The FCPA Under Attorney General Loretta Lynch

After the third longest wait for Senate confirmation in history, Loretta Lynch finally received approval to be the next Attorney General of the United States on April 23. When she assumes her position as the head of the U.S. Department of Justice, complex challenges related to cybersecurity and community-police relations will likely be at the top of her list of undertakings. But Lynch has also vowed to make continuing the DOJ’s commitment to fighting global corruption “a top priority.”

Indeed, Lynch has substantial FCPA experience – more than any previous Attorney General (unsurprising, given that it was her two predecessors, Eric Holder and John Ashcroft, who largely oversaw the ascendance of the FCPA regime). As the U.S. Attorney for the Eastern District of New York, Lynch collaborated with the DOJ’s Fraud Section to secure the Ralph Lauren and Comverse non-prosecution agreements. She as worked on the other side as well. As a partner at Hogan & Hartson, she conducted internal investigations, advised clients that had run afoul of the FCPA, and conducted continuing legal education classes on anticorruption. As lawyers, scholars, and business leaders debate the need for FCPA reform (see, for example, here and here), what might the new Attorney General mean for the enforcement regime?

For a nominee, a public confirmation proceeding is an art of talking a lot while saying little, and remaining firmly in uncontroversial territory. Thus, it is may not be the most productive exercise to use confirmation questionnaires and hearing statements as indicators of future policy positions. Nevertheless, the FCPA figured relatively prominently in the Senate Judiciary Committee’s first round of questions for Lynch (nearly 20% of the questions presented by Senator Ted Cruz revolved around the FCPA). The questions themselves give an indication of where the pressures for reform lie. Predictably, many of Lynch’s responses were diplomatic overtures promising to listen to private sector input, advance the administration’s policies, etc. But, in response to other questions, Lynch adopted an unusually strong position and gave an indication of where she stands on proposed reforms to the U.S. anticorruption enforcement regime.

First and foremost, Lynch is an FCPA supporter. This point may seem obvious but, given Fraud Section Chief Andrew Weissman’s past criticisms of the FCPA, it is certainly relevant. Senator Cruz asked Lynch point-blank for her opinion on Weissman’s proposals, which would seriously weaken the American prosecutors’ anticorruption tools. Lynch could not have been clearer: “I do not support the proposed changes. Several of them would be a significant departure from general principles of corporate criminal law, effectively creating unique exceptions for FCPA cases that are unwarranted, are contrary to Congress’s intent in enacting the FCPA, and would impose often insurmountable obstacles to effective enforcement of the FCPA.” Lynch’s statement might assuage concerns – like those appearing on this blog – about putting so much power over FCPA’ enforcement in Weissman’s hands.

Beyond demonstrating her general support, Lynch also weighed in on the following areas of potential reform:

  • Limiting FCPA jurisdiction – Senator Cruz also asked for Lynch’s opinion on proposals to limit the jurisdiction of the FCPA to countries that do not have prima facie anticorruption infrastructure. Again, Lynch was adamant: “Such an exception would be unique under federal law. I disagree with this approach, as I believe it would do harm to the Department’s anticorruption efforts.”
  • Creating a “safe haven provision” – Senator Cruz asked about allowing companies a defense for (i) robust compliance programs, (ii) early disclosure, and (iii) cooperation. This amendment is akin to the proposed FCPA “compliance defense,” which a number of experts have been promoting. In agreement with the critiques on this blog (see here and here), Lynch responded clearly that such a provision would be “unnecessary and undesirable,” given that the DOJ already considers these factors in mitigation.
  • Publishing declination decisions – On a related point, Senator Chuck Grassley and Senator Cruz both asked about whether Lynch would commit to making declination decisions (that is, decisions not to pursue enforcement actions against firms or individuals who may have violated the FCPA) public, and whether she would increase transparency in FCPA proceedings  more generally. The alleged lack of transparency and guidance is a major point of contention for FCPA critics. Proponents of reform might get more traction with Lynch on this point. She expressed general agreement with the push for transparency and stated that decisions should be shared “responsibly and appropriately.” As U.S. Attorney, Lynch worked with the DOJ on a Morgan Stanley investigation that culminated in the first ever-public release of a declination decision. Of course, Lynch will only be at the helm for 18 months and she likely won’t do anything radical in FCPA enforcement. However, the devil is in the details of the reform process, and the initial close look suggests that we might see more transparent FCPA cases under Attorney General Lynch.

