By: Lindsay Simmons
Since September 2011, the Department of Justice (DOJ) has tried and failed numerous times to meet its burden of proof in Foreign Corrupt Practices Act (FCPA) enforcement actions. These cases have been referred to by some as “debacles”. Perhaps that helps explain why the DOJ recently and somewhat surprisingly announced its settlement of a significant FCPA case with Louis Berger International Inc. (LBI), rather than taking the matter to trial. Louis-Berger-International-Announcement. Under the agreement, LBI admitted to violations of the FCPA and entered into a deferred prosecution agreement (DPA) to resolve charges that it bribed foreign officials in several countries to secure U.S. government contracts. LBI will pay a $17.1 million criminal penalty, implement rigorous internal controls, continue to cooperate with the DOJ, and retain a compliance monitor for at least three years. Two of the company’s former executives also pleaded guilty to conspiracy and FCPA charges in connection with the scheme. But still this settlement seems a bit surprising. Why?
This 5-year FCPA matter is not the only recent enforcement action against LBI or its related entities. In 2010 the company reached a global settlement with the DOJ related to an investigation of its cost allocating methodologies for numerous U.S. federal contracts overseas. Under that settlement, LBI paid $65M, entered into a two-year DPA, and agreed to an independent monitor. The company also entered into a settlement agreement with the DOJ and the relator of a whistleblower lawsuit in a related civil action. In addition, LBI entered into an Administrative Agreement with the company’s lead federal agency, the U.S. Agency for International Development.
The question is how and why the commitments and controls put in place in 2010 failed to prevent or arrest the activities that led to the FCPA violations just settled by the DOJ and, given that these measures were not effective, why was LBI given another opportunity – in the form of a second DPA and other agreements – to ramp up compliance programs and internal controls? The answer may be in the transcript from the recent sentencing hearing in another FCPA case brought by DOJ – the Seligman case – where the DOJ essentially dropped its case early in the trial. In that case Judge Irenas lambasted the DOJ about their purported troubles in prosecuting FCPA cases and getting convictions:
DOJ COUNSEL: In a complex white-collar case, certainly in a FCPA case, where there are numerous difficulties to obtaining evidence overseas … because of the complex and difficult nature of building these cases, we think that—
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THE COURT: You know, I mean, so you could talk generally how difficult this is. There may have been certain legal issues, but—what was difficult? What was the particular difficulty here? You had—
THE COURT: —two co-conspirators pled guilty early on cooperating, alleged co-conspirators. You had Duran, here right in the country talking to you. It was not as if, you know, he was hiding somewhere in the jungle of Colombia to avoid—he actually wanted to be here. And then you had Sidley & Austin, turned over thousands and thousands of—I think it was 4,000 pages. I can’t remember the number, but it was some very large number of documents, and had done—you know, and Sidley does this kind of work in other context. I mean, they know what they’re doing, and they—you know, and they did all this investigation.
You know, you tell me as a general matter, it’s hard to prove Foreign Corrupt Practices Act. I guess as a generic form of—
THE COURT: —that’s difficult. But in this case, what was the difficulty?
DOJ COUNSEL: … And the point I’m making is simply a general point, that the white — complex white-collar financial crimes are difficult to prove, FCPA cases are difficult to prove, and so, therefore, we believe that a sentence of incarceration is — sends an important message in –
THE COURT: Well, I guess they haven’t been in my court because I tried several. I tried a nine and-a-half-month criminal white-collar case, in which I gave the longest tax fraud sentence ever given, twice what Al Capone got, for someone who was engaged in a tax fraud trial. I’ve done three or four –
THE COURT: I’ve done three or four big white-collar cases, all resulted in convictions and all resulted in substantial sentences.
THE COURT: I don’t know what you’re talking about.
Complete-Sigelman-Sentencing-Transcript.
The Lesson? It’s hard to say, but one explanation may be that sometimes DOJ’s allegations of corrupt practices are overstated and they cannot prove them at trial. Perhaps this is part of the reason that, at least thus far in 2015, we are seeing the lowest number of FCPA prosecutions in 10 years.
Lindsay Simmons is responsible for the contents of this Article.
© Jackson Kelly PLLC 2015