Compliance and legal officers interested in knowing what Foreign Corrupt Practices Act enforcement might look like under Attorney General Nominee Loretta Lynch now have a treasure chest of valuable insight.
In a written series of tough questions, the Senate Judiciary Committee last week drilled Lynch on a variety of touchy subjects pertaining to the FCPA, including her views about the Justice Department’s current level of transparency—or lack thereof—as well as the increasing length of time that it takes to resolve FCPA investigations. Committee members also questioned Lynch on her thoughts about “FCPA abuses,” FCPA reform, and revisions to the FCPA Resource Guide.
One question posed by Sen. Charles Grassley (R-Iowa), for example, asked Lynch whether she would “commit to working with companies and individuals” to further improve—and update, when necessary—the FCPA Resource Guide. In response, Lynch said she would “look forward to continuing the outreach efforts that the Department has been making with the private sector to understand their needs and concerns and, if necessary, update and/or improve the Guide.”
Lynch also said she supports under appropriate circumstances the publication of FCPA decline-to-prosecute decisions. “The Department has a longstanding general practice of refraining from discussing non-public information on matters it has declined to prosecute,” she wrote. “This practice is designed to protect ongoing investigations, privacy rights and other interests of uncharged parties, and sensitive, internal law enforcement deliberations.”
She added: “I agree that the Department should continue to explore ways by which it can responsibly share information while protecting the many sensitive interests that federal, criminal investigations implicate.”
Sen. Ted Cruz (R-Texas) then asked about whether Lynch agrees with critics of the FCPA who claim that the Justice Department’s ability to collect and retain fines incentivizes vigorous application of the FCPA. “I disagree with this claim, which I believe is built on a faulty premise regarding the process by which criminal fines and other financial penalties are paid and subsequently put to use,” Lynch responded.
“Fines for FCPA violations are not ‘kept’ or ‘used’ by the Department, and no such use incentivizes application of the FCPA. Rather, as with all cases, the Department considers the strength of the evidence and other long-standing policy considerations in determining whether to bring an FCPA prosecution,” Lynch added.
She went on to state: “A company convicted of an FCPA violation pays any accompanying fine not to the Department but to the relevant U.S. district court clerk’s office. Those funds are then directed to the Crime Victim Fund, which is a U.S. Treasury fund. Funds paid into the U.S. Treasury are not available for use by the Department except through the appropriations process or by statute. A company that settles an FCPA investigation through a non-prosecution or deferred prosecution agreement pays any accompanying financial penalty not to the Department but to the U.S. Treasury.”
Cruz further pressed Lynch on her sentiment toward many of the positions taken by Andrew Weissmann, an outspoken critic of the FCPA program. In January, Weissmann was named chief of the Criminal Division’s Fraud Section, which is charged with investigating and enforcing the criminal provisions of the FCPA.
In 2010, while serving as an attorney at law firm Jenner & Block, Weissmann produced a report commissioned by the U.S. Chamber of Commerce’s Institute for Legal Reform that criticized FCPA enforcement as overly aggressive.
In that report, Weissmann issued a series of recommendations, including:
Adding a compliance defense to the FCPA;
Limiting a company’s liability for the prior actions of an acquired company;
Adding a ‘willfulness’ element for corporate criminal liability; and
Changing the definition of ‘foreign official’ under the FCPA.
Lynch said she does not support the proposed changes. “Several of them would be a significant departure from general principles of corporate criminal law, effectively creating unique exceptions for FCPA cases that are unwarranted, are contrary to Congress’s intent in enacting the FCPA, and would impose often insurmountable obstacles to effective enforcement of the FCPA,” she said.
Lynch also shot back at Cruz’s question regarding the length of time it takes to resolve a foreign bribery case, in which he cited the 2014 OECD Foreign Bribery Report. According to that report, “the average time taken (in years) to conclude foreign bribery cases has steadily increased over time, [from an average of 1.3 years in 2004] peaking at an average of 7.3 years taken to conclude the 42 cases in 2013.”
“While the Department has been working diligently to find meaningful and reasonable ways to reduce the time white-collar FCPA investigations take, the question’s reliance on the OECD Foreign Bribery Report is misplaced,” Lynch wrote. “As I understand it, the referenced statistic is based on an aggregate of all the OECD Working Group members’ cases, rather than isolating the time taken by the United States in its cases.”
“Also, this statistic does not measure the length of the criminal investigation,” she continued. “Rather, it measures the time between the last criminal act and the sanction, increasing substantially the time measured, since the Department (or foreign law enforcement) might not learn about a potential violation until years after the last criminal act has occurred.”
Furthermore, Lynch disagreed that expanded resources and more international cooperation should expedite FCPA investigations. “Compared to other white collar investigations, the challenges associated with FCPA investigations can be much greater,” she said. “Because of the nature of the offense, most of the evidence in these cases is typically located overseas. While international cooperation efforts have expanded significantly over the past ten years, the process for obtaining evidence from overseas is still time-consuming.”
She went on to say: “While improvements in this area can be made, irresponsibly or artificially expediting an investigation solely for the sake of speed can harm the investigation and the pursuit of justice, as well as create greater harms to the targets, subjects, and witnesses in our investigations. If I am confirmed as Attorney General, you can be assured that the Department will continue to review each case on its merits and will move as expeditiously and responsibly as possible.”
The Senators also questioned Lynch on whether the FCPA should contain a “safe harbor” from criminal prosecution for companies that have robust compliance programs; self-disclose potential FCPA violations; and cooperate fully with the Justice Department’s investigation.
In response, Lynch said, “I do not believe a ‘safe harbor provision’ is necessary or desirable. Both the U.S. Sentencing Guidelines and the Department of Justice already provide significant benefits for companies that have robust compliance programs, self-disclose potential FCPA violations, and cooperate fully with the Department’s investigation.”