Tuesday, December 23, 2008

Fiat FCPA Deferred Prosecution Agreement

Noted here was the recent Fiat deferred prosecution agreement.  The FCPA Blog has the agreement, as well as comments here.  Yes, this is an end-of-the-year (or as some might say, a pre-new administration) agreement in the U.N. Oil for Food investigation. The DOJ Press Release states that "Fiat S.p.A (Fiat), an Italian corporation based in Turin, Italy, has agreed to a $ 7 million penalty for illegal kickbacks paid to officials of the former Iraqi government by three of its subsidiaries."  There is also a $3.6 million in civil penalties and an additional amount in disgorgement of profits. 

By having a deferred prosecution agreement, the government is able to keep check of any future violations of the company.  If the company complies with the agreement than the government dismisses the information against the entities charged.

This all sounds good and clearly it is a win-win situation for all parties - the government, the companies, and the general public that wishes to know that kickbacks will not occur in the future.

But there are several aspects of the agreement that raise questions here:

  • The deferred prosecution agreement is yet another instance of the company selling out individuals within the company.  Now clearly if these individuals are going against company policy, and acting illegally - it is deserved.  But having the larger entity being able to negotiate these agreements while individuals take the fall, raises issues as to whether power is being used against the less powerful.
  • The agreement states that the department "in its sole discretion" gets to determine a breach.  From a contract standpoint is it proper to have a breach of the contract determined solely by one of the parties to the contract? See Zierdt & Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing, 96 Kentucky L.J., available here. 
  • And again (see here) we are seeing a provision that only allows the company to issue a "press release if they first determine that the text of the release is acceptable to the Department."

(esp)

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