During this week, I have been considering last week’s Department of Justice (DOJ) and Securities and Exchange Commission (SEC) pronouncements about where 2018 Foreign Corrupt Practices Act (FCPA) enforcements have been and where the FCPA may be going in the future. We were treated to a speech by Deputy Attorney General Rod Rosenstein, who delivered a keynoteaddress to the conference the same week as ACI. The speeches and remarks provided solid information for the compliance practitioner going forward into 2019. I had intended to have a three-part blog series on these remarks but as usual I got carried away and so in this post I will review Rosenstein’s speech and his modification to the Yates Memo. In Monday’s post, tie it all together for what it means for the compliance profession and how a Chief Compliance Officer (CCO) or compliance practitioner can use the information going forward.
But before I do so, I want to say a few words in tribute to George Hebert Walker Bush who died last Friday night here in Houston. He was buried in College Station yesterday next to his beloved wife, Barbara. I know they are now together again in heaven. He was the last of the Greatest Generation to serve as President. His administration was the culmination of nearly 40 years of American homogeny which led to the downfall of the Soviet Union. That final point would be enough for any political legacy. Yet his legacy was much more than that seminal event.
Born into immense family wealth, he enlisted in the US Navy on his 18thbirthday serving during World War II (WWII). After the war, he attended Yale University where he played baseball, after graduation he went into the oil business, first in Midland, Texas and then moving to Houston. In the 1960s he went into public service. He was a Congressman, representing west Houston. After Congress, he served as Ambassador to the United Nations, Chairman of the Republican National Committee, Envoy to China and Director of the Central Intelligence Agency. He ran for President in 1980 and when Ronald Reagan become the GOP nominee, he asked Bush to serve as his Vice-President which he did for eight years. Bush ascended to the Presidency in 1988 for one term.
On the foreign affairs front, Bush oversaw the end of the Soviet Union. He did so in a manner which did not humiliate America’s former rival. Bush also successfully prosecuted the First Gulf War, after Iraqi President Saddam Hussain invaded Kuwait. Bush led a grand coalition which expelled the Iraqi’s from Kuwait without invading Iraq or toppling Hussain. Unfortunately his son did not learn much from that success.
However it was one domestic matter that, of the political acts Bush engaged in, was the most powerful for me and said more about the character of the man. It was his vote for passage of the Fair Houston Act of 1968, which prohibited discrimination in housing. To say that this vote went against the wishes of the majority of voters in his district is a very large understatement. Yet Bush met his constituent’s head on. Bush’s son Neil said of one angry town hall meeting, “His constituents were, many of them were irate and so he addressed the crowd at a particular gathering that we all attended. And he did it with such dignity, and I just will never forget how proud I was.”
Rosenstein began with a personal example of the invidiousness of corruption. He stated, “I visited the nation of Armenia in 1994, just as it was emerging from seven decades of Soviet domination. I gave a talk about public corruption at the University of Yerevan. After I finished, a student raised his hand. He asked me, “If you cannot pay bribes in America, how do you get electricity?” It was a pragmatic question that illustrated how that young man had learned to think about his society. Corruption may start small, but it tends to spread like an infection. It stifles innovation, fuels inefficiency, and inculcates distrust of government.”
From there he moved to the international efforts to fight bribery and corruption. He said, “Many of our cases require extensive coordination with domestic and foreign law enforcement partners. Three recent corporate resolutions involved collaboration with the Securities and Exchange Commission. Those settlements resulted from coordinated dispositions consistent with the policy against “piling on” that we announced in May. Under that new policy, Department components work jointly with other enforcement agencies with overlapping jurisdiction. Our goal is to enhance relationships with law enforcement partners in the United States and abroad, and avoid duplicative penalties. It is important to punish wrongdoers. But we should discourage the sort of disproportionate and inefficient enforcement that can result if multiple authorities repeatedly pursue the same violator for the same misconduct.”
Rosenstein concluded by announcing a modification of the Yates Memo. The change will probably not be significant going forward for the compliance professional. Nevertheless, the minor change and none other demonstrates the DOJ’s commitment to the principals underlying it as articulated by Rosenstein last year when he announced the new FCPA Corporate Enforcement Policy. The Yates Memo had required companies to fully investigate and turn over to the government information on all employees who might be involved in bribery and corruption violating the FPCA. The revision is designed to make “clear that any company seeking cooperation credit in criminal cases must identify every individual who was substantially involvedin or responsiblefor the criminal conduct.” [emphasis supplied] This change was made so that “investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted. We want to focus on the individuals who play significant roles in setting a company on a course of criminal conduct. We want to know who authorized the misconduct, and what they knew about it.”
Now companies must focus their efforts on those who were substantially involved or substantially responsible. In practice this may not seem like much of a change, but it does remove the requirement that each and every person who participated be investigated before a company can conclude a FCPA enforcement matter. Taken together with the FCPA Corporate Enforcement Polic y, it should be a continued welcome for the compliance profession, allowing a more focused investigation and hopefully quicker overall resolution.
Next Monday I will consider what it all means.
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© Thomas R. Fox, 2018