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Tuesday
Oct272015

The Big Ban: Let's use debarment and exclusion to promote personal deterrence

In a New York Times op-ed, former assistant U.S. attorney Eric Havian recommended using better methods to deter corporate misbehavior. "Exclusion," he said, "needs to be dusted off, modernized and used more frequently.”

He was talking about debarment -- the right of federal agencies “to temporarily or permanently block corporations that violate their rules from doing business with them.”

Havian said exclusion can also be applied to individual corporate officers, such as chief executives and lower level executives. That’s something I learned about first hand.

As the Contract and Fiscal Law Division of the U.S. Army wrote to me:

Your criminal actions raise serious questions as to whether you have the requisite personal integrity and business ethics to be a responsible U.S. contractor.

As a result, I was debarred -- a decision that was rightfully in the public interest.

And guess what, the entire process from suspension to debarment was entirely fair. The Army gave me a chance to argue why the period of debarment might be shortened due to my cooperation and conduct after my offenses. Accordingly, the duration was reduced and a well reasoned letter setting out the rationale for the decision was  provided  as part of the debarment paperwork.

The DOJ's charging documents in my criminal prosecution for FCPA and related offenses all read “Richard Bistrong, Defendant’ and “United States of America, Plaintiff.”  That's how criminal cases under federal statutes are presented. Thus, why should individuals or corporations who have committed crimes against United States law continue to enjoy unfettered access to agencies within the U.S. government?

University of Virginia law professor Brandon Garrett provides a reasonable explanation when he says “prosecutors are absolutely right to try to avoid collateral consequences of a corporate conviction.” Those consequences can include economic hardship for innocent employees and lawful customers who had nothing to do with the criminal conduct. Why should they become collateral damage?

But from the front lines of business, corporate fines, non-prosecution and deferred prosecution agreements are remote and abstract, usually paid from the corporate treasury and not impacting the company's marketplaces. There's no real personal deterrence there. But if exclusion and debarment, which the New York Times op-ed calls “strong medicine,” are used, the consequences for people  become very real.

When employees and front-line teams start to exert internal peer-to-peer pressure “not to screw up my market or cost me my job,” due to the potential consequences of debarment, then we have an element of real-world deterrence that goes beyond a compliance program. That’s when a request for even a small bribe becomes important and hopefully thought of as impacting more than those just involved in the transaction.

Suspension and debarment, as Professor Garrett said, remain “highly uncommon.” But in any discussion about the Yates Memo and holding individuals responsible for corporate criminal acts, these tools should be considered as an available, suitable and useful instrument of both punishment and deterrence.

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Richard Bistrong is a contributing editor of the FCPA Blog and CEO of Front-Line Anti-Bribery LLC. He consults, writes and speaks about compliance issues. He can be contacted here.

Reader Comments (1)

Debarments should not be limited to cases of criminal violations. Administrative Debarment should be used against executives who self-blind and refuse to fund adequate compliance training and internal compliance/auditing. If general counsels and CFOs who cut funds for internal compliance knew that they might personally suffer for their non-feasance and misfeasance, without having to prove specific intent to commit a criminal act, it would counter the pressure to cut costs imposed by shareholders and CEOs.
October 28, 2015 | Unregistered CommenterMichael Deal
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