VOLUME 47 SPRING 2010 NUMBER 2 · twenty-fifth annual survey of white collar crime editor’s note introductory essay aproposal for a united states department of justice foreign corrupt

TWENTY-FIFTH ANNUAL SURVEY OF WHITE COLLAR CRIMEEDITOR’S NOTE

INTRODUCTORY ESSAYA PROPOSAL FOR A UNITED STATES DEPARTMENT OF JUSTICE FOREIGN CORRUPT

PRACTICES ACT LENIENCY POLICY

POLICY PROPOSALFEDERAL CRIMINAL PROSECUTIONS OF KICKBACK ARRANGEMENTS IN THE HEALTHCARE

SECTOR INVOLVING PRIVATE PAY PATIENTS

ARTICLESANTITRUST VIOLATIONSCOMPUTER CRIMESCORPORATE CRIMINAL LIABILITYELECTION LAW VIOLATIONSEMPLOYMENT-RELATED CRIMESENVIRONMENTAL CRIMESFALSE STATEMENTS AND FALSE CLAIMSFEDERAL CRIMINAL CONSPIRACYFINANCIAL INSTITUTIONS FRAUDFOREIGN CORRUPT PRACTICES ACTHEALTH CARE FRAUDINTELLECTUAL PROPERTY CRIMESMAIL AND WIRE FRAUDMONEY LAUNDERINGOBSTRUCTION OF JUSTICEPERJURYPUBLIC CORRUPTIONRACKETEER INFLUENCED AND CORRUPT ORGANIZATIONSSECURITIES FRAUDTAX VIOLATIONS

VOLUME 47 SPRING 2010 NUMBER 2

Published bythe Georgetown University Law Center

Twenty-Fifth Annual Survey of White Collar CrimeEditor in Chief

KEVIN R. GLANDON

Twenty-Fifth Annual Survey of White Collar CrimeManaging EditorMICHAEL W. HOLT

Senior Annual Survey EditorsROLLO C. BAKER JUSTIN ALEXANDER KASPRISIN JESSICA L. MCCURDY

Annual Survey EditorsLYDIA CHAO

THERESA M. COUGHLIN

JONATHAN B. KRISCH

ALLISON L. FRUMIN

KATHERINE T. KLEINDIENST

RICK KOZELL

ABIGAIL H. LIPMAN

LISA C. PEARLSTEIN

MARK A. PROVOST

CRAIG THEDWALL

Editor in ChiefAIYSHA S. HUSSAIN

Senior Articles EditorBRIAN A. FOX

Managing EditorALLISON C. WHITE

Administrative EditorKATHERINE S. DUMOUCHEL

Executive EditorsTRISTAN S. BREEDLOVE

ERIC D. OLSON

Notes EditorsJOSEPH W. CORMIER

CRAIG FRANCIS DUKIN

Articles EditorsBETH CORRIGAN

COLLEEN B. DIXON

JILL K. PASQUARELLA

HEATHER J. SIGLER

Article Development EditorsBENJAMIN J. WOLINSKY

CRAIG THEDWALL

Article & Note EditorsSTEPHEN M. BLANK

KEVIN M. DAVIS

EMILY S. FULLER

SUNEEL J. NELSON

Note Development EditorsCAROLYN A. DELONE

DAVID E. DWORSKY

SPENCER GWARTNEY

ANDREA C. HALVERSON

MATTHEW R. KING

NATHANIEL D. SHAFER

CHRISTOPHER J. STUART

MEGHAN K. WOODSOME

PUBLISHED BY

The Georgetown University Law Center

VOLUME 47 SPRING 2010 NUMBER 2

AMERICANCRIMINAL

LAW REVIEW

EDITORIAL BOARD

INTRODUCTORY ESSAY

A PROPOSAL FOR A UNITED STATES DEPARTMENT OFJUSTICE FOREIGN CORRUPT PRACTICES ACT

LENIENCY POLICY

Robert W. Tarun & Peter P. Tomczak1

INTRODUCTION

On December 15, 2008, the Fraud Section of the United States Department ofJustice (“DOJ”) and the United States Securities and Exchange Commission(“SEC”) announced that Siemens AG had pleaded guilty to violating the ForeignCorrupt Practices Act (“FCPA”)2 for a far-reaching and long-lasting briberyscheme of international scope, and had agreed, among other things, to payapproximately $1.6 billion in sanctions to United States and German law enforce-ment.3 On February 11, 2009, the DOJ and the SEC reported that Kellogg Brown& Root LLC had pleaded guilty to violating the FCPA in a decade-long briberyscheme, and had agreed with its present and former parent companies, amongother things, to pay $579 million in criminal fines and disgorged profits.4 OnMarch 1, 2010, the DOJ disclosed that BAE Systems plc had pleaded guilty toFCPA-related charges, and had agreed, among other things, to pay fines ofapproximately $400 million and $50 million to law enforcement authorities in the

1. Robert W. Tarun is a Principal, and Peter P. Tomczak is a Partner, in the San Francisco and Chicago offices,respectively, of Baker & McKenzie LLP. Mr. Tarun served as a federal prosecutor in the Northern District ofIllinois from 1976 to 1985, and as the Executive Assistant U.S. Attorney there from 1982 to 1985. The authorswish to thank Jay Martin of Houston, Texas, for his editorial insights, and Eileen T. Flynn, Linda F. Braggs andJames F. Brown of Baker & McKenzie LLP for their assistance in preparing edits to this Article. The views andopinions expressed in and any shortcomings of this Article are solely those of the authors. © 2010, Robert W.Tarun and Peter P. Tomczak.

2. Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat. 1494 (codified as amended at 15 U.S.C.§ 78m, 78dd-1 to 78dd-3, 78ff).

3. See Press Release, DOJ, Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices ActViolations and Agree to Pay $450 Million in Combined Criminal Fines (Dec. 15, 2008) [hereinafter DOJ, SiemensPress Release], available at http://www.justice.gov/opa/pr/2008/December/08-crm-1105.html; Press Release,SEC, SEC Charges Siemens AG for Engaging in Worldwide Bribery (Dec. 15, 2008) [hereinafter SEC, SiemensPress Release], available at http://www.sec.gov/news/press/2008/2008-294.htm.

4. See Press Release, DOJ, Kellogg Brown & Root LLC Pleads Guilty to Foreign Bribery Charges and Agreesto Pay $402 Million Criminal Fine (Feb. 11, 2009) [hereinafter DOJ, Kellogg Brown & Root Press Release],available at http://www.justice.gov/opa/pr/2009/February/09-crm-112.html; Press Release, SEC, SEC ChargesKBR and Halliburton for FCPA Violations (Feb. 11, 2009) [hereinafter SEC, KBR and Halliburton Press Release],available at http://www.sec.gov/news/press/2009/2009-23.htm.

153

United States and the United Kingdom, respectively.5 On April 1, 2010, the DOJannounced that Daimler AG and three of its subsidiaries had resolved FCPAinvestigations, and had agreed to pay the DOJ $93.6 million and the SEC $91.4million.6 Undoubtedly, the immense sanctions imposed on these four companiesconveyed a message: FCPA misconduct will be punished severely.7

Massive penalties like those noted above may deter corporate crimes.8 How-ever, because of how corporations9 respond to criminal sanctions, under somecircumstances, such measures may dissuade corporations from investigatingpurported misconduct and reporting detected crimes. In regards to FCPA viola-tions, corporations that must decide whether to report voluntarily bribery conductconfront considerable uncertainty as to the benefits (in the form of reducedsanctions) of self-reporting and cooperation.10 While self-reporting corrupt pay-ment activities results in indeterminate benefits, it does assure that law enforce-ment will know of the misconduct and, thus, in many instances, some sanction willbe imposed.11

Whether a corporation should undertake a costly internal investigation, self-report its employees or agents’ FCPA bribery conduct and cooperate fully with lawenforcement is a highly contextual decision that is not invariably answered in the

5. See Press Release, DOJ, BAE Systems plc Pleads Guilty and Ordered to Pay $400 Million Criminal Fine(Mar. 1, 2010) [hereinafter DOJ, BAE Press Release], available at www.justice.gov/opa/pr/2010/March/10-crm-209.html.

6. See Press Release, DOJ, Daimler AG and Three Subsidiaries Resolve Foreign Corrupt Practices ActInvestigation and Agree to Pay $93.6 Million in Criminal Penalties (Apr. 1, 2010) [hereinafter DOJ, DaimlerPress Release], available at www.justice.gov/opa/pr/2010/April/10-crm-360.html.

7. See SEC, KBR and Halliburton Press Release, supra note 4 (“‘FCPA violations have been and will continueto be dealt with severely by the SEC and other law enforcement agencies,’ said SEC Chairman Mary L.Schapiro.”); SEC, Siemens Press Release, supra note 3 (“‘The $1.6 billion in combined sanctions that Siemenswill pay in the U.S. and Germany should make clear that these corrupt business practices will be rooted outwherever they take place, and the sanctions for them will be severe.’” quoting Associate Director of the SEC’sDivision of Enforcement Cheryl J. Scarboro)). Interestingly, if the sanctions imposed on Siemens AG and KelloggBrown & Root LLC are removed from the analysis, the total fines imposed against corporations in a given yeardecreased from 2007 to 2009. See Shearman & Sterling LLP, FCPA Digest: Recent Trends & Patterns in FCPAEnforcement (Mar. 2010) [hereinafter 2010 Trends & Patterns], at 7, available at http://www.shearman.com/files/upload/FCPA-Trends-and-Patterns-Spring-2010.pdf.

8. This is a stated goal of the DOJ. See SEC, KBR and Halliburton Press Release, supra note 4 (quoting ActingAssistant Attorney General Rita M. Glavin of the Criminal Division of the DOJ as warning that, “‘[t]he successfulprosecution of KBR, and its agreement to pay a more than $400 million fine, demonstrates that no one is above thelaw, and that the Department is determined to seek penalties that are commensurate with, and will deter, this kindof serious criminal misconduct’”). Scholars have debated whether imposing liability on corporations deterscrime—a debate that is beyond the scope of this Article. See Miriam Hechler Baer, Insuring Corporate Crime, 83IND. L. J. 1035, 1036 n. 2 (2008) (collecting sources).

9. Unless otherwise indicated by the context, we refer throughout this Article to business enterprises,regardless of their form of legal entity, as “corporations”.

