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Mendelsohn Takes His Leave

Matt Kelly | April 15, 2010

I could be cute and say, “Farewell, Mark Mendelsohn, we hardly knew ye!” but that would not be accurate. For most corporate compliance officers at U.S. corporations, Mark Mendelsohn has loomed large in their lives at least figuratively, and often personally, for years.

No longer.

Mendelsohn, of course, was the Justice Department’s point man on enforcement of the Foreign Corrupt Practices Act—with an emphasis on the word “was.” News leaked out this week that Mendelsohn is finally leaving the department, after five years as deputy chief of the Fraud Section, to take a job in the private sector at the law firm Paul Weiss.

MendelsohnYou can’t overstate the importance of Mendelsohn’s influence in the last several years. He led a revival of FCPA enforcement when the law had lain largely dormant for more than 20 years. He was the Justice Department’s emissary to the Organization for Economic Cooperation and Development, and helped coax that group to follow the U.S. lead in anti-corruption enforcement. I’ve heard that he forged a friendship with Richard Alderman, head of the Serious Fraud Office in Britain, which also now takes a no-nonsense view of fraud along U.S. lines. Mendelsohn spoke at just about any public event he could find, including the Compliance Week annual conference several times, to preach the gospel of FCPA compliance.

Indeed, more than a few people used religious allusions when I asked them this week to talk about Mendelsohn’s significance to corporate compliance. One chief compliance officer called him “the Moses of FCPA,” taking time to teach the masses about compliance with the law, instead of simply enforcing it. Another called him “a veritable Oracle of Delphi … if he spoke at a conference, the high priests of the compliance world would work feverishly to decipher the meaning of his words.” (I didn’t even tell those two to use historical allusions, by the way; this is heartfelt stuff.)

We should also give Mendelsohn credit for dusting off another seldom-used tool in the Justice Department and taking it mainstream: the deferred-prosecution agreement. Remember, he didn’t need to do that. He and his colleagues at the Fraud Section could have pursued indictments and trials, which would have done nothing but cost lots of people lots of money and jobs. Or they could have imposed large fines and been done with it, which is as morally weak as parents forcing a child to attend church while they relax at home. Instead, Mendelsohn imposed DPAs and compliance monitors—which is nobody’s idea of fun, I know, but you can’t say that the Fraud Section didn’t take the spirit of the FCPA seriously. These guys genuinely wanted companies to adhere to a high standard of conduct, and they pretty much succeeded. As one of my sources noted, you don’t see many repeat FCPA offenders.

I’ve seen the effect of Mendelsohn’s vigor and zeal many times. Almost every month, Compliance Week hosts an editorial roundtable to let compliance officers talk through various issues; almost every time, the topic meanders back to bribery. Any law firm with a white-collar defense practice now publishes regular bulletins about FCPA enforcement, and at Mendelsohn’s own last count in February, his department had more than 130 investigations open. Just this week reports surfaced that Avon Products has suspended four executives (including its former head of internal auditing, ouch) amid an internal investigation into bribery in China and Latin America.

And as further proof that Mendelsohn’s message has gone global, today we heard word that German authorities are investigating Hewlett-Packard for alleged bribes paid to Russian officials to supply—get this—the Russian federal prosecutor’s office with computer equipment. If true, that will go down in my book as the stupidest FCPA violation of all time. But it is a telling example of how the rest of the world now views bribery as the United States does: as a scourge to be stamped out. You wouldn’t have seen Berlin taking that action in 2005.

In truth, Mendelsohn was only one of many people at the Justice Department who revived FCPA enforcement. Steve Tyrrell, his former boss at the Fraud Section, and John Roth, a career prosecutor also in the section, were the other two elements of the triumvirate that made the FPCA the paramount concern it is for compliance officers today. And Lanny Breuer, assistant attorney general for the criminal division, has made it abundantly clear that the Justice Department will continue to talk about FCPA enforcement for a long, long time to come.

But Mendelsohn was the one who talked about it first, and talked about it the most.