Blackout on Corporate Crime Enforcement

Lawyers Behind Closed Doors

by RUSSELL MOKHIBER

 

Put top corporate crime law enforcement officials and defense attorneys behind closed doors for two days at a posh resort outside of Washington, D.C.

Call it the American Conference Institute’s National Conference on the Foreign Corrupt Practices Act (FCPA).

Charge $2,000 to $4,000 per person to attend.

And for 90 percent of the conference sessions, slam the door shut on the press.

Is that any way to discuss foreign bribery in a democracy?

Probably not.

But that’s what’s happening at the Gaylord National Resort just south of Washington, D.C. later this week.

Reporters will be allowed to cover the keynote address by Justice Department Criminal Division Chief Lanny Breuer and two other sessions.

But they will not be allowed to cover twenty other sessions, including ones where top FCPA law enforcement officials will be speaking.

So, for example, Tracy Price, the assistant director of the Securities and Exchange Commission’s (SEC) FCPA unit, will speak on Friday at a session titled “FCPA Internal Controls amid Increased SEC Expectations: What Your Books and Records Need to Accomplish.”

Reporters are not allowed to cover her talk.

Sean McKessy, the SEC’s top whistleblower official, will be speaking on Thursday at a session called “Creating a Home for the Whistleblower: How to Facilitate Open Communication and Appropriately Respond to Allegations in a Bounty Hunter Environment.”

Reporters are not allowed to cover his talk.

Nathaniel B. Edmonds, assistant chief at the Criminal Division’s Fraud Section will be speaking at a session called “Friend or Foe?: A Dissection of a Monitorship from Start to Finish.”
Reporters are not allowed to cover his talk.

James M. Koukios is another assistant chief at the Fraud Section.

He’ll be speaking at a session titled “Where Companies Go Wrong on FCPA Compliance: What Not To Do and Lessons Learned from the Most Costly Mistakes.”

Reporters are not allowed to cover his talk.

Jason Jones, another assistant chief of the Fraud Section, will be speaking at a session titled “10 Trip Wires to Avoid When Conducting an FCPA Internal Investigation.”

Reporters are not allowed to cover his talk.

The American Bar Association (ABA) has never prohibited press from covering their sessions – including last month when the ABA held it’s Foreign Corrupt Practices Act 2012 Conference at the Westin Hotel in Georgetown.

In fact, according to the ABA’s Earnestine Murphy, the ABA has an open meetings policy – which means that all conference sessions – with the exception of business meetings – are open to the media.

Mike Koehler, who runs the FCPA Professor blog and is an Assistant Professor of Law at Southern Illinois University, recently questioned the wisdom of putting law enforcement officials and corporate defense attorneys behind closed doors to discuss FCPA policy.

“Should public servants be allowed to speak at private conferences and events that charge thousands of dollars to attend?” Koehler asked. “Should public servants be used as pawns by corporate conference organizers to boost attendance and thus revenue? Should the enforcement agencies release all speeches, comments and remarks, including answers to questions posed by the audience? Do small to medium size enterprises have the resources to attend such events?”

Too Big to Jail

Brandon Garrett and Corporate Crime

by RUSSELL MOKHIBER

 

Brandon Garrett has pulled together a database of all the deferred and non prosecution agreements and plea agreements since 2001. And he’s sliced and diced them.

And now he’s writing a book for Harvard University Press about what he’s finding.

The working title?

Too Big to Jail: How Prosecutors Take On Corporations.

Garrett is a Professor at the University of Virginia Law School.

Garrett wonders, for example, why the Justice Department secures guilty pleas for environmental crimes while getting primarily deferred and non prosecution agreements in Foreign Corrupt Practices Act (FCPA) cases.

“There is nothing inherent in environmental crimes that requires guilty pleas and FCPA that requires deferred prosecution agreements, right?”

“No, if anything they are kind of similar,” Garrett said in an interview last week.

“For environmental cases – are customers going to stop buying the products of a company that makes plastics or steel because their factory was out of compliance with the Clean Water Act or the Clean Air Act? Customers may not know.”

“It may not hurt the company’s reputation so that it will be the death knell.”

“And we know that there have been companies convicted multiple times, seemingly without significant effect.”