5 thoughts on “The FCPA Under Attorney General Loretta Lynch

  1. Thanks for this nice succinct summary of AG Lynch’s statements on the FCPA. Especially given that I’d previously posted on the blog about my concerns regarding Andrew Weissman (co-author of the notorious, and notoriously sloppy, Chamber of Commerce attack on the FCPA), this comes as something of a relief. But looked at another way, the fact that she was being pressed so much on this does make me worry that the Chamber and its allies are gearing up for another assault on the statute (as a recent piece in the WSJ suggested). Given that there are only 18 months left in this administration, I doubt we’ll see much action on this in the near term. The interesting question, I think, will be what happens if a Republican wins the White House. Previously, aggressive FCPA enforcement had bipartisan support in the DOJ — the big take-off actually occurred under President Bush, and AG Ashcroft was a vocal supporter of the FCPA. But it this becomes a more partisan issue, things could start looking quite different.

    • Exactly – the questions, themselves, say something about the FCPA’s prospects outside of the DOJ, which may have a lot to do with the administration. Maybe it isn’t a partisan issue but perhaps the FCPA will get some airtime as we head into an election year, especially with Senator Cruz and the former Secretary of State already in the mix. Your comment also relates to the great point that Rick raised in response to your previous post – keeping control over the FCPA in the DOJ’s hands, rather than the hands of private litigants or judges, is good for now but also might render the enforcement regime more susceptible to political shifts.

  2. These answers were a resource I was (embarrassingly) unaware of, so thanks for the great analysis! I feel oddly less qualified to offer commentary here than even on, say, Mexican electoral politics, but I agree that it will be worth tracking the extent to which these ideas, particularly with respect to the FCPA, are picked up on outside this small subset–I’m not fully convinced that Cruz sets the direction for the Republicans as much as he might have at some past point. Then again, his legal expertise might cause extra deference towards his opinions/concerns, or he may be picking up on a larger trend (as Matthew suggests a WSJ piece proposed). I suppose moreover on such a niche area (which most of the public is unaware of or doesn’t care about), all it really takes is for a few highly interested parties to rally behind one particular position and a big change can occur–even if their message never goes much beyond that niche. Who would have ever expected the Export Import Bank would become a hot-button political issue? The extent to which the FCPA could become similarly politicized would seem to depend on how much it (or opposition to it) can be reframed to fit into existing political narratives, and I suppose the government-interference-with-private-enterprise angle does fit with existing conservative concerns.

    • Thanks, Katie. You make a good point that Ted Cruz isn’t the best gauge of the prevailing political winds. But I agree that the FCPA could fit into larger debates only about government constraints on business (and, more particularly, American competitiveness abroad) but also about neo-isolationism, or the degree to which the U.S. should be addressing what some perceive to be foreign issues. Rand Paul has been talking a lot about the latter. Again, Senator Paul is not necessarily representative of a broader political class. But both he and Cruz are becoming increasingly prominent political figures and they are drum beaters.

      Here I contradict myself a bit but I actually think that threats to the FCPA as it currently stands come not from it becoming a hot-button political issue. On the contrary, the fact that it isn’t a prominent concern might give zealous critics (or advocates) more influence than they would otherwise have. I could, of course, be off base. It seems like anything and everything is over-politicized in today’s Congress.

  3. Pingback: Corruption Currents: New York State Reaches Corruption Zenith - FinancialRegulation

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.