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Department of Justice 950 Pennsylvania Avenue NW Washington, D.C. 20530-0001 May 16, 2012 RE: Foreign Corrupt Practices Act guidance Dear Mr. Breuer and Mr. Khuzami:
Robert Khuzami Director of Enforcement U.S. Securities and Exchange Commission 100 F Street NE Washington, D.C. 20549
On behalf of the undersigned organizations, we are writing to reiterate our main concerns and expand upon suggestions as discussed during our consultation meeting on the draft guidance for the Foreign Corrupt Practices Act held on March 14, 2012. We would also like to address concerns expressed in letters by the U.S. Chamber of Commerce on February 21, 20121 and by Senators Chris Coons and Amy Klobuchar on February 15, 2012,2 as well as proposals made by the U.S. Chamber Institute for Legal Reform (ILR) in its publication Restoring Balance: Proposed Amendments to the Foreign Corrupt Practices Act (“ILR Report”).3
Definitions of “Foreign Official” and “Instrumentality” The guidance should summarize and, if necessary, supplement current case law concerning what constitutes an instrumentality of government under the definition of foreign official. However, we have serious concerns about determinations based solely or principally on percentage ownership. Both the ILR and Senators Coons, Klobuchar and Grassley have requested additional guidance with respect to what constitutes an “instrumentality” of government under the definition of foreign official. As you know, recent case law has created a non-exhaustive list of factors that a company should take into account when determining whether an entity is an instrumentality of government, and has noted that this is a fact-specific determination.4 We support the inclusion and expansion of this type of analysis in the guidance.
Letter from the U.S. Chamber of Commerce and affiliated businesses to the Honorable Lanny A. Breuer, Assistant Attorney General, U.S. Department of Justice, and Robert Khuzami, Director of Enforcement, U.S. Securities and Exchange Commission (Feb. 21, 2012) (hereinafter “Feb. 21 Ltr.”). 2 Letter from Senators Amy Klobuchar and Chris Coons to Eric Holder, Attorney General, U.S. Department of Justice (Feb. 15, 2012) (hereinafter “Feb. 15 Ltr.”). 3 U.S. CHAMBER INSTITUTE FOR LEGAL REFORM, RESTORING BALANCE: PROPOSED AMENDMENTS TO THE FOREIGN CORRUPT PRACTICES ACT 11 (2010). 4 Rachel Jackson, “Judicial Consensus Growing on ‘Foreign Official’ Criteria,” Just Anti-Corruption, Feb. 28, 2012, available at http://www.mainjustice.com/justanticorruption/2012/02/28/judicial-consensus-growing-on-foreign-official-criteria/.
The Chamber suggests that in order to create a “clear understanding of the parameters of ‘instrumentality’ and ‘foreign official,’” the DOJ should adopt a policy that would allow companies to “identify the percentage ownership or level of control by a foreign government that ordinarily will qualify a corporation as an ‘instrumentality.’”5 This is both surprising and concerning to us. We are surprised at this position because the U.S. Chamber of Commerce (“the Chamber”), which tax records show is essentially the parent entity of the ILR and is the first signatory on the Feb. 21 Ltr.—even ahead of the ILR, knows very well that ownership of companies around the world, including in the U.S., is impossible to determine independently. Not only is the Chamber aware of the problem, it has vociferously and formally objected to a U.S. legislative proposal to require disclosure of the beneficial ownership of companies in the United States and continues to lobby against efforts to do so.6 The Chamber and ILR are literally standing in the way of their own proposed solution. In the United States and around the world, it is not necessary to identify the real shareholders or controllers of a corporation in registration documents. If shareholder information is required, nominee shareholders and legal entities may be identified, and only one level of ownership is ever required. The staff of a U.S. company is not likely to be able to independently verify the direct and indirect ownership of foreign companies. If the DOJ and SEC are giving any consideration