Over the years, there has been a siren’s call for the addition of a compliance defense to the FCPA. This call has argued that if a company had a compliance in place, it should receive a free pass for FCPA violations engaged in by the company’s employees. Just as the sirens who tempted Ulysses were illusionary beauties, however, the arguments for a compliance defense were ill-advised, unworkable in practice, and not based on any data to support their advocates’ claim that they would actually lessen the global scourge against bribery and corruption.
The FCPA Corporate Enforcement Policy has sounded the death-knell of this misguided call for a compliance defense. The protocol set up by the Department of Justice is creative and unique in federal criminal law enforcement. The enforcement aspects, coupled with the incentives provided to corporations and the detailing of best practices, are much more comprehensive to advance compliance than any argument for a compliance defense.
Those who advocate a compliance defense argue it will somehow drive more compliance. Of course, there has never been any evidence to back up this claim. The structural problem with the compliance defense is it is simply a paper program to give companies cover as they look the other way while their employees engage in bribery and corruption. The compliance defense is designed neither to encourage the doing of compliance nor the operationalizing of compliance within a company. It is simply designed to give companies a way to argue to the Justice Department that it is not to be held responsible in a failure to uphold the FCPA, while simultaneously not contributing to the fight against international bribery and corruption.
Perhaps the most basic misunderstanding that those advocating the compliance defense is that there is simply a binary choice to be made: us vs. them; guilty vs. not guilty; conviction at trial vs. no conviction at trial. They fail to understand that the underpinnings of FCPA enforcement have always held a much broader view.
Perhaps the most basic misunderstanding that those advocating the compliance defense is that there is simply a binary choice to be made: us vs. them; guilty vs. not guilty; conviction at trial vs. no conviction at trial. They fail to understand that the underpinnings of FCPA enforcement have always held a much broader view. It was true at the time of the FCPA’s enactment in 1977, and it is even more true today. The new policy recognizes this unusual nature in the international fight against bribery and corruption, which is a convergence of U.S. economic interests, U.S. security interests, U.S. corporate governance interests, and U.S. foreign affairs interests. It is these shared interests, both public and private sector, which make the new policy so critical in the fight against global corruption.
This is the brilliance of the new policy, as not only does it encourage doing compliance by mandating an operationalized compliance program. It also requires a company to do much more than simply operationalize compliance. Each component of the new policy moves this notion forward. First, there is a presumption created, not a guarantee, that a company will receive a declination. This is important for not only the aggravating factors that the policy listed, such as “involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism.” The carrot of a declination requires other steps and continuation of those steps throughout the investigation and enforcement process.
The new policy furthers the goals of global anti-corruption enforcement, but does it in a way in which all the stakeholders involved are a part of that effort. It gives companies a very bright line to work toward, with the presumption of a full declination to follow at the end. This is a much more well-rounded approach for incentivizing not only the increased importance of compliance but also other goals of cooperation, investigations, and returning monies not obtained in legitimate commerce. It is this commitment to legal compliance and strong business ethics that will drive compliance programs and the compliance profession forward, not a paper compliance defense.
The Justice Department certainly ended the year with an impressive run. The death of the compliance defense is welcomed by all those who wish to see companies doing compliance.