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Calling All Pundits

The mailbag brings plenty of pleasant surprises — and this morning was no exception. We received the following message (changed slightly to protect identities)

Dear FCPA Blog,

As a member of the Law Review, I am required to write a student note. I am very interested in the FCPA and would love to write a note relating to it. I was wondering if any of the contributors to the FCPA Blog had any suggestions for a topic. Specifically, I am looking to write about an issue that is both novel and non obvious and that would be useful to both scholars and practitioners in this field. Any suggestion would be most appreciated.

Yours truly,

 Rising 2L

First, Rising 2L, congratulations on making the Law Review. It’s a major accomplishment and presents lots of challenges and opportunities. With that in mind, here are a few FCPA-related topics that could use some attention. We hope you’ll find at least one of them worth exploring:

 1. Respondeat Superior — the legal doctrine by which corporations are held criminally responsible when an employee breaks the law. We have real difficulties with RS. For starters, it trashes the presumption of innocence.

As we said in our post titled Justice For Corporate Defendants,

If respondeat superior sounds oppressive and unbalanced, that’s because it is. It becomes irrelevant to a corporation’s defense that the wrongdoer isn’t a high managerial official, that the corporation specifically instructed the employee not to engage in the proscribed conduct, or that the statute in question (such as the FCPA) requires willful or knowing violations. The idea, the courts say, is that criminal statutes impose a duty upon the corporation to prevent its employees from committing the statutory violations. So forget intent, mens rea, good faith and so on; think instead of strict liability for the employee’s criminal conduct.

The topic is controversial and timely. There’s a serious challenge to respondeat superior in a pending Second Circuit case called United States v. Ionia Management, S.A. Prof Ellen Podgor discussed the case on her White Collar Crime Prof Blog here. As she said, “This case forcefully takes on corporate criminal liability both from a policy perspective and in its application. This is clearly a case that needs to be watched.” Sounds like a bull’s eye, law review-wise.

 2. Opinion Procedure Release No.: 08-02 (June 13, 2008). Halliburton made a hostile bid (now withdrawn) to acquire British firm Expro. But Halliburton couldn’t determine whether Expro had undisclosed FCPA compliance problems. If its bid succeeded, therefore, and if Expro had compliance problems, Halliburton could be held responsible by the application of successor liability and respondeat superior. What to do?

Halliburton went to the Justice Department and proposed an aggressive post-acquisition compliance plan. In return it received a de facto non-prosecution agreement. But the cost was high. Halliburton essentially agreed to help the DOJ prosecute Expro’s personnel if their pre-acquisition behavior might have violated the FCPA. While we’re in favor of FCPA compliance and enforcement, we think something’s wrong here.

It’s easy to guess how very disturbed Expro’s people must have been. Hey, if Halliburton buys us, we might be prosecuted in the U.S. We might even spend time in jail there! Let’s find someone else — anyone else — to buy our company, and fast.

Here’s the question: Should U.S. companies ever be forced to choose publicly between potential FCPA prosecutions of themselves on the one hand or of their M&A targets on the other? Does a choice like that mean Americans can never again compete fairly overseas for unfriendly acquisitions?

This topic is both “novel and non obvious” — and needs some scholarly unscrambling. We have no idea how to approach it — commerce clause, equal protection, due process? And that too makes it a good subject for a law review author to tackle.

3. Promotional Expenses — an affirmative defense under the FCPA that allows businesses to pay travel-related expenses of foreign officials. But the expenses, the FCPA says, must be related directly to “the promotion, demonstration, or explanation of products or services” and must be “reasonable and bona fide.” 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A).

If an expenditure is reasonable and bona fide, however, it is not a corrupt payment. And if it’s not a corrupt payment, it’s not prohibited by the FCPA. If it’s not prohibited by the FCPA, what’s the point of the affirmative defense?

The question matters. Today, when companies want to pay promotional expenses, they’re forced to adopt increasingly elaborate guidelines to make sure everything is reasonable and bona fide. All the self-imposed restrictions, though, are making Americans look petty, stingy, unsophisticated and inhospitable. It’s a national embarrassment, and we’re hoping some law review ink will help inspire Congress to fix it.

Those are our ideas, Rising 2L. Perhaps our readers can suggest more FCPA-related law review topics — by dropping us an email or commenting on this post. In any case, thanks for your interest in the FCPA. It’s a great subject with plenty of twists and turns.

We wish you another successful and rewarding year at law school.

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  1. Any thoughts on how Opinion Release 08-02 might play out in the context of joint venture partners? What if a company enters into a joint venture with a known partner, who then sells part or all of its shares to an unknown third party? The company might suddenly find itself partnered with an entity about which it knows nothing and without an opportunity to conduct due diligence.

  2. How about theories that private plaintiffs use to get around the absence of a private cause of action under the FCPA? Based on your recent postings and other blog sites, there seems to be quite a number of lawsuits based on indirectly based on FCPA violations.

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