The Foreign Corrupt Practices Act (FCPA) governs conduct of U.S. businesses and individuals conducting business abroad, penalizing them for paying bribes to foreign officials in business dealings. This teleforum will discuss recent developments in FCPA Enforcement (i.e., the new corporate enforcement policy/declinations, etc.), criticism of enforcement over the past few years, and offer predictions about what enforcement will look like during a second Trump term or a Biden presidency. Rod Rosenstein and Jonathan Su will offer commentary.
Rod J. Rosenstein, Partner, King & Spalding LLP
Jonathan C. Su, Partner, Latham & Watkins
Moderator: Brian Lichter, Senior Director, Global Investigations, Cognizant
This call is open to the public - please dial 888-752-3232 to access the call.
Dean Reuter: Welcome to Teleforum, a podcast of The Federalist Society's Practice Groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at www.fedsoc.org.
Dean Reuter: Welcome to The Federalist Society's practice group teleforum conference call. Our call today, April 24, 2020, is titled “FCPA Enforcement in the Trump Administration and Beyond.” I’m Dean Reuter, Vice President and General Counsel of The Federalist Society.
As always, please note that all expressions of opinion are those of the experts on today's call. Also, this call is being recorded and will be transcribed and will be used as a podcast in the future. As always, our experts might be limited in some of their answers since they’re both practicing attorneys, and some have government experience in their recent past.
With that in mind, we’re very pleased to welcome a moderator to today’s program. So what we’re going to do is have some moderated discussion led by our moderator. And we’re trying to reserve maybe 10 or 15 minutes at the end for audience questions, so be thinking of those for when we get to that portion of the program.
Our moderator, Brian Lichter, is the Senior Director at Global Investigations at Cognizant. We’re very pleased to have you with us, Brian. With that, the floor is yours.
Brian Lichter: Thank you very much, Dean. And thank you, everyone, for joining us today. So I’m pleased to be moderating this panel with two distinguished guests, Rod Rosenstein and Jonathan Su. And we want to talk about the FCPA.
So I think as a lot of you know, the FCPA has become one of the most consequential criminal laws in America, can shape corporate behavior. It leads to large fines, large headlines, and significant jail time for executives. But unlike most criminal laws which are shaped by jury verdicts and judicial decisions, the FCPA is shaped largely by enforcement and policy decisions made by the DOJ. Most of the corporate cases never see a judicial decision, so it’s really the DOJ that’s driving a lot of the lawmaking around the FCPA, so to speak.
Now, there’s been a lot of talk, and there was a lot of talk when President Trump was elected, as to what would happen to FCPA enforcement during his administration. Would he enforce it less aggressively than prior administrations was one of the key questions. The numbers thus far don’t really bear out that hypothesis. The DOJ brought more FPCA enforcement actions in 2017, 2018, and 2019 than in 2012 through 2015. And the SEC’s numbers for those years were pretty similar across the board. So the FCPA has remained a fixture of white collar enforcement during the President’s first term.
As we near the end of that term, we thought it would be a good idea to review some of the significant developments over the past three and a half years and to look ahead to what enforcement might hold in the future. So to help us do that today, as I said, I want to introduce our two distinguished panelists.
So first we have former Deputy Attorney General Rod Rosenstein. Rod began his career as a law clerk to Judge Ginsburg on the D.C. circuit, and then he embarked on a long career with the DOJ, starting as an honors program attorney in the public integrity section where he prosecuted domestic corruption cases. He later served in a number of roles throughout the department, including as the U.S. Attorney for the District of Maryland for approximately 12 years.
He was confirmed as Deputy Attorney General in April of 2017 and served in that role for approximately two years. As the DAG, Rod was responsible for overseeing U.S. attorneys’ offices and the DOJ’s criminal division, including FCPA enforcement. After taking what I’m sure was a much needed break when he left the government, Rod joined King & Spalding as a partner in their special matters and government investigations practice earlier this year.
Our second panelist is Jonathan Su, who’s a partner in the white collar defense and investigations practice at Latham & Watkins where he represents corporations and individuals in significant enforcement matters and other high profile matters, including FPCA investigations. Prior to joining Latham in 2014, Jonathan served as special assistant and special counsel to President Obama, where he was responsible for advising on congressional investigations, internal investigations, and other sensitive matters. Before joining the White House, Jonathan served as an AUSA in the District of Maryland where he worked for Rod and as a federal law clerk and as an associate at Latham.
So I’m very pleased that they were both able and willing to join us for today’s discussion. So I want to kick this off with a couple of questions for you, Rod. And I want to talk a little bit about what you view as some of the most significant FCPA related developments over the past three years. And I want to start with one which I think may be the most significant development, which is the corporate enforcement policy. So Rod, can you talk to us a little bit about what are the terms of the FCPA Corporate Enforcement Policy which you announced in November of 2017?
Rod Rosenstein: Yes, Brian. This was one of a series of policy changes that we made over my two years in the department that were focused on the goal of addressing some of the concerns, some legitimate concerns, I think, that had been raised about the department’s corporate enforcement policies. And the FCPA policy goal was to provide guidance about how prosecutors should decide whether to prosecute corporations when corporate employees or subsidiaries had paid foreign bribes in violation of the FCPA. So the premise here is that the corporation is legally culpable, that we, in fact, could prove the case.
