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Opening Remarks

Professor Mike Koehler (Butler University)

World Bribery & Corruption Compliance Forum 2010

September 14-15 – London, UK

Millennium Knightsbridge Hotel

It is my pleasure to welcome you to the World Bribery & Corruption Compliance Forum. My name is
Mike Koehler and I am honored to serve as the Chair of this event. Thank you to the event sponsors and
thank you for attending what promises to be an informative and valuable two days of expert
commentary and insights from government enforcement officials, in-house counsel, legal practitioners
and 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 has
never 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 and
enforcement activity in other jurisdictions as well.

Regarding the Bribery Act, when it was announced in July that implementation of the Act would be
delayed until April 2011, some commentators questioned this country’s commitment to anti-bribery
measures and/or speculated whether the Act would be watered down. Whatever the reason or
motivation for the delay, it is always a good idea to have clear laws that put all on notice of what is
prohibited and what is permissible. I also offer the historical fact that U.S. implementation of what
became the FCPA sailed through rough waters as well. It took years of Congressional hearings on
materially different approaches and a change in executive administration before the FCPA was signed
into law in 1977.

In my role as Chair, I hope to facilitate a candid and thoughtful discussion of topics raised by the current
business and regulatory environment – not just here at this forum, but in the days and months that
follow 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 and
enforcement topics, investigative trends and case studies.

I would like to explore some of the broader, big-picture issues raised by the current regulatory
environment – 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 that
impacts more than just U.S. companies. Indeed many of the largest, most-high profile FCPA
enforcement 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 only
are these laws, as written, applicable to a wide range of companies across diverse industries, but recent
enforcement actions clearly demonstrate a greater degree of cooperation between sovereign
enforcement 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 is
that that enforcement theories and procedures are also becoming internationalized. For instance, in
both 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. style
enforcement procedures such as encouraging (and presumably rewarding) voluntary disclosure and
making 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 to
resolve bribery enforcement actions, some of the other big-picture issues deserving of candid discussion
and debate that I would like to touch upon include: how should fines and penalties assessed in an
enforcement action be calculated, where should the money go, what should happen to a company
resolving an enforcement action, and is government only enforcement the best and most efficient way
to eliminate business bribery?

Voluntary Disclosure

One curious component of FCPA enforcement and expected Bribery Act enforcement is the constant
encouragement by government enforcement agencies that corporates voluntarily disclose conduct to
the agencies that could potentially implicate the law – rather than deal with the conduct at issue
internally 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 in
the 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 unclear
whether such theories would even prevail in court. In addition, many of these enforcement theories
have never been subjected to judicial scrutiny because the enforcement action is settled via a resolution
vehicle that is itself subject to little or no judicial scrutiny.

I fully understand that various “carrots” and “sticks’ may motivate corporates to voluntarily disclose
conduct, but I continue to believe that it is premature to encourage corporates to voluntarily disclose
conduct when the contours of the law at issue remain unsettled and in many cases have never been
subjected to judicial scrutiny.

Non and Deferred Prosecution Agreements

Non and deferred prosecution agreements share a common thread – they both remove, whether in
whole 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 and
ensuring that resolution specifics are in the public interest.

In his recent Innospec sentencing remarks, Lord Justice Thomas cited a paper – “The Risk of Abusing a
Dominant 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 other
resolutions 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 compelled
to enter into, regardless of facts or legal theories, mindful of the “sticks” the enforcement agencies

I support the study Transparency International (“TI”) has called for in its recent “Progress Report on the
OECD Convention.” That report expresses a concern that negotiated settlements could be
“questionable deals” between enforcement agencies and companies and it calls for procedures to make
settlement 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 the
recent TI report is – just how should fines and penalties be calculated in an enforcement action. Lord
Justice Thomas called for a uniform approach to financial penalties across multiple sovereigns, an
important issue given the increased collaboration between foreign enforcement agencies. The TI report
noted 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 multiple
enforcement agencies increasingly having jurisdiction over the same core conduct, greater attention
needs to be paid so that corporates are not paying duplicative (and thus excessive) fines and penalties
for the same conduct.

Another issue in need of deeper analysis is the commonly held enforcement view that the contract (and
thus net profits of the contract) at issue was secured solely because of the alleged improper payments
made by the corporate. This ignores the fact that most of the companies settling enforcement actions
are otherwise viewed as industry leaders presumably because they offer the best product or service for
the best price. With such companies, can it truly be said that the alleged improper payments were the
sole reason the company secured the contract at issue, thus justifying the company being forced to
disgorge 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 agency
have to prove that but for the improper payment, the company would not have secured the contract at
These are all interesting and important questions to ponder in arriving at the sensible goal, articulated
by Lord Justice Thomas, of having a uniform approach to financial penalties in bribery cases.

