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How big a problem is corporate FCPA recidivism?

The DOJ and SEC have prosecuted 240 different companies (by my count) for FCPA offenses. Of those 240 companies, 13 have been repeat FCPA defendants. That means the recidivism rate for all corporate FCPA defendants is about 5.5 percent.

Is a recidivism rate of 5.5 percent high, low, or average?

It depends on what you compare it to. And that’s a problem. If there are reliable same-crime recidivism rates for corporate defendants, I haven’t found them. Even for individual defendants, recidivism rates for most white-collar crimes are anyone’s guess. Statistics either aren’t there or are so diluted by other crimes that they produce meaningless comparisons.

Those missing statistics matter when you’re trying to understand the deterrent effect of corporate prosecutions. There’s no “science” to support arguments this way or that.

One brave scholar who opened this can of worms (if only slightly) is Prof Peter Henning of Wayne State’s law school. He published a brilliant article in 2015 that asked, “Is deterrence relevant in sentencing white-collar criminals?” He wrote mostly about individual white-collar defendants. But he looked briefly at corporate perps, too.

Prof Henning said,

At least where corporate misconduct takes place, the deterrent message from a fine, even one counted in the billions of dollars, will not necessarily be heard outside of the particular industry in which the company operates. It is certainly true that companies have responded to how prosecutors and civil regulators have stepped up policing of corporate misconduct by ramping up compliance programs, even creating separate departments to handle this function. But whether management at one company knows what actually happened in another organization or will internalize the threat of sanctions by altering operations is at least an open question. Unlike an individual who can visualize being in a similar position to someone who is punished, it is unlikely corporate officers will consider themselves comparable when only the organization is punished.

Did Prof Henning get it right? Among compliance officers and corporate counsel specializing in FCPA work, there’s lots of community knowledge and awareness. So there’s probably a lot of deterrent effect from corporate FCPA enforcement actions. At least I hope so.

Can we learn anything about corporate recidivism from individual rates? Maybe. For example, we know recidivism generally declines for first-time offenders (first-time arrested and prosecuted). And we know that most individual FCPA defendants are first-time offenders. From U.S. Sentencing Commission stats, we also know that older criminal defendants overall have much lower recidivism rates than younger offenders. Again, most individual FCPA defendants are older.

So, on one hand, we can safely conclude that individual FCPA defendants generally have a comparatively low recidivism rate. (In fact, I think the FCPA recidivism rate for individuals is approximately zero). That low individual recidivism rate may translates to a lower corporate recidivism rate, since companies can only act through individuals.

On the other hand, how many individual FCPA first offenders stay in jobs where they can become repeat offenders? Probably close to none.

Back to our first question. Is a 5.5 percent FCPA recidivism rate for corporations good or bad? Asked another way, do corporate FCPA prosecutions deter bribery?

I knew an associate general counsel from a company the feds had once prosecuted for overseas bribery. She called all FCPA issues “go-to-jail” questions. When executives asked her FCPA-related questions, she’d preface every answer with, “Oh, that’s a go-to-jail question.” By reminding her colleagues over and over how serious FCPA outcomes could be, the associate general counsel kept the memory of that earlier FCPA prosecution fresh, and that (I’ve always thought) deterred more bribery.

Nonetheless, some companies are repeat FCPA offenders. Here’s a list of corporate FCPA recidivists, compiled from the enforcement index on FCPA Blog+.

1.  ABB Ltd. in 2004 and 2010.

2.  Baker Hughes Incorporated  in 2001 and 2007.

3.  Deutsche Bank AG 2019 and 2021.

4. Eni S.p.A. in 2010 and 2020.

5.  Goodyear International Corp. and Goodyear Tire & Rubber Company in 1989 and 2015 respectively.

6.  Halliburton Company in 2009 and 2017.

7.  International Business Machines Corporation in 2000 and 2011.

8.  Marubeni Corporation in 2012 and 2014.

9.  Novartis AG in 2016 and 2020.

10. Orthofix International N.V. in 2012 and 2017.

11. Stryker Corporation in 2013 and 2018.

12. Technip S.A.  and TechnipFMC plc in 2010 and 2019 respectively.

13. Tyco International Ltd. in 2006 and 2012.

Why did those 13 companies commit repeat FCPA offenses? Again from Prof Henning: “Deterrence has little impact for economic crimes when there is a low probability of being caught.”

So maybe the simple answer is that despite their earlier FCPA prosecutions, those 13 companies still believed they’d get away with it.

They were wrong.

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