But how should we decide whether or not to exercise our discretion? And so what the policy did was to establish a presumption that the department will not prosecute companies for FCPA violations if they satisfy four conditions. First, the company needs to voluntarily disclose the misconduct to the government which means on their own, not in response to a threat of disclosure investigation. They have to do it reasonably promptly, and they have to disclose all relevant facts, including facts about individuals substantially involved in the violation because, remember, the theme of our changes was we want to make sure that we’re holding accountable the individuals who are responsible for criminal conduct.
The second thing companies need to do if they want the benefit of the policy is they have to provide full cooperation, which means they have to satisfy the ordinary conditions in the Justice Department’s manual for cooperation credit. They have to disclose in a timely basis all facts gathered during an independent investigation. And the presumption here is that lawyers will conduct independent internal investigations and provide details, not just a summary narrative, but details that the government can use in making its own determination about whether to pursue individuals.
The policy also requires companies to remain in contact with the government and provide timely updates about their internal investigation and, ultimately, to disclose all facts relevant to criminal activities, particularly by officers, employees, or agents as well as by third parties that come to their attention. That cooperation is required to be proactive, not just -- it’s precisely answering inquiries from the government, but actually being forthcoming about the criminal conduct that occurred. The concept here is that if you’re looking for leniency from the government and you’ve committed misconduct, you should come in and act like a victim and try to help the government uncover the ultimate perpetrators.
The third element that is required in order to come under the policy is for the company to provide timely and appropriate remediation that minimizes the risk of repetition. So we require the companies to understand the factors that contributed to the misconduct and to implement an effective compliance and ethics program. You can’t solve a systemic problem just by firing one rogue employee. And this was the start of a process that we saw more of in subsequent policies of trying to identify what factors an effective compliance program should have in order to satisfy this element.
It includes evidence that there’s a general awareness among employees that criminal conduct will not be condoned, what I refer to as a culture of compliance. It requires devoting sufficient resources to compliance and assigning experienced people to oversee compliance and review risky activities. It’s not just a job you give to somebody who can’t perform in other functions. It’s a significant position in the company. You need to make it sufficiently independent and provide expertise to the board so the board of the company is able to ensure that the policy is being effectively implemented.
And you have to conduct ongoing risk assessments. If you think about the way large corporations operate, you’ve got to continually be examining your operations and make sure that no opportunities for corruption are slipping into the system. You’re also required to impose adequate discipline on employees who engage in wrongdoing to show that you really take this seriously.
The fourth factor is that there must be no aggravating circumstances. In order to get the full benefit of the policy, the policy recognizes there will be circumstances where companies provide timely notification and they cooperate and they remediate, but nonetheless, there may be aggravating circumstances that make it inappropriate to give the company full credit, such as significant involvement by executive management so that it’s not possible to say the conduct was isolated in one portion of the company. If it was pervasive throughout the corporation or if the corporation generated significant profit as a result of the misconduct, and of course, if it’s a repeat offender, you don’t want somebody coming back to the well to try to take advantage of the policy.
Just a few more points I want to make about it. One is that it’s not immunity. The company has to pay disgorgement, forfeiture, and restitution arising from the misconduct so the money that was generated by the misconduct is being repaid. The company is not getting off scot free. In addition to that, it has a caveat that if the company does everything it’s supposed to do but, nonetheless, aggravating circumstances prevent the company from getting full credit under the policy, it still provides that the company can get 50 percent off the low end of the guidelines range to give corporations an incentive to be cooperative and to remediate, even if they’re not going to get a full pass under the policy.
And if the information that they don’t qualify because it wasn’t a voluntary disclosure, that is, that the company fully cooperates or remediates but only after somebody’s blown the whistle or the government has come calling, they’re eligible for a reduced penalty. They don’t get -- they’re not required to pay the full penalty. They can get a reduction of up to 25 percent off the fine range. And generally, in those circumstances, the company will not be required to appoint a monitor.
So that’s, Brian, an overview of the general aspects of the policy.
Brian Lichter: Thanks, Rod. So one interesting thing is prior to this policy, there had been a series of memos by your predecessors as DAG. You hear about the Holder memo and the Filip memo, and this build up. I think a lot of those were leading up to this policy. Can you talk a little bit about the underlying thinking and the objectives, like why did you think it was important to implement the corporate enforcement policy?
Rod Rosenstein: Yeah, I think, Brian, over the years the policies tend to be known by the name of the deputy attorney generals. So we had the Holder policy, the Thompson policy, the Filip and the Yates policies. Obviously, everybody wants to put their own stamp on it. But the point here is that what we ought to be doing isn’t remaking the policy every time somebody new comes on board. We ought to be refining it as we identify flaws.
But I think, generally, when we looked at it in 2017, we had in mind a couple of goals. Number one, to promote consistency in the exercise of prosecutorial discretion, which I think is a consistent goal. That’s why we try to codify policies in our department. It signals a commitment to fairness, and it build confidence in the rule of law if people understand that we’re following some sort of standards for how we determine whether or not to prosecute.
Number two, it enables us to identify more cases by encouraging voluntary disclosure. Some of the cases might never be discovered or may not ever have been fully investigated, meaning that no one would be held accountable but for the company’s willingness to come forward.
