This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
The recent Louis Berger International FCPA settlement highlighted once again the serious consequences from systemic bribery violations, the ease with which bribery schemes can be carried out and the risks facing all global companies, especially those involved in high-risk industries like construction.
Berger agreed to pay $17 million to settle the case and to a three-year corporate monitor. Interestingly, at the same time the company’s case was settled, the DOJ announced the guilty pleas of two former Berger executives who are scheduled to be sentenced in November 2015.
The Berger settlement raises several interesting issues.
Same-Time Individual Prosecutions: After reviewing the facts, there is no question that these two actors deserved prosecution. The DOJ had substantial evidence from a large number of witnesses who were willing to testify against the executives, along with extensive email evidence corroborating the evidence and demonstrating their attempts to cover up the bribery scheme.
Individual FCPA Prosecutions: The contemporaneous prosecution of two former Berger former executives raises a real question about DOJ handling of other FCPA criminal prosecutions against individuals. The guilty pleas of these two individuals shows that the DOJ is more committed to contemporaneous guilty pleas of individuals at the same time as the resolution of corporate cases.
This new trend stands in stark contrast to the DOJ settlement of corporate cases and subsequent prosecution of individuals. For example, the DOJ settled the Avon case without resolving the individual criminal cases. If the DOJ declined to prosecute the Avon individuals whose conduct was equal to or worse than the two Berger executives, the DOJ’s disparate treatment of these individuals raises a question as to its prosecutorial discretion.
The DOJ has been criticized for failing to prosecute individuals and the Berger case shows the DOJ operating efficiently to bring related criminal prosecutions against individuals simultaneously with the resolution of the corporate case. If this approach is new, the DOJ will have trouble explaining why it did not commit itself to such a strategy earlier.
Fine of $17 Million: Under the settlement calculation, Berger’s fine range was $17 to $34 million. Based on its cooperation, the DOJ signed off on the $17 million settlement, but did not give Berger any discount for cooperation.
Its reason for not giving a discount reflects several considerations:
First, the circumstances surrounding Berger’s “voluntary” disclosure were somewhat ambiguous. The DOJ first notified Berger of potential False Claims Act violations. Berger launched an internal investigation, during which Berger discovered FCPA violations. Berger then disclosed these FCPA violations to the DOJ.
Second, Berger’s conduct involved approximately $3.9 million in bribes and involved several high-ranking executives who actively sought to cover up the bribery scheme.
The nature and amount of such evidence may have pushed the DOJ to take a more aggressive stance on the resolution, the discount and the terms of settlement.
Balancing these considerations, the DOJ came out at $17 million. If Berger had discovered the FCPA violations itself and voluntarily disclosed the matter to the DOJ independent of the False Claims Act issue, Berger might have earned around a 25 percent discount from $17 million.
Return of the Corporate Monitor: The DOJ has not imposed a three-year corporate monitor since 2013 in the Weatherford case. Looking at the Berger settlement, it is hard to understand why a three-year corporate monitor was imposed, especially in comparison to other settlements where the DOJ settled for a hybrid monitor: 18 months under monitoring and 18 months of self-reporting. Again, given the facts and the cover up, the DOJ may have felt that Berger had been given enough positive benefits for its remediation and cooperation.