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Howard Sklar On FCPA Compliance, Open Society Foundation Report

October 19, 2011

By EJ Fagan

EJ Fagan was New Media Coordinator for the FTC from 2011-2013. He is now Deputy Communications Director for Global Financial Integrity. You can follow him on Twitter @ejfagan.

In his new article, Against an FCPA Compliance Defense, Howard Sklar responds to the U.S. Chamber of Commerce Institute for Legal Reform’s argument that corporations should be granted a compliance defense. Sklar summarizes their argument:

“A compliance defense, according to the Chamber of Commerce’s Institute for Legal Reform (a chief proponent of FCPA reform), would allow companies to avoid liability ‘if the individual employees or agents had circumvented compliance measures that were otherwise reasonable in identifying and preventing such violations’ (from the Institute’s publication ‘Restoring Balance: Proposed Amendments to the Foreign Corrupt Practices Act‘).  A compliance defense is allegedly needed because ‘a company can now be held liable for violations committed by rogue employees, agents or subsidiaries even if the company has a state-of-the-art FCPA compliance program.’”

He then responds, noting that, in reality, the DOJ not only exercises discretion in prosecutions, but is in fact mandated to do so:

Credit for good compliance is, in fact, mandated by the DOJ’s own prosecution guidelines. The ‘Principles of Federal Prosecution of Business Organizations,’ the Department of Justice’s official policy on what they consider when instigating a prosecution of a company, includes a requirement that prosecutors consider ‘the existence and effectiveness of the corporation’s pre-existing compliance program.’  Mukasey is correct that the Department’s actions underscore the importance of effective compliance.  In fact, the Department goes so far as to describe—in detail—exactly what they want companies to implement.  In each of the recent Deferred Prosecution Agreements, there is an appendix (colloquially referred to as ‘Schedule C,’ after it’s place in the overall DPA) that lays out twelve elements to an effective compliance program.  More important than even Schedule C, however, is the information that trickles out of the DOJ on cases they decline to prosecute.  One element that is common among declinations is the existence of a robust compliance program.

A reasonable question follows from this discussion: if the Department places such emphasis on compliance, and everyone agrees that a company that does its utmost should get credit, up to getting a pass on prosecution, what does it hurt to embody that in legislation?

Emphasis mine. One can only guess that the Chamber isn’t looking for a defense against unwarranted prosecutions, but rather a reason to relax compliance standards.

Sklar had some great things to say about last month’s Open Society Foundation report, Busting Bribery: Sustaining the Global Momentum of the Foreign Corrupt Practices Act, in his video blog this week, starting at 33:00:

Episode #18 from Howard Sklar on Vimeo.

He notes that Open Society’s response to the US Chamber of Commerce’s push to eliminate successor liability in FCPA is a ‘home run’. Like their push for a compliance defense, eliminating successor liability has little to do with reducing unwarranted liability risk, but is more about allowing corporations to shrug off responsibility for bribery and corruption.


Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

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