10. See infra Part III.C.11. See infra at III.B-C.

154 AMERICAN CRIMINAL LAW REVIEW [Vol. 47:153

affirmative.12 For example, if the underlying FCPA misconduct is egregious,bound to become public (such as through the federal securities laws’ disclosureregime or a whistleblower’s report) and subject to severe sanctions (such asdebarment), then a corporate decision-making body comprised of risk-adverseindividuals is significantly incentivized under the current legal sanction regime,including the Federal Sentencing Guidelines for Organizations (“SentencingGuidelines”),13 to self-report such misconduct and try to seize any possibility of amore lenient sentence. However, if that underlying misconduct is neither systemicnor likely to be independently detected by law enforcement, and the corporationbelieves that it will receive an insubstantial reduction in the sanction for self-reporting or be required to pay other costs in connection with self-reporting (suchas the costs of an internal investigation or those attendant to additional inquiriesfrom law enforcement), then a corporate decision-making body comprised of risk-neutral individuals may decide not to voluntarily report such misconduct. Themore difficult self-reporting decisions involve factual scenarios between these twoextreme ends of the sanctioning spectrum.14

Thus, situations exist in which corporations rationally and responsibly choose toremedy bribery conduct internally and not self-report misconduct. But if corpora-tions fail to report voluntarily the FCPA violations that they detect, then societycannot realize the substantial benefits from corporations self-reporting theiremployees and agents’ wrongdoing.15 Significantly, inducing corporations to bring

12. To be clear, we are not advocating that corporations always decline to report, more so ever undertake activesteps to conceal, wrongdoing by their employees or agents that they discover. Companies must, in allcircumstances, immediately stop any improper conduct and promptly undertake measures to prevent itsrecurrence. See In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959, 971 (Del. Ch. 1996) (“In order to show thatthe Caremark directors breached their duty of care by failing adequately to control Caremark’s employees,plaintiffs would have to show either (1) that the directors knew or (2) should have known that violations of lawwere occurring and, in either event, (3) that the directors took no steps in a good faith effort to prevent or remedythat situation, and (4) that such failure proximately resulted in the losses complained of, although . . . this lastelement may be thought to constitute an affirmative defense.”). Nor do we claim that there is no incentive tovoluntarily report misconduct and, in certain circumstances, existing “carrots” of mitigated sanctions and/oravoidance of indictment are strong motivations to self-report detected malfeasance, particularly in light ofpotential disclosure obligations under the federal securities laws, see infra Part III.C.1.b, and disclosures by thirdparties, such as whistleblowers, see infra id. Nevertheless, these and other factors do not assure that allcorporations will under all circumstances fully investigate and voluntarily report each and every FCPA violationthat they uncover. See infra Part III.C.

13. 18 U.S.C. §§ 3551-3742 (2006); 28 U.S.C. § 991-98 (2006). On April 7, 2010, the Sentencing Guidelineswere amended, effective November 1, 2010. See infra note 62. Under United States v. Booker, the SentencingGuidelines are advisory and not mandatory. 543 U.S. 220, 245 (2005).

14. See infra Part III.D (discussing various factual scenarios and the incentives for a corporation to self-reportFCPA bribery conduct to law enforcement or remedy the misconduct internally).

15. See Louis Kaplow & Steven Shavell, Optimal Law Enforcement with Self-Reporting of Behavior, 102J. POL. ECON. 583, 584-596 (1994) (demonstrating that an optimal legal regime with self reporting is superior toan optimal legal regime without self-reporting for both one act and multiple act models); see also Robert Innes,Self-Reporting in Optimal Law Enforcement when Violators Have Heterogeneous Probabilities of Apprehension,29 J. LEGAL STUD. 287, 287-288, 291-96 (2000) (showing the benefits of self-reporting regimes). Certainly,“bribery of public officials abroad is, for the most part, harmful to the citizens of the particular country. The

2010] PROPOSAL FOR AN FCPA LENIENCY POLICY 155

FCPA bribery conduct to the attention of law enforcement agencies saves onenforcement costs.16 These savings are considerable in regards to FCPA investiga-tions, which “are the most challenging of all corporate investigations because thepotential misconduct is serious, many countries in which most misconduct mayhave occurred are distant and tolerant of corruption, interviewees are frequentlyhostile and indifferent to U.S. laws, and, in limited cases, there is personal risk toinvestigating counsel.”17 This Article therefore proposes a Fraud Section FCPAleniency policy modeled after the Antitrust Division’s well-recognized CorporateLeniency Program.

To date, the Fraud Section has declined to promulgate an FCPA leniency policyon likely three grounds. First, unlike with an Antitrust Division leniency applicant,a corporation that is engaged in improper payment activity usually cannot establisha criminal agreement with another corporate entity and thereby make a criminalcase against that other corporate entity for the Fraud Section.18 Therefore, thebenefit to law enforcement from a corporation’s investigation and cooperation isperceived to be neither as substantial to the Fraud Section nor as great to theAntitrust Division.19 However, corporate self-reporting of bribery conduct may

literature on corruption appears to have defeated the notion that bribery is efficient or desirable, and regimechange in certain corrupt countries has helped debunk that myth as well.” Philip Segal, Coming Clean on DirtyDealing: Time for a Fact-Based Evaluation of the Foreign Corrupt Practices Act, 18 FLA. J. INT’L L. 169, 172 &nn. 10-11 (2006) (collecting authorities and examples).

16. See Kaplow & Shavell, supra note 15, at 584 (explaining that this is “because those who commit harmfulacts are induced to report their behavior, enforcement effort need not be spent identifying them”).

17. ROBERT W. TARUN, THE FOREIGN CORRUPT PRACTICES ACT HANDBOOK: A PRACTICAL GUIDE FOR

MULTINATIONAL GENERAL COUNSEL, TRANSACTIONAL LAWYERS AND WHITE COLLAR CRIMINAL PRACTITIONERS 161(2010); see also Federal Bureal of Investigation, Bribes Beyond the Border: Stemming the Export of Corruption(Feb. 5, 2007) [hereinafter Bribes Beyond the Border], available at http://www.fbi.gov/page2/feb07/fcpa020507.htm (“FCPA cases are often complicated and difficult to prosecute. Overseas bribes are typically wellhidden in complex contracts and other procurement processes. The days of someone ‘accidentally’ leaving abriefcase full of money sitting on the floor after a business meeting to help grease the skids are long gone.”); cf.Brandon L. Garrett, Structural Reform Prosecution, 93 VA. L. REV. 853, 880-81 (2007) (“[O]rganizationalprosecutions require a substantial investment due to their complexity, the organizations’ greater ability to concealinformation, attorney-client privilege issues, access to very highly paid defense counsel, and the factualcomplexity of such cases.”).

18. James R. Doty, a former SEC General Counsel, has asserted that the corrupt practices and paymentsprohibited by the FCPA are similar to insider trading activities. See James R. Doty, Toward a Reg. FCPA: AModest Proposal for Change in Administering the Foreign Corrupt Practices Act, 62 BUS. LAW. 1233, 1240(2007).

19. By providing for leniency to self-reporting wrongdoers, law enforcement attempts to create a prisoner’sdilemma for colluding wrongdoers, thereby “undermining trust [between them] by shaping incentives to play oneparty against the other(s). . . .” Paolo Buccirossi & Giancarlo Spagnolo, Leniency Policies and Illegal Transac-tions, 90 J. PUBLIC ECON. 1281, 1282 (2006). In this manner, the antitrust leniency program deters the formation ofcartels, and speeds the demise of existing cartels. See generally Christopher R. Leslie, Trust, Distrust, andAntitrust, 82 TEX. L. REV. 515 (2004); Bruce H. Kobayashi, Antitrust, Agency and Amnesty: An EconomicAnalysis of the Criminal Enforcement of the Antitrust Laws Against Corporations, 69 GEO. WASH. L. REV. 715,728-31 (2001). The prisoner’s dilemma “has been very influential as a simple illustration of how’s people rationalpursuit of their individual best interests can lead to outcomes that are bad for all of them.” ROGER B. MYERSON,GAME THEORY: ANALYSIS OF CONFLICT 98 (Harvard Univ. Press 2002) (1991). In a single-play prisoner’s


enable the Fraud Section to prosecute individual wrongdoers, including employeesand agents of the confessing corporation, and their co-conspirators.20 Corporateself-reporting may also enable U.S. and foreign law enforcement to prosecutecorrupt foreign government officials.21

Second, the Fraud Section may argue that public companies must already reportimproper payment activity under the federal securities laws and, in particular, theobligations imposed by the Sarbanes-Oxley Act of 2002 (“SOX”).22 However, notall bribery conduct will be required to be disclosed. As important, multinationalcompanies required to report under the federal securities laws may provide inmany instances extraordinary cooperation leading to the exposure of internationalcorruption that, absent corporate investigative efforts, would likely never havecome to the light given the limited resources of law enforcement and internationallegal hurdles. Extraordinary investigation and cooperation by multinational corpo-rations warrant extraordinary credit akin to that offered under the AntitrustDivision’s Corporate Leniency Program.

Third, the Fraud Section may contend that it currently treats cooperatingcompanies with leniency by, for example: limiting the conduct, countries and/ortime frames that cooperating companies need investigate; negotiating what con-duct will be part of the final sentencing-fine calculus; and, in limited instances,offering deferred or non-prosecution agreements.23 Such informal leniency is not

dilemma, the dominating strategy for each of the two prisoner-players is to confess on the other, so that the uniqueNash equilibrium is that of both prisoners confessing on each other. See id. at 97 (discussing R. D. LUCE AND H.RAIFFA, GAMES AND DECISIONS (1957)). However, this results in a greater punishment being imposed on bothprisoner-players than if they had both adopted the strategy of refusing to confess. See id. at 97-98.

20. Indeed, the DOJ has increasingly focused on prosecuting individuals engaged in FCPA misconduct,particularly in light of the perceived substantial deterrent effect of such prosecutions. Mark Mendelsohn, formerDeputy Chief of the DOJ’s Criminal Division, Fraud Section, has stated that “‘[t]o really achieve the kind ofdeterrent effect we’re shooting for, you have to prosecute individuals. . . . If the only sanctions out there aremonetary, penalties against companies could be interpreted as the cost of doing business. . . . But when people’sliberty is at stake, it resonates in new ways.’” Posting of Nathan Koppel, Now It’s Personal: The DOJ TargetsIndividuals in Prosecuting Bribery, WALL ST. J., Oct. 8, 2009, available at http://blogs.wsj.com/law/2009/10/08/now-its-personal-the-doj-targets-individuals-in-prosecuting-bribery/tab/print.

In this regard, though the FCPA context is not readily susceptible to making a case against another corporatedefendant, corporate and individual leniency programs may in some ways create a prisoner’s dilemma betweenthe corporation and certain of its employees and agents, thereby preventing bribery conduct. See generallyChristopher R. Leslie, Cartels, Agency Costs, and Finding Virtue in Faithless Agents, 49 WM. & MARY L. REV.1621 (2008) (focusing on links between cartel participants and their employees, as opposed to the relationshipsbetween corporate cartel participants, towards destabilizing cartels).

21. See 2010 Trends & Patterns, supra note 7, at 10-11 (summarizing two 2009 cases in which the DOJbrought non-FCPA charges against corrupt foreign government officials); Mike Koehler, The Foreign CorruptPractices Act in the Ultimate Year of Its Decade of Resurgence, 43 IND. L. REV. 389, 405-06 (2010) (same).

22. Pub. L. No. 107-204, 116 Stat. 745. Public companies may have reporting obligations in the wake ofantitrust violations, yet this has not deterred the Antitrust Division from expanding its leniency program and,indeed, promoting its criteria and principles to competition authorities around the world.

