THE NEW ERA OF FCPA ENFORCEMENT: A TIME FOR REFLECTION

The Department of Justice ended one of its most significant FCPA prosecutions against individuals in the history of the Act, voluntarily dismissing with prejudice all of the remaining charges in the Africa sting case. U.S. v Goncalves, No. 09-cr-335 (D.D.C.). The court papers filed by the DOJ stated that the unprecedented step follows careful consideration of three factors: “(1) the outcomes of the first two trials in which . . . juries remained hung as to seven defendants and acquitted two . . . and one defendant [was acquitted] . . .pursuant to Fed. R. Crim. P. 29; (2) the impact of certain evidentiary and other legal rulings . . .; and (3) the substantial governmental resources, as well as judicial, defense, and jury resources, that would be necessary to proceed . . .”

The dismissal may mark a turning point in FCPA enforcement. The DOJ and SEC have had a string of significant corporate settlements over the years. Ever increasing sums were paid in settlement. What was once a headline grabbing, and record setting amount, became an after thought in the wake of the next huge case and even larger settlement.

Born of this trend, the African sting case was quickly hailed as another FCPA milestone. It represented the largest FCPA sting operation in history. Twenty two defendants were indicted in an action that was so large it had to be broken into segments for trial. Early on defendants began pleading guilty. What had been declared to be a “new era” of FCPA enforcement seemed destine to continue.

Then things started to unravel. In the first corporate case where a jury returned a verdict, the court tossed the case out on post-trial motions as to Lindsey Manufacturing and the other defendants. U.S. v. Aguillar, Case no. 2:10-cr-01031 (C.D.Cal.). While the ruling was predicated on prosecutorial misconduct, the court made it clear that a key factor was the weakness of the evidence. The first African Sting case ended with a hung jury after the court dismissed substantive FCPA charges as to certain defendants and each money laundering charge. In another case the court dismissed all the FCPA charges as to former ABB official John O’Shae. U.S. v. O’Shae, H-09-cr-429 (S.D. Tx). Subsequently the DOJ dismissed the remaining charges. That was followed by the second African Sting trial which ended in two acquittals and a hung jury as to three defendants. Post trial juror comments made it clear that that jurors thought little of the government’s case.

In the wake of DOJ’s dismissal of all the remaining African sting charges the critical question is where does the “new era” of enforcement go? Nobody would seriously argue with the goals of the FCPA. At the same time enforcement officials have steadfastly resisted efforts to amend portions of the Act to give clarity to key terms such as who is a foreign official or to add a compliance defense which should only serve to foster the goals of the FCPA. Those officials also seem to have overlooked suggestions that their interpretations of the Act are at times over-reaching such as in the application of its jurisdictional provisions and the construction of the facilitation payment provisions.

Perhaps now is a good time to stop and reflect on what the courts and jurors have said about the “new era” of FCPA enforcement. Surely that era should be more than a dazzling array of ever increasing monetary payments by corporations or actions against individuals built on questionable blue collar tactics. Surely it should be more than business organizations spending ever increasing sums to conduct far reaching and perhaps at times unnecessary investigations at huge expense in a effort to win cooperation credit. Surely it should be more than brining increasing numbers of charges against individuals and demanding longer and longer prison terms. Perhaps now is the time to craft meaningful reform to the Act and enforcement policy to ensure clearer guidance and a more balanced application of the statutes to ensure that the laudable goals of the statute in a fair and balanced manner in the future. That would truly be a “new era” of FCPA enforcement.