to civil and criminal penalties for a wide variety of conduct that is in many cases beyond their control or even their knowledge.”
 
He outlined six changes the Chamber of Commerce wants to make:

(1) Adding a compliance defense;

(2) Clarifying the meaning of “foreign official”;

(3) Improving the procedures for guidance and advisory opinions from the DOJ;

(4) Limiting a company’s criminal liability for the prior actions of a company it has acquired;

(5) Adding a “willfulness” requirement for corporate criminal liability; and

(6) Limiting a company’s liability for acts of a subsidiary not known to the parent.

While the past decade, he said, has seen an extraordinary increase in the level of FCPA enforcement and investigation by the DOJ and SEC, "judicial oversight of such enforcement remains minimal.”
 
Mukasey served as U.S. Attorney General from November 2007 to January 2009. He was a federal district judge from 1988 to 2006 for the Southern District of New York.

A full copy of his House testimony today can be downloaded here.

A Strange Season

The last time it happened, North America was still deep in winter. On February 22nd, Flowserve agreed to appoint a monitor under a deferred prosecution agreement with the Department of Justice. Since then, just one corporate FCPA case is known to have settled. AB Volvo's agreement with the DOJ was announced on March 22nd. But -- typical of oil-for-food cases -- it didn't call for appointment of a monitor. In April and so far in May, no corporate FCPA settlements have made the news, with or without monitors.

What's going on? Last year -- even with fewer FCPA cases pending -- the DOJ still settled an average of one corporate case a month. Why the slowdown in 2008? Well, as we've mentioned before, there's an undeclared moratorium at the DOJ on new appointments of monitors. And since most corporate FCPA settlements involve a monitor, that means settlements must wait.

The de facto moratorium started after ex-U.S. Attorney General John Ashcroft's controversial appointment by his former subordinate, U.S. Attorney Chris Christie. Ashcroft became a monitor for orthopedic device maker Zimmer Holdings Inc. as part of Zimmer's settlement of a domestic bribery case. The news that Ashcroft's firm could rake in as much as $52 million from the appointment triggered sticker shock on Capitol Hill. Democratic lawmakers (and plenty of Republicans) were very unhappy to learn that Bush-appointed prosecutors, acting alone, could tap Republican big shots and other friends for such lucrative (part-time) posts. So Congress launched investigations into all aspects of the monitors -- their appointment, pay, oversight and reporting responsibilities -- and even whether deferred prosecution agreements make sense in the first place. Until the political firestorm is doused, nobody wants new appointments to happen -- not Congress, the DOJ, companies in trouble, or potential monitors themselves.

It's up to Attorney General Michael Mukasey to make peace with Congress and end the stalemate. Can he do it? A better question may be, is he willing to do it? According to a story in the Washington Post from April 17th, the AG's approach with lawmakers hasn't been . . conciliatory. The story focused not on the monitorship mess but on other disagreements between the DOJ and Congress -- warrantless wiretapping operations, the media shield law, updating the state secrets law, the use of national security letters, and attorney-client privilege for military detainees. Based on comments from Republican Sen. Arlen Specter, the story said on these issues the new Attorney General has been overly obstinate and unwilling to compromise. Ouch. If that's the attitude, it could be blocking resolution of the monitorship logjam as well.

For some companies, the delay is bad news. Siemens has been saying publicly since Christmas that it wants a quick resolution with U.S. authorities -- so it can concentrate on repairing its scandal-damaged business. Panalpina's bottom line is also hurting, in part, it says, because of the DOJ's pending FCPA case. Other companies, though, are sure to be using the delay to their advantage -- by conducting deep internal investigations, firing or demoting people who caused the FCPA violations, and adopting best practices to create effective compliance programs. Those companies should be in a better position to deal with the DOJ when the time finally comes.

For now, though, the strange season continues.