23. “Settlements without trial are the usual resolution of FCPA investigations and prosecutions.” Rebekah J.Poston et al., FCPA Due Diligence in Acquisitions, 43 REV. SEC. & COMMODITIES REG. 13, 14 (Jan. 20, 2010).Under a deferred prosecution agreement (DPA) and a non-prosecution agreement (NPA), “charges are filed and


transparent or instructive to decision-making bodies of corporations that are tryingto make informed decisions in the best interests of the corporations and theirshareholders about the benefits of fully investigating malfeasance, and voluntarilydisclosing it to and fully cooperating with law enforcement.24

In sum, while the typical inability of a leniency applicant to make a prosecutableFCPA case against another corporate entity, the potential obligation to disclosecertain FCPA violations under the federal securities laws and the current practiceof granting informal leniency may not weigh in favor of giving complete amnestyto a corporation that conducts a thorough, global investigation of potential FCPAmisconduct and discloses misconduct to and fully cooperates with law enforce-ment, it surely does not militate against the establishment of a clear, graduated, writtenleniency program for FCPA violations drawn from the Antitrust Division’s CorporateLeniency Program.25 The proposed FCPA leniency policy will provide much greaterclarity to corporations about the benefits and consequences of fully investigating andself-reporting FCPA violations. Finally, a U.S. anti-corruption leniency policy couldbecome, like it has in the case of theAntitrust Division’s Corporate Leniency Program, amodel for other law enforcement authorities, leading to greater global coordination incombating bribery of public officials.26

Part I of this Article summarizes the FCPA and the sanctions imposed oncorporations that, through their employees and agents, engage in bribery orcorruption in violation of the FCPA.27 Part II of this Article briefly reviews theSherman Act and its sanctions regime that punishes cartel behavior by corpora-

later dismissed (or in the case of an NPA, never filed at all), provided that the company adheres to the agreement’sother terms. With either agreement, no conviction ever occurs—which means that a federal judge never renders asentence, and Chapter 8 is never judicially applied.” Jay G. Martin & Ryan D. McConnell, How RevisedSentencing Guidelines Impact CCOs, COMPLIANCE WEEK (May 4, 2010), available at http://www.complianceweek.com/index.clm?fuseaction�article.viewArticle&articled�590388msg�. “‘The scope of things companies haveto worry about is enlarging all the time as the government asserts violations in circumstances where it’s unclear ifthey would prevail in court,’ says Lucinda Low, who has helped companies deal with the FCPA for years. ‘Youdon’t have the checks and balances you would normally have if you had more litigation.’” Nathan Vardi, TheBribery Racket, FORBES (May 24, 2010), at 74. Such agreements may be especially important to multinationalcorporations facing government debarment or suspension for felony bribery convictions. See infra notes 49 and341-42, and accompanying text, & note 393.

24. See generally F. Joseph Warin & Andrew S. Boutros, Response: Deferred Prosecution Agreements: A Viewfrom the Trenches and a Proposal for Reform, 93 VA. L. REV. IN BRIEF 121 (2007), available at http://virginialawreview.org/inbrief.php?s�2007/06/18/warin.

25. See infra note 135.26. See 2010 Trends & Patterns, supra note 7, at 15 (noting that “the DOJ approach is also reflected in the July

2009 ‘Approach of the Serious Fraud Office to Dealing with Overseas Corruption’ white paper issued by theU.K.’s [Serious Fraud Office]. In that paper, the [Serious Fraud Office] encourages self reporting and providesguidelines for reporting, investigation, and settlement.”); see also Doty, supra note 18, at 1251 n.57 andaccompanying text (noting influence of the FCPA on foreign anti-corruption laws).

27. The FCPA and the Sentencing Guidelines provide for punishment of individuals. In this Article, though, wefocus primarily on the punishment of corporations (“organizations”) and not individuals. For a brief discussion ofissues relating to the punishment of individuals under the FCPA, see Part V.A.1 of the FOREIGN CORRUPT

PRACTICES ACT article in this issue.


tions, focusing upon the Corporate Leniency Program that the Antitrust Divisionhas successfully created and developed. Next, Part III of this Article reviews thearguments and evidence from academics and practitioners on the decision-makingprocess of corporations in regards to whether to self-report bribery conduct of theiremployees and agents. Finally, Part IV of this Article proposes an FCPA leniencypolicy based in substantial part on the Antitrust Division’s successful CorporateLeniency Program and criteria for the DOJ to adopt in rewarding, negotiating andlevying fines and other sanctions against corporate and employee violators of theFCPA anti-bribery laws.

I. A BRIEF OVERVIEW OF THE FCPA AND THE SANCTIONS IMPOSED FOR

VIOLATIONS OF THE FCPA

A. The Foreign Corrupt Practices Act

In 1977, in the wake of its inquiry into bribery of public officials in Japan andelsewhere by U.S. corporations, Congress enacted the FCPA to prohibit andcriminalize foreign bribery.28 The FCPA’s “anti-bribery” provisions expansivelyprohibit U.S. corporations and nationals, among other persons, from paying orgiving, or offering or promising to pay or give, directly or indirectly, money or anyother thing of value to any foreign government official, foreign political party orcandidate for foreign political office for the purpose of obtaining or retainingbusiness or some other unfair advantage.29 Further, the FCPA’s “accounting”provisions require “issuers” (as defined under the Securities Exchange Act of1934, as amended (the “Exchange Act”))30 to satisfy requirements governing thosecorporations’ recordkeeping and internal controls.31

Two law enforcement authorities, the DOJ and the SEC, are charged withenforcing the FCPA.32 The DOJ is solely responsible for the criminal enforcementof that statute.33 Specifically, the Fraud Section of the DOJ’s Criminal Divisioninvestigates and prosecutes bribery of foreign government officials and accounting

28. See Peter W. Schroth, American Law in a Time of Global Interdependence: U.S. National Reports to theXVIth International Congress of Comparative Law: Section V The United States and the International BriberyConventions, 50 AM. J. COMP. L. 593, 593-97 (2002). For a more detailed overview of the FCPA and itsprovisions, see generally TARUN, supra note 17, at 1-40, 207-09, 215-24, from which much of Part I is taken. For asummary of how the FCPA was born, see Judge Stanley Sporkin, Origins of the FCPA, Address at the ABA Nat’lInst. on the Foreign Corrupt Practices Act (Oct. 16, 2006) [hereinafter Judge Sporkin Speech], at 2-4 (on file withthe American Criminal Law Review) (describing FCPA’s origins in a voluntary disclosure program of the SEC).That program’s benefits were summarized in In re Sealed Case, 676 F. 2d 793, 818-19 (D.C. Cir. 1982).

29. See 15 U.S.C. §§ 78dd-1-dd-3 (2006).30. 15 U.S.C. § 78a et seq.; see also David E. Dworsky, Foreign Corrupt Practices Act, 46 AM. CRIM. L. REV.

671, 675-76 (2009) (explaining what corporations qualify as “issuers”).31. See 15 U.S.C. §§ 78m(b)(2)(A)-(B).32. See Dworsky, supra note 30, at 685 (citing, inter alia, S. REP. No. 95-114, at 11-12 (1977)); DOJ, Foreign

Corrupt Practices Act Antibribery Provisions Brochure [hereinafter DOJ Brochure], at 2, available at http://www.justice.gov/criminal/fraud/fcpa/docs/lay-persons-guide.pdf.

33. See DOJ Brochure, supra note 32, at 2.


violations under the books and records and internal controls provisions of theFCPA.34 FCPA bribery allegations are generally investigated by the FederalBureau of Investigation (“FBI”), which is required by internal regulation to bringalleged FCPA violations to the Fraud Section of the Criminal Division of theDOJ.35 No prosecution of an alleged FCPA violation may be brought without theexpress permission of the DOJ Criminal Division in Washington, D.C.36

The SEC is the “primary overseer and regulator of the U.S. securities mar-kets . . . .”37 Allegations of civil violations of the anti-bribery and recordkeepingprovisions are investigated by the SEC’s Division of Enforcement.38 In the case ofpublic companies, the SEC has regularly conducted parallel or joint FCPAinvestigations with the Fraud Section and sought civil penalties39 and, since 2004,disgorgement of profits and prejudgment interest.40 In 2009, the SEC EnforcementDivision announced the creation of an FCPA unit with staff around the countrydedicated to FCPA enforcement.41

The DOJ and SEC may jointly or separately initiate and conduct an FCPAinvestigation.42 They are increasingly conducting joint or parallel civil andcriminal investigations of the same FCPA allegations involving public compa-nies.43 The Fraud Section of the DOJ has FCPA expertise and frequently coordi-nates with the SEC Enforcement Division on FCPA matters, and vice versa.44 It

34. See Christopher A. Wray & Robert K. Hur, Corporate Criminal Prosecution in a Post-Enron World: TheThompson Memo in Theory and Practice, 43 AM. CRIM. L. REV. 1095, 1161 n.315 (2006) (citing U.S. DEP’T OF

JUSTICE, U.S. ATTORNEYS’ MANUAL, CRIMINAL RESOURCE MANUAL § 1018) (1997)). The Fraud Section isexpected to increase in size by as much as 50% in the near future. See David Hechler, DOJ Unit that ProsecutesFCPA to Bulk Up ‘Substantially,’ CORPORATE COUNSEL (Feb. 26, 2010), available at http://www.law.com/jsp/articlejsp?id�12024446/2530.

35. U.S. DEP’T OF JUSTICE, U.S. ATTORNEYS’ MANUAL, CRIMINAL RESOURCE MANUAL § 1015 (1997).[hereinafter U.S. ATTORNEYS’ MANUAL]. The FBI has established a team of special agents that focuses oninvestigating FCPA violations. See Bribes Beyond the Border, supra note 17. This dedicated team of agents hasinvestigated several, recent high-public FCPA cases. See, e.g., DOJ, BAE Press Release, supra note 5.

36. U.S. ATTORNEYS’ MANUAL § 9-47.110 (1997).37. See SEC, The Investor’s Advocate: How the SEC Protects Investors, Maintains Market Integrity, and

Facilitates Capital Formation, available at http://www.sec.gov/about/whatwedo.shtml (last visited Mar. 9, 2010).38. See Dworsky, supra note 30, at 685; David C. Weiss, Note, The Foreign Corrupt Practices Act, SEC

Disgorgement of Profits, and the Evolving International Bribery Regime: Weighing Proportionality, Retribution,and Deterrence, 30 MICH. J. INT’L L. 471, 478 (2009).

39. See Dworsky, supra note 30, at 685-86; Weiss, supra note 38, at 478.40. See Weiss, supra note 38 at 484. For examples of parallel proceedings resulting in the imposition of

criminal fines by the DOJ as well as civil disgorgement by the SEC, see Doty, supra note 18, at 1237 n.11.41. Robert Khuzami, Dir., SEC Div. of Enforcement, Remarks Before the New York City Bar: My First 100

Days as Director of Enforcement (Aug. 5, 2009), available at http://www.sec.gov/news/speech/2009/spch080509rk.htm (announcing formation of specialized Foreign Corrupt Practices Act Unit of the SEC).

42. See SEC v. Dresser Indus., Inc., 628 F.2d 1368, 1379 (D.C. Cir. 1980); Weiss, supra note 38, at 478.43. See, e.g., SECURITIES INVESTIGATIONS, ch. 5, Cooperation in SEC and DOJ Cases (Richard J. Morvillo ed.

