Professor Mike Koehler is perhaps the leading critic of the Foreign Corrupt Practices Act – or at least of how the U.S. Justice Department and Securities and Exchange Commission currently enforce it. On his FCPA Professor Blog, he regularly bemoans the way the enforcement agencies have stretched a law its authors wrote to outlaw hard core bribery to make donations to foreign charities, internships for relatives of business associates, birthday gifts to business partners, and other seemingly innocuous conduct a serious felony under American law. Such broad interpretations of the law’s antibribery stricture could never withstand judicial review he argues, but because the costs, reputational and otherwise, of challenging an FCPA enforcement action are so great, companies facing FCPA charges quickly settle rather than contest the agencies’ interpretation in court. The result is the agencies not only enforce the law but their interpretations in effect make it as well.
So what advice does Professor Koehler proffer businesses wanting to avoid running afoul of the FCPA or the similar laws of other nations in his new book Strategies for Minimizing Risk Under the Foreign Corrupt Practices Act and Related Laws? Does he urge a corporation threatened with an enforcement action based on an overly broad reading of a law to fight back? Has he produced a polemical guide to compliance? One written for the risk-taking corporate maverick? Is this how he separates his book from the many other compliance guides flooding the market?
Not at all. To the contrary, what distinguishes Professor Koehler’s book from many of its competitors is its straightforward, easy to read exposition of what any firm should do to minimize the chances that, thanks to the wayward act of an employee or consultant, it will face allegations it has bribed a government official. In eight tightly-written chapters, he brings his encyclopedic knowledge of FCPA cases, pre-trial settlements of enforcement actions, and the commentary on antibribery law to bear to explain how to develop and implement a sound, reasonable, cost-effective antibribery compliance program. Along the way he chucks the jargon that has grown up around antibribery compliance programs, opting instead for clearly written prose that demystifies rather obscures the process all firms should follow to develop and implement preventive measures.
Take his account in chapter six on how to conduct a risk assessment.
As he explains, “risk assessment” has become a term of art, and “terms of art tend to make things more complex than they really need to be.” So he jettisons the verbiage and complicated charts some guides use to explain how to conduct an assessment, organizing the discussion around how companies should answer four simple questions: Where does it do business? Who are its customers? How does it do business with them? What licenses, permits, certifications, and other regulatory requirements is the firm subject to when doing business? The analysis of each makes it easy for compliance personnel to develop firm-specific answers to each while avoiding facile answers of little or no value. Contrary to many other compliance guides, he urges ignoring Transparency International’s Corruption Perception Index in assessing country risk. If only others in the compliance-advice business would read his take-down of the index, it put their clients on a surer path to reducing their legal exposure.
If I had one bone to pick with the risk assessment discussion, it would be with his explanation of how to conduct an employee focus group. He advises that key personnel be gathered in a room and asked the following: “An FCPA violation is occurring today in the company – where do you think it is occurring and why do you think it is occurring there?” The answers, as he writes, are likely to reveal a common thread or threads that will allow compliance staff to focus on those areas where the risk is greatest.
Great way to open the discussion. No argument about that. But in my experiences junior employees can be reluctant to contradict what more senior ones say and will often endorse the views of older, higher ranking staff even if the juniors disagree with the elders. To avoid such “elder bias,” I have participants write down their answers without attaching their names to them and I then read the answers aloud. The loss of spontaneity from an open, free-flowing discussion is more than outweighed by eliminating the risk that elder bias will color the results. On the other hand, my experience has been with organizations in non-Western countries where there may be greater deference afforded one’s elders. A minor gloss at most on a first-rate discussion.
All in all, Professor Koehler has written a book corporate compliance staff and their advisors will want to have in easy reach as they help companies avoid entanglement in the ever growing thicket of antibribery laws.