Over the weekend, Senator Amy Klobuchar (D-MN) entered the crowded field of Democrats hoping to secure the party’s nomination for President.
This post highlights how Senator Klobuchar was a leading voice for FCPA reform in connection with the Senate’s 2010 FCPA hearing and aftermath. (See here for a transcript of the hearing and here for the video).
As a participant in the Senate’s 2010 hearing (see here for my testimony), what surprised me most was how there seemed to be bipartisan support for certain aspects of FCPA reform including by Senator Klobuchar and Senator Christopher Coons (D-DE and a former in-house counsel). Indeed, in January 2011 I had a conference call with aides for Senator Klobuchar and Senator Coons regarding FCPA reform.
Set forth below is Senator Klobuchar’s exchange with the DOJ’s witness (Greg Andres) at the hearing:
“SENATOR KLOBUCHAR: “[O]ne of the basic principles of due process is that people in companies have to be able to know what the law is in order to comply with it. And I will tell you that I have heard from many very good standing companies in my State that they do not always know what behavior will trigger an enforcement action. As we know, the goal is not just to punish bad actors after a violation is committed, but rather to prohibit actions from happening in the first place. So a lot of my questions are focused on how we can incentivize corporations to make sure they have appropriate compliance procedures in place and that they voluntarily disclose violations when a rogue employee violates the law. I head up the Subcommittee on Exports and Commerce, a big believer in the President’s focus of trying to double exports. I believe this is the way that we are going to get ourselves out of this economic downturn. And I have a State where we truly believe in exporting all over the world and it is what I think has given our State a leg up when you look at our unemployment rate compared to other States. At the same time, I have heard a lot of concerns about any little conduct is going to trigger some kind of investigation. So my first question is—and in your testimony, you detailed several of the large cases that DOJ has prosecuted over the last few years. While many of these cases, clearly, these egregious cases may be clear-cut, I have heard from some businesses that additional guidelines laying out best practices would help them operate with more certainty. Have you given any thought to increasing the guidance you give businesses, especially in situations covered by the FCPA that are not so clear or fall into gray areas?
DOJ: Yes, Senator. As you may know, there is a unique procedure under the current law that allows companies to seek an advisory opinion under the FCPA. So that allows companies to provide facts and information to the department and we are able to give them an advisory opinion as to specific conduct and whether that conduct violates the FCPA. I believe that procedure is unique among the criminal laws. Those opinions are published and available to companies to analyze them, to understand where the government is focusing its enforcement, and what specifically violates the law. One other area where the government is particularly transparent in this area is with the publication and filing of our non-prosecution agreements, deferred prosecution agreements, information, and indictments. We have a Website at the Department of Justice
SENATOR KLOBUCHAR. And do you think there is more that you can do, though? Because this is what I keep hearing of their concerns, of relatively minor things, and they are just not sure if it is a gray area or not. That what you are doing is not enough?
DOJ: Again, the best procedure is the advisory opinions, but officials from the department speak routinely about the Foreign Corrupt Practices Act, and our filings are rather detailed in specifically what we are looking for by way of compliance. The OECD’s good practice guidance also provides information about the appropriate compliance procedures, and the sentencing guidelines also reference compliance procedures.
SENATOR KLOBUCHAR. Has the department established or considered establishing a self-disclosure program, such as is offered by the department with the antitrust amnesty program, to encourage those companies that discover FCPA violations through their compliance efforts to disclose them to the department? It seems to me like that would be a way of advancing anti-corruption efforts.
DOJ: Many of our cases rely on the self-disclosure and cooperation of corporations, and we encourage that. Self-disclosure and cooperation are two of the nine factors that the government considers as part of the principles of Federal prosecution of business entities when we are making our charging decisions and we are deciding how to resolve cases. We do not believe that immunity is appropriate, just as we do not believe that a bank robber should get immunity for disclosing that he robbed a bank. The fact alone that a company discloses their involvement in criminal activity or that of an employee in criminal activity does not amount necessarily to getting a pass for those crimes. We think the antitrust provisions are different, because in that field, obviously, it takes two or more competitors to collude to fix prices. There is not the same incentives or the same criminal conspiracies necessarily at work with respect to the FCPA. But I will say this. In many of the cases that we resolve, some of which we decline to prosecute, self-disclosure is a very important factor and we believe that the current factors that the department follows under the principles of business organizations give sufficient motivation to self-disclose and cooperate.
