Random Musings

A recent Main Justice article by Christopher Matthews (see here) talked about Mark Mendelsohn (DOJ FCPA Top Cop) and Cheryl Scarboro (Head of the SEC's New FCPA Team) "spreading the FCPA gospel" at the recent National Forum on the Foreign Corrupt Practices Act.

Two items in the article caught my eye.

First, Mendelsohn is reported to have said, in response to a question, that the DOJ "does consider collateral consequences when structuring settlement agreements" and that "there is a growing recognition that the European Union debarment requirement presents particular challenges for companies trying to settle cases."

That European debarment is the engineer driving the FCPA locomotive in certain cases is clear upon reviewing the DOJ's sentencing memoranda in the Siemens, BAE, and Daimler bribery, yet no bribery enforcement actions.

The Siemens memo (here) states:

"The Department's analysis of collateral consequences included the consideration of the risk of debarment and exclusion from government contracts."

The BAE memo (here) has a separate section on debarment and states:

- "European Union Directive 2004/18/EC, which has recently been enacted in all EU countries through implementing legislation, provides that companies convicted of corruption offenses shall (emphasis in original) be mandatorily excluded from government contracts."

- "BAES's business is primarily from government contracts, including with several EU customers."

- "Mandatory exclusion under EU debarment regulations is unlikely in light of the nature of the charge to which BAES is pleading. Discretionary debarment will presumably be considered and determined by various suspension and debarment officials."

- "The Department will communicate with U.S. debarment and regulatory authorities, and relevant foreign authorities, if requested to do so, regarding the nature of the offense of which BAES has been convicted, the conduct engaged in by BAES, its remediation efforts, and the facts relevant to an assessment of whether BAES is presently a responsible government contractor."

The Daimler memo (here) states:

The DOJ's "analysis of collateral consequences included the consideration of the risk of debarment and exclusion from government contracts, and in particular European Union Directive 2004/18/EC, which provides that companies convicted of corruption offenses shall be mandatorily excluded from government contracts in all EU countries."

The way around these debarment provisions appears to be simple, yet troubling.

Despite clear evidence of FCPA antibribery violations, don't charge FCPA antibribery violations!

Second, Scarboro indicated that the SEC's "FCPA Team" will be up and running "in the next two weeks" and that "the dedicated staff involved in these cases will have a chance to learn the nuts and bolts."

Perhaps in learning the FCPA's "nut and bolts," the SEC enforcement attorneys will learn that many features of its FCPA enforcement program have no legal support such as: (i) employees of state-owned or state-controlled enterprises being deemed "foreign officials"; (ii) parent companies being strictly liable for subsidiary or affiliate books and records and internal control violations; (iii) seeking disgorgement remedies in the absence of antibribery charges.