NYU Roundtable on the DOJ Fraud Section’s New “Corporate Compliance Counsel”: The Video and Some Thoughts

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: Continue reading

Should FCPA Enforcers Focus on Bribe-Paying Employees or Their Corporate Employers?

These days most (though not all) resolutions in Foreign Corrupt Practices Act cases involve corporate defendants paying fines or other penalties to the government. Usually (again, not always) the government does not bother prosecuting the employees who paid the bribes. (While the government has recently made individual liability in corporate criminal cases more of a point of emphasis — as exemplified by the DOJ’s Yates Memo, which Danielle discussed in yesterday’s post — the targets in those cases are typically senior executives who orchestrated bribe-paying schemes, not the lower-level executives or employees who actually paid the bribes.) The government also uses various legal tools to encourage lower-level employees blow the whistle on their employers.

Do we have this backwards? Right now, the government focuses its enforcement efforts on the corporate employers, rather than the lower-level employees who pay the bribes. Should the government instead emphasize enforcement actions against the employees? Right now, the government tries to give employees incentives to uncover and disclose evidence of FCPA violations committed by their employers. Should the government instead focus on encouraging the employers to uncover and disclose FCPA violations committed by their employees?

This past summer, I was fortunate enough to attend the Third Annual Conference on Evidence-Based Anti-Corruption Policies in Bangkok, and the keynote speaker at that event, New York University Law Professor Jennifer Arlen, made a case along those lines. (Professor Arlen’s address was actually a much more wide-ranging discussion of corporate criminal liability; I’ve extracted, and possibly oversimplified or distorted, one thread of her argument. But it’s an interesting enough argument that I think it’s worth engaging, and I’ll focus on the simple version, even though her position is more nuanced.) The argument goes something like this: The DOJ should adopt a policy that any corporation that discovers FCPA violations by its employees, and then promptly (a) discloses the violation to the government, (b) provides the government with information, and (c) assists the government in prosecuting the employee, should be exempt from corporate criminal liability for the violation; the DOJ should instead vigorously prosecute the individual employees in this situation (using the evidence that the corporate employer has itself provided). If the corporation fails to promptly disclose such a violation, however, and the government subsequently finds out about it, the corporation should be held criminally liable for the FCPA violation, and penalized accordingly.

I think this proposal is interesting enough to take seriously, though in the end I remain unconvinced that this shift in emphasis would be a good idea. Let me first lay out the argument in favor of this change, and then explain why I ultimately disagree. Continue reading