“But the same might be true of foreign bribery. When Siemens was convicted for bribery around the globe, did that affect whether someone bought a Siemens coffee maker or not? Probably not. It might cause a government to have doubts when walking into negotiations for a major contract.”

“The difference in the way FCPA and environmental cases are handled just has to do with different divisions at Main Justice that are handling those cases and how they have developed their own practices over the years.”

And Garrett is troubled by the wording and details of the deferred and non prosecution agreements.

“The fines are sometimes not particularly impressive at all,” Garrett says. “There are many agreements with no fines.”

“And if the purpose of these agreements is to not necessarily impose the most severe penalty or fine to a corporation, but to instead trade off of that to insure compliance, to rehabilitate the company – I’m not convinced that rehabilitation is being taken seriously enough either.”

“The bargain reflected in these agreements may not be strong enough. Some of these agreements have pretty detailed terms about what compliance is supposed to look like going forward, but in plenty of them, it is quite vague.”

“Some of these agreements impose monitors, but even there, the duties of the monitors are left somewhat vague.”

“And we have no idea what the monitors are doing – or even who the monitors are in many cases.”

“So, it’s pretty hard to tell from the outside whether these agreements are performing or not.”
Do we get access to monitor reports?

“No one has ever seen monitor reports, except for a prologue that was released in one case, but that was really more of an extended press release,” he says.

“My understanding is that in most of the cases, the company retains the monitor. The agreement typically says that the monitor reports are to remain confidential, that they will be disclosed to prosecutors and maybe regulators, but to no one else.”

“And there may be portions of those reports dealing with employment matters and the like that shouldn’t be public.”

“But the public should know more about what the companies have done and what has happened.”

“When the deferred prosecution agreement is entered, there is a lot of detailed information describing the nature of the alleged crimes – what employers did, what employees did, maybe without naming them – describing the pattern of criminal behavior, what was the breakdown in corporate governance that permitted it to happen.”

“And then identifying, sometimes specifically, what needed to be done to repair the company.”
“And you would think that there could be a similar report at the end of the agreement – maybe not every monitor’s quarterly report – but some detailed accounting of – this is where things stand now – two or three years after the agreement was entered into.”

Garrett says corporate crime cases differ from street crime cases in fundamental ways.

“One of the many ways corporations are not like regular criminal defendants is that in regular criminal cases, prosecutors and police have access to some of the best information about what really happened,” Garrett said.“In violent crimes that I have been looking at, you worry about Brady violations, you wonder whether prosecutors and police are doing a good investigation and getting accurate evidence.”

“But it all gets flipped around in these corporate cases, where the corporation may have the best information about what really happened. They all have access to e-mails and documents, to any interviews their own lawyers did investigating it.”

“And the cases can be incredibly complicated with millions and millions of documents. They are incredibly difficult cases for prosecutors to bring. If you have conduct that occurred around the globe, can the FBI really take on the job of sorting through it all or trying to get a hold of millions of documents distributed around the globe?”

“Both the corporations and the executives can afford brilliant top lawyers.”

“In regular criminal cases, it is the defendant that may find out later – what evidence did the police gather? When the police are investigating the crime scene, there might not even be a defendant who has a lawyer. There might be a suspect later.”

“It is all reversed in corporate cases. In some ways, you have to applaud prosecutors for taking more of these on. And you can understand why they need to negotiate these agreements. Without the cooperation of the companies, they might not easily get access to those documents and records to find out what happened.”

“It’s not a surprise that in the hardest cases to bring, in these antitrust cases where there is a cartel, they need special tools like the leniency program to crack that nut and encourage defection, encourage corporation-on-corporation snitching.”

“What you see is that prosecutors are able to bring more and more of these cases in areas where they can leverage their admittedly sometimes thin resources to produce more self-reporting and cooperation.”

“How are they supposed to find out about ocean dumping at sea? The statute has whistleblower provisions to encourage shipmates to come forward, take pictures on their cell phones and get a share of the fine.”

“And prosecutors offer companies similar rewards. They can say – we can offer you significant leniency if you come forward, self-report and cooperate – give us the documents and help us prosecute individual employees that committed wrongs.”

“If we really are going to take these difficult cases more seriously, it’s going to be a question of resources.”

