Every compliance training session should include this warning: If you ever become involved with, see, or otherwise discover a potential FCPA violation, stop everything. Don’t clean your desk, empty the trash can, or clear your browser history. Prosecutors could view moves like those as an attempt to cover up the bribery or impede an investigation.
For emphasis, add this to your warning: Individuals convicted of a criminal FCPA violation face up to five years in prison. But anyone guilty of violating the federal obstruction statute can be jailed for up to 20 years.
Congress passed the obstruction statute mainly as a reaction to the Enron scandal.
The short but dangerous law is found at 18 U.S. Code § 1519:
Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under [the federal bankruptcy code] or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.
Prosecutors can’t throw corporations in jail. But they can punish organizations with huge fines.
The DOJ/SEC FCPA Resource Guide warns issuers about the obstruction provisions of Sarbanes-Oxley (again at 18 U.S.C. § 1519).
SOX, by the way, also criminalizes “retaliation against employee whistleblowers under the obstruction of justice statute.”
The DOJ’s Justice Manual — the handbook for federal prosecutors previously known as the U.S. Attorneys Manual — describes corporate obstruction as the opposite of cooperation:
Another factor to be weighed by the prosecutor [when making a charging decision] is whether the corporation has engaged in conduct intended to impede the investigation. Examples of such conduct could include: inappropriate directions to employees or their counsel, such as directions not to be truthful or to conceal relevant facts; making representations or submissions that contain misleading assertions or material omissions; and incomplete or delayed production of records.
What’s the history of obstruction in FCPA cases? It’s been a mixed bag for individual defendants.
In 2019, the DOJ included an obstruction count against a former Herbalife executive charged with conspiracy to bribe Chinese officials. Prosecutors said Jerry Li, a Chinese citizen, allegedly lied to the SEC and destroyed evidence. The charges are pending.
In another case, the DOJ said a French citizen tried to obstruct an ongoing federal grand jury investigation into potential FCPA and money laundering offenses. Frederic Cilins pleaded guilty in 2014 to obstruction and was sentenced to two years in prison.
In a 2011 FCPA case, the DOJ charged Rose Carson from Control Components Inc. with obstruction. She allegedly flushed documents down a toilet on her way to being interviewed by CCI’s lawyers.
White-collar defense lawyers (among others) protested. They said the federal obstruction statute — punishable by up to 20 years in prison, after all — wasn’t intended to apply to internal investigations, only government investigations. The DOJ relented and dismissed the obstruction charge. Rose Carson eventually pleaded guilty to one FCPA count and was sentenced to six months of home confinement.
Another early FCPA prosecution included an obstruction count. The defendant was Hollywood movie producer Gerald Green.
The DOJ said Green bribed an official in Thailand, and later cooked his company’s books to disguise the bribes as bona fide film production expenses.
The jury convicted Green of 17 FCPA and money laundering counts but acquitted him on the single obstruction count.
Green, who died in 2015, was 77 when his trial started and in poor health. He served a six-month prison sentence and was released in 2011.