to this proposal, we recommend that those developing the guidance discuss the issue with the Chief of the DOJ’s Asset Forfeiture and Money Laundering Section, Jennifer Shasky Calvery. We are concerned by this proposal because it belies a fundamental confusion with respect to the FCPA. “Instrumentality” refers to a function, not a particular legal structure. If a company or agency acts as an instrument of government policy and is effectively controlled by the government, then it is an instrumentality, regardless of its percentage ownership. This virtue of control can be conferred by law, by overlap of executive officers, or even by unspoken custom, so a percentage ownership threshold is not an adequate line of inquiry. We would not support DOJ guidance that seeks to overturn this basic premise. In light of the UK Bribery Act’s prohibition of bribery in all commercial transactions, not just transactions with foreign officials, a multinational company is unlikely to split hairs with respect to whether an entity is state-owned or not. Criminalization of all forms of commercial bribery is
Feb. 21 Ltr., supra note 1, at 2-3. See Letter from the U.S. Chamber of Commerce to Senators Joseph Lieberman and Susan Collins (Sept. 13, 2011), available at http://www.centerforcapitalmarkets.com/wp-content/uploads/2010/04/110913_S1483_TheIncorporationTransparencyandLawEnforcementAct_Senate-2.pdf. The Chamber vaunts its advocacy against the Incorporation Transparency and Law Enforcement Assistance Act on its own website: “Due to Chamber lobbying and outreach, Senator Carl Levin dropped plans to offer S.1483, the Incorporation Transparency and Law Enforcement Assistance Act as an amendment to the Homeland Security Authorization bill. This bill would place additional regulatory disclosure requirements on all business entities in the United States.” U.S. Chamber of Commerce, Capital Markets, Corporate Governance, and Securities Regulation: Policy Accomplishments for 2011, at http://www.uschamber.com/issues/accomplishments/capital-markets-corporategovernance-and-securities-regulation.
also recommended in the UN Convention Against Corruption, to which the United States is a party. Compliance Programs And Compliance Defense The guidelines should include best practices for compliance programs and details on DOJ’s consideration of these programs in prosecutions. However, compliance programs should not constitute a defense to FCPA violations. The Chamber and Senators Klobuchar and Coons have argued for the DOJ to provide guidance concerning what constitutes an effective compliance program, as well as to define the benefits companies will receive for having compliance programs. The Chamber’s analysis of what information about compliance programs is currently available is incomplete, however. The Chamber cites the U.S. Department of Justice Principles of Federal Business Organizations and the SEC “Seaboard Factors” as being too general, and references the “Corporate Compliance Program” (Attachment C) section of Deferred Prosecution Agreements (DPAs) and Non Prosecution Agreements (NPAs), as having limited marginal utility.7 In addition to the dismissal of these carefully calibrated standards, the Chamber also neglects to mention the U.S. Sentencing Guidelines or the Organization for Economic Cooperation and Development’s (OECD) Good Practice Guidelines. Between these guidelines, there is more than enough clarity on the steps a company needs to take to enact an effective compliance program. Common factors in these sources include: A clearly articulated and visible corporate policy against bribery with involvement by top leadership and which extends throughout organization Use of risk assessment Ongoing assessment Internal financial and accounting controls Training and ongoing advice and guidance to prevent violations Oversight and compliance of business partners and agents Discipline and cooperation with enforcement authorities Protections to prevent retaliation against employees who report violations.8