“You would think those resources should flow to the prosecutors working on these cases, since they are, after all, bringing in significant fines and money.”

“I would like to learn more about the degree to which some of that can be sent back to the people doing these cases – so they have the resources to get more agents working on future cases.”

Phone Hacking: US Authorities Preparing to Subpoena News Corp

Saturday, July 23, 2011 by The Guardian/UK
Investigation launced into whether News Corp broke anti-bribery and hacking laws in US

by Ed Pilkington in New York 

 

The judicial screws are tightening on Rupert Murdoch's empire in America as the US justice department prepares to subpoena News Corporation in its investigation into whether the company broke anti-bribery and hacking laws on both sides of the Atlantic.

The Foreign Corrupt Practices Act forbids US-based companies from profiting from bribery in other countries. The news that subpoenas are being drawn up, reported by News Corp's flagship newspaper the Wall Street Journal, comes a week after attorney general Eric Holder said he was launching a preliminary investigation into the media group as a result of the UK phone-hacking scandal.

According to the Journal, the subpoenas will be broadly cast to draw information from the company relevant to the investigation, though final approval has yet to be granted by top justice department officials. In addition, it has emerged that federal prosecutors have begun probing allegations that News Corp's advertising arm in the US hacked into a computer of a competitor as part of a campaign to crush its rival.

A lawyer for the smaller company, Floorgraphics, told NBC he was visited by two federal prosecutors and an FBI agent. News Corp declined to comment on the legal moves.

Mary Mulligan, a former federal prosecutor in the southern district of New York that handles many of the big corporate cases of this sort, said there were numerous directions in which the probe of News Corp could go. "This is a complicated investigation, and a very important matter that's being looked into." She said the FBI and other federal agents would be guided by what they found.

"The facts are going to drive any charges that arise – what was accessed, how it was accessed and where."

One specific allegation that the FBI is investigating is whether News of the World journalists tried to access the phone records of 9/11 victims. The claim was raised in the UK's Daily Mirror, though, so far, no solid evidence has emerged to support it. If the accusations are confirmed, News Corp could be susceptible to prosecution under Title 18 USC 2701, involving unlawful access to stored communications, or 2703 and 2704 if the mobile phone messages are found to have been stored on a separate server.

News Corp also faces a possibly lengthy and costly federal probe into whether it broke anti-bribery laws as part of the illegal News of the World phone hacking in the UK.

The company is potentially liable under the Foreign Corrupt Practices Act (FCPA), which bans US-based companies from profiting from bribery and corruption in other countries.

News Corp is a US-based firm, its headquarters on Sixth Avenue in Manhattan.

FCPA experts have suggested that it could be brought under the auspices of the act because News of the World journalists bribed police officers in the UK in search of exclusive stories that in turn increased sales and generated profits.

It is not a defence for News Corp executives to argue that they were unaware of the bribery. Under the FCPA, a company can still be penalised if it should have known – what is called "willful blindness".

News Corp could also come under the scrutiny of the US Securities and Exchange Commission (SEC), which is jointly responsible with the justice department for policing the FCPA.

The SEC will want to know whether News Corp properly declared all its activities in its accounts or whether it tried to hide any bribes made within the UK under false accounting returns.

It is not known precisely what information investigators are seeking from News Corp under the subpoenas, but it could include News of the World accounts which would then be examined by forensic accountants.

News Corp itself seems to be most anxious about the FCPA side of the federal investigations, judging from the legal team it has assembled – some of the heaviest hitters in American legal affairs.

They include Brendan Sullivan, a formidable trial lawyer once described as "the legal equivalent of nuclear war", and Mark Mendelsohn, who used to head the justice department section that decides which FCPA cases to prosecute. He is joined by Michael Mukasey, a former US attorney general, and his legal partner Mary Jo White, who represented Siemens in one of the largest FCPA cases ever.

The Siemens case underlined how serious an FCPA prosecution could be for News Corp. In 2008, the engineering company admitted bribing foreign officials around the world and paid a record $800m (£490m) in settlement. That included $350m in disgorgement – a repayment for the profits it was estimated to have made as a result of the bribery.

No figure exists for how much money News of the World made out of its phone hacking activities. Under the FCPA, a rough calculation would be made which News Corp could be forced to disgorge.