The French bill for Transparency and Modernization of Economic Life, which, among other things, aims at preventing foreign bribery and intensifying the fight against it, has been the subject of much speculation during the past few months.
Entries in Pre-Trial Agreements (7)
The OECD is hosting an Anti-Bribery Ministerial meeting Wednesday (March 16) to discuss how to strengthen implementation of its Anti-Bribery Convention. One of the issues on the table for discussion is how to encourage voluntary disclosure by companies of wrongdoing and how settlements can be used to do that.
The first negotiated settlement of a corporate bribery investigation under the UK Bribery Act involved a deferred prosecution agreement between the Serious Fraud Office and ICBC Standard Bank. That case is a turning point in the enforcement history of the UK Bribery Act and, at a global level, it fuels the debate about the use of settlements to resolve foreign bribery charges.
Ralph Lauren Corporation will pay $1.6 million in combined penalties to the DOJ and SEC in exchange for unprecedented dual non-prosecution agreements after admitting its Argentina subsidiary paid bribes to government and customs officials.
Many, including myself, have expressed doubts about how effective deferred prosecution agreements would actually be.
With so much to lose by going to trial, how many organizations and people will plead guilty to white collar crimes they didn't commit? Ellen Podgor (left) of Stetson University College of Law and the White Collar Crime Prof Blog asks that question in her latest essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game." She looks at three defendants who claimed their innocence at trial but were convicted -- Arthur Andersen LLP, Jamie Olis, and Jeffrey Skilling. And three who pleaded guilty and avoided trials -- KPMG, Gene Foster, and Andrew Fastow. The first group, as everyone knows, got clobbered. The second group, Prof Podgor says with considerable understatement, enjoyed reduced sentences and finite results.
"The pronounced gap between those risking trial and those securing pleas is what raises concerns here," she says. "Some refer to this as a 'trial penalty' while others value the cooperation and support the vastly reduced sentences."
In Olis's case, for example, she points out that the 'trial penalty' paid by the former Dynegy tax executive convicted of accounting fraud resulted in "an initial sentence that was 288 times greater than a non-risk taker and an eventual sentence that was approximately seventy-two times greater than a co-worker who decided not to take the risk of going to trial. [Olis's] boss, who also did not risk trial, received a sentence less than one quarter of what Olis received."
No wonder guilt or innocence doesn't always figure in decisions to fight white collar charges in court. For individuals, the trial penalty can mean sitting in jail for decades (or as long as they survive); for organizations it can mean a corporate death sentence. Plea bargaining, though, removes the risks and limits the damage.
When the amount and quality of law enforcement are just right, when the guilty are usually punished and the innocent usually go free, we call it the "rule of law." Most of us don't think much about the rule of law. We enjoy its benefits and take it for granted, forgetting that it's a rare blessing -- and very fragile. So when the rule of law is out of balance and someone points that out, we should be grateful. Ellen Podgor is someone we're grateful for.
Her essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game," can be found on SSRN here. It'll be published soon in the Chicago-Kent Law Review.
The Justice Department resolves corporate FCPA enforcement actions these days by using deferred and non-prosecution agreements. And the go-to guys for information about them are Ryan McConnell, an Assistant United States Attorney in Houston, and Larry Finder, a partner in Houston with Haynes and Boone. They've identified, cataloged, analyzed and published findings about every "corporate pre-trial agreement" (their term) used from 1993 to 2008 -- all 112 of them.
They were joined for their latest study by Scott Mitchell, the head of the high-profile Open Compliance & Ethics Group, a nonprofit organization that helps member companies improve their culture by "integrating governance, risk management, and compliance processes."
In 2008, the authors say, there were just 16 deferred and non-prosecution agreements, down 60% from the record-setting 40 agreements in 2007. (From 2003-2006, there were 47 agreements; before 2003, there were just 9.) Seven of the 16 agreements last year related to Foreign Corrupt Practices Act settlements, compared with about a third in 2007. Last year's pre-trial agreements involved Sigue Corp., Jackson Country Club, WABTEC, Flowserve, AB Volvo, Willbros Group, AGA Medical, Faro Technologies, ESI, Milberg Weiss, Lawson Products, Republic Services, American Italian Pasta Co, Penn Traffic, IFCO and Fiat.
We asked Larry Finder a couple of questions about the 2008 study. Here's what he had to say:
The FCPA Blog: Why were the DPA / NPA numbers down so much last year?
Lary Finder: Your guess is as good as mine. It's possible that the DOJ was distracted with Congressional hearings and the possibility of federal legislation on the monitor issue, but I truly can't divine the reasons. It is equally as possible that in the post-9/11 environment, more investigatory resources, e.g., FBI and U.S. Attorney, have been concentrated on terrorism-related matters rather than fraud cases. I just don't know.
The FCPA Blog: Your 2008 study talks about the Justice Department's recent clarification [at United States Attorneys Manual 9-28.710] that it won't require waivers of attorney-client or attorney work-product privileges when determining corporate "cooperation." You also talk about the DOJ's new internal rules on the appointment of monitors and the ban on "extraordinary restitution" payments by corporate targets. Do the DOJ's internal rules have the force of law?
LF: As I recall, the DOJ often states (in its published monographs, for example) that its policies are generally not enforceable against the government. The federal case the Department often cites as authority for that proposition is United States v. Caceres, a Supreme Court case from the late 1970s. That being said, our analysis suggests that the Department has been abiding by its own waiver policy. We saw that the privilege waiver language in DPAs was the exception (statistics from 2007 showed only 3 waivers, while in 2008 we found but two) . Further, the Department has every incentive to avoid the perception of violating its own policies on privilege and monitors, lest the organized white collar bar again lobby for curative federal legislation. We'll have to wait and see.
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Ellen Podgor at the White Collar Crime Prof Blog has already said, "This piece should be a must-read for in-house counsel and all attorneys working with companies on compliance programs." She's right. We don't know of any other way to get a clearer picture of what's going on with the DOJ's compliance agreements. This is practical information and a welcome bit of accountability.
The article can be downloaded now from SSRN here. It will appear in the May 2009 Corp. Counsel Rev. - Published by S. Tex. College Of Law, Volume XXVIII, No. 1.