Thursday, July 10, 2008

2008 Mid-Year FCPA Update from Gibson Dunn

Gibson Dunn has issued its 2008 Mid-Year Foreign Corrupt Practices Act Update, and it contains an interesting statistical analysis demonstrating that the "trend of continually increasing enforcement is here to stay for the near future."

In a nutshell, the FCPA's anti-bribery provisions target companies that offer money to officials of foreign governments to obtain business. The law also requires the keeping of "books-and-records" detailing companies' transactions and dispositions of assets. It is a fascinating piece of legislation that resulted from a sweeping SEC investigation of such practices in the 1970s and was intended to restore confidence in the integrity of American businesses.

The Gibson Dunn report contains case studies regarding several recent FCPA investigations and, besides increasing enforcement, another trend emerges. Every FCPA investigation of a corporation ended with either a guilty plea, a deferred prosecution agreement, or a non-prosecution agreement. It seems, therefore, at least from the perspective of a corporation, that FCPA cases are ripe for bargaining. What leads to such a trend? Without attempting an exhaustive analysis of this complex and intriguing area of law, I will offer three significant considerations.

(1) FCPA cases involve corporations, and corporations do not like trials. Corporations would much rather examine the case and decide between two alternatives: (a) If the evidence is weak, convince the government not to proceed; or (b) If the evidence is strong, reach a deal. The results of a guilty verdict can be devastating for a corporation and, where victory at trial is uncertain, a guilty plea to a charge that will not result in debarment or, even better, a deferred or non-prosecution agreement is much preferred.

(2) FCPA cases are typically very complex and involve numerous legal difficulties such as obtaining evidence and witnesses from overseas. As such, it is not only in the interests of the company to resolve the issue without trial but it is also in the interests of the government.

(3) Most corporations facing an FCPA investigation do not have a sweeping culture of illegal bribery. If a corporation did have such a sweeping culture, it is unlikely the government would accept a plea bargain that did not include significant penalties. More often, however, corporate management learns of the illegal bribery by an employee thousands of miles away only after receiving a subpoena from the government. In such cases, it is not in the interests of the government to punish the corporation so severely as to result in its dissolving. Rather, the government in such cases merely seeks to ensure that corporations feel sufficient enforcement pressure to implement policies to prevent unlawful conduct and remain vigilant and on the look-out for rogue employees engaging in FCPA prohibited activities.

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