A Missing Cornerstone Of Enforcement?

Professor Mike KoehlerIn a post  a few months ago, we looked at some of the biggest cases in recent years. Then we asked whether FCPA-related mega settlements are replacing individual prosecutions.

That subject popped up at Tuesday’s hearing about FCPA enforcement, when Senator Specter asked Mike Koehler about the DOJ’s tally of individual prosecutions.

With Mike’s permission, we reprint below some of his comments:

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In his November 2010 speech, Assistant Attorney General Breuer provided the following statistics as to individual FCPA prosecutions: In 2004 the DOJ charged two individuals under the FCPA; in 2005 the DOJ charged five individuals; and last year and this year combined the DOJ has charged over 50 individuals. 

However, an analysis of these figures reveals interesting results. The approximately 50 individuals charged in recent FCPA cases break down as follows:

Twenty-two individuals have been in one case, the so-called Africa Sting case, in which FBI agents (posing as representatives of the President of Gabon with the assistance of an individual who had already pleaded guilty to unrelated FCPA violations) facilitated fictitious business transactions largely involving owners and employees of military and law enforcement products companies; and

Twenty-four individuals are or were in cases where the recipient of the alleged payments was not a bona fide foreign government official.  

Rather the DOJ’s theory of prosecution was or is based on the above-mentioned theory that employees of alleged [state-owned enterprises] are “foreign officials” under the FCPA –- an interpretation that is contrary to Congressional intent. (These prosecutions are: Control Components Inc. employees/agents (8 individuals); Haiti Teleco related cases (6 individuals); Mexico Comisión Federal de Electricidad related-cases (6 individuals); and Nexus Technology employees/agents (4 individuals).

Prosecuting individuals is a key to achieving deterrence in the FCPA context and should thus be a “cornerstone” of the DOJ’s FCPA enforcement program. However, the answer is not to manufacture cases or to prosecute individuals based on legal interpretations contrary to the intent of Congress in enacting the FCPA while at the same time failing to prosecute individuals in connection with the most egregious cases of corporate bribery.

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Professor Koehler’s prepared statement from Tuesday’s hearing “Examining Enforcement of the FCPA” before the Senate Subcommittee on Crime and Drugs chaired by Senator Specter can be viewed here.