Feb. 21 Ltr., supra note 1, at 4. See U.S. SENTENCING GUIDELINES MANUAL § 8D2.1(2010); Attachment C in Panalpina Word Transport DPA, available at http://www.justice.gov/opa/documents/panalpina-world-transport-dpa.pdf; Shell DPA, available at http://www.justice.gov/opa/documents/shell-dpa.pdf; Tidewater Marine International DPA, available at http://www.justice.gov/opa/documents/tidewater-dpa.pdf; Noble Corporation NPA, available at http://www.justice.gov/opa/documents/noble-npa.pdf; Transocean DPA, available at http://www.justice.gov/opa/documents/transocean-dpa.pdf; and Pride International DPA, available at http://www.justice.gov/opa/documents/pride-intl-dpa.pdf; see also Thomas Fox, DOJ Guidance on FCPA Compliance Program (Nov. 13, 2010), at http://www.infosecisland.com/blogview/9531-DOJ-Guidance-on-FCPA-Compliance-Programs.html (outlining common features of compliance programs in DPAs and NPAs); OECD WORKING GROUP ON BRIBERY IN INTERNATIONAL BUSINESS
The DOJ could diffuse concerns regarding what entails an effective compliance program by consolidating the guidelines from these multiple sources in the upcoming guidance. Having one central reference could assist corporations in quickly assessing the government’s basic expectations for their compliance programs. Such consolidated guidance might help avoid the problem of “over-compliance” identified in the Senators’ Feb. 15 Ltr.9 Effective compliance programs will look different depending on the structure, needs and risk profile of companies, however, and the DOJ must be able to maintain flexibility in applying these guidelines. For example, the OECD notes that its guidelines do not provide a definitive guide for how a company should create its compliance program. Numerous unique factors may dictate each company’s unique program, as compliance programs are expected to address “the individual circumstances of a company, in particular the foreign bribery risks facing the company (such as its geographical and industrial sector of operation).” 10 For example, the compliance program of a company with only one foreign subsidiary operating in Canada should be quite different from that of a multinational corporation with operations throughout Asia and the Middle East. The OECD also notes that these circumstances and risks should be “regularly monitored, re-assessed, and adapted as necessary to ensure the continued effectiveness of the company’s internal controls, ethics, and compliance programme or measures.”11 The DOJ should qualify any compliance program guidelines it issues in a similar manner. While the DOJ does consider compliance programs when indicting and sentencing companies in accordance with publicly available federal prosecuting and sentencing guidelines, providing more specific guidelines about how compliance programs factor into the specific context of FCPA indictments might be beneficial, including the methodology used to calculate fines and disgorgements (as suggested by Senators Coons and Klobuchar).12 For example, the U.S. Sentencing Guidelines assign points for violations, which are then factored into calculating fines.13 The DOJ seems to apply a similar point system when determining fines levied via DPAs and NPAs, but it might be helpful for companies to have greater certainty that the DOJ will follow the sentencing guidelines as a starting point when proposing fines to be agreed under a DPA/NPA process. Although the DOJ should clarify how adequate compliance programs factor into indictment and sentencing, the DOJ should not create a compliance defense. In their initial policy recommendations in “Restoring Balance,” the ILR’s proposal for the creation of a compliance defense was based on the premise that the defense would be available “if the individual
TRANSACTIONS, RECOMMENDATION OF THE COUNCIL FOR FURTHER COMBATING BRIBERY OF FOREIGN BRIBERY OF FOREIGN PUBLIC OFFICIALS IN INTERNATIONAL BUSINESS TRANSACTIONS, Annex II, Nov. 26, 2009 (as amended Feb. 18, 2010), at http://www.oecd.org/dataoecd/11/40/44176910.pdf (hereinafter “OECD RECOMMENDATION”) 9 Supra note 2 at 1. 10 OECD RECOMMENDATION, supra note 8, Annex II. 11 Id. 12 Feb. 15 Ltr., supra note 2, at 2. 13 U.S. SENTENCING GUIDELINES MANUAL § 8C2.5(f) (2011) (prescribing substraction of 3 points may be subtracted from company’s total points, thereby impacting calculation of the total fine).
