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World Bribery and Corruption Compliance Forum - Opening Remarks of Professor Mike Koehler

World Bribery and Corruption Compliance Forum - Opening Remarks of Professor Mike Koehler

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Published by: Mike Koehler on Sep 13, 2010
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10/21/2010

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Opening RemarksProfessor Mike Koehler (Butler University)World Bribery & Corruption Compliance Forum 2010
September 14-15 – London, UKMillennium Knightsbridge Hotel
It is my pleasure to welcome you to the World Bribery & Corruption Compliance Forum. My name isMike Koehler and I am honored to serve as the Chair of this event. Thank you to the event sponsors andthank you for attending what promises to be an informative and valuable two days of expertcommentary and insights from government enforcement officials, in-house counsel, legal practitionersand others who deal with bribery and corruption topics on a daily basis.This forum occurs at a time when business interest and concern over bribery and corruption issues hasnever been higher. This is due to increased enforcement of the U.S. Foreign Corrupt Practices Act(FCPA), expected implementation of the Bribery Act in this country, and increased interest andenforcement activity in other jurisdictions as well.Regarding the Bribery Act, when it was announced in July that implementation of the Act would bedelayed until April 2011, some commentators questioned this country’s commitment to anti-briberymeasures and/or speculated whether the Act would be watered down. Whatever the reason ormotivation for the delay, it is always a good idea to have clear laws that put all on notice of what isprohibited and what is permissible. I also offer the historical fact that U.S. implementation of whatbecame the FCPA sailed through rough waters as well. It took years of Congressional hearings onmaterially different approaches and a change in executive administration before the FCPA was signedinto law in 1977.In my role as Chair, I hope to facilitate a candid and thoughtful discussion of topics raised by the currentbusiness and regulatory environment – not just here at this forum, but in the days and months thatfollow when you return to your offices and go about your professional lives.As is fitting for a forum of this nature, the panels that follow are devoted to specific compliance andenforcement topics, investigative trends and case studies.I would like to explore some of the broader, big-picture issues raised by the current regulatoryenvironment – issues that are often in minds of participants, but seldom publicly explored at forums of this nature. Yet these topics are of keen interest to the business community and represent topics of considerable importance in analyzing how bribery and corruption laws should be enforced.The enforcement of anti-bribery laws has clearly become internationalized. The FCPA is a law thatimpacts more than just U.S. companies. Indeed many of the largest, most-high profile FCPAenforcement actions have involved non-U.S. companies. Similarly, the Bribery Act is expected to impact
 
not just U.K. companies, but also foreign corporates who conduct business in this jurisdiction. Not onlyare these laws, as written, applicable to a wide range of companies across diverse industries, but recentenforcement actions clearly demonstrate a greater degree of cooperation between sovereignenforcement agencies such as the U.S. Department of Justice (“DOJ”) and the U.K. Serious Fraud Office(“SFO”) in enforcing bribery and corruption laws.While each nation has unique attributes of local law and procedure, what is increasingly clear as well isthat that enforcement theories and procedures are also becoming internationalized. For instance, inboth the SFO’s memo titled “Approach of the Serious Fraud Office to Dealing with Overseas Corruption”and in other public comments by SFO officials, it is clear that the SFO intends to adopt many U.S. styleenforcement procedures such as encouraging (and presumably rewarding) voluntary disclosure andmaking use of negotiated settlements such as non prosecution and deferred prosecution agreements.In addition to voluntary disclosure and greater reliance on non and deferred prosecution agreements toresolve bribery enforcement actions, some of the other big-picture issues deserving of candid discussionand debate that I would like to touch upon include: how should fines and penalties assessed in anenforcement action be calculated, where should the money go, what should happen to a companyresolving an enforcement action, and is government only enforcement the best and most efficient wayto eliminate business bribery?Voluntary DisclosureOne curious component of FCPA enforcement and expected Bribery Act enforcement is the constantencouragement by government enforcement agencies that corporates voluntarily disclose conduct tothe agencies that could
 potentially 
implicate the law – rather than deal with the conduct at issueinternally in an effective and responsible manner with the assistance of professional advisors.It is this aspect of enforcement that remains controversial and rightfully so. It is widely acknowledged inthe U.S. that the enforcement agencies are, with greater frequency, pushing the envelope in terms of enforcement theories, so much so that several leading U.S. practitioners have noted that it is unclearwhether such theories would even prevail in court. In addition, many of these enforcement theorieshave never been subjected to judicial scrutiny because the enforcement action is settled via a resolutionvehicle that is itself subject to little or no judicial scrutiny.I fully understand that various “carrots” and “sticks’ may motivate corporates to voluntarily discloseconduct, but I continue to believe that it is premature to encourage corporates to voluntarily discloseconduct when the contours of the law at issue remain unsettled and in many cases have never beensubjected to judicial scrutiny.Non and Deferred Prosecution AgreementsNon and deferred prosecution agreements share a common thread – they both remove, whether inwhole or in part, an independent judiciary from a critical role in a transparent legal system founded on
 
the rule of law – and that is ensuring that provable facts support each element of the crime alleged andensuring that resolution specifics are in the public interest.In his recent Innospec sentencing remarks, Lord Justice Thomas cited a paper – “The Risk of Abusing aDominant Position” – that notes, among other things, that the newly enacted SFO guidance on“alternative methods to the disposal of criminal investigations by way of negotiated pleas or otherresolutions by corporate defendants” may “introduce some unintended risks of abuse.”I share this concern and assert that it is troubling when an area of law largely develops outside of the judicial system via privately negotiated agreements – agreements that corporates often feel compelledto enter into, regardless of facts or legal theories, mindful of the “sticks” the enforcement agenciesposses.I support the study Transparency International (“TI”) has called for in its recent “Progress Report on theOECD Convention.That report expresses a concern that negotiated settlements could be“questionable deals” between enforcement agencies and companies and it calls for procedures to makesettlement terms subject to judicial approval independent from the prosecutor’s office.How Should Fines and Penalties Be Calculated?Another topic touched upon both by Lord Justice Thomas in his Innospec sentencing remarks and in therecent TI report is – just how should fines and penalties be calculated in an enforcement action. LordJustice Thomas called for a uniform approach to financial penalties across multiple sovereigns, animportant issue given the increased collaboration between foreign enforcement agencies. The TI reportnoted that in some cases fines and penalties are based on the amount of the bribe, while in other cases,fines and penalties are based on the amount of profit or gain from the transaction at issue.Fines and penalties should exceed the amount of profit from the wrongdoing, but with multipleenforcement agencies increasingly having jurisdiction over the same core conduct, greater attentionneeds to be paid so that corporates are not paying duplicative (and thus excessive) fines and penaltiesfor the same conduct.Another issue in need of deeper analysis is the commonly held enforcement view that the contract (andthus net profits of the contract) at issue was secured solely because of the alleged improper paymentsmade by the corporate. This ignores the fact that most of the companies settling enforcement actionsare otherwise viewed as industry leaders presumably because they offer the best product or service forthe best price. With such companies, can it truly be said that the alleged improper payments were thesole reason the company secured the contract at issue, thus justifying the company being forced todisgorge all of its net profits associated with the contract?Does a
but for 
analysis have a place in bribery laws – in other words should the enforcement agencyhave to prove that
but for 
the improper payment, the company would not have secured the contract atissue?

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