Frederick Davis, a member of the New York and Paris Bars and a Lecturer in Law at Columbia Law School, contributes today’s guest post:
As recently as a few years ago, posts in this space by me and others bemoaned the striking inability of French authorities to prosecute French companies involved in global corruption. In the first fifteen years after France criminalized overseas bribery (thereby meeting its obligations under the OECD Convention on Combatting Bribery for Foreign Officials that France had signed in 1997), not a single French company had been convicted of this crime. This was attributed to the difficulty of pinning corporate criminal responsibility on corporations, as well as to limits in French criminal procedures that rendered its prosecutors unable to move as quickly, efficiently, and effectively as their U.S. counterparts. French deficiencies included the lack of both “sticks” (the credible threat of significant sanctions) and “carrots” (the ability to offer a deferred prosecution agreement (DPA) in exchange for self-disclosure and cooperation). The result: a number of iconic French companies reached negotiated outcomes with the U.S. Department of Justice (DOJ), and paid well over US$2 billion in fines and other payments to the U.S. government.
Resisting populist demands for retaliation, France instead changed its criminal procedures and enforcement institutions to address the challenge. The most notable changes include the creation of a National Financial Prosecutor’s Office with nationwide responsibility for many economic crimes, the creation of the French Anti-Corruption Agency to enforce compliance regimes, and the passage of the so-called Loi Sapin II, which increased penalties for financial crimes and introduced a French-style DPA called a Judicial Convention in the Public Interest. In addition to these reforms, France’s highest court has clarified the laws on corporate criminal responsibility, and in an unprecedented decision ruled that a parent or successor corporation remains criminally responsible for acts of an acquired entity even the acts took place prior to the acquisition.
The results of these reforms have been nothing short of remarkable:
In 2019 a Paris court convicted subsidiaries of Swiss banking giant UBS of money laundering to facilitate tax evasion, and imposed a penalty of more than 4 billion Euros. While the penalty will be revised on appeal, the conviction—coupled with the report that the bank turned down a negotiated outcome with a more favorable outcome—has greatly increased the prosecutor’s perceived clout. In January 2020, the National Financial Prosecutor announced a multilateral deal (in conjunction with the U.S. DOJ and U.K. Serious Fraud Office) with Airbus that resulted in in over $3.9 billion in total fines for corruption violations. A recent parliamentary report in France describes the introduction of such negotiated outcomes into the country’s criminal procedures as an “undeniable success.”
French authorities have not rested on their laurels but continue to analyze corporate investigative and criminal procedures in a global context, and to explore possible improvements. These analyses raise some thoughtful and interesting ideas that merit consideration by U.S. lawmakers and authorities. Most notably, Raphael Gauvain, a lawyer and member of the National Assembly (whose 2017 report contributed to several of the changes summarized above), co-authored a July 2021 report evaluating the Loi Sapin II and the fight against corruption more generally, and then in October 2021 he submitted to the Assembly a proposed bill to “strengthen the fight against corruption.” These documents address several questions that deserve discussion not only in France, but in other countries—including the United States. Two stand out:
- First, the new report notes that the battle against global corruption depends critically on persuading corporations to “self-report” and cooperate with authorities. The proposed bill suggests procedures to increase the attractiveness of self-reporting by enhancing transparency and by specifying a corporation’s procedural rights in negotiations. Such rights would include limited obligations by the prosecutor to share access to information it has gathered, and strengthening the protection to a company if negotiations fail. U.S. prosecutors would almost certainly oppose any such requirement. But interest in legislative reform in the direction of increased openness may be building in the U.S.: While bills to require judicial review of DPAs have been introduced in Congress only to languish without action, a little-noticed provision of the Anti-Money Laundering Act of 2020 provides that beginning in January 2022 the DOJ must make annual reports of the money-laundering DPAs it has signed in the prior year, including a “justification” for each.
- Second, Gauvain’s proposed bill provides a framework for internal investigations, including procedures designed to protect interviewees. These protections include a right for interviewees to be told that they can be represented by counsel, a right to see (and comment on) a formal report of the interview, and under certain circumstances a right to be given access to information concerning them that the investigation has developed. No such procedures exist in the United States, where internal investigations remain essentially unregulated. Gauvain’s bill also provides that at the request of the prosecutor, an investigation may be managed by a specially designated representative or committee of the corporation—a setup that is very occasionally adopted in the United States, but only at the instigation of the company. This addresses a little-discussed but key problem with internal investigations: the inherent conflict of interest when a law firm is paid by a corporation to interview officers and employees whom they do not (and cannot) represent. In 2019, a U.S. federal trial judge discussed this problem when an indicted former bank officer claimed that his prosecution was based in significant part on the fruits of an interview he had given to his employer’s law firm as part of its internal investigation. As the judge noted, there are serious questions about the fairness of “outsourcing” a criminal investigation to a law firm that could compel its client’s employees to cooperate but owed no duty to protect the employees’ interests.
Global corruption can only be fought by coordinated prosecutions. France lagged considerably in this effort, but has made remarkable steps to catch up, in significant part by analyzing and selectively adopting U.S. based procedures such as a DPA. U.S. authorities would do well to reciprocate by considering some new thinking on the other side of the Atlantic.