employee or agents had circumvented compliance measures that were otherwise reasonable in identifying and preventing such violations.”14 As authority, the Chamber cited to laws in the United Kingdom and Italy15 but did not note that the compliance defenses included in those statutes pertain only to strict liability offenses that exist under these anti-bribery laws. This contrasts with the FCPA, which has no strict liability offense—intent is a required element under every offense of the FCPA for a company to be found liable. Companies in the United States should have compliance programs as outlined in both domestic and international law.16 Not only can companies benefit from having effective compliance programs, but they may be penalized if they do not have one in place.17 Because every company should have a compliance program, it would be illogical to have an affirmative defense for the existence of a compliance program. If companies were allowed to have an affirmative defense for compliance programs then no company would ever be prosecuted and held liable for foreign bribery. A further reason that a compliance defense is not in order is the challenges in creating effective compliance programs that corporate officers themselves have identified. According to a recent study by Deloitte LLP, only 29 percent of 476 executives surveyed were very confident that their respective company’s anti-corruption program would prevent or detect corrupt activities.18 PriceWaterhouseCoopers found in a 2007 study that only 40 percent of respondents believe their current controls are effective at identifying high-risk business partners or suspect disbursements, and 28 percent say there are problems with either the communication and or the enforcement of their anti-corruption program.19 We hope significant progress has been made since 2007; however, in light of these concerns, a compliance defense would be ill-advised. Self Reporting
RESTORING BALANCE, supra note 3, at 11. Id. at 11-13. 16 See U.S. SENTENCING GUIDELINES MANUAL § 8D1.1(a)(3); Press Release, OECD, OECD Calls on Businesses to Step Up Their Fight Against Bribery, (Mar. 3, 2010), available at http://www.oecd.org/document/5/0,3746,en_21571361_44315115_44697385_1_1_1_1,00.html (stating that “companies should put in place strict internal controls and establish ethics and compliance programmes as part of a strategy to combat bribery in international business deals”). 17 See U.S. SENTENCING GUIDELINES MANUAL § 8D1.1(a)(3). Under the Sentencing Guidelines, if an organization has more than 50 employees but does not have an effective compliance program, the Guidelines require that the organization be put on probation. A company that is on probation may be required, inter alia, to “develop and submit to the court an effective compliance and ethics program.” Id. § 8D1.4(b). 18 Deloitte Forensic Center, Anti-corruption practices survey 2011: Cloudy with a chance of prosecution?, available at https://www.deloitte.com/view/en_US/us/Insights/centers/centers-forensiccenter/b500b9383c442310VgnVCM3000001c56f00aRCRD.htm. 19 PriceWaterhouseCoopers, Confronting corruption: The business case for an effective anti-corruption program (2007), available at http://www.pwc.com/gx/en/forensic-accounting-dispute-consulting-services/business-case-anti-corruptionprogramme.jhtml.
The guidance should include provisions on self-reporting as part of the broader discussion on compliance programs and cooperation with investigations, but the DOJ should maintain discretion to reward self-reporting according to a broad range of criteria and considerations. The Chamber and others have expressed concern that self-reporting benefits are not clear enough to allow companies to do viable cost-benefit analysis, and that the DOJ’s current approach may render self-reporting a greater liability to corporations then not reporting at all.20 We find the characterization of the issue as a “cost-benefit” analysis to be an interesting choice of phrase. Hogan Lovells’ Bribery and Corruption Task Force reports that defendants who voluntarily disclose and settle their cases before trial frequently are rewarded with discounts of between 3 and 67 percent off the fines they are required to pay.21 The variation in discount rate, while significant, is easily justified by the wide variance in circumstances under which companies self-report; it can (and should) depend on how promptly the company self-reports, the amount of public expenditure saved and the public value of self-reporting, the degree of cooperation afforded, and the quality of the company’s prior and post-reporting efforts to prevent corrupt payments, among other factors. Moreover, despite the wide range of potential sentence reductions that may result from self-disclosure, it is nonetheless financially beneficial to disclose potential violations of the FCPA rather than have them “discovered” later by law enforcement or through the actions of a whistleblower.22 Therefore the question is really how much a particular case potentially will cost a company and whether it is better to cover up the potential violation hoping no one discovers or reports it. The former will likely be a large number, and the latter will always be zero, with a contingent liability of a large number. We query whether this is truly a meaningful “cost-benefit analysis.” Notwithstanding, companies may be able to more effectively incorporate self-reporting mechanisms into their compliance programs if the benefits are relatively consistent and more clearly articulated. It is important that the DOJ and SEC maintain their discretionary prerogatives when negotiating settlements for FPCA violations, however, and that selfreporting benefits can be incorporated into a broader analysis of cooperation and compliance. Therefore, we recommend that the DOJ’s guidelines attempt to strike a balance between these two considerations. The DOJ guidelines should clarify the range of self-reporting benefits, while retaining the DOJ’s ability to apply self-reporting credits commensurate with a company’s
See Feb. 21 Ltr., supra note 1, at 4; Thomas O. Gorman, FCPA Enforcement: Crafting Incentives to Foster Compliance, SEC ACTIONS (Dec. 2, 2010); Samuel Howard, FCPA Self-Reporting Still a Tough Sell, LAW 360 (Feb. 25, 2011), available at www.mayerbrown.com/news/article.asp?id=10516&nid=20; Thomas R. Fox, Disclosure and Negotiating with the Government – A FCPA Conundrum?, FCPA COMPLIANCE AND ETHICS BLOG (Feb. 7, 2011) available at tfoxlaw.wordpress.com/2011/02/07. 21 HOGAN LOVELLS, GLOBAL BRIBERY AND CORRUPTION REVIEW 2011 2 (Jan. 2012). Hogan Lovells highlights a number of companies that have received fine reductions due to voluntary disclosure, cooperation and self-reporting initiatives. Id. at 2–3. 22 A 2011 study of 40 FCPA cases between 2002-2009 suggests that self-reporting companies may not reap these tangible benefits and that voluntary disclosure may ultimately be more costly for companies. Bruce Hinchey, Punishing the Penitent: Disproportionate Fines in Recent FCPA Enforcements and Suggested Improvements, 40 PUB. CONT. L.J. 393 (2011). However, Hinchey’s analysis is based on a very limited sample, which he acknowledges, and his methodology is limited to a comparison of ratios between bribes and fines for companies that did and did not voluntarily disclose. Hinchey did not consider whether selfdisclosing companies may have incurred higher fines due to their failure to comply or cooperate in other respects. Id.
