Criminal FCPA Cases – Targeting Individuals

The Justice Department warned everyone – they are going to prosecute more individuals for criminal violations of the FCPA.  The DOJ has backed up its warning.  Everyone should expect more criminal cases against individuals.

Last year was the year of the criminal prosecution of individuals for FCPA violations.  This year will be another banner year for individual criminal prosecutions.

Eleven individuals have been indicted this year, including a criminal indictment of five individuals in one case.    The numbers will continue to rise.

In the antitrust cartel context, the DOJ indicts, on average, three individuals for each company charged.  The ratio of individual prosecutions to corporate prosecutions for FCPA cases is not as high.

The DOJ has clearly targeted individuals for proactive investigations such as the Cilins case from 2013.  In addition, they have been culling through past corporate settlements to charge individuals involved in these cases, including Maxwell Technologies, Siemens and BizJet.

Additional individual prosecutions can be expected from some of the recent corporate settlements.  Weatherford, Avon (soon to be announced) and Marubeni are prime candidates for follow-up criminal investigations.

Some argue that every corporate case should have at least one, and possibly more, individuals prosecuted for criminal violations.  The argument is fairly straightforward – the conduct of at least one individual has to be imputed to the company to establish corporate liability.

With the exception of the collective knowledge doctrine that the DOJ has not tried to apply in the criminal FCPA context, the DOJ has to have at least one individual who satisfies the requisite elements of the criminal offense.

Since the DOJ suffered its defeat in the Shot Show sting cases in 2010, it has gone back to basics – it has brought strong criminal cases, many of which have resulted in guilty pleas.  Several of the cases remain unresolved because the defendants have not been apprehended.

The DOJ will continue its focus on individual criminal cases.  The number of cases will continue to increase; more individuals will be prosecuted.  Corporations that settle their cases with the Justice Department will provide valuable cooperation and information relied on by the Justice Department to indict individuals from the company.

The Justice Department targets senior officers and managers at smaller companies (e.g., BizJet).  It will be interesting to see who is prosecuted from some of the larger companies that settled their cases.

At the same time, the Justice Department is interested in finding an appropriate case to prosecute C-Suite executives and/or Board members for willful blindness.  They want to find a strong case where they can send a powerful message.

Prosecutors know that a willful blindness prosecution, by definition, is very difficult to win.  The Bourke case was a long and hard fight where the evidence was fairly strong but not overwhelming, especially when the legal theory was not as established as it is now.

Policymakers are convinced that a focus on criminal prosecution of individuals is a more effective deterrent than large fines against companies.  That seems like a fairly obvious point – in the corporate prosecution context, individuals can lose their jobs or suffer reputational harm.

The threat of jail time carries a much stronger message.  In the antitrust context, the message of aggressive enforcement has been communicated around the globe.  Senior executives know that cartel conduct will be prosecuted criminally in the United States.  Unfortunately, the potential revenues from cartel behavior can be significant and outweigh the fear of criminal conviction.

Foreign bribery has a very similar tradeoff, depending on the potential upside of a bribery scheme.  Corporate employees can earn significant benefits from bribery but the fear of criminal prosecution should have a strong countervailing influence, especially as the Justice Department’s FCPA criminal prosecution program matures.

This article was republished with permission from Michael Volkov’s Corruption, Crime & Compliance.