The hearing in the House about the FCPA on Tuesday was a testy affair, with some serious debate and some less serious political theater.
Mike Koehler’s excellent coverage is here. As he said, “It bears noting that the last time Congress enacted significant FCPA amendments, the process took eight years and the statute was amended, not through a stand-alone bill, but through Title V, Subtitle A, Part I of the Omnibus Trade and Competitiveness Act of 1988.”
Our view? Business people and lawyers have a legitimate gripe. But as we said three years ago, the problem isn’t the FCPA or the DOJ. It’s respondeat superior — the legal doctrine by which companies are strictly liable for crimes committed by most employees acting within the scope of their employment.
That doctrine prevents corporations from mounting serious defenses against enforcement. That’s why there hasn’t been a public-company defense against the FCPA in more than twenty years.
Without judicial review, the DOJ calls all the enforcement shots. That’s unfair and inconsistent with our criminal justice system. It’s also why problems with the text and interpretation of the FCPA are never solved. Instead they fester, causing frustration in the business and legal communities.
Three years ago this week, we said as long as respondeat superior is the law of the land, corporations won’t be mounting any defense to potential criminal charges under the FCPA. They can’t win in court so they won’t even try. That puts the prosecutors in full control. They know an FCPA criminal indictment waved in front of a defenseless corporation inevitably leads to a plea deal — usually a hefty financial penalty and a deferred or non-prosecution agreement on terms dictated by the DOJ.
As we said then, the fix is easy. Professor Ellen Podgor proposed a “good faith” defense for corporations charged for criminal acts of rogue employees. That, she said, would be similar to the application of the analogous civil-law defense. It would let corporations defend themselves based on their own good-faith compliance efforts. That would allow them a measure of justice and give them the strongest possible incentive to maintain an effective compliance program. Everyone would win.
One of the six amendments to the FCPA the U.S. Chamber of Commerce wants would create a “compliance defense.” That’s Podgor’s idea.
Congress should make that change and forget the rest. Letting companies defend themselves would bring fairness to FCPA enforcement. It would also give the courts a chance to solve the other problems with the statute’s words. And that’s what courts are for.