2009).44. See SEC, KBR and Halliburton Press Release, supra note 4 (Director of SEC’s Division of Enforcement

Linda Chatman Thomsen stating: “‘This case demonstrates the close and cooperative working relationships thathave developed in FCPA investigations among the SEC, the U.S. Department of Justice, and foreign law


has become common for the DOJ and SEC to announce settlements of FCPAinvestigations simultaneously.45

In 1994, the then largest DOJ corporate fine in an FCPA prosecution was the$24.8 million penalty imposed on Lockheed.46 In December 2008, the FraudSection, in conjunction with German authorities and the SEC, obtained recordanti-corruption penalties totaling approximately $1.6 billion from Siemens AG andthree of its foreign subsidiaries.47 Seven months later, the World Bank sanctionedSiemens AG and obtained an additional $100 million fine, resulting in a total fineof $1.7 billion.48

B. FCPA Violations: Criminal Penalties and the Sentencing Guidelines

The FCPA establishes maximum fines that may be imposed against corporationsthat violate its anti-bribery and accounting provisions. The statutory maximumcriminal penalties49 for corporations are: (i) $2,000,000 for each violation of theFCPA’s anti-bribery provisions;50 and (ii) $25,000,000 for each violation of theFCPA’s accounting provisions.51 Moreover, under the Alternative Fines Act, a fineequal to twice the gross gain or gross loss resulting from the offense, whichever isgreatest, may be imposed.52 In numerous cases, U.S. law enforcement agencieshave successfully imposed penalties and sanctions that, in aggregate, exceed thestatutory maximums.53 The criminal provisions of the FCPA have always providedfor felony conviction.

1. The Corporate Sentencing Calculus

For the DOJ as well as defendant corporations, the potential corporate finestarting point in corporate prosecutions is the Sentencing Guidelines and, in

enforcement agencies and securities regulators.’”). These investigations may entail working in conjunction withother agencies, such as the Internal Revenue Service and U.S. Immigration and Customs Enforcement. SeeMarsha Z. Gerber et al., Voluntary Disclosure of FCPA Violations, 43 REV. SEC. & COMMODITIES REG. 55, 59(2010) (describing the investigations of Gerald and Patricia Green, and Shu Quan-Sheng).

45. See, e.g., supra notes 3-4.46. See United States v. Lockheed Corp., No. CR.A. 194CR226MHS, 1995 WL 17064259 (N.D. Ga. Jan. 9,

1995) (discussing indictment against Lockheed Corporation, Allen R. Love, and Suleiman A. Nassar).47. See supra note 3 and accompanying text.48. See Vanessa Fuhrmans, Siemens Settles with World Bank on Bribes, WALL ST. J., July 3, 2009, at B1.49. The FCPA also provides for civil penalties. See Dworsky, supra note 30, at 689-90. In addition,

corporations that violate the FCPA may be debarred from doing business with the U.S. government, or have theirexport licenses revoked. See id. at 690; see also id. at 687 (citing, inter alia, U.S. DEP’T OF STATE, FIGHTING

GLOBAL CORRUPTION: BUS. RISK MGMT. (2001), at 28, available at http://www.ogc.doc.gov/pdfs/Fighting_Global_Corruption.pdf (“The President has directed that no executive agency shall allow any party to participate in anyprocurement or nonprocurement activity if any agency has debarred, suspended, or otherwise excluded that partyfrom participation in a procurement or nonprocurement activity.”)).

50. 15 U.S.C. § 78dd-2(g) (2006).51. 15 U.S.C. § 78ff(a) (2006).52. 15 U.S.C. § 78dd-2(g); 18 U.S.C. § 3571(a) (2006).53. See Dworsky, supra note 30, at 689 (collecting examples).


particular, Chapter 8, which governs the sentencing of “organizations.”54 Ingeneral, the fine range is a product of the seriousness of the offense and theculpability of the corporation. A corporate fine is based on a five-step process.55

“First, the seriousness of the offense . . . is computed and reflected in a numbercalled the ‘Base Fine.’”56 This equals “the greatest of: (1) the amount from a tablecorresponding to a calculation under the individual Guidelines; (2) the pecuniarygain to the [corporation] from the offense; or (3) the pecuniary loss from theoffense caused by the [corporation], to the extent” caused intentionally, knowinglyor recklessly.57

“Second, the culpability of the [corporation] is assessed by adding up the[corporation’s] ‘Culpability Score.’ One begins the computation with a score offive.”58 Points may be added depending upon: the size of the corporation; the leveland degree of discretionary authority of individuals who participated in ortolerated the criminal activity; whether the corporation had a fairly recent historyof similar misconduct; whether the offense violated a judicial order, injunction, orcondition of probation; or whether the corporation willfully obstructed or at-tempted to obstruct justice during the investigation, prosecution or sentencing ofthe offense.59 Points may be subtracted if: (1) the offense occurred even though thecorporation had in place a compliance and ethics program; or (2) the corporationself-reports, cooperates, and accepts responsibility.60

As noted, a corporation may receive a lesser sanction with a three-pointdeduction from its culpability score if its employees or agents violated the FCPA“even though the organization had in place at the time of the offense an effectivecompliance and ethics program. . . .”61 The Sentencing Guidelines set forth the

54. See Martin & McConnell, supra note 23 (“Despite Booker and the rise of DPAs/NPAs, Chapter 8 remains acritical consideration for corporate compliance programs because every corporate criminal prosecution (regard-less of any conviction) begins with a charging decision and a fine calculation under the guidelines.”).

55. See JULIE O’SULLIVAN, FEDERAL WHITE COLLAR CRIME (3d ed. 2007) at 209-216 (describing in greaterdetail the five-step process summarized in this Article).

56. Id. at 209.57. Id. (citing U.S. SENTENCING GUIDELINES MANUAL § 8C2.4 (2009) [hereinafter U.S.S.G. MANUAL]). In

many FCPA cases, the pecuniary gain to the corporation will be the greatest amount.58. Id. at 210.59. See id., § 8C2.5(b-e).60. See id., § 8C2.5(f-g).61. Id. § 8C2.5(f)(1). Commentators contend that the Sentencing Guidelines helped create a self-serving

compliance industry. See, e.g., Miriam Hechler Baer, Governing Corporate Compliance, 50 B.C.L. REV. 949,993-99 (2009); Frank O. Bowman, III, Drifting Down the Dnieper With Prince Potemkin: Some SkepticalReflections About the Place of Compliance Programs in Federal Criminal Sentencing, 39 WAKE FOREST L. REV.671, 679-90 (2004). Others have posited that compliance programs, if merely cosmetic, may lead to inefficientcorporate monitoring structures. See generally Kimberly D. Krawiec, Cosmetic Compliance and the Failure ofNegotiated Governance, 81 WASH. U.L.Q. 487 (2003). The BAE enforcement action, however, demonstrates thatcorporations who misrepresent the efficiency of their internal controls and compliance programs do so at theirperil. See DOJ, BAE Press Release, supra note 5 (“Despite BAES’s representations to the U.S. government to thecontrary, BAES knowingly and willfully failed to create sufficient compliance mechanisms to prevent and detectviolations of the anti-bribery provisions of the FCPA.”).


criteria for an effective compliance and ethics program for purposes of theculpability score, and currently requires, among other things, that:

(1) The organization shall establish standards and procedures to prevent anddetect criminal conduct.(2) (A) The organization’s governing authority shall be knowledgeable aboutthe content and operation of the compliance and ethics program and shallexercise reasonable oversight with respect to the implementation and effective-ness of the compliance and ethics program.

(B) High-level personnel of the organization shall ensure that the organiza-tion has an effective compliance and ethics program, as described in thisguideline. . . .(3) The organization shall use reasonable efforts not to include within thesubstantial authority personnel of the organization any individual whom theorganization knew, or should have known through the exercise of due dili-gence, has engaged in illegal activities or other conduct inconsistent with aneffective compliance and ethics program.(4) (A) The organization shall take reasonable steps to communicate periodi-cally and in a practical manner its standards and procedures, and other aspectsof the compliance and ethics program, [throughout the organization and asappropriate, the organization’s agents] by conducting effective training pro-grams and otherwise disseminating information appropriate to such individu-als’ respective roles and responsiblities. . . .(5) The organization shall take reasonable steps—(A) to ensure that theorganization’s compliance and ethics program is followed, including monitor-ing and auditing to detect criminal conduct; (B) to evaluate periodically theeffectiveness of the organization’s compliance and ethics program; and (C) tohave and publicize a system, which may include mechanisms that allow foranonymity or confidentiality, whereby the organization’s employees and agentsmay report or seek guidance regarding potential or actual criminal conductwithout fear of retaliation.(6) The organization’s compliance and ethics program shall be promoted andenforced consistently throughout the organization through (A) appropriateincentives to perform in accordance with the compliance and ethics program;and (B) appropriate disciplinary measures for engaging in criminal conductand for failing to take reasonable steps to prevent or detect criminal conduct.(7) After criminal conduct has been detected, the organization shall takereasonable steps to respond appropriately to the criminal conduct and toprevent further similar criminal conduct, including making any necessarymodifications to the organization’s compliance and ethics program.62

62. U.S.S.G. MANUAL § 8B2.1(b)(1-7). These requirements have been in place, with minor modifications,since 2004. On April 7, 2010, the U.S. Sentencing Commission approved changes to the Sentencing Guidelines,effective November 1, 2010, that amend the definition of what constitutes an effective compliance program. SeeU.S. Sentencing Commission, Amendments to the Sentencing Guidelines [hereinafter 2010 Amendments to theSentencing Guidelines], available at http://www.ussc.gov/2010guid/finalamend10.pdf. Among other things, the


This downward departure is not available, however, “if, after becoming aware ofan offense, the [corporation] unreasonably delayed reporting the offense toappropriate governmental authorities.”63 The downward departure for effectivecompliance and ethics programs also is not, or a rebuttable presumption exists thatit is not, available if certain high-level officials “participated in, condoned, or[were] willfully ignorant of the offense.”64

Downward departures of one, two or five points off of a corporation’s culpabil-ity score are also available for varying degrees of self-reporting, cooperation, andacceptance of responsibility by the corporation.65 The report “must be made underthe direction of the” corporation.66 A cooperating corporation must be “both timelyand thorough” and “disclose all pertinent information known by the” corporationto receive a downward departure under the Sentencing Guidelines.67

Third, after the culpability score is calculated, it is assigned a minimummultiplier and a maximum multiplier.68 The two multipliers “are then applied tothe Base Fine amount, and the result is a fine range.”69

Fourth, a sentencing court should consider in determining the amount of the finewithin the applicable range such factors as the corporation’s “role in the offense,any nonpecuniary loss caused or threatened by the offense, prior [corporate]misconduct . . . not previously counted, and any prior criminal record of high-levelpersonnel in the” corporation and whether it failed to have, at the time of theoffense, an effective compliance and ethics program.70

Fifth, a sentencing court may consider other factors in granting an upward ordownward departure, including “substantial assistance to the authorities in theinvestigation or prosecution ‘of another organization that has committed anoffense, or in the investigation and prosecution of an individual not directly

2010 Amendments to the Sentencing Guidelines clarified what is a reasonable corporate response to criminalactivity. See id. at 17 (adding new Application Note 6 to Section 8B2.1 of the Sentencing Guidelines). For adiscussion of the impact of these amendments, see generally Martin & McConnell, supra note 23.