practices of cooperation and compliance. The guidelines should also make clear that the DOJ reserves discretion in applying the self-reporting standards within the clarified range. Declination Decisions We have no reservations about the guidance including provisions for the DOJ to provide more information about decisions not to prosecute. A related concern in the Feb. 21 Ltr. is that the Department of Justice should provide information when it has undertaken an investigation and determined that no enforcement action was necessary.23 The Chamber noted that “to the extent that a declination decision is based on the robustness of a company’s compliance program, information about that program would help provide a standard against which other companies may measure their own programs.” This does seem a worthwhile consideration, with the caveat that DOJ should receive the consent of the company under investigation to release information, as some companies may have cooperated with an investigation with the expectation that they would thereby minimize publicity regarding both the investigation and the declination decision. We would be surprised if individual companies supported such a proposal; to explain the decision not to prosecute, it may be necessary to explain the facts underlying that decision. Factual recitation could lead to identification of the target company or at least industry speculation as to the target company’s identity. It is unclear to us why industry would invite such scrutiny, but we have no concerns about including information about these decisions in the guidance. Parent-Subsidiary Liability The guidance should be unequivocal that willful ignorance of the activities of subsidiaries will not exonerate a parent. The Chamber complains that there is a lack of clarity with regard to when a parent company may be held liable for the acts of a subsidiary, despite the DOJ’s position that a company may only be liable “for the acts of foreign subsidiaries where they authorized, directed or controlled the activity in question.”24 Indeed, the ILR Report recognizes that the FCPA’s language only allows for prosecution of cases where there is evidence of knowledge and intent.25 We are not aware of any cases in which the DOJ has taken any action where a parent company was ignorant about the conduct of its foreign subsidiary. In fact, the ILR Report only discusses two cases where the SEC brought charges against parent companies for their subsidiaries’
See Feb 21 Ltr., supra note 1, at 9; see also Gibson Dunn, “2010 Year-End Update on Corporate Deferred Prosecution and Non-Prosecution Agreements,” Jan. 4, 2011, at http://www.gibsondunn.com/publications/pages/2010year-endupdatecorporatedeferredprosecutionandnon-prosecutionagreements.aspx. 24 Feb. 21 Ltr., supra note 1, at 4-5 (citing DOJ’s Layperson’s Guide to FCPA). 25 RESTORING BALANCE,supra note 14, at 22.
