Wednesday, June 2, 2010

The Holder Memo and FCPA Enforcement

Attorney General Eric Holder recently issued a memo (here) regarding "Department Policy on Charging and Sentencing."

There is little that is new is this memo; in fact Holder states that the purpose of the memo is "to reaffirm the guidance" provided by Title 9 of the U.S. Attorneys' Manual, Chapter 27" (see here) - a manual which has "guided federal prosecutors" for "nearly three decades."

Nor is there anything FCPA specific in the memo.

Yet the memo, and the broad pronouncements Holder makes, call into question whether several recent Foreign Corrupt Practices Act enforcement actions contradict the guidance the Attorney General has reaffirmed.

In the memo, Holder states - "persons who commit similar crimes and have similar culpability should, to the extent possible, be treated similarly."

Under the law, "persons" include both individuals and business entities, including corporations.

However, as explored in this post, a two-tiered justice system has seemingly developed in FCPA enforcement.

Certain corporations in certain industries, most often selling certain things to certain customers, can seemingly violate the FCPA's anti-bribery provisions with very little consequence. In fact, with increasingly frequency, such companies are not even charged with FCPA antibribery violations and/or may not even have to plead guilty to anything. See here for the recent Daimler, here for the recent BAE, and here for the Siemens "bribery, yet no bribery" enforcement actions.

On the other hand, the DOJ seeks long prison sentences for individuals such as Charles Paul Edward Jumet, who make payments that pale in comparison to the payments made by the above corporations. In doing so, the DOJ usually trots out its get tough language (i.e. "bribery isn't just a cost of doing business overseas [... but] a serious crime that the U.S. government is intent on enforcing").

The Holder memo also states "in accordance with long-standing principle, a federal prosecutor should ordinarly charge 'the most serious offense that is consistent with the nature of the defendant's conduct, and that is likely to result in a sustainable conviction."

Again, reference is made to the Daimler, BAE, and Siemens enforcement actions.

In Daimler, the DOJ release (here) notes that Daimler "brazenly offered bribes in exchange for business around the world" and that Daimler "saw foreign bribery as a way of doing business." Yet, Daimler was not charged with FCPA anti-bribery violations. In fact, Daimler was not required to plead guilty to anything as it received a deferred prosecution agreement.

In BAE, the DOJ's criminal information (here) alleges that “BAE provided substantial benefits to one KSA (Kingdom of Saudi Arabia) public official, who was in a position of influence regarding the KSA Fighter Deals (the “KSA Official”), and to the KSA Official’s associates.” The indictment alleges that BAE “provided these benefits through various payment mechanisms both in the territorial jurisdiction of the U.S. and elsewhere.” Yet, BAE was not charged with FCPA anti-bribery violations.

In Siemens, the DOJ release (here) states, among other things, that for "much of its operations across the globe, bribery was nothing less than standard operating procedure for Siemens." Yet, Siemens was not charged with FCPA anti-bribery violations.

It is difficult to reconcile the charging decisions in these recent enforcement actions with the language of the Holder memo.

As to sentencing, the Holder memo states - "in a typical case" the appropriate sentence should be reflected by the "applicable guidelines range, and prosecutors should generally continue to advocate for a sentence within that range."

Apparently, neither Siemens and Daimler were "typical" cases, because in both enforcement actions the DOJ advocated for a sentence significantly below the guidelines range.

In Siemens, the guidelines range (see here) was $1.35 billion - $2.7 billion. However, the ultimate DOJ fine was $448.5 million. Siemens did not voluntarily disclose the conduct at issue, nevertheless, the DOJ gave Siemens greater sentencing credit than allowed for under the guidelines because the guidelines calculation was "incongruent with the level of cooperation and assistance provided by the company in the Department’s investigation." For more on Siemens' fine, see here and here.

In Daimler, the guidelines range (see here) was $116 million - $232 million. However, the ultimate DOJ fine was approximately $94 million. Again, Daimler did not voluntarily disclose the conduct at issue, nevertheless, the DOJ gave Daimler greater sentencing credit allowed for under the guidelines. The DOJ stated, "indeed, because Daimler did not voluntarily disclose its conduct prior to the filing of the whistleblower lawsuit, it only receives a two-point reduction in its culpability." However, the DOJ "respectfully submit[ed] that such reduction is incongruent with the level of cooperation and assistance provided by the company in the Department's investigation."

As demonstrated above, three of the DOJ's most high-profile FCPA or "FCPA like" enforcement actions seemingly contradict many of the guiding principles in the Holder memo.

With Attorney General Holder now re-affirming these principles, it will be interesting to see if future FCPA enforcement actions comply more closely with these principles or if the future holds more facade enforcement actions.


Speaking of Attorney General Holder, while most of us were enjoying the Memorial Day barbeque, he was delivering remarks at the OECD Conference in Paris. See here for a copy of his remarks.

1 comment:

  1. This is outrageous. How do we bring this to the attention of more people? It’s inequities like this that need to be brought to everyone’s attention.