63. U.S.S.G. MANUAL § 8C2.5(f)(2).64. Id., § 8C2.5(f)(3). The 2010 Amendments to the Sentencing Guidelines relax this condition, and provide

that a corporation’s compliance program may be deemed as “effective,” despite the involvement of high levelcorporate employees in the wrongdoing, if, inter alia, the compliance program meets certain criteria. See Martin& McConnell, supra note 23.

65. See id., § 8C2.5(g).66. Id., § 8C2.5 cmt.11.67. Id., § 8C2.5 cmt.12.68. See O’SULLIVAN, supra note 55, at 213 (citing U.S.S.G. MANUAL § 8C2.6).69. Id. (citing U.S.S.G. MANUAL § 8C2.7).70. See id. at 214 (citing U.S.S.G. MANUAL § 8C2.8) (“Determining the Fine within the Range (Policy

Statement)”). A court must add to this calculated fine “any gain to the [corporation] from the offense that has notand will not be paid as restitution or by way of other remedial measures.” Id., § 8C2.9. This guideline usuallyapplies to offenses that lack identifiable victims. See id., § 8C2.9 cmt. 1. Notwithstanding its availability, theAntitrust Division regularly has not sought restitution orders in corporate plea agreements. See, e.g., PleaAgreement, United States v. Epson Imaging Devices Corp., No. 3:09-cr-00854-SI, ¶ 12 (N.D. Cal. Oct. 23, 2009);Plea Agreement, United States v. LG Display Co., No. CR 08-0803-SI, ¶ 12 (N.D. Cal. Dec. 8, 2008).


affiliated with the defendant who has committed an offense,’”71 “threats tonational security”72 or “to a market flowing from the offense,”73 and “remedialcosts that greatly exceed the gain from the offense.”74 In practice, these fourth andfifth steps are rarely applicable to either Antitrust Division or Fraud Sectioncorporate pleas, as those final fines are usually numbers negotiated between theUnited States and the corporate defendants, e.g., the aggravating or mitigatingfactors in steps 4 and 5.

Further, under the Alternative Fines Act, a fine may be imposed equal to twicethe gross gain or twice the gross loss resulting from the offense, whichever is thegreater.75 (Of course, the Antitrust Division follows its Corporate LeniencyProgram in negotiating and reaching an agreed fine figure.) While the DOJ and acorporate target may negotiate over various sentencing enhancements, the primarydriver in a serious bribery case remains either the amount of the bribes or, morecommonly, the pecuniary gain to the corporation. Pecuniary gain to the corpora-tion is defined in the Commentary to the Sentencing Guidelines as “the additional,before-tax profit to the defendant resulting from the relevant conduct of theoffense.”76

The Sentencing Guidelines thus offer mitigated sanctions to corporations thatundertake certain measures in order to induce their adoption by corporations.77 Incontrast to the Antitrust Division,78 the Fraud Section has not promulgated anyleniency guidelines, leaving companies and their counsel to review DOJ and SECFCPA resolutions and often speculate about the ultimate monetary benefits ofvoluntary disclosure and corporate cooperation with the Fraud Section and SECFCPA unit.79

2. SEC Settlements

Settlements reached in many FCPA cases involve payments to not only theDOJ, but the SEC,80 though limitations on the SEC’s authority generally causethe SEC to seek penalties and disgorgement against parent company, publicissuers.81 These SEC penalties typically include: (i) a civil penalty; and (ii)disgorgement of ill-gotten gains (e.g., profits derived or losses avoided by the

71. See O’SULLIVAN, supra note 55, at 215 (quoting U.S.S.G. MANUAL § 8C4.1).72. Id. (quoting U.S.S.G. MANUAL § 8C4.3).73. Id. (quoting U.S.S.G. MANUAL § 8C4.5).74. Id. (quoting U.S.S.G. MANUAL § 8C4.9).75. 18 U.S.C. § 3571(d) (2006).76. U.S.S.G. MANUAL § 8A1.2 cmt. 3(h).77. See John S. Baker, Jr., Reforming Corporations Through Threats of Federal Prosecution, 89 CORNELL L.

REV. 310, 317 (2004).78. See infra Part II.B.79. See infra Part III.C.80. See Doty, supra note 18, at 1237.81. See id. at 1236 n.9.


misconduct), together with prejudgment interest. Signally, SEC disgorgementand civil fine settlements may approach the DOJ settlement criminal finefigure.82

Disgorgement to the SEC is a relatively new phenomenon in FCPA enforce-ment,83 the SEC having first insisted upon this remedy in a 2004 FCPAresolution.84 The amount of disgorged profits secured by the SEC, neverthe-less, has been significant.85 The legality of disgorgement of profits in the FCPAcontext has yet to be resolved in a published court decision.86 However, thestatutory authorization for obtaining disgorgement of profits in the FCPAcontext, even if based on SOX in addition to the FCPA itself, may bequestioned.87 The complexities in calculating the profits that are directlyattributable to bribery conduct caution against using disgorgement as a majorenforcement tool under the FCPA.88

C. Current DOJ and SEC General Charging Criteria

1. United States Attorneys’ Manual

The decision of federal prosecutors to charge an individual or a corporation isguided by the United States Attorneys’ Manual.89 Beginning in 1980, the DOJpublished Principles of Federal Prosecution to guide federal prosecutors incharging individuals.90 These principles, which are incorporated into the UnitedStates Attorneys’ Manual, list seven factors for determining whether a substantialfederal interest would be served by prosecution.91 Those factors have remainedthe general criteria for criminally charging individuals in federal court for thirtyyears.

In regards to the factors guiding the decision to charge corporations, in 1999,then Deputy Attorney General Eric H. Holder, Jr., issued a memorandum entitled

82. See, e.g., DOJ, Daimler Press Release, supra note 6; SEC v. UTStarcom, Inc., SEC Litigation Release No.21357 (2009); see also infra note 336.

83. See Weiss, supra note 38, at 486.84. See SEC v. ABB Ltd., No. 1:04-CV-01141 (D.D.C. 2004).85. See Weiss, supra note 38, at 486; see also infra note 336 (describing amounts disgorged by Titan Corp.,

Baker Hughes, Inc., Siemens AG, and Halliburton Co).86. See Doty, supra note 18, at 1237 n.13 (defining the issue as “[w]hether Congress intended the equitable

disgorgement remedy to subsume the FCPA’s express fining provisions”).87. See Weiss, supra note 38, at 496-499 (though not arguing that the disgorgement remedy is statutorily

inpermissible or undesirable per se).88. See id., at 509-511. This general uncertainty may be exacerbated by the rule that the SEC, in general, need

only show a reasonable approximation of the amount of profits to be disgorged. See id. at 510.89. See U.S. ATTORNEYS’ MANUAL § 9-27.120.90. DEP’T OF JUSTICE, PRINCIPLES OF FEDERAL PROSECUTION (1980).91. U.S. ATTORNEYS’ MANUAL § 9-27.230.


“Federal Prosecution of Corporations.”92 After several iterations,93 in 2008, thecorporate charging policy became part of the United States Attorneys’ Manual.94

The nine general criteria that today guide all federal prosecutors in decidingwhether to charge corporations are:

1. the nature and seriousness of the offense, including the risk of harm to thepublic, and applicable policies and priorities, if any, governing the prosecutionof corporations for particular categories of crime;2. the pervasiveness of wrongdoing within the corporation, including thecomplicity in, or the condoning of, the wrongdoing by corporate management;3. the corporation’s history of similar misconduct, including prior criminal,civil, and regulatory enforcement actions against it;4. the corporation’s timely and voluntary disclosure of wrongdoing and itswillingness to cooperate in the investigation of its agents;5. the existence and effectiveness of the corporation’s pre-existing complianceprogram;6. the corporation’s remedial actions, including any efforts to implement aneffective corporate compliance program or to improve an existing one, toreplace responsible management, to discipline or terminate wrongdoers, to payrestitution, and to cooperate with the relevant government agencies;7. collateral consequences, including whether there is disproportionate harmto shareholders, pension holders, employees, and others not proven personallyculpable, as well as impact on the public arising from the prosecution;8. the adequacy of the prosecution of individuals responsible for the corpora-tion’s malfeasance; and9. the adequacy of remedies such as civil or regulatory enforcement actions.95

Because of the profound and harsh consequences arising from indictment, corpora-tions often seek to reach a resolution with the DOJ before charges are filed.96

2. SEC Enforcement Criteria

In 2001, the SEC issued a Section 21(a) report, commonly referred to as the

92. Memorandum from U.S. Deputy Attorney General Eric H. Holder, Jr., Federal Prosecution of Corpora-tions (June 16, 1999), available at http://www.justice.gov/criminal/fraud/documents/reports/1999/charging-corps.pdf.

93. See, e.g., Memorandum from U.S. Deputy Attorney General Larry D. Thompson, Principles of FederalProsecutionofBusinessOrganizations(Jan.20,2003),availableathttp://www.justice.gov/dag/cftf/corporate_guidelines.htm); Memorandum from U.S. Deputy Attorney General Paul J. McNulty, Principles of Federal Prosecution ofBusiness Organizations (Dec. 12, 2006) [hereinafter McNulty Memorandum], available at http://www.justice.gov/dag/speeches/2006/mcnulty_memo.pdf.

94. Memorandum from U.S. Deputy Attorney General Mark R. Filip, Principles of Federal Prosecution ofBusiness Organizations (Aug. 28, 2008), available at http://www.justice.gov/opa/documents/corp-charging-guidelines.pdf.

95. U.S. ATTORNEYS’ MANUAL § 9-28.300.96. See Baer, supra note 8, at 1062-63. This regime has been criticized as not being transparent or predictable.

See infra notes 379-80.


Seaboard Report, that outlined thirteen non-exhaustive criteria the SEC considersin deciding whether to bring an enforcement action against a corporation.97 Thosefactors are:

1. What is the nature of the misconduct involved? Did it result from inadvert-ence, honest mistake, simple negligence, reckless or deliberate indifference toindicia of wrongful conduct, willful misconduct or unadorned venality? Werethe company’s auditors misled?2. How did the misconduct arise? Is it the result of pressure placed onemployees to achieve specific results, or a tone of lawlessness set by those incontrol of the company? What compliance procedures were in place to preventthe misconduct now uncovered? Why did those procedures fail to stop orinhibit the wrongful conduct?3. Where in the organization did the misconduct occur? How high up in thechain of command was knowledge of, or participation in, the misconduct? Didsenior personnel participate in, or turn a blind eye toward, obvious indicia ofmisconduct? How systemic was the behavior? Is it symptomatic of the way theentity does business, or was it isolated?4. How long did the misconduct last? Was it a one-quarter, or one-time, event,or did it last several years? In the case of a public company, did the misconductoccur before the company went public? Did it facilitate the company’s abilityto go public?5. How much harm has the misconduct inflicted upon investors and othercorporate constituencies? Did the share price of the company’s stock dropsignificantly upon its discovery and disclosure?6. How was the misconduct detected and who uncovered it?7. How long after discovery of the misconduct did it take to implement aneffective response?8. What steps did the company take upon learning of the misconduct? Did thecompany immediately stop the misconduct? Are persons responsible for anymisconduct still with the company? If so, are they still in the same positions?Did the company promptly, completely and effectively disclose the existenceof the misconduct to the public, to regulators and to self-regulators? Did thecompany cooperate completely with appropriate regulatory and law enforce-ment bodies? Did the company identify what additional related misconduct islikely to have occurred? Did the company take steps to identify the extent ofdamage to investors and other corporate constituencies? Did the companyappropriately recompense those adversely affected by the conduct?9. What processes did the company follow to resolve many of these issues andferret out necessary information? Were the Audit Committee and the Board ofDirectors fully informed? If so, when?

