Monday, November 28, 2011

Monday Morning Rant

WSJ's Joe Palazzolo reports here this morning on lobbying efforts to weaken/clarify the FCPA. In yesterday's NYTimes, Gretchen Morgenson commented upon the movement to prevent the CFTC from bringing transparency to the swaps market. In a November 4 piece, WSJ's Michael Rapoport detailed Jon Corzine's successful July 2011 campaign, on behalf of MF Global Holdings, to block a CFTC proposal "that would have placed tighter restrictions on how futures-trading firms can invest cash sitting in customer trading accounts." (Prescient move, Jon.) Most or all of the GOP candidates favor repeal of Dodd-Frank. If a Martian fell to Earth he/she/it would never believe that the same financial elites who brought us to the edge of ruin are still having so much success calling the regulatory shots.

FCPA clearly needs clarification. DOJ, in typical fashion, has given the statute the broadest possible interpretation. But don't expect any significant weakening. Why? FCPA is a cash cow. Big companies, most of whom are quite vulnerable, will do anything to avoid a civil or criminal trial. FCPA becomes a cost of doing business. The money flows into the government. Many of the DOJ attorneys flow into private practice. Because big companies do not want to risk losing at trial, bringing FCPA cases and obtaining huge monetary settlements, at least against those companies, is like shooting fish in a barrel. In other words, the cases are easy to do--just like insider trading cases. They bring big headlines. So the public is diverted from thinking about DOJ's remarkable failure to systematically investigate the top tier entitities and individuals who facilitated the worst economic catastrophe since the Great Depression.

(wisenberg)

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Comments

Great insight. I agree with those who are arguing for an affirmative defense for FCPA. As a person who used to design and deliver training and conduct these kinds of audits when I was in house counsel and compliance officer, I know first hand that you can do everything in the world to let employees, vendors and agents know the law and company standards, but there will always be someone out there who ignores the message or who sees bribery or facilitating payments as a necessity. We see reports every day of long sentences for individuals under FCPA or insider trading but nothing from those whose actions led to the "great recession." By the way, nice meeting you at the UMKC event a few weeks ago.

Posted by: Marcia Narine | Nov 28, 2011 11:14:31 AM

I keep wondering when it comes to FCPA compliance, who exactly is confused? I don't think the FCPA needs to be clarified at all: we all know what the regulatory expectations are. Companies aren't getting into trouble because they don't know what's expected, they get into trouble because they're not willing to commit the time, money, and resources into proper compliance. Despite the semi-hysterical reactions of some, companies aren't being held responsible for the rogue actions of single employees: the actual enforcement record shows that the DOJ brings cases where senior management knew, participated in, or tacitly acknowledged out-and-out bribery. Far from overreaching, the DOJ has been hitting ground-ball singles---maybe a double every once in a while---not swinging for the fences.

I'm up for a reasoned discussion of whether the FCPA needs to be changed, but clarified isn't something I think we need.

I also think that we have a de facto affirmative defense for corporate compliance programs already. I worry about trying to legislate one. If the facts are on your side---meaning, you have a real compliance program in place---you'll come out better under the current statute than you will if a formal defense gets passed, in my opinion.

On the other subject---and I don't really get how you relate one with the other---I think we are in total agreement that the lack of prosecutions over the financial shenanigans that got us into the Great Recession, and are keeping us from getting out, is an absolute disgrace. Corporate failure to assess risk, combined with corporate deceit about that risk committed against the public, deserves to be prosecuted harshly. Someone needs to go to jail. Many someones.

Posted by: Howard Sklar | Dec 1, 2011 11:04:35 AM

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