Donald Trump is not a fan of the Foreign Corrupt Practices Act (FCPA), the law that says it’s illegal for any person – corporate or human – to bribe overseas. Trump has called the FCPA “a horrible law” and has said that the law “puts us at a huge disadvantage.” And you could argue that the Trump Justice Department’s first two FCPA enforcement cases reflect Trump’s point of view. Both were declinations – despite the fact that the companies disclosed illegal overseas payments and agreed to disgorge illegally gained proceeds. Some are using the cases to ask the question – is Trump soft on corporate crime? As the lawyers say, let’s stipulate for the record that he is. But let’s also remember that going soft on corporate crime was perfected by the Democrats.
The Obama Justice Department, for example, regularly used declinations – five in Obama’s last year in office – and non prosecution agreements – 22 over the eight years of his administration – to settle corporate FCPA matters. And since September 2015, when the Obama administration put out the Yates memo calling for more prosecutions of individual executives, there have been 20 FCPA corporate prosecution agreements – yet not one individual has been charged in connection with those cases.
There are those in the get tough on corporate crime camp – like David Uhlmann, former head of the Environmental Crimes Section at the Justice Department and now a University of Michigan Law professor – who argue that if a corporation commits a serious crime, then a corporation should be convicted. We’re talking guilt – as in guilty pleas. For environmental crimes, that has been the practice. Over the past fifteen years, 93 percent of major corporate criminal environmental cases ended with public companies pleading guilty to their crimes. Same for antitrust corporate crimes.
Over the past fifteen years, 74 percent of major corporate criminal antitrust cases ended with public companies pleading guilty to their crimes. But only 29 percent of corporate criminal FCPA cases were settled with guilty pleas. And only 8 percent of securities fraud cases have been settled with guilty pleas. Why? You might ask – maybe these corporations weren’t guilty? Not likely, because in almost every one of these cases – no matter the type of soft settlement – deferred prosecution, non prosecution, declination – the company admits to illegal wrongdoing.
The companies admit to their criminal wrongdoing in documents that are now publically available on a new web site – the Corporate Prosecution Registry – created by University of Virginia Law School Professor Brandon Garrett. And what do we learn from this comprehensive corporate crime database? That there is a two tier system of corporate criminal justice – one for the smaller, politically less well connected companies – which generally are forced to plead guilty to their crimes – and one for large, politically well connected public companies – which generally enter into softer alternative resolutions – declinations, non prosecution agreements and deferred prosecution agreements.
Or if they are forced to plead guilty, it’s not the parent forced to plead guilty but some unit that won’t be adversely affected by any debarment or other collateral sanction that might follow. The dominant corporate narrative – driven by the corporate crime defense law firms – is that big public companies – especially banks and financial institutions – even if they commit the crimes, can’t withstand the brunt force trauma of a guilty plea. They say – the company will be driven out of business. Innocent shareholders will lose money and innocent workers lose their jobs. A corporate guilty plea is the equivalent of the corporate death penalty. Not true.
Top corporate crime prosecutors and defense attorneys – they’re interchangeable and regularly swap places via the revolving door – are expert at crafting guilty pleas that avoid these consequences. That’s why when prosecutors want to, they can get guilty pleas – even for big banks – who for years dodged any personal or corporate criminal liability for causing the 2008 financial collapse. Burned by that public criticism, the Obama Justice Department in May 2015, thought it was necessary to throw the public a bone.
And they did just that by forcing Citigroup, JP Morgan Chase, The Royal Bank of Scotland, UBS and Barclays to plead guilty to felonies in connection with a conspiracy to fix foreign exchange markets. Why doesn’t the Justice Department demand felony guilty pleas from parents in more big corporate crime cases? Power and money. The big companies don’t want to plead guilty even when they are guilty. They have corporate reputations to protect. And they have the power and money to hire the best corporate criminal defense law firms to get the job done. The lawyers’ marching orders?
For the corporate parent, anything but a guilty plea. Move down the corporate crime ladder from guilty plea to deferred prosecution to non prosecution to declination. In the parallel Securities and Exchange Commission (SEC) case, move down the ladder from admission to no admission with a neither admit nor deny consent decree. In a World Bank proceeding, move down the ladder from a debarment to a reprimand or a conditional non-debarment agreement.
Some say that it was Obama’s slippery slide down the corporate crime ladder – he hit bottom with not one executive or bank criminally charged for the 2008 financial meltdown – that fueled the populist revolt that helped Trump take the White House. We don’t want to become Brazil, a country battered by wave after wave of corporate crime and corruption. It’s time to restore a modicum of corporate criminal justice that will deliver tangible deterrence. Let’s start by moving back up the ladder of corporate justice. If a company commits a felony, it should plead guilty to a felony. No more deferrals, non prosecutions and declinations in major corporate crime cases.
Published in Daily Times,August 07th 2017.