Number three, if promotes efficiency in our investigations by encouraging that cooperation in these cases. As I know you and Jonathan know well, they can be extremely costly and resource intensive, if not impossible for the government to perform, absent cooperation from the company.
The other thing we wanted to accomplish was to promote a culture of compliance by rewarding it. The objective of law enforcement should be to create incentives to self-police, and I think this policy achieves that. It also creates an incentive for the company to identify individual wrongdoers. And I think that’s another theme that you’ve seen over the years as these policies have evolved. Some prosecutors are happy to settle with a corporation writing a big check and then claim victory, but we recognize that crimes are committed by corrupt people. We want the right individuals to be held accountable, so we establish a proper deterrent.
And finally, of course, the ultimate goal is to reduce corruption and level the playing field for international business competition. That line is really what the FCPA is all about.
Brian Lichter: Thanks, Rod. So you’ve mentioned a couple of times now the importance of corporate compliance programs and the importance of companies policing themselves. So one interesting thing is in April of 2019, just a few weeks before you left the department, the criminal division issued updated guidance for a corporate compliance program. So can you talk a little bit about that guidance and what it recommends?
Rod Rosenstein: Yes. The corporate compliance guidance that the criminal division issued was actually following up on a prior draft. The criminal division previously had developed some internal guidelines within the fraud section, which is where most of these cases are handled out of Washington are prosecuted.
And then in April 2019, the criminal division promulgated a policy that was intended to apply division wide. And of course, it’s almost like a federal system with the states. The criminal division in the department establishes a policy. It’s sort of a trial, and other components of the department often will follow along if they find the policy to be effective. And I think this is a really valuable document. And anybody practicing in this field, as you do, Brian, I’m sure you’re familiar with it, and Jonathan, defending companies. In my new job in private practice, we use it to counsel companies.
And what it really does is establish a standard, a sort of a best practices as to what corporate compliance programs ought to look like. And it has three fundamental questions. Is the compliance program well designed, is the program implemented effectively, and does it work in practice? And I mentioned earlier that the FCPA policy we rolled out in 2017 had some provisions that were intended to signal what a good compliance program would look like. This policy is intended to be more complete and more broad because it applies to all criminal division cases.
And so it’s certainly worthwhile looking at. If any of the practitioners on the line are not familiar with that program, it’s published on the internet. And it gives some pretty significant details. It’s not too lengthy. I think it’s about 16 or 17 pages. But it gives the elements of a compliance program that I think compliance professionals will find very valuable in designing their program, not just for the purpose of satisfying prosecutors if they ultimately come calling, but for best preserving corporate integrity and doing the job they’re supposed to be doing for their stockholders.
Brian Lichter: Rod, I want to shift to another significant policy, which is something that’s known as the anti-piling on policy, which you announced in May of 2019. So can you talk a little bit about why did you give the policy this name, the anti-piling on policy, and what is it intended to accomplish?
Rod Rosenstein: That metaphorical name, Brian, you’re calling attention to the policy, which I think is a good thing. We announced that in May of 2018, and it encourages coordination among department components and other enforcement agencies, both domestic and foreign, when imposing multiple penalties for the same conduct. If we just called it something bland like the coordination policy, it wouldn’t have made the same impact. The goal was to enhance relationships among law enforcement agencies and avoid unnecessary duplicative penalties.
In football, the term piling on refers to a player jumping on a pile of other players after the opponent is already tackled. It’s unfair, inefficient, and pointless. I faced similar issues as a U.S. attorney prosecuting violent crime in Baltimore where we coordinated with local, state, and federal prosecutors. There’s more than enough crime to keep every prosecutor busy. But we coordinated so that we could maximize our collective impact instead of spending our scarce resources prosecuting the same people for the same conduct multiple times.
I think it’s important for all law enforcement authorities to be aggressive in pursuing wrongdoers. The SEC, the Justice Department, and foreign agencies, they don’t all have identical interests, but we should discourage disproportionate enforcement of laws by multiple authorities. So when there’s evidence that a company is engaged in wrongdoing, particularly a regulated company, having multiple agencies each independently pursue the case promotes inefficiency because each government agency has limited resources and reduces the company’s willingness to resolve cases through settlement because you can’t achieve finality because the threat of other cases.
You’re always going to face the threat of private civil liability, but the prospect of multiple government agencies coming after you impede you from resolving any of those cases. So the policy requires federal prosecutors to consider the potential penalties imposed by other federal agencies, which include the SEC, state, federal, and foreign government agencies as well as domestic federal agencies when they’re resolving potential claims arising from the same misconduct.
It also encourages prosecutors to coordinate with all investigating authorities, even if there are not cases that already being charged. And that coordination may include providing credit and apportioning financial penalties, fines, and forfeitures. So what we’re doing there is encouraging prosecutors not to measure their success by the amount of the fine they collect for their particular agency, but to look comprehensively at the overall resolution.
And this policy, again, applies to all prosecutions, not just FCPA. And as with the FCPA policy, we put this one in the justice manual. It’s actually in Title 1, Section 12, which is not the criminal provision because it applies to criminal and civil. And I think that’s been pretty effective in getting out the word about the importance for all of our department employees to focus on coordinating with other agencies.
