As many readers are likely aware, the U.S. Department of Justice Fraud Section (now headed by Andrew Weissmann), which has responsibility for enforcing the Foreign Corrupt Practices Act (among other things), recently created a new position called the “Corporate Compliance Counsel,” and appointed to the post Hui Chen, a former corporate compliance officer for a number of major firms (including Microsoft, Pfizer, and Standard Chartered). The avowed purpose of the new position is to assist the DOJ in assessing the quality of a company’s internal compliance program and remediation measures. In the FCPA context (and others), these assessments are relevant to the DOJ’s decisions regarding whether to prosecute, what penalties to seek, and what additional remedial measures to pursue, even though there is not a formal “compliance defense” under the FCPA (or other statutes that the Section enforces). Thus, the thinking behind the creation of the new DOJ position seems to be that having someone in the Section with a lot of background in corporate compliance will enable the DOJ prosecutors to do a better job in evaluating the quality of a company’s compliance program and remedial efforts.
The creation of the Corporate Compliance Counsel position has garnered praise in some quarters, but also attracted some criticism; the critics tend to argue that the creation of the new position is, at best, a public relations move with little real consequence, and at worst an indirect effort to weaken the enforcement of corporate criminal laws.
Last week, the NYU Program on Corporate Compliance and Enforcement (PCCE) hosted a public forum where Mr. Weissmann and Ms. Chen discussed the new position and answered some questions posed by NYU Professor (and PCCE co-director) Jennifer Arlen. Because I thought that this might be of interest to some readers, here’s a link to a video of the discussion.
A few additional thoughts about what I thought were the more interesting exchanges:
- Early in the conversation, Professor Arlen asked Mr. Weissmann point-blank about whether the creation of the Corporate Compliance Officer position was the first step toward creating some sort of “corporate compliance defense,” of the sort long sought by the U.S. Chamber of Commerce and others. It’s not an unreasonable question, given that while he was in private practice, Mr. Weissmann co-authored a lobbing document for the Chamber of Commerce that argued strenuously (and, in my view, sloppily, disingenuously, and ineffectively) for a number of “reforms” to the FCPA, including the creation of a compliance defense. But Mr. Weissmann’s response was an unequivocal “no.” Rather, he claimed that, if anything, the purpose of the Corporate Compliance Counsel was the opposite: To enable the Section to do a better job scrutinizing corporate compliance programs and recognizing those that might look good on paper but actually are not well-designed. Given Mr. Weissmann’s history, one might reasonably be skeptical, though perhaps this is another example of the old adage that where you stand often depends on where you sit (and maybe this goes double for lawyers). [On the video, this exchange occurs at 6:13-8:02.]
- Professor Arlen also expressly raised the concern noted by several critics (including Duke Law Professor and former federal prosecutor Samuel Buell) that the new position serves little purpose because DOJ prosecutors have long engaged in these sorts of assessments of corporate compliance. Here I thought Mr. Weissmann and Ms. Chen had a persuasive response (at least to me, as an outsider to all this). Although DOJ fraud section lawyers are, in my limited experience, generally top-notch prosecutors, they don’t really have a lot of first-hand experience with running a compliance program, and that’s supposed to be what the new officer will bring to the table. [On the video, this exchange is at 8:09-10:28, immediately following the conversation about the corporate compliance defense.]
- Near the end of the conversation, Professor Arlen asked what I thought was a great question about whether (or how) the DOJ’s assessment of the quality of a corporation’s compliance program should take into account not only the compliance program as such, but also other aspects of company policy – in particular, incentive and compensation systems that might create pressure to bend or break the rules. This is an issue that’s come up in several guest contributions on this blog (see here and here): companies tell their employees not to pay bribes, but then set short-term sales growth targets, coupled with high-powered incentives, that are difficult or impossible to meet in the relevant markets without engaging in corruption. One way to address this, implied by some of Professor Arlen’s question, might be for the company, through its compliance program, to offer incentives that reward ethical behavior. But I suspect that the larger point that Professor Arlen was getting at – and I’d tend to agree – is that a company’s compensation and promotion policy should be considered as part of the overall, holistic assessment of the quality of a corporation’s compliance program. If the corporation seems to be sending mixed messages (say, by telling its regional sales people in Nigeria or China or Bangladesh or wherever not to pay any bribes, but at the same time telling them that a substantial chunk of their compensation will depend on landing lots of government procurement contracts within a short time frame), then that should undercut the corporation’s claim to have a genuinely effective compliance program, even if the other factors associated with a good program are in place. Neither Mr. Weissmann nor Ms. Chen, in my view, gave a very good or clear answer to this, but you can check it out yourself and see what you think. [This part of the exchange is near the end of the video. Professor Arlen poses the question, along with another one, at 26:20-27:01, and Mr. Weissmann and Ms. Chen reply at 28:40-31:56.]
My initial impression is to share Professor Arlen’s skepticism about the added value of a Corporate Compliance Counsel, when DOJ prosecutors have already played this role for decades. It may be true that prosecutors don’t have “a lot of first-hand experience with running a compliance program,” but I’m not totally convinced that is enough to justify the change. What about the old system wasn’t working? Were prosecutors finding it difficult to assess compliance in an effective, realistic way? Unless they were, it seems difficult to justify adding another layer of prosecutorial bureaucracy. This change seems likely to lengthen and complicate investigations. I’m hopeful that the DOJ had good cause for doing so.