97. See Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934, as amended,and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions, Exchange ActRelease No. 44,969, Accounting and Auditing Enforcement Release No. 1,470 (Oct. 23, 2001), available athttp://www.sec.gov/litigation/investreport/34-44969.htm.


10. Did the company commit to learn the truth, fully and expeditiously? Did itdo a thorough review of the nature, extent, origins and consequences of theconduct and related behavior? Did management, the Board or committeesconsisting solely of outside directors oversee the review? Did companyemployees or outside persons perform the review? If outside persons, had theydone other work for the company? Where the review was conducted by outsidecounsel, had management previously engaged such counsel? Were scopelimitations placed on the review? If so, what were they?11. Did the company promptly make available to our staff the results of itsreview and provide sufficient documentation reflecting its response to thesituation? Did the company identify possible violative conduct and evidencewith sufficient precision to facilitate prompt enforcement actions against thosewho violated the law? Did the company produce a thorough and probingwritten report detailing the findings of its review? Did the company voluntarilydisclose information our staff did not directly request and otherwise might nothave uncovered? Did the company ask its employees to cooperate with ourstaff and make all reasonable efforts to secure such cooperation?12. What assurances are there that the conduct is unlikely to recur? Did thecompany adopt and ensure enforcement of new and more effective internalcontrols and procedures designed to prevent a recurrence of the misconduct?Did the company provide our staff with sufficient information for it to evaluatethe company’s measures to correct the situation and ensure that the conductdoes not recur?13. Is the company the same company in which the misconduct occurred, orhas it changed through a merger or bankruptcy reorganization?98

These thirteen non-exhaustive criteria offer guidance on whether the SEC shouldbring an enforcement action, but do not provide specifics about what credit acharged corporation will receive for its investigation, disclosure, cooperation andremedial efforts. For this and other reasons, much uncertainty existed under theSeaboard factors as to the benefits arising from cooperating with the SEC.99

The SEC recently announced a series of measures aimed at increasing coopera-tion of corporations and individuals in SEC investigations and enforcementactions.100 Notably, to incentivize corporations and individuals to report violationsof the federal securities laws, the SEC’s Division of Enforcement is now empow-ered to use cooperation agreements, deferred prosecution agreements and non-

98. See id. (footnote omitted).99. See Ropes & Gray LLP, The New Era in SEC Enforcement: Fostering Cooperation (Feb. 12, 2010), at 2,

available at http://www.ropesgray.com/secenforcementfosteringcooperation (follow hyperlink at top of page forpdf version). (“Most important, it was unclear what credit the SEC actually gave for cooperation under theSeaboard factors. The Seaboard factors were barely mentioned in the Enforcement Manual in existence prior toJanuary 2010, and many practitioners doubted the SEC gave any real credit for cooperation.”).

100. See Press Release, SEC, SEC Announces Initiative to Encourage Individuals and Companies toCooperate and Assist in Investigations (Jan. 13, 2010), available at http://www.sec.gov/news/press/2010/2010-6.htm.


prosecution agreements that, previously, were not formally available in SECenforcement matters.101 The cooperation initiative also establishes a regime forindividuals similar to that provided for in the Seaboard Report in regard tocorporations.102 In addition, the 2010 SEC Enforcement Manual, though notsupplanting the Seaboard Report, highlighted four of its factors: (i) self-policingprior to the discovery of the misconduct; (ii) self-reporting of misconduct when itis discovered; (iii) remediation; and (iv) cooperation with law enforcement.103

Therefore, although it may be too soon to predict with certainty how thesedevelopments will play out in practice, corporations and their legal counsel will,without specific clarification, continue to be uncertain as to the benefits ofcooperating with the SEC in FCPA cases.

D. Prior FCPA Reform Proposals

In light of these uncertainties and shortcomings, this Article proposes a leniencypolicy for FCPA violations, specifically, those that involve bribery conduct.Promulgation of such a leniency policy by the Fraud Section would be a timelydevelopment: recently, a respected financial publication remarked critically that“[s]till, nobody in Washington is rethinking enhanced FCPA enforcement. There isno movement for different approaches, such as a corporate amnesty program orless severe punishment.”104

This Article’s proposed FCPA policy also shares the goals of, though differs inseveral material respects from, three additional, noteworthy, reform proposalsoffered by preeminent lawyers. First, James R. Doty, former General Counsel ofthe SEC, has advocated “for a new approach to administration of the FCPA, onethat would provide a measure of regulatory certainty to public companies regard-ing the elements of good faith compliance” in the form of a proposed “Reg.FCPA.”105 Modeled after precedent SEC regulation such as Regulation D andRules 144 and 144A, Reg. FCPA would establish a permissive filing regime,created through SEC rule-making, under which participating corporations wouldestablish, implement and attest to the reasonable discharge of obligations providedunder an FCPA Compliance Program drawn from, inter alia, the criteria for aneffective compliance and ethics program set forth in the Sentencing Guidelines.106

Participating corporations would make a public portion of a filing (“Part I”) thatdiscloses, inter alia, the corporation’s code of conduct, the implementation and

101. See id.102. See id.103. See SEC ENFORCEMENT MANUAL § 6.1.2, at 127 (2010) [hereinafter SEC ENFORCEMENT MANUAL],

available at http://www.sec.gov/divisions/enforce/enforcementmanual.pdf. Indeed, the 2010 SEC EnforcementManual refers SEC staff to the Seaboard Report “[f]or greater detail regarding the analytical framework used bythe Commission to evaluate cooperation by companies . . . .” See id., § 6.1.2, at 128.

104. Vardi, supra note 23, at 77.105. Doty, supra note 18, at 1233.106. See id. at 1244.


communication of an FCPA Compliance Program, and related internal controlsand procedures for testing and monitoring that program’s effectiveness.107 Corpo-rations could also seek confidential treatment of a non-public portion of the filing(“Part II”), which would contain certain proprietary and confidential informationof the corporation.108 “[B]y making the filing, a registrant would benefit from aregulatory presumption of compliance.”109 Specifically, Reg. FCPA would alsoidentify the components of an FCPA Compliance Program that permit a corpora-tion to avail itself of a safe harbor.110 If a corporation met its burden to demonstratethat the safe-harbor requirements had been satisfied, then it “would be presumednot to have violated the statute”—a presumption that “could be rebutted by apreponderance of the evidence.”111

Drawing from the successes of the voluntary program that existed for foreignbribery in the 1970s, in a 2006 address, Judge Stanley Sporkin, a former Directorof Enforcement at and General Counsel of the SEC, proposed an “FCPA Immuni-zation-Inoculation Program”—a voluntary disclosure program that would grantlimited amnesty to corporations for FCPA violations.”112 Under that program, aparticipating corporation would “conduct a full and complete review of [its]compliance with the FCPA for the previous 3 years,” such review to be accom-plished by a law firm and a major or specialized forensic accounting firm.113

Moreover, the corporation would agree to conduct a similar review annually for atleast five years.114 It then would report the results of this review by its legalcounsel and accounting firm to its stakeholders, the SEC and the public.115 Thecorporation would remediate any violations and establish controls to prevent therecurrence of any violations discovered in the review; in particular, the corporationwould need to establish the position of “FCPA compliance officer”—an officerwho would focus exclusively on FCPA compliance by the corporation.116 If aparticipating corporation satisfied these conditions, then it would receive from theSEC and DOJ “qualified assurances that no actions would be brought for violationsexposed by the review.”117 This limited amnesty, however, would not be available

107. See id.108. See id. at 1246-47.109. Id. at 1234.110. See id. at 1245.111. Id. Mr. Doty concludes that the benefits of Reg. FCPA include, among other things, guidance to registrants

on the establishment of anti-bribery policies, more generalized adoption of best practices, improved complianceby corporations, and greater transparency. See id. at 1234, 1246, 1248-54.

112. See Judge Sporkin Speech, supra note 28, at 7-8.113. Id. at 7.114. See id. at 8.115. See id. at 7.116. See id. at 7-8.117. Id. at 8.


to and exculpate flagrant or egregious FCPA violations.118

Finally, in a June 2010 speech in Washington, D.C., former Deputy AttorneyGeneral George J. Terwilliger became the third preeminent lawyer to proposesome form of an FCPA leniency policy.119 Noting the uncertain benefits arisingfrom self-reporting of FCPA violations, and the success of the Antitrust Division’sCorporate Leniency Program, Mr. Terwilliger outlined in his prepared remarks anamnesty policy “whereby there would be a presumption against criminal prosecu-tion or disposition for organizations that voluntarily disclose wrongdoing andthereafter cooperate with the government by, for example, providing the results ofan itnernal investigation and/or cooperating with additional government investiga-tion.”120 In addition, Mr. Terwilliger observed that such a policy “would still haveto provide forbearance from some aspects of non-criminal monetary penalties forviolations voluntarily disclosed,” which could be achieved through a complemen-tary “formula to determine the fine or financial punishment, or a range thereof, thatshould be imposed for violations.”121 While his “skeletal outline”122 leniencyprogram did not propose implementing statutory language or specific discounts,123

Mr. Terwilliger captures the sentiment of many corporations and FCPA counselthat “[t]he opportunity to receive ‘meaningful credit’ is too much promise and toolittle policy.”124

II. A BRIEF OVERVIEW OF THE SHERMAN ACT, SANCTIONS IMPOSED FOR

VIOLATIONS OF THE SHERMAN ACT, AND THE ANTITRUST DIVISION’SSUCCESSFUL CORPORATE LENIENCY PROGRAM

A. The Sherman Act: Criminal Penalties

Enacted in 1890, Section 1 of the Sherman Act prohibits certain forms ofanti-competitive behavior, including price fixing, bid rigging and market alloca-

118. See id. Judge Sporkin observes that his “Immunization-Inoculation” regime ultimately would incentivizecorporations to establish and implement rigorous ethical and compliance standards, and decrease the number ofcases for and investigative efforts undertaken by law enforcement. Id.

119. George J. Terwilliger III, Prepared Remarks for the Marcus Evans FCPA & Anti-Corruption ComplianceConference: Proposed Change in DOJ Policy: Presumption of No Criminal Disposition for Voluntary Disclosure(June 23, 2010) (on file with the American Criminal Law Review).

120. Id. at 2.121. Id. at 3.122. Id.123. Previously, Alexandros Zervos proposed for small scale bribery a graduated penalty scheme that would

allow companies to investigate and report such violations under a safe harbor which would shield participatingcorporations from prosecution. See Alexandros Zervos, Amending the Foreign Corrupt Practices Act: Repealingthe Exemption for “Routine Government Action” Payments, 25 PENN ST. INT’L L. REV. 251, 286 (2006).