Brian Lichter: Well, one thing you noted, Rod, in that answer is the importance of cooperation and coordination between U.S. enforcement agencies and our foreign counterparts who might also have an enforcement interest in various FCPA matters. I think on recent and significant enforcement trend we’ve seen in the FCPA is increased international cooperation for large investigations and prosecutions. There’s been some recent prominent prosecutions involving extensive international cooperation, Operation Car Wash which involved the Brazilian authorities, and more recently, the Ericsson settlement and the Airbus settlement which involved significant cooperation across the globe. So can you talk to us a little bit about what lessons can be learned from these cases with increased international cooperation and how are they important?
Rod Rosenstein: I think that’s true, Brian. I won’t take the time to give you all the details of all the cases, although if people have particular questions, we can talk about that at the end of the session. But if you look at the cases the department has resolved, yeah, it’s great to talk about coordination, but how do you actually measure whether that’s happening? And one effective way to measure it is by looking at how cases are resolved.
You mentioned Brazil for example, where in the past two years the department has credited the defendant nearly a billion dollars for penalties paid to Brazilian authorities, but the companies have gotten credit for it, and they’re American resolutions. Those cases are Technip, which was a London-based oil and gas company and a U.S. subsidiary where the department credited money paid to Brazilian authorities. Another one was Petrobras, which is a much bigger case and was resolved in late 2018, a Brazilian state owned and state controlled energy company with a total amount of penalties, what I believe was over $800 million, but most of that money was credited for penalties paid to Brazil.
And so that indicates the department effectively resolving those cases in a coordinated way with a foreign agency. They’re giving those agencies an incentive to cooperate with us in the future because they know that we’re going to effectively share the proceeds just like the department does equitable sharing with state and local agencies in the United States. And there was another resolution last year in which the department gave Mobile TeleSystems, a Russian company, credit for $100 million penalty paid to the SEC in addition to the penalties paid to the department. So that was an example of a case resolved through domestic coordination.
And then other big cases that you mentioned that have been resolved recently, we’ve seen evidence of that as well. Two of the biggest, in fact -- Airbus you mentioned I think is probably the biggest FCPA settlement ever. And that case, which was resolved last year -- I’m sorry, this January, a couple of months ago, ultimately involved a payment of combined penalties of more than $3.8 billion that resolved FCPA related charges as well as other violations that included U.S. branch and U.K. investigations that touched a total of about 16 jurisdictions.
And that’s a case where the French authorities had primary responsibility for the investigation. But they coordinated with the United Kingdom’s Serious Fraud Office as well as with the U.S. And I think that’s a great example of a case where the settlement reflects that coordination and really a leveraging effect that is -- sometimes people criticize the FCPA, and the perception is that America is taking on all the responsibility. But this is an illustration that it is working in bringing together an international coalition of countries with an interest in preventing corruption.
And finally Ericsson, which was last year. That was just a month or so before the Airbus settlement. It was about a billion dollar settlement to resolve claims related to Ericsson’s alleged bribery in five countries over the course of nearly 20 years to win telecommunications contracts from state owned customers. And as in many of these cases, the bribes were allegedly disguised as consulting contracts with third parties. And in that case, the department highlighted its coordination with the Southern District of New York, SEC, and the IRS in reaching the resolution and credited Sweden for its significant cooperation in the case.
So I think those, as I said, Brian, are some public examples of the kind of coordination that I believe is continuing to go on, much of it behind the scenes, that’s building those law enforcement relationships that are going to pay dividends, not only in deterring FCPA violations but also in other areas of law enforcement.
Brian Lichter: Well, thanks, Rod. Those are great insights. I want to turn it a little bit now to you, Jonathan. So for the past six years where Rod has been in the DOJ on the enforcement side, you’ve been in private practice defending FCPA actions. So from the perspective of a defense lawyer, what do you see as the most significant development in the FCPA over the past couple of years?
Jonathan Su: Thanks, Brian. So I think the most significant development is likely the corporate enforcement policy and the additional direction that the Justice Department has given the bar and the community about the ways that it looks at how corporations react to allegations of misconduct and engage with the department. That kind of direction is really critical because the vast majority of companies want to do the right thing. And when they encounter allegations of misconduct and need to engage with the department, I think it’s really important that by issuing policies, the department builds the notion that if it treats corporations fairly, that it treats cases consistently in a way that really gives those of us in the bar a roadmap into how the department will look at how our corporate clients respond to allegations of misconduct. And that has a lot of impact in terms of how we advise our clients on a daily basis.
As an example, the guidance for corporate compliance programs was really important because that sets in a very public way the benchmark for how the department views corporate compliance programs, and that allows those of us in the bar to really go over in pretty strong detail with our clients the things that they need to be looking out for so that even in an advisory situation that if they were ever to come into contact with the department and there was scrutiny as to the compliance program, what are the areas that they should be looking for. And that kind of clarity and guidance from the department I think really promotes awareness and attention to these issues in a way that I think benefits everybody.
The other thing I would say is that I think it’s great that the corporate enforcement -- the department has not just issued the corporate enforcement policy and left it on its own. It has continuously reacted to insights and comments from the bar such that there have been a couple of refinements to the policy since Rod initially introduced it, and the most recent one, among other things, clarifying what corporations are expected to report at the time that they do. And in short, that corporations are encouraged to report early but that they’re required only to report what they know at the time. And certainly, they will follow up with the department later.