conduct.26 Both companies chose to enter into DPAs before the cases went to trial; thus the question of whether they met the mens rea standard of the FCPA was never adjudicated.27 Companies should not be allowed to escape liability for the actions of their subsidiaries by remaining willfully ignorant of those actions. If companies are not adequately engaged in ensuring that their subsidiaries’ actions do not contravene the FCPA, they should be held liable. Not holding these companies liable could put the United States out of compliance with its international obligations and best practice. The OECD has released guidance clarifying that companies are liable when top-level corporate managers fail to create adequate compliance programs or to monitor the actions of employees,28 and recommends that parent companies have adequate procedures in place to ensure that subsidiaries are not participating in bribery. 29 Successor Liability The guidance should reinforce that successor companies must conduct due diligence and should highlight that incentives are already provided for companies who do engage in adequate due diligence. The Feb. 21 Ltr. states that “a company may be held liable for the actions of a company that it acquires or merges with—even if those actions took place prior to the acquisition or merger and were entirely unknown to the acquiring company.”30 No examples of this actually happening are provided, nor are we aware of any. Moreover, the Chamber notes and cites guidance that DOJ provided to Halliburton on this subject but complains that DOJ required a “massive investigation” that was “unrealistic and unduly punitive.”31 No alternatives for what would constitute sufficient due diligence are provided. It is unclear to us how one would determine whether the scope of an investigation is over-inclusive prior to obtaining the results of that investigation. That determination must be made on a case by case basis based on the facts known at the time of the order. The DOJ would create a perverse incentive if it announced that it would not hold successor companies liable for the FCPA violations of their predecessor companies when the successors have not conducted adequate due diligence prior to the acquisition or merger. Companies could bribe with impunity, with the knowledge that their slate would be wiped clean if they were to merge with or later be acquired by another company. Thus, in the guidance, the DOJ should reiterate that successor companies must conduct due diligence and that the same incentives that accrue to other companies with adequate preventative programs are available for successor companies that conduct adequate due diligence.
Id. at 23. See DAVID KENNEDY AND DAN DANIELSON, BUSTING BRIBERY: SUSTAINING THE GLOBAL MOMENTUM OF THE FOREIGN CORRUPT PRACTICES ACT 45-46 (2011). 28 See OECD RECOMMENDATION, supra note 8, Annex I. 29 See Id Annex II ¶¶ 5 & 8. 30 Feb. 21 Ltr., supra note 1, at 6. 31 Id. at 6-7.
De Minimis Gifts and Hospitality Although the guidance should include information about what constitutes de minimis gifts, a blanket monetary de minimis exception is inappropriate given the many variables of different country contexts. The Chamber and Senators Klobuchar and Coons have requested DOJ guidance pertaining to the prosecution of de minimis gifts and expenditures. The Chamber raises strawman examples such as travel expenses, meals, and corporate trinkets. However, given the FCPA’s business expense provision, we feel this is unnecessary. One might ask whether it would be appropriate to create a rebuttable presumption that payments to foreign officials under a certain amount are not bribes—for example, an annual total of $250 per person. While some guidance explaining when small expenditures do not constitute bribes could be helpful for companies who are eager to comply with the FCPA, creating a blanket numerical threshold would be detrimental and inconsistent with the law. First, creating a de minimis exception would undermine companies who otherwise would use the FCPA as a basis for refusing to pay bribes under the threshold amount. It essentially says that U.S. companies can always be “shaken down” for at least a certain amount. It would make it very difficult for those operating in the field to refuse other bribe demands, as has often been complained of in relation to facilitation payments. Second, similar payments could be made to family members or associates of the foreign official for the benefit of the foreign official, making it tantalizingly easy to circumvent any minimum threshold requirement. Those of your colleagues that work in money laundering are well aware of the frequency with which payments are made to family members and close associates of public figures in order to avoid legal controls and sanctions. Finally, it is important to consider that a $25 or $250 bribe can be a very powerful motivation for those who live in countries where people live on less than a few dollars a day. What is or is not de minimis is a question of context and purchasing power, not a fixed amount that can be applied with the same effect worldwide. Guidance on this issue should generally describe the scope of violations that have led to investigations and prosecutions in the past, clearly lay out the sorts of payments that are legitimate under the statute, and note that small bribes, while equally illegal as large bribes, will be prosecuted according to the normal and reasonable priorities of DOJ, especially when they are part of or are indicative of a larger and more systemic bribery problem. Mens Rea Standard for Corporate Criminal Liability