SENATOR KLOBUCHAR. Companies are obligated to disclosure, is that right, when they hear about things?
DOJ: They are not obligated to disclosure.
SENATOR KLOBUCHAR. They are not.
DOJ: They make a decision to disclose and in return for their disclosing and their investigating, in large part, their own criminal conduct, they get meaningful credit with the department and that credit goes into the decision whether to file an information or charge the company, whether to enter a deferred prosecution or a non-prosecution agreement.
SENATOR KLOBUCHAR. How many disclosures has the DOJ received since 2007?
DOJ: I would not know the specific number. I can get that for you, Senator. But it is significant. We are getting a significant number of disclosures from corporations about their own criminal conduct. I think that, in part, relates to the passage of the Sarbanes-Oxley legislation, which encourages corporations to review their own books and records.
SENATOR KLOBUCHAR. Well, I will look forward to getting that, as well as working with you going forward. And I will have some more questions for the second round.”
In the aftermath of the hearing, Senator Klobuchar submitted the following questions to the DOJ and the DOJ’s answers can be found in the hearing transcript.
- Do you believe companies could comply with more certainty with the FCPA if they were provided with more generally-applicable guidance from the Department in regards to situations covered by the FCPA that are not clear cut or fall into “gray” areas?
- What would be the most helpful steps our government could take in the area of anti-bribery to create a more level playing field for U.S. companies competing overseas?
- What is the Department’s position on creating a rebuttable presumption that small gifts such as meals are not undertaken for the purpose of obtaining business improperly?
- What is the Department’s position on amending the FCPA to bring the intent standard for corporations in line with the current “willfulness” standard that applies to individuals?
In this February 2012 letter to then Attorney General Eric Holder, Senator Klobuchar and Senator Coons stated:
“[I]t has become apparent that too many companies are devoting a disproportionate amount of resources to FCPA compliance and internal investigations. To be clear, it is both necessary and desirable that companies pay adequate attention to compliance efforts, and in certain cases, adequate anti-corruption initiatives may require a significant corporate commitment. Over-compliance, however, can have a negative effect on product development, export promotion, and workforce expansion.”
In the letter, Senator Klobuchar and Senator Coons stated that the DOJ “must provide clear and concrete guidance on:
- “the definition of “foreign official,” in particular, the term “instrumentality” including under what circumstances an employee of an instrumentality who is not exercising the sovereign authority of the state may be considered a “foreign official;”
- the benefits, such as non-prosecution, deferred prosecution, and reduced fines, that will be granted in return for self-reporting of violations, cooperating with investigations, and maintaining an FCPA compliance program;
- the scope of internal investigations and other actions required of companies seeking to cooperate with the government in order to quality for such benefits;
- the requirements of an adequate compliance program and how such requirements vary depending on the size and complexity of a company;
- the methodology used to calculate fines and disgorgement, including the extent to which the Department of Justice will take into account parallel Securities and Exchange Commission enforcement actions and the enforcement actions of competent foreign authorities for the same conduct at issue;
- the extent to which companies may be held liable for the actions of subsidiaries, predecessor entities, and acquired entities;
- the requisite levels of intent required to incur liability, including the circumstances under which the actions or knowledge of an employee will be imputed to the company;
- the methodology used to determine whether a payments is a “reasonable and bona fide expenditure … directly related to … the promotion, demonstration or explanation of products or services;” and
- the applicability of the FCPA to transactions of de minimis value.”
In November 2012, the DOJ and SEC issued the FCPA Guidance, in 2017 the DOJ issued an FCPA Corporate Enforcement Policy, and in 2018 the DOJ issued its so-called no “piling on” policy.
However, many of Senator Klobuchar’s concerns do not seem to be directly addressed by these non-binding forms of government guidance.