I think that kind of attention is also important because -- that kind of refinement is also important and shows that the department is listening to the bar when the bar raises concerns about unintended consequences or perhaps unforeseen results of the policy in a way that builds confidence that’s to everybody’s benefit.
Brian Lichter: So Jonathan, you noted how the new guidance from the department is very helpful in terms of how you advise your clients in setting clarity in terms of expectations as to how you can advise them to proceed. Have you seen actual changes in the behavior of your clients, either in how they decide to interact with regulators or in terms of how they structure their compliance programs as a result of the new guidance the department has issued?
Jonathan Su: Yeah. So as I said as an example with the corporate compliance program, the guidance in the corporate compliance programs, it really does set a benchmark. And that is the document that many companies use in order to stress test whether there need to be additional refinements made to their programs. In terms of the corporate enforcement policy, I think it gives companies pretty clear guidance in terms of what’s expected of them and their risks and rewards of making disclosures or not making disclosures.
So I think from our side, we rely on this guidance very regularly because it is the department speaking into how it analyses these issues and assesses corporations’ responses to allegations of misconduct. So it’s critical.
Brian Lichter: So Jonathan, one question that I’m interested in is you’ve talked a lot about the benefits of these policies and how they set good expectations for the bar and for companies. But looking back on them, do you have any criticisms of these policies or things you might have done differently or wished had been done differently?
Jonathan Su: So it’s not so much a criticism as is I think ideally that the department could issue more standards and clarity on how the policies are implemented. And let me give you one example of that, which is as Rod noted earlier, in order to get full credit under the corporate enforcement policy, amongst other things, you have to be determined to have voluntarily disclosed a matter. And the definition the department uses is whether a company has disclosed an allegation of misconduct prior to the imminent threat of disclosure or investigation.
In practice, in the whistleblower context, which is how a lot of FCPA cases begin, in some contexts, whistleblowers will send the allegations to a company and then say that at the same time they are sending the allegation to the company that they are also sending that allegation to the Justice Department. And so in that situation, which is not that uncommon, it would be, I think, helpful for those of us in the bar to know from the department’s perspective whether they view that -- in a situation where a company receives that kind of allegation from a whistleblower, the whistleblower says that they are going to simultaneously report it to the department, and then in turn the company reports that promptly to the department whether the department would view that scenario as the company qualifying for voluntary disclosure.
The reason that I raise that is because if the department’s position is that the company in that situation does not qualify for voluntary disclosure, that would, in my view, would have a lot of unintended consequences and doesn’t seem fair that in a situation where a company doesn’t really have control over what the first step that a whistleblower takes, in that situation if the company has done everything that it could to report to the department promptly, in my view, that would -- I think that is absolutely worth considering the company as having voluntarily disclosed.
I understand that these types of cases all have their individual facts and situations, but the voluntary disclosure issue is an important one because, as Rod noted, whether a company is considered to have voluntarily disclosed can have a significant impact on how the case ultimately resolves. And so I think to the extent that the department can issue guidance on situations that occur relatively frequently, I think that would be helpful to everyone for the reasons I just said before.
Brian Lichter: Well, thanks, Jonathan. On the topic of how FCPA enforcement could be changed moving forward to make things more clear or how the law itself could be changed, as Rod and Jonathan, as you both may know, in January of this year, Larry Kudlow, who’s the Director of the President’s National Economic Council, said that the administration was looking at amending the FCPA and suggested a possible weakening of the law because its prohibitions make it difficult for American companies to do business abroad, essentially putting U.S. companies at a competitive disadvantage because they’re unable to make certain payments.
So Jonathan, why don’t I start with you, and then Rod, get your thoughts. Do you think that there are major structural changes that we need with the FCPA, or do you think the sorts of changes that need to be made are these smaller enforcement level changes that are more properly modified through the department’s policy and enforcement decisions rather than through a legislative fix?
Jonathan Su: I think probably the most likely scenario is that to the extent that there are any changes, they would be done through the latter route, Brian, that you noted. In general, I think that as you noted at the beginning of this call, the notion that President Trump’s express views about the FCPA historically were going to result in some sea change in how the department prosecuted FCPA cases has not borne out, and the figures actually show an increase. So to the extent that there are changes, I think it is more likely that they would be executed through refinements as has historically been done as opposed to some major change. Rod, what do you think?
Rod Rosenstein: Well, Jonathan, I think it’s important to recognize that there are a variety of different objections or concerns expressed about the FCPA. In particular, the most common ones are that it impedes or unfairly handicaps U.S. companies that are competing abroad. If U.S. companies are subject to the FCPA and other companies from foreign companies either aren’t subject to it or ignore it and violate it, they can get the business by paying bribes. So that’s one type of objection.
The other is that it’s costly in terms of American resources for us to be effectively devoting American enforcement resources to enforcement of crimes that are occurring mostly overseas. There has to be an American nexus, but mostly overseas. And so I think it’s important when you think about the notion of weakening the FCPA, are you talking about fundamentally abolishing it or are you talking about some refinement? The statute is actually pretty straightforward. It prohibits bribery of foreign officials in pursuit of business. And I’m not sure how you would weaken that in a way that would accomplish any of the goals that the critics seek.