The guidance should not include a willfulness requirement for companies because corporations are not human beings, and such a standard would be a disincentive to the creation of adequate monitoring systems. As you well know, contrary to the Chamber’s statement,32 there is currently no strict liability offense under the FCPA through which a company can be held responsible for acts of its agents in the absence of knowledge or conscious disregard of corrupt circumstances.33 Further, courts and the DOJ have consistently interpreted “corruptly” under the statute to require a mens rea of knowing and dishonest actions.34 A “willfulness” requirement makes sense for individual actors who are making conscious and individual decisions to engage in bribery, and of course, corporate liability is predicated on a violation having been committed by individuals who acted with the requisite mens rea. However, we cannot see what purpose would be served by requiring an additional measure of willfulness in order to attribute that liability to the corporate employer, nor can we understand how such a mens rea standard could even be applied to a legal person like a corporation that has no mind independent of its employees and agents. Where companies can be criminally and civilly liable for failing to adequately monitor the actions of their employees, they are motivated to establish systems of monitoring, accountability, and compliance in their business plans. To establish a mens rea standard of corporate willfulness would accomplish precisely the opposite: it would give a powerful incentive to avoid creating systems and practices that promote responsible conduct or provide for adequate monitoring and mitigation of corruption risks. Second, as to the Chamber’s argument that worldwide application of the FCPA without a willfulness requirement subjects foreign companies to liability when they are unaware that U.S. law might apply to a given transaction, the high profile of the FCPA, coupled with the vast increase in international, regional and national measures designed to criminalize bribery, make it highly unlikely that a company would be unaware of its potential for prosecution. Furthermore, assuming that many of the foreign companies doing business in the United States also have business in the United Kingdom, the jurisdictional reach of the U.K. statute means that many foreign companies will be required to maintain strong anti-corruption measures to avoid prosecution in the United Kingdom.35 Aside from being inconsistent with the general thrust of the U.S. legal system, in which ignorance of the law is not a defense, excusing FCPA violations based simply on ignorance of the applicability of U.S. law would not ease the compliance burden on those companies that are also subject to the UK Anti-Bribery Act.
Feb. 21 Ltr., supra note 1, at 8-9. KENNEDY & DANIELSON, supra note 27, at 32. 34 Id. at 38. 35 Anti-Bribery Act, (2010) (U.K.). Under the U.K. statute, a “commercial organization” (which includes U.S. incorporated companies that have substantial business in the U.K., Anti-Bribery Act (2010) c. 7 § 5) may be held criminally liable for failure to prevent bribery conducted by individuals employed by or representing the company whether or not the company has knowledge or intent to engage in bribery. Under this category of strict liability offense, a company may have access to an affirmative defense of “adequate” compliance procedures; however the affirmative defense is unavailable for any offense that includes an intent requirement. Id. c. 6 §2, c. 7 § 2. See also KENNEDY & DANIELSON, supra note 27, at 31.
Finally, the Chamber has argued that nothing in the legislative history suggests that the statute was intended to allow a parent corporation who had no knowledge of bribes paid to be charged with criminal violations of the FCPA.36 However, the elimination of the “reason to know” requirement in the 1998 amendment was a very deliberate measure, with a specific purpose to limit shelters and combat unaccountability for corporations.37 Furthermore, a 1998 House of Representatives Conference Report explicitly states, “Management officials could not take refuge from the Act’s prohibitions by their unwarranted obliviousness to any action (or inaction), language or other ‘signaling’ device that should reasonably alert them of the ‘high probability’ of an FCPA violation.”38 As always, we appreciate your time and consideration of our position. We look forward to continuing our work with you to preserve and protect a strong Foreign Corrupt Practices Act. In the meantime, we would welcome any requests for clarification or expansion on this submission. Yours sincerely,
Raymond Baker Director Global Financial Integrity
Sarah Pray Senior Policy Analyst, African Affairs Open Society Foundations
Jonathan Kaufman Staff Attorney EarthRights International
Corinna Gilfillan Head of U.S. Office Global Witness
Amol Mehra Coordinator International Corporate Accountability Roundtable
Jennifer M. Green Director, Human Rights Litigation Clinic University of Minnesota Law School
RESTORING BALANCE, supra note 3, at 21. KENNEDY & DANIELSON, supra note 27, at 43. 38 Id. at 43 (citing FCPA Amendments, H.R. Rep. No. 100-576, at 920-921 (1988), (Conf. Rep.) reprinted in 1988 U.S. Code Cong. & Admin. News, 1547, 1950).
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