For years, commentators have decried the plight of the corporate FCPA defendant in a world without trials: As Arthur Andersen made clear, most companies accused of crimes by the Department of Justice (DOJ) can’t afford to go to trial. As a result, the story goes, prosecutors are able to pressure companies into accepting negotiated resolutions of FCPA charges that rest upon conclusory allegations and dubious, untested legal theories. This story, often retold, is at the core of what Professor Mike Koehler calls “The Façade of FCPA Enforcement.” It also happens to be a gross oversimplification. Corporate FCPA defendants may not go to trial, but they aren’t helpless victims of prosecutorial bullying. Even as their advocacy shifts from the courtroom to the conference room, these defendants often retain powerful forms of leverage over federal prosecutors.
Why do corporate defendants still have leverage when they cannot credibly threaten to go to trial? Because of the confluence of two factors: the small size of DOJ’s FCPA Unit and the complexity of foreign bribery prosecutions. Though the FCPA Unit has generated billions in fines and DOJ has poured increasing resources into FCPA enforcement in recent years, only a few dozen prosecutors are assigned to foreign bribery cases, and many of them only on a part-time basis. And the investigations those prosecutors handle are notoriously challenging: they frequently span years, continents, business units, and languages. With more than 150 ongoing investigations parked in a single unit, it is beyond DOJ’s reach to thoroughly prosecute each and every case.
To maintain its robust enforcement program despite these resource limitations, the FCPA Unit relies on corporate targets and their outside counsel to assist with crucial components of the government’s investigation. This practice of “investigation by proxy” in turn confers a degree of leverage upon the defendants whose assistance is required, leverage that is amplified when the corporation’s assistance is key to identifying and prosecuting individual employees and agents. This countervailing leverage derives from, among other things, the defendants’ ability to:
- Facilitate access to employees around the globe: One of the toughest challenges in any FCPA investigation is to obtain access to employees of interest who are stationed abroad; they are often both reluctant to speak to the authorities and protected by local laws that prohibit foreign investigators from conducting in-country interviews. But there is one party that can often produce them: their employer. Conditioning the witness’s continued employment on cooperation with government authorities is often the easiest way around these obstacles, even if the government only ever obtains vicarious access in the form of interviews conducted by defense counsel. It is precisely for this reason that many corporate targets initially delay terminating employees suspected of bribery-related misconduct.
- Produce evidence from abroad in a timely fashion: Mutual Legal Assistance Treaty (MLAT) requests are a notoriously cumbersome and inefficient mechanism for gathering evidence from abroad. Perhaps the biggest problem is that these requests are dependent upon the willingness and ability of foreign states to produce timely and/or thorough evidentiary responses, something that is generally far from a given. As a result, the government often turns to other mechanisms for obtaining international evidence, such as informal evidence-exchange agreements with foreign regulatory counterparts. The most common tactic, though, is to simply ask corporate counsel for assistance in preserving and accessing evidence stored abroad. With the help of forensic investigation teams and in-country counsel, firms are often able to reach faster and further into foreign countries than DOJ, delivering access to foreign evidence in a quicker and more direct fashion than the MLAT process.
- To organize, screen, and convey the evidence in a useful manner: FCPA investigations often involve millions of documents and hundreds of interviews spread around the globe. Both the mountain of material and the challenge of reviewing it can quickly overwhelm government investigators and their information technology resources. To make things easier, FCPA prosecutors frequently rely on the corporate targets themselves to gather, process, screen, and deliver evidence in a usable format. From database files to interview summaries, defense counsel often serves as the first-pass eyes, ears, and mouth of the FCPA Unit.
Of course, critics like Professor Koehler would likely argue that, notwithstanding the FCPA Unit’s small size, the practice of “investigation by proxy” is actually a sign that corporate defendants have little bargaining power. After all, how much leverage could corporations have when the government could just compel them to turn over the same information?
The answer: A lot. The government’s FCPA enforcement regime rests primarily on good faith, negotiated settlements. Even where the government could compel corporate cooperation, it rarely wants to. Aggressive and adversarial investigative tactics place a tremendous strain on the Unit’s limited resources and cut down on both the quantity and quality of cooperation. In the relatively small world of FCPA enforcement, where prosecutors and defense attorneys are often repeat players, life is easier (and the enforcement program more robust) when cooperation, rather than compulsion, is the dominant investigative dynamic. Fortunately for corporate targets, as compulsion falls into disfavor, the target’s relative willingness to make the government’s investigative life easier becomes a major bargaining tool.
The dynamic at play here is quite simple: DOJ’s frequent unwillingness to resort to adversarial investigative techniques breeds dependence upon the cooperation of corporate targets. And this dependence confers bargaining power upon those same targets. Thus, even in a world where the locus of defense advocacy has shifted from the courtroom to the conference room, corporate FCPA defendants often have plenty of arrows in their quivers.