Tuesday, June 21, 2011

The Foreign Corrupt Practices Act

Guest Bloggers: Stephen Richer – Director of Outreach, Washington Legal Foundation; John Kendrick – Summer fellow, Washington Legal Foundation

"The Foreign Corrupt Practices Act is a huge legal quagmire; companies don’t have a clear idea of what they can and can’t do." Tony Alexis, Mayer Brown LLP.

In 2004, the DOJ found just two violations of the Foreign Corrupt Practices Act (FCPA). In 2010, that number rose to 48. Have businesses become significantly more corrupt in the past six years? Hardly. Rather, as Mike Volkovpointed out at a recent Washington Legal Foundation (WLF) web seminar, the DOJ has simply realized a cash cow in the FCPA, and they’re milking it for all it’s worth. Consider these FCPA fines from the past four years: Siemens, $800 million; Haliburton, $579 million; Daimler $185 million; Johnson & Johnson, $70 million.

Onlooking companies in similar positions have witnessed such nine digit fines and asked, "How do we steer clear of similar penalties?" Unfortunately, that’s uncertain when it comes to the FCPA. Questions such as "what constitutes a foreign official," are difficult for even attorneys to answer, and the absence of a de minimis provision makes it so even a cup of coffee to a Chinese transportation official could merit an FCPA fine. As Volkov stated later in the WLF program, "The reach of FCPA is unbelievable.

"The FCPA is both vague and broad, and, to make things even easier for the DOJ, it has a generous whistleblower program that doesn’t encourage inter-company solutions first. Volkov called it a, "confessional justice system." All told, the FCPA is a nightmare for American businesses. Especially unwelcome at a time when national unemployment is at 9.1 percent.

Fortunately, Volkov, Alexis, and WLF are not the only ones to recognize the flaws of the FCPA. At a Tuesday House Judiciary Committee hearing on the FCPA, Former Attorney General Michael Mukasey emphasized the need to "clarify the meaning of a ‘foreign official,’" the need for a "willfulness requirement for corporate criminal liability," and the general want for greater "clarity and certainly." George J. Terwilliger of White & Case LLP and Shana Regon of the National Association for Criminal Defense Lawyers also added their ideas to "help clarify ambiguity in the statute and its application."

It can only be hoped that such experts have influence on Congress because, as Volkov put it, the current ambiguity of the laws allow government officials to be "not only enforcers of the law, but also judge and jury," and that’s not a formula for inspiring American business.



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