You could abolish it, which of course would have pretty dramatic implications because it has had relatively bipartisan support since the statute was passed and has been enforced pretty aggressively, at least over the last two decades or so. And it has been used as leverage to persuade other countries to adopt similar laws. And so the consequence is now that we are part of treaty obligations with other countries that have agreed with us to create a level playing field.
So I think that I understand the criticism, and I think it’s always worth looking at it. But my approach generally, Brian, and this is a philosophical approach to my view of the Department of Justice, you don’t throw the baby out with the bath water. If there are particular concerns you have with it, you can address those. And that’s what we tried to do with this policy and with many of the other corporate policies that we’ve talked about is give serious consideration -- these were not slapdash efforts. This was a product of a lot of discussion with stakeholders, including a lot of defense attorneys and corporate representatives about how the policy affected them.
And so I think that my view is based on what I know, what I’ve seen, and the criticisms that the best way to address them is to tinker with the department’s enforcement policies and not to revisit the statute itself. Larry Kudlow, I don’t think gave any details about what kind of changes he had in mind, and I’d be happy to talk about particular ideas if people have them. But I tend to agree with Jonathan that the right way to deal with this is let’s look at the individual cases, and if people have issues with the way the statute’s being enforced or not enforced, the department can address that.
Brian Lichter: Well, thanks, Rod and Jonathan. While we’re on the topic of whether future changes are necessary or what might happen, I want to talk a little bit about what do you see projecting out over the next four to five years in the FCPA landscape? What do you think are likely possible significant developments? Rod, why don’t we start with you?
Rod Rosenstein: Well, part of that, obviously, is a function of the philosophies and personalities of the folks who are running the Department of Justice, so it’s a little hard to project specifically. It depends on who’s going to be there. But generally speaking, I think that you’ll continue to see enforcement. And I hope it’ll stay on the trajectory it was on when I left, now over a year ago.
There certainly are going to be legal challenges to the FCPA. There was, for example, a case just decided in February in Connecticut, a district court judge who ordered the acquittal of an individual defendant. It was a former senior executive of a French company named Alstom. And the issue was whether the defendant was acting as an agent of a U.S. subsidiary. Now, that issue of whether or not purely foreign people who are beyond the FCPA’s jurisdiction can be charged because they’re involved with a corporation involved within America jurisdiction.
So I think legal issues like that will continue to be worked out, but my prediction — contingent upon, obviously, who’s running the department — my prediction is that you’ll continue to see enforcement in the kinds of cases that have been brough in recent years. And you briefly touched on that earlier, and I think that by my count -- I’m not speaking for the department, but by my count, the department has entered about 35 corporate FCPA resolutions and collected about $4.5 billion in fines and penalties during the Trump administration.
And in terms of sheer numbers, 2019 was a landmark year by multiple metrics for FCPA enforcement. Five of the largest FCPA monetary penalties were imposed during the Trump administration. And I don't think money alone is a measure of the effectiveness of the program, but it certainly does indicate the department’s commitment to following through on the policy. And you see that from the Assistant Attorney General, Brian Benczkowski, who is running the criminal division, who has been very supportive of FCPA enforcement.
Brian Lichter: Jonathan, what are your thoughts on this topic? Where do you see the FCPA going over the next few years? And do you think it’s really going to change in a material way, depending on whether President Trump is reelected or whether Joe Biden’s our next President?
Jonathan Su: I think one trend that is likely to continue is that the department’s prosecutors will likely continue to stake out aggressive positions on jurisdiction. I think that the expansion of the department’s view on jurisdiction is something that’s occurred over a period of years. And because, as we discussed earlier, that the vast majority of these cases resolve on a settlement or resolution basis, there’s not very much in terms of case law that guides core issues like jurisdiction. And to the extent that the bar believes that there may be a specific case that’s suitable for litigation, we may end up there, although that’s always a high-risk proposition for everyone.
In terms of the upcoming election, I guess I would say that, obviously, leaders of the department matter significantly, and they drive policy decisions. But on a day-to-day basis, we are lucky to have committed, thoughtful prosecutors who can run these cases on a day-to-day basis, and they do what they think is right, and particularly when they serve under assistant AGs who know what they’re doing and let prosecutors do the cases as they believe is right and consistent with the interest of justice. I don’t see a huge sea change one way or the other.
Brian Lichter: Well, thank you. Before we get to questions, there’s just one other topic I want to touch on briefly which is maybe of more immediate interest, and that’s the current COVID-19 pandemic. So to both of you -- and Jonathan, I guess I’ll start with you, given your longer experience in private practice, how have you seen the pandemic impacting FCPA or white collar enforcement more generally over the past month to six weeks, and do you think any trends that we see are likely longer term, or do you think they’re going to subside when we emerge from this, whenever that is?
Jonathan Su: So my experience has been that both the folks at the department and at the SEC very much continue their work, and they’re engaging and doing their outreach and investigative activity as they otherwise might. Obviously, given the social distancing and lockdown procedures, I think that has likely hampered field work by the department or the bureau or other agents.
But in terms of the prosecutors side and engaging with defense counsel, that has largely continued. And in many instances, prosecutors have asked for interviews by Zoom or by phone. From a defense bar side, I think the notion of not being in the same room with your client during a government interview is really challenging and is something that you would have to think about very, very carefully because that’s not usually how we do things by any means. And that’s certainly not how prosecutors are used to doing these types of key interviews, either.