Where Should the Money Go?

Regardless of the approach used to calculate fines and penalties, there remains the related question of
where should the fines and penalties actually go once paid?

On this issue, the U.S. and the U.K. appear to have different approaches. In the U.S., all fines and
penalties assessed in an FCPA enforcement action are deposited into the U.S. Treasury. Whereas, here
in this country, my understanding – as reflected in the Mabey & Johnson enforcement action and as
contemplated in the BAE plea agreement – is that at least a portion of the fines and penalties assessed
are to be repatriated to the countries affected by the bribery. Recognizing the conventional wisdom
that bribery is not a victimless crime, the U.K. approach seems to be the better approach, even if it does
present several logistical hurdles in ensuring that the money is indeed paid to the proper persons or

I do not know what the exact answer should be, but I am comfortable in my conclusion that the best
answer is not $703 million (USD) solely to the U.S. Treasury because a French, Dutch, and Italian
company allegedly bribed Nigerian officials – something that actually happened over a 10-day period
earlier this summer.

The amount of money assessed in some enforcement actions, while perhaps reflective of the egregious
nature of the conduct at issue, also raises a controversial question – and that is, with all due respect to
the government enforcement officials in attendance today, whether enforcement of bribery laws has
become a profit center for governments.

On this issue, I note that a former Assistant Director of the SEC Enforcement Division recently noted that
one of the reasons “governments will keep pursuing corrupt business practices” is for “one simple
reason – it’s lucrative.” Similarly, a former high-ranking DOJ FCPA official recently was quoted, in
connection with the increase in FCPA enforcement, that “government sees a profitable program, and it’s
going to ride that horse until it can’t ride it anymore.”

Based on these statements, and the comments of others to the same effect, I believe this to be a valid
issue and one that should not be entirely dismissed when asking why has enforcement increased?

What Should Happen to the Company?

In asking what should happen to a company resolving a bribery enforcement action, I highlight the
uncomfortable truth that, with increasing frequency, the company involved is the same company that is
also providing valuable goods and services to the U.S., U.K. and other governments. Reading the public
documents associated with these enforcement actions demonstrates that the enforcement agencies
indeed considered this factor in resolving the action in the way it was resolved. The question is – should
this factor matter? Should a company that sells certain products to certain customers be treated
differently than other companies when resolving a bribery case?
Related to this issue is the issue of debarment. It is clear, again from reading the public documents, that
in three recent FCPA or related enforcement actions a significant factor determining the ultimate charge
was the European Union’s directive that companies convicted of corruption offenses shall be excluded
from government contracts in all EU countries.

It seems odd that the simple way to avoid application of this directive is for the enforcing government
not to prosecute the charge most fitting the crime, but that is what happened in these three major cases
when, despite government allegations firmly supporting FCPA anti-bribery charges, the company was
not charged with an FCPA anti-bribery offense.

In addition, reasonable minds can differ as to what should happen to a company resolving a bribery
offense and whether debarment is a useful tool in the public interest, but it remains controversial, at
least to me, that within weeks or months of accusing a company of a pattern of bribery “unprecedented
in scale and geographic scope,” the same government enters into multi-million dollar contracts with the
same company.

Private Right of Action?

A final big-picture issue that I submit deserves greater attention and analysis is the fundamental
question of whether government only enforcement is the best and most efficient way to eliminate
business bribery? Returning to the notion that bribery is not a victimless crime, it would seem that the
most direct victim in most business bribery cases is the competitor who was denied an opportunity to
bid or lost a contract because it was unwilling to make the improper payments its competitor made.
Should bribery laws allow for a direct private right of action by a business harmed by a competitor’s
improper conduct?

As TI notes in its recent report, and as reflected in certain recent events both in the U.S. and U.K.,
political interference of bribery investigations is an unfortunate result of government only enforcement.
Such concerns would likely not derail a private right of action. In addition, a private plaintiff would not
be armed with the “sticks” government enforcement agencies possess – meaning that defendants in
such cases would likely mount a legal defense based on the facts and the law. This process would thus
likely inject much-needed judicial scrutiny into bribery cases and result in useful judicial decisions.


Even though the increased enforcement of bribery laws raises several fundamental questions, these
questions should not detract from the fact that increased enforcement and public awareness of business
bribery issues have resulted in much good – even if that good may not, at all times, be felt directly by all
business participants.

Corporate boards and executives are taking, and rightfully so, a keener interest in how the company is
obtaining or retaining foreign business and in better understanding who is representing the company in
foreign jurisdictions. These areas, as well as others, are key risk areas for corporates seeking to
aggressively, yet legally and ethically, compete in the current global market and this forum will provide
you the tools to best achieve these business objectives.

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