124. Terwilliger, supra note 119, at 2. Mr. Terwilliger notes that the benefits of the proposed leniency policy toinclude, among others: (i) clearly establishing that there is a benefit to self-reporting FCPA violations; (ii)promoting investigation and self-reporting of FCPA violations by corporations; and (iii) counteracting thenegative consequences from self-reporting. See id. at 2.


tion.125 For nearly a century, violations of the Sherman Act were criminallypunishable by only misdemeanor penalties.126 In 1974, Congress amended theSherman Act to make such misconduct a felony.127 The maximum criminal penaltyfor violations of the Sherman Act has been adjusted upwards from time to time; in2004, Congress increased the maximum criminal penalty for violations of Section1 of the Sherman Act from $10 million to $100 million.128 The maximum criminalpenalty for corporations for violations of Section 1 of the Sherman Act currentlyincludes, among other penalties, a fine of $100 million, or twice the gross gain ortwice the gross loss resulting from the offense, whichever is the greater.129

The amount of criminal fines collected by the Antitrust Division has expandeddramatically. In 1997, the Antitrust Division obtained criminal fines totaling $205million, which then was 500% higher than that which had been collected in anyprevious given year.130 Since then, the division has collected fines exceeding $5billion,131 including numerous corporate fines each exceeding $10 million.132 Thisincrease in fines preceded that experienced by the Fraud Section by a half-decadeor more,133 and is likely the result of at least five factors: (1) promulgation in 1991of the Sentencing Guidelines;134 (2) the issuance of Antitrust Division leniencypolicies for corporations (the Corporate Leniency Policy)135 that have beencontinuously refined and elucidated in position papers authored and speeches

125. 15 U.S.C. § 1 (2006).126. Sherman Act, ch. 647, §§ 1-2, 26 Stat. 209 (1890).127. See Antitrust Procedures and Penalties Act, Pub. L. No. 93-528, 88 Stat. 1706, 1708 (1974).128. See Antitrust Criminal Penalty Enhancement and Reform Act of 2004, Pub. L. No. 108-237, 118 Stat.

661, 668 (2004); see also Kobayashi, supra note 19, at 717 (listing increases in the maximum criminal penalty forcorporations from 1890 until 2001, at which time it equaled $10 million).

129. See 15 U.S.C. § 1 (2006); 18 U.S.C. § 3571(d) (2006).130. See Scott D. Hammond, Deputy Assistant Attorney Gen. for Criminal Enforcement, DOJ Antitrust Div.,

Recent Developments, Trends and Milestones in the Antitrust Division’s Criminal Enforcement Program,Presented at the 56th Annual Spring meeting of the ABA Section of Antitrust Law (Mar. 26, 2008) [hereinafterHammond, Recent Developments], at 11, available at http://www.justice.gov/atr/public/speeches/232716.pdf.

131. See Scott D. Hammond, Deputy Assistant Attorney Gen. for Criminal Enforcement, DOJ Antitrust Div.,The Evolution of Criminal Antitrust Enforcement Over the Last Two Decades, Presented at the 24th AnnualNational Institute on White Collar Crime (Feb. 25, 2010) [hereinafter Hammond, Evolution of Criminal AntitrustEnforcement], at 5-6, available at http://www.justice.gov/atr/public/speeches/255515.pdf.

132. See DOJ Antitrust Div., Sherman Act Violations Yielding a Corporate Fine of $10 Million or More,available at http://www.justice.gov/atr/public/criminal/sherman10.pdf.

133. See id.134. See Kobayashi, supra note 19, at 723-28.135. The Corporate Leniency Policy may be found at http://www.justice.gov/atr/public/guidelines/0091.pdf.

In 1994, the Antitrust Division promulgated an Individual Leniency Policy, which is available at www.justice.gov/atr/public/criminal/sherman10.htm. Though it addresses the leniency afforded to a corporate applicant’s directors,officers, and employees under the Corporate Leniency Program, this Article does not examine the IndividualLeniency Policy.

Former Deputy Assistant General Gary R. Spratling is widely recognized as the architect of the modernAntitrust Division corporate and individual leniency programs.


given by the Antitrust Division and its senior officials for the past 15 years;136 (3)informal and formal exchanges of information between U.S. and foreign competi-tion authorities pursuant to Mutual Lateral Assistance Treaties and other agree-ments;137 (4) increased focus by the DOJ on enforcement against large, interna-tional cartels that affect a more substantial amount of commerce, with closercooperation between U.S. and foreign competition authorities;138 and (5) theaforedescribed increases in the maximum criminal fine for corporations, and theintroduction of potential alternative fines.139

B. The Antitrust Division’s Corporate Leniency Program

The DOJ has established and promoted leniency policies to incentivize corpora-tions and individuals to report antitrust violations to and cooperate with lawenforcement. The Antitrust Division first implemented a leniency program in1978.140 In 1993, the Division significantly revised and greatly improved theleniency program with the issuance of the Corporate Leniency Program.141 Underthe Division’s Corporate Leniency Program, “a corporation can avoid criminalconviction and fines . . . by being the first to confess participation in a criminalantitrust violation, fully cooperating with the Antitrust Division and meeting other

136. See, e.g., Hammond, Evolution of Criminal Antitrust Enforcement, supra note 131; Scott D. Hammond,Deputy Assistant Attorney Gen. for Criminal Enforcement, DOJ Antitrust Div., & Belinda A. Barnett, SeniorCounsel, DOJ Antitrust Div., Frequently Asked Questions regarding the Antitrust Division’s Leniency Program’sModel Leniency Letters, Presented at the 24th Annual National Institute on White Collar Crime (Nov. 19, 2008),available at http://www.justice.gov/atr/public/criminal/239583.pdf; Hammond, Recent Developments, supranote 130; Scott D. Hammond, Deputy Assistant Attorney Gen. for Criminal Enforcement, DOJ Antitrust Div.,Measuring the Value of Second-In Cooperation in Corporate Plea Negotiations, Address at the 54th Annual ABASection of Antitrust Law Spring Meeting (Mar. 29, 2006) [hereinafter Hammond, Second-In Cooperation],available at http://www.justice.gov/atr/public/speeches/215514.pdf; Scott D. Hammond, Deputy Assistant Attor-ney Gen. for Criminal Enforcement, DOJ Antitrust Div., Charting New Waters in International Cartel Prosecu-tions, Presented at the 20th Annual National Institute on White Collar Crime (Mar. 2, 2006) [hereinafterHammond, Charting New Waters], available at http://www.justice.gov/atr/public/speeches/214861.pdf; Scott D.Hammond, Director of Criminal Enforcement, DOJ Antitrust Division, Cornerstones of an Effective LeniencyProgram, Presented at the ICN Workshop on Leniency Programs (Nov. 22-23, 2004) [hereinafter Hammond,Cornerstones], available at http://www.justice.gov/atr/public/speeches/206611.pdf; Gary R. Spratling & D.Jarrett Arp, The International Leniency Revolution: The Transformation of International Cartel EnforcementDuring the First Ten Years of the United States’ 1993 Corporate Amnesty/Immunity Policy, Presented at theAmerican Bar Association Section of Antitrust Law 2003 Annual Meeting (Aug. 12, 2003), at 4-5 nn.16 & 19,available at http://media.gibsondunn.com/fstore/documents/pubs/Sprating-Arp%20ABA2003_Paper.pdf.

137. See Gary R. Spratling & D. Jarrett Arp, Making the Decision: What to do when Faced with InternationalCartel Exposure—Developments Impacting the Decision in 2010, Presented at the 24th Annual National Instituteon White Collar Crime (Feb. 24-26, 2010), at 36-42.

138. See id.; Hammond, Evolution of Criminal Enforcement, supra note 131, at 5-6.139. See Kobayashi, supra note 19, at 717-22.140. See Hammond, Evolution of Criminal Enforcement, supra note 131, at 2.141. See id.


specified conditions.”142

Senior enforcement officials of the Antitrust Division have made many speeches,published numerous papers and answered frequently asked questions about theprocedures to be followed in applying for amnesty, expectations of cooperation,and leniency program benefits.143 The Division has also issued “model conditionalleniency letters for both corporate and individual applicants to memorialize theagreement made with a leniency applicant.”144 The Antitrust Division’s leniencyprograms and policies, along with its position papers, speeches and guidingmaterials, have enabled corporations to ascertain (and corporate counsel to advisebetter their clients about) the benefits and costs of self-reporting antitrust viola-tions and cooperating with law enforcement, thereby promoting rational andinformed decision making in the best interests of corporate constitutents.145 Inorder to accurately convey the policy of the Division, the ensuing portions of thisPart II draw heavily upon these carefully prepared policy statements of theAntitrust Division, and presuppose the reader’s familiarity with those authorities.Much of the cited language is reproduced almost verbatim from those importantpronouncements of the Division, and the reader is directed to those papers as wellas the model corporate and individual conditional leniency letters for furtherexplanation of the Division’s leniency policies.146

There are two forms of leniency under the Corporate Leniency Program: (i)Type A Leniency; and (ii) Type B Leniency.147 The conditions to and availabilityof each of these types of antitrust leniency are summarized below.

1. Leniency Before an Investigation Has Begun “Type A Leniency”

Of the two types of leniency, a corporation would prefer to qualify for “Type ALeniency” due to the added protections offered under it. To do so, however, acorporation must satisfy the following six conditions:

1. At the time the corporation comes forward to report the illegal activity, theDivision has not received information about the illegal activity being reportedfrom any other source;

142. Hammond & Barnett, supra note 136, at 1. Professor Kobayashi has argued that the resulting “race” toconfess, along with increases in the fines imposed for antitrust violations and other factors, may lead toover-deterrence. See Kobayashi, supra note 19, at 744.

143. See supra notes 130-31, 136.144. Hammond & Barnett, supra note 136, at 1. The Model Corporate Conditional Leniency Letter may be

found at http://www.justice.gov/atr/public/criminal/239524.pdf, and the Model Individual Conditional LeniencyLetter may be found at http://www.justice.gov/atr/public/criminal/239526.pdf.

145. The decision to self-report antitrust violations, though significantly more transparent and predictable thanthat concerning FCPA violations, is not completely free from uncertainty, especially for corporations that do notqualify as “first-in” applicants under the Corporate Leniency Policy. See Gail Dutton, Amnesty: If You Can’t beFirst, at Least be Second, ETHISPHERE (Jan. 7, 2008), available at http://ethisphere.com/amnesty-if-you-cant-be-first-at-least-be-second.