I do think that once COVID-19 subsides, we will largely go back to a regular order because there’s nothing like being in the same room, whether you’re the questioner or you’re representing a client. And I’m not sure that -- although we’re now all used to being on Zoom and finding the coolest background to put on your Zoom background, I think that when this pandemic subsides, and I think that we all hope that it does promptly, we’ll largely get back to regular order.
Brian Lichter: Rod, what about you? Any thoughts on that?
Rod Rosenstein: Well, obviously, we’ve seen some pretty significant impacts in the short term, and as Jonathan made reference to, from the courts closing their operations and curtailing their operations to federal agencies sending all their folks home. And I think that what we’ve seen in our practice is that the federal government, just like the private bar, is starting to adapt the way that we can do things remotely.
But we still have challenges. Witness interviews and depositions, particularly the challenge that lawyer face who want to be able counsel their clients during a deposition, those are things that are technological solutions to that I think will develop over time, but certainly tremendous short-term disruption.
In terms of the long term, though, it’s certainly good news for lawyers when the government hands out so much money, particularly under circumstances where there are a lot of ambiguities in the law. Obviously, any government program is going to be attacked by fraudsters, but the more ambiguities in the law, the more people who are trying to operate in good faith are likely to be wrapped up in it, and the more work for private practitioners like Jonathan and me, unfortunately.
So I do think that it’s inevitable that this is going to generate a lot of investigator work. I actually have looked with great interest at the enforcement resources that Congress is devoting to this, and the thing that has occurred to me -- and this is something, Jonathan, I know that you saw in your experience. Jonathan and I actually tried an SBA fraud case together when he was an assistant U.S. attorney about a decade ago. You think about the way the system operates. It’s not just a matter of having a sufficient number of agents, which traditionally SBA didn’t have to pursue this sort of fraud, a particularly sophisticated fraud.
It’s also a matter of having the prosecutorial resources. And as we all know, prosecuting white collar cases has gotten exponentially more complicated in the digital age, and so I think it’ll be important for the department and the Congress to take a close look at whether there are appropriate resources throughout the system to deal with the cases that are going to arise because your ultimate goal is to deter the fraud. You want to send a message to people who are applying for these programs today that they may face prosecution, and we need to make that a credible threat.
Jonathan Su: Brian, let me just interject here and say that with respect to the reference that Rod made about us trying a case together, there’s nothing quite like being in line at USA, as I was, and having a trial partner that’s a United States attorney. But we were very lucky when we served under Rod to have a very active and engaged United States attorney. And I think certainly I, along with many others, were the beneficiaries of his mentorship and guidance, and we continue to be that. So we were very lucky to have Rod as our U.S. attorney.
Brian Lichter: Well, thanks, Jonathan and Rod. I think this has been a great discussion, but we want to give the audience -- as much as I’d like to keep going, I want to make sure the audience has an opportunity to ask some questions and hear your perspectives. So Dean, I’ll turn it over to you to facilitate the Q&A with our audience members at this time.
Dean Reuter: Of course. Thank you all. We’ve got two questions in the queue, so let’s turn to our first caller of our teleforum
Caller 1: Dear speakers, I have a question. Is there really a good reason to prosecute our corporations for foreign corruption, and what does this accomplish?
Rod Rosenstein: Yeah, Brian, if I could take that first.
Brian Lichter: Sure.
Rod Rosenstein: As I said, there are legitimate policy issues to be raised. One interesting aspect that I really didn’t fully appreciate until preparing for this call is that the most substantial cases that have been prosecuted by the department actually involve foreign corporations. The top five, all of which have been prosecuted in the last two or three years, Airbus, Petrobras, Ericsson, Telia, and Mobile TeleSystems, are all foreign corporations. So when we talk about our corporations, I think we need to consider that context. Now that, of course, raises the other issue, as I said, about whether or not we’re going to be devoting American resources to prosecuting cases that primarily occur overseas.
Just to address briefly though the theory of the statute, when Congress actually first implemented the -- first adopted the FCPA, it was in recognition of the fact that there was corruption rife throughout the world and that companies that wanted to do the right thing -- again, the premise here is that honorable companies want to be able to get business on their merits, not by secretly paying off somebody who’s in political power in a foreign country. And so the premise here was that the companies who try to do the right thing would always be outcompeted by companies that were willing to do the wrong thing and pay bribes if there’s no enforcement mechanism.
So I think that you need to consider what the playing field would look like if we were to drop our FCPA enforcement and, hypothetically, if everybody else who has followed us in adopting bribery prohibitions followed us in dropping bribery prohibitions. And then, instead of a level playing field where you have people competing on the merits, that is, the profitability and value to the citizens of the country, the primary metric in many places would become how much you’re willing to divert to pay off the politicians who are in power.
So for all those reasons, I think that the policy judgement is sound. But I certainly recognize the strength of the criticism. Jonathan?
Jonathan Su: Yeah, I guess the only thing I’d say is I think that there’s this community that places a high value on acting ethically and doing things consistently with law. We may have some arguments and discussions on how the FCPA is enforced, but as a core matter, I think the business community stands firmly behind the notion that they want to do everything they can to act ethically and appropriately and support policy objectives that further that goal.
Dean Reuter: We’ll turn to our next caller.
