Monday, July 11, 2011

... But Nobody Was Charged

James Stewart’s first Common Sense column for Business Day at the New York Times (here) profiles the February 2011 FCPA enforcement action against Tyson Foods involving Mexican veterinarians. (See here for the prior post).

The column is silent as to the relevant fact (as indicated in the DOJ's charging document) that Mexican law permitted certain of the veterinarians at issue to charge the facility in which they work a fee for their services in addition to their official salary.

But that is besides the point, because Stewart's column once again raises the valid issue that so many FCPA enforcement actions involve corporate resolutions only - with no related individual prosecutions.

Stewart writes as follows. "It would seem self-evident that if Tyson engaged in a conspiracy and violated the Foreign Corrupt Practices Act, then someone at Tyson did so as well." Stewart further noted as follows. "But surely bribery, not to mention other forms of corporate wrongdoing, would be more effectively deterred if someone was actually held accountable for it."

Spot on.

In my November 2010 prepared statement (here) to the Senate Judiciary Committee I stated as follows.

"Key to achieving deterrence in the FCPA context is prosecuting individuals, to the extent the individual’s conduct legitimately satisfies the elements of an FCPA anti-bribery violation. For a corporate employee with job duties that provide an opportunity to violate the FCPA, it is easy to dismiss corporate money being used to pay corporate FCPA fines and penalties. It is not easy to dismiss hearing of an individual with a similar background and job duties being criminally indicted and sent to federal prison for violating the FCPA."

I further observed that during this era of the FCPA’s resurgence, the DOJ has consistently stated that prosecuting individuals is a “cornerstone” of its FCPA enforcement strategy. Yet, I asked, why is DOJ’s FCPA enforcement program largely a corporate fine-only program devoid of individual prosecutions?

As highlighted in this prior post, 70% of DOJ FCPA enforcement actions in 2010 have not involved (at least thus far) DOJ prosecutions of company employees.

What do the numbers look like thus far at the mid-point of 2011?

So far this year there have been six DOJ FCPA enforcement actions against companies (Maxwell Technlogies, Tyson Foods, Johnson & Johnson, Comverse Technologies, JGC of Japan, and Tenaris).

None of these FCPA enforcement actions have resulted (at least thus far) in DOJ prosecutions of company employees. Nor has the SEC brought civil charges against any employees of these companies. Nor has the SEC charged any employees (at least thus far) in the three SEC only FCPA enforcement actions this year (IBM, Ball Corporation, and Rockwell Automation).

As I noted in my Senate testimony, the high percentage of corporate FCPA enforcement actions that do not result in related enforcement actions against individuals legitimately causes one to wonder whether the conduct given rise to the corporate enforcement action was engaged in by ghosts.

Yet, I submit, there is an equally plausible reason why no individuals have been charged in some of the above-mentioned enforcement actions (and others) and that involves the quality of the corporate enforcement action.

Given the prevalence of NPAs and DPAs in the FCPA context and the ease in which DOJ offers these alternative resolution vehicles to companies subject to an FCPA inquiry, companies often agree to enter into such resolution vehicles regardless of the DOJ’s legal theories or the existence of valid and legitimate defenses. It is simply easier, more cost efficient, and more certain for a company to agree to a NPA or DPA than it is to be criminally indicted and mount a valid legal defense – even if the DOJ or SEC's theory of prosecution is questionable. [See here for a prior post detailing a former DOJ prosecutor's concern regarding NPAs and DPAs as to these issues].

Individuals, on the other hand, face a deprivation of personal liberty, and are more likely to force the DOJ or SEC to satisfy its high burden of proof as to all FCPA elements.

Regardless of what you think about the possible reasons, the fact remains FCPA enforcement is, despite enforcement agency rhetoric, largely corporate enforcement only.

While on the topic of individual prosecutions, it must be noted that the bulk of such recent prosecutions are in the manufactured Africa Sting case where 22 individuals were criminally charged. Last week (see here for the prior post) Judge Richard Leon declared a mistrial in the trial of the first 4 defendants. The FCPA Blog had a stellar post yesterday (here) titled "Feds Should Forget Shot Show Defendants" and stated that instead of future sting operations to dig up FCPA individual defendants, the DOJ should focus "instead on the real bad apples [companies that have admitted to violating the FCPA and paid big fines] who paid real bribes to real foreign officials."

Spot on.


  1. Madoff victims have also learned how the SEC and the DOJ seemed to have a very lenient approach to finding those responsible for the fraud.
    It is unconscionable and inconceivable that these agencies continue to lure innocent citizens into a false sense of safety and security while actually protecting those who are guilty.
    At what point will Americans demand that the SEC, FINRA, SIPC and the DOJ become accountable and responsible for performing their jobs as protectors?
    Perhaps we should revoke sovereign immunity to ensure there are repercussions for their lack of action.

    Ronnie Sue Ambrosino
    Madoff Victims Coalition

  2. The responsibility towards fraud is less they escape very nicely and they are not even charged for it . This should not happen and they should be severe action towards them .

    Job duties