146. See supra notes 130-31, 136, 144.147. See Corporate Leniency Policy, supra note 135, at 1-3.


2. The corporation, upon its discovery of the illegal activity being reported,took prompt and effective action to terminate its part in the activity;3. The corporation reports the wrongdoing with candor and completeness andprovides full, continuing and complete cooperation to the Division throughoutthe investigation;4. The confession of wrongdoing is truly a corporate act, as opposed toisolated confessions of individual executives or officials;5. Where possible, the corporation makes restitution to injured parties; and6. The corporation did not coerce another party to participate in the illegalactivity and clearly was not the leader in, or the originator of, the activity.148

Notably, Type A Leniency is only available if the Division had not yet commencedan investigation.149

2. Leniency After an Investigation Has Begin: “Type B Leniency”

Even though a corporation may not qualify for Type A Leniency, particularly ifthe Antitrust Division has already received information about the offense, thecorporation may still qualify for Type B Leniency if it meets the following sevenconditions:

1. The corporation is the first one to come forward and qualify for leniencywith respect to the illegal activity being reported;2. The Division, at the time the corporation comes in, does not yet haveevidence against the company that is likely to result in a sustainable convic-tion;3. The corporation, upon its discovery of the illegal activity being reported,took prompt and effective action to terminate its part in the activity;4. The corporation reports the wrongdoing with candor and completeness andprovides full, continuing and complete cooperation that advances the Divisionin its investigation;5. The confession of wrongdoing is truly a corporate act, as opposed toisolated confessions of individual executives or officials;6. Where possible, the corporation makes restitution to injured parties; and7. The Division determines that granting leniency would not be unfair toothers, considering the nature of the illegal activity, the confessing corpora-tion’s role in it, and when the corporation comes forward.150

C. Leniency for Corporate Directors, Officers, and Employees under theCorporate Leniency Policy

A critical aspect of the Corporate Leniency Policy is the protection potentiallyavailable to a corporate applicant’s directors, officers and employees who are

148. Corporate Leniency Policy, supra note 135, at 1-2.149. Hammond & Barnett, supra note 136, at 4.150. Corporate Leniency Policy, supra note 135, at 2-3.


possible subjects or targets of investigation. Under Type A Leniency, “all directors,officers, and employees of the corporation who admit their involvement in thecriminal antitrust violation as part of the corporate confession will also receiveleniency if they admit their wrongdoing with candor and completeness andcontinue to assist the [Antitrust] Division throughout the investigation.”15 Non-participating directors, officers, and employees who nevertheless possessed knowl-edge of the conspiracy and choose to cooperate with the Division are generallyafforded leniency through the terms of a conditional leniency letter.152 Under TypeB Leniency, the directors, officers and employees of the corporate applicant who“come forward with the corporation will be considered for immunity fromcriminal prosecution on the same basis as if they had approached the [Antitrust]Division individually.”153 “In practice, however, the Division ordinarily providesleniency to all qualifying current employees of Type B applicants in the samemanner that it does for Type A applicants.”154

D. Conditions to Leniency, Including Cooperation

The conditions to leniency are set forth in the conditional leniency letters forcorporations and individuals.155 Conditions include the corporation verifying thatit “took prompt and effective action” to end its participation in the offense and“was not the leader in, or the originator of, the activity.”156 Also, in regards tocorporations under both forms of leniency, and in regards to directors, officers andemployees who come forward with the corporate applicant, an important conditionto leniency is continued cooperation with the Division and its investigation.157 Themodel conditional leniency letters set forth what is expected by the Division froman applicant in “cooperating.”158 Corporations are expected to, among otherthings, and in addition to verifying its representations in the conditional leniencyletter: (i) disclose all facts relating to the offense; (ii) provide promptly allunprivileged documents and information requested by the Division; (iii) assistingin procuring the truthful cooperation of its directors, officers and employees; and(iv) attempting to pay restitution to injured parties.159 In addition, “[t]he specificcooperation obligations of the individuals are also defined in . . . the corporateconditional leniency letter,” and include among other things: “the provision of

151. See Hammond & Barnett, supra note 136, at 20.152. See id.153. Id.154. Hammond & Barnett, supra note 136, at 20.155. Model Corporate Conditional Leniency Letter, supra note 144, at 1.156. Id. at 2.157. See Corporate Leniency Policy, supra note 135, at 2, ¶ 3 (Type A Leniency); id. at 3, ¶ 4 (Type B

Leniency).158. See Hammond & Barnett, supra note 136, at 20.159. See Model Corporate Conditional Leniency Letter, supra note 144, at 2-3.


documents, records and other materials and information; participation in inter-views; and the provision of testimony.”160

E. Amnesty Plus and Penalty Plus

1. Amnesty Plus

The Antitrust Division leniency program has been successful: approximatelyhalf of the Division’s international cartel investigations have been “initiated byevidence obtained as a result of an investigation of a completely separatemarket.”161 This can happen “when a [corporation] approaches the Division tonegotiate a plea agreement in a current investigation and then seeks to obtain morelenient treatment by offering to disclose the existence of a second, unrelatedconspiracy.”162 In this scenario, corporations that report and cooperate as to asecond matter may be eligible for “Amnesty Plus.”163 Under Amnesty Plus, acorporation and its cooperating directors, officers and employees may secureamnesty in regards to the second offense, and a corporation would “receive[] asubstantial additional discount” from the Division in calculating an appropriatefine “for its participation in the first conspiracy.”164

2. Penalty Plus

Corporations “that elect not to take advantage of the Amnesty Plus opportunityrisk potentially harsh consequences.”165 The Division will ask the court to “imposea term and conditions of probation for the company,” and “will pursue a fine or jailsentence at or above the upper end of the Sentencing Guidelines range” againstcorporations that are “knowledgeable about a second offense and decide[] not toreport it,” if that unreported offense is subsequently detected and prosecuted by theDivision.166 If there are multiple convictions, a corporation’s “calculations may beincreased based on the prior criminal history.”167 Thus the Antitrust Division hasreported that the increased penalties for failing to report under Amnesty Plus maybe severe.168

160. Hammond & Barnett, supra note 136, at 20-21.161. Hammond, Second-In Cooperation, supra note 136, at 9.162. James M. Griffin, Deputy Assistant Attorney, DOJ Antitrust Div., The Modern Leniency Program After

Ten Years: A Summary Overview of the Antitrust Division’s Criminal Enforcement Program, Presented at theABA Section of Antitrust Law Annual Meeting (Aug. 12, 2003), at 8, available at http://www.justice.gov/atr/public/speeches/201477.pdf

163. See id.164. Hammond, Second-In Cooperation, supra note 136, at 10.165. Hammond, Cornerstones, supra note 136, at 17.166. Id.167. Id.168. See id. (noting “the difference [may be] between a potential fine as high as 80 percent or more of the

volume of affected commerce versus no fine at all on the Amnesty Plus product”).


F. Value of Second-In Cooperation in Corporate Plea Negotiations andOther Issues

First-in cooperating companies receive the most robust set of benefits: “nocriminal convictions [and] no criminal fines,”169 and restrictions on the damagesavailable in any ensuing civil litigation.170 The Antitrust Division has alsoprovided guidance on what benefits may accrue to corporations that are not the firstto report illegal activity to and cooperate with the Division.171

1. Second-In Cooperation Credit

In Spring 2006, the Antitrust Division published its seminal paper: “Measuringthe Value of Second-In Cooperation in Corporate Plea Negotiations.” Furtheringthe transparency and predictability that has come to typify the Corporate LeniencyProgram, that paper identified six specific rewards for corporations that substan-tially cooperate with the Antitrust Division but are not first through the AntitrustDivision’s door.172

a. Reducing the Scope of Affected Commerce Used to Calculate aCorporation’s Sentencing Guidelines Fine Range

“If a [corporation’s] cooperation pursuant to a plea agreement reveals that thesuspected conspiracy was broader than had been previously identified—either interms of the length of the scheme or the products, contracts or commerceaffected—then the [Antitrust] Division’s practice is not to use that self-incriminating information in determining the applicable” fine under the Sentenc-ing Guidelines.173 This benefit often significantly lowers the corporation’s poten-tial Sentencing Guidelines fine.174

“The amount of the recommended departure—often referred to as the ‘coopera-tion discount’—is measured as a percentage and reflects the overall value of thecooperation provided.”175 Third, fourth, and fifth-in cooperators still receive acooperation discount to the Division below the Sentencing Guideline’s minimum,albeit a lesser one than that provided to earlier-reporting corporations, if theyprovide substantial assistance to the Division.176 The Liquid Crystal Display(LCD) industry cartel investigation illustrates the substantial incentive for corpora-tions to report antitrust violations. There, the corporation first-in received amnesty

169. Hammond, Second-In Cooperation, supra note 136, at 2.170. See infra note 337.171. See generally Hammond, Second-In Cooperation, supra note 136.172. See id. at 3-11. The headings announcing these benefits are reproduced from Mr. Hammond’s ground-

breaking paper.173. Id. at 3-4 (though noting except as provided for in Section 1B1.8(b) of the Sentencing Guidelines).174. See id. at 4.175. Id. at 5.176. See id. at 12.


and paid no fine. Later-in cooperating corporations paid fines of $26 million(Epson),177 $31 million (Hitachi),178 $120 million (Sharp),179 and $400 million(LG).180 Thus, the financial difference between the amnesty applicant and onemuch later cooperating participant in the LCD investigation was $400 million.

b. Obtaining a Substantial Cooperation Discount

The reward to second-in cooperating corporations that substantially advance aninvestigation is a fine below the minimum Sentencing Guidelines range.181

“Cooperation discounts for second-in [corporations] are, on average, in the rangeof 30%-35% off the bottom of the [Sentencing] Guidelines fine range.”182

c. Securing a Low Starting Point for Application of the Cooperation Discount

The starting point for a second-in cooperating corporation is generally theminimum Sentencing Guideline fine.183 There are two principal exceptions to thispractice: (i) if the corporation “had a significant leadership role in the conspira-cy;”184 and (ii) the Penalty Plus situation, in which a corporation “fail[ed] todiscover and report the second offense,” and the Division later detects the illegalactivity.185 In the Penalty Plus circumstance, the starting point for the corporation’scooperation discount will be “at least as high as the midpoint of the [Sentencing]Guidelines range for the second offense.”186

d. Securing More Favorable Treatment for Culpable Executives

If a second-in corporation fully cooperates early, then its “mid- to lower-levelemployees who provide significant evidence furthering the investigation will beoffered nonprosecution protection under the corporate plea agreement.”187 Thisamnesty, communicated and granted in a clear and predictable manner, provides areal benefit to cooperating corporate applicants. It “encourage[s] as many employ-

177. See Plea Agreement, United States v. Epson Imaging Devices Corp., No. 09-cr-00854-SI (N.D. Cal. Oct.23, 2009), available at http://www.justice.gov/atr/cases/f251400/251434.pdf.

178. See Press Release, DOJ, Hitachi Displays Agrees to Plead Guilty and Pay $31 Million Fine forParticipating in LCD Price-Fixing Conspiracy, available at http://www.justice.gov/atr/public/press_releases/2009/243414.htm.

179. See id.180. See id.181. See Hammond, Second-In Cooperation, supra note 136, at 5.182. Id. at 5.183. See id. at 6.184. Id. at 6.185. Id. at 7.186. Id.187. Id. at 8.


ees as possible” to cooperate.188 It does so by assuring employees that they will notbe prosecuted, to some extent.189 Finally, employees who are not eligible forformal antitrust leniency may still be granted statutory or informal immunity.190

e. Increasing the Likelihood That a Corporation Will Qualify For AmnestyPlus Credit

The Antitrust Division has had substantial success “rolling one investigationinto another.”191 It cautions that corporations “cannot afford to remain wilfullyignorant by limiting the scope of their internal investigations.”192 As explainedabove, corporations receive two types of benefits under Amnesty Plus: completeamnesty in regards to the second offense and a sizeable discount off of the finepayable in regards to the first offense.193

f. Qualifying As a Candidate For “Affirmative Amnesty”

When the Division is investigating suspected cartel conduct in one market, itwill likely commence a new investigation into anticompetitive behavior in asecond, unrelated market.194 If the Antitrust Division discovers cartel conduct inthe second market, then it