Caller 2: Yes, hi. My question relates to enforcement of the FCPA against nonprofits and ministries. I advise a number of ministries and churches primarily in the area of the First Amendment. But I’ve heard other highly regarded nonprofit counsel warn that the FCPA can be a real snare for especially smaller, unsophisticated ministries that send money overseas maybe to build a church, maybe to support a local pastor, without good documentation. So I’m wondering if you’re aware of that type of enforcement, if that’s a realistic concern for small ministries, and what they should be cognizant of.
Rod Rosenstein: Well, I think that would fall in the category of critiques that I think you need to test against the evidence. That is, is there any evidence that the department is enforcing the law in a way that’s unfair to nonprofit organizations or that is in any way deterring nonprofit organizations from engaging in activities that would be socially beneficial? And I hope that the answer is no. If there were examples of that, it certainly might be worth revisiting the way the law is enforced.
But based upon the cases that I’ve seen -- and this is a law that is enforced by the criminal division of the Department of Justice. All these FCPA cases are centrally controlled, often, in fact, prosecuted by main justice prosecutors in coordination with assistant U.S. attorneys throughout the country. But there is a high degree of centralization and screening of the cases that are brought, and so I think that insignificant violations and overzealous cases hopefully aren’t being investigated and certainly aren’t being prosecuted.
The other thing to keep in mind is that this is a criminal law where the elements need to be proven beyond a reasonable doubt. And this law in particular has a corrupt intent element to it, which means, generally speaking, you’re not going to accidentally violate it and the government’s going to be able to come in an persuade a jury beyond a reasonable doubt that somebody was acting in good faith -- acting with corrupt intent.
And the other elements of the offense are that you make a payment to a foreign official for the purpose of influencing them in violation of their lawful duty to assist in obtaining or retaining business. And I guess if it were truly a nonprofit, you also might have a defense as to whether or not you have the purpose of the bribe was to obtain or retain business.
But I think — and Jonathan will let me know if he’s aware of any cases — I think it’s a situation where the hypothetical is probably not matched by real life examples of cases where you might think that the law was being used in an overzealous way. Jonathan?
Jonathan Su: Yes, I agree with all that. And I’ve not seen any case where -- involving nonprofits and small dollar amounts and whatnot. I don’t think that is the kind of scenario that the department ordinarily invests its resources in. And I think that -- so yeah, I don’t see that as being a significant issue.
Now look, to the extent that there are large dollar amounts being paid for no documented purpose, for a reason to gain some commercial advantage, that’s -- even in a nonprofit situation, that may be something the department looks at. But you’d have to have sort of the right combination in order for the department to invest significant resources in an investigation that can take you around the world.
Dean Reuter: We’ve got one question pending.
Caller 3: Yes, hello. Good afternoon, Mr. Rosenstein and Mr. Su. My question is in McDonnell v. United States, the Supreme Court very narrowly defined bribery to an official act. So my question is do you think if a case were to come before a court or the Supreme Court that they would possibly export that reasoning and narrow the FCPA to an official act when they talk about the statute as influencing any act or decision of a foreign official?
Rod Rosenstein: Well, I’ll take that first, Brian. And the answer is probably yes. As you accurately quoted, the FCPA actually does have a bail money offense payment to a foreign official, a politician, or a party official candidate for office for the purpose of influencing a person in an official act or decision. So it’s the same concept, the concept being that there’s got to be a quid pro quo. That is, the payment is in return for an official act. So I think if you had a case like McDonnell, you might face the same sort of legal result.
And that’s one of the reasons, as I mentioned earlier, why these cases are controlled out of Washington. And pretty much every one of them receives very high level review because they typically are cases that involve large corporations. They often have large defense teams who you can count on to raise every viable legal argument. Jonathan, who’s probably been in some of those meetings on the defense side, can speak about that.
But the upshot is that -- I mean, the short answer to your question is yes, I certainly do agree that McDonnell and any other cases that construe the meaning of bribery or the meaning of official acts would have relevance to FCPA. And the broader answer I think is that the department is probably cautious about bringing these cases so that the cases we see prosecuted are typically egregious. Not to say that there aren’t often defenses, and sometimes they’re jurisdictional defenses, for example, but usually, the case is premised on an unambiguous bribe. Jonathan, have you seen anything different?
Jonathan Su: No, I haven’t, but I think what I would also say though is that judicial -- as I think I’ve mentioned a couple of times, judicial review of FCPA cases is rare in the corporate context because in many of the cases, corporations -- it makes sense to corporations to have finality and to defend their resolution. The acquittal that Rod mentioned earlier was an individual, involved an individual, and so I think to the extent that there are court challenges to the definition of bribery or other aspects of the FCPA would much more likely be in the context of an individual prosecution as opposed to a corporate prosecution.
Dean Reuter: Gentlemen, it looks like we’re out of questions. Happily, that coincides with us being out of time. So I want to give special thanks to Brian Lichter for moderating and helping us put this program together. Also, of course, want to thank our two panelists for today, Rod Rosenstein and Jonathan Su. Thank you very much, all three of you.
And I want to thank the audience as well. Thank you for dialing in. Thank you for your thoughtful questions. A reminder to the audience to check our website and monitor your emails. Next week is Executive Branch Review Week with a whole slate of programming online. But until our next call, we are adjourned. Thank you very much, everyone.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s Practice Groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at www.fedsoc.org.