Pressure Points Of Enforcement

Defense lawyer George Terwilliger: The DOJ will put indirect pressure on corporations to encourage compliance. At last week’s annual meeting of the National Institute on White Collar Crime, Assistant Attorney General Lanny Breuer warned corporate executives and directors to expect tougher and more innovative Foreign Corrupt Practices Act enforcement. Here’s an account from Sue Reisinger at Corporate Counsel.

Braeuer told his Miami Beach audience that recent DOJ enforcement actions “should make clear to every corporate executive, every board member, and every sales agent that we will seek to hold you personally accountable for fraud violations. We will not shy away from tough prosecutions and trials.” His full remarks are here.

How to interpret AAG Breuer’s remarks and recent DOJ enforcement practices?

We asked George Terwilliger, above, a Washington, D.C. lawyer in private practice who previously served in the DOJ for 15 years, including a stint as deputy attorney general. (We talked about his NLJ comment, “FCPA Internal Investigations — Are They Worth It?” here.)

He said:

Dear FCPA Blog,

The Department’s enforcement policy on the FCPA continues to evolve, with a focus on bringing cases that hit “pressure points” designed to influence corporations to take actions that promote FCPA compliance. The Department’s increased attention to prosecuting individuals is in recognition of the fact that corporations don’t think and decide, the people who operate and lead them do. Punishing individual wrongdoers is designed to affect the course of corporate actions.

Of course, prosecuting corporations themselves remains important, as Assistant Attorney General Breuer noted, because corporations’ shareholders and directors—particularly independent board members—constitute another compliance pressure point. Corporate prosecutions negatively impact the value of the corporation’s stock, thereby adversely affecting shareholders, and expose directors to allegations that they failed to implement adequate compliance measures.

The Department’s focus on the quality of FCPA due diligence in mergers and acquisitions hits yet another pressure point, where companies have both the power to look into an acquisition target and an opportunity to address any FCPA issues they discover.

It remains to be seen whether, or to what extent, those persons or organizations financing foreign acquisitions and other transactions involving companies subject to the FCPA may themselves get scrutiny for their level of FCPA due diligence, especially when such investors take an equity position in a company or joint venture, but do not exercise any operational control.

Finally, Assistant Attorney General Breuer’s emphasis on the benefits of voluntary disclosure is a restatement of existing Department policy, but questions still remain about how to measure and quantify those benefits.  Such quantification is necessary for informed decision-making.