Law Office Management
Jul. 2, 2008
Busting Bribery
Business booms for lawyers helping companies avoid--or get out of--trouble overseas, thanks to increased prosecutions under the Foreign Corrupt Practices Act.
Now is not a good time to run afoul of the Foreign Corrupt Practices Act (FCPA): Since 2006 the SEC and the Department of Justice have more than doubled their prosecutions for foreign bribery and other violations, according to a report from Gibson, Dunn & Crutcher. And the current crop of cases is just the "tip of the iceberg," as Mark Mendelsohn, deputy chief of the DOJ fraud section, told the Washington, D.C., Bar Association last year.
That means now is a good time for California law firms who counsel companies on avoiding and getting out of such entanglements.
Although the FCPA is more than 30 years old, enforcement is just now heating up. That's because of the 2002 passage of the Sarbanes-Oxley Act and its internal-controls review requirement, which makes it easier for a company to determine whether it complies with the FCPA regulations. Now, many companies that find violations are voluntarily disclosing them to the SEC and the DOJ.
The decision to come clean is complex and based on factors such as the reach of the corruption and whether senior management had knowledge of or involvement in it, says Walter F. Brown Jr., litigation partner at Orrick, Herrington & Sutcliffe in San Francisco. Also, the lure of leniency can be strong: In return for their full cooperation, companies may receive deferred prosecution-or none at all. "The DOJ has been giving a lot of credit to companies who voluntarily disclose," says Brown.
At the same time, the DOJ has also begun punishing repeat noncompliers with steep penalties: In 2007, petroleum-services firm Vetco International was fined a record-breaking $26 million.
Such figures add up to good business for California lawyers. Brown, for example, reports that 20 to 30 percent of his practice is now FCPA-related, compared with a "very small" amount three years ago.
To bust bribery cases, federal agencies generally use a two-pronged approach: companywide penalties for corrupt conduct, and individual criminal prosecutions for corporate leaders.
"There is a new appreciation of the deterrent effect of individual prosecution," says Lucinda Low, partner at Steptoe & Johnson in Washington, D.C. She leads a group of attorneys specializing in foreign corrupt practices law and cochairs a Practicing Law Institute seminar on FCPA compliance. "People can go to jail-and that's something that gets attention."
Last year the government charged ten individuals with FCPA violations, including sitting U.S. Rep. William J. Jefferson. The Louisiana Democrat, who pleaded not guilty, is currently awaiting trial in Alexandria, Virginia, on 16 counts, including wire fraud, money laundering, RICO violations, and bribing a Nigerian public official.
Most corporations tend to settle FCPA cases, which results in some ambiguity about the scope of the law. "Individuals litigate more often than companies, so if you're a lawyer who likes to go to trial," notes Low, "you're [more] likely to get to try a case with an individual defendant."
With growing awareness of the hazards of the FCPA, many public companies are hiring additional outside counsel to bolster their compliance programs and head off trouble before it starts.
"Our business has increased in that area," says Ed Rubinoff, a Washington, D.C.based partner at Akin Gump Strauss Hauer & Feld, which has three California offices. "And we are doing more staffing on that."
According to Nicola Hanna, a former assistant U.S. Attorney who is now a litigation partner at Gibson Dunn in Orange County, white-collar and DOJ experience are a firm's best preparation for assisting clients with voluntary FCPA disclosures.
However a firm prepares, though, it may want to do so quickly. As Brown says, "You see a lot of people trying to focus on this area."
Alexandra Brown
For reprint rights or to order a copy of your photo:
Email
jeremy@reprintpros.com
for prices.
Direct dial: 949-702-5390
Send a letter to the editor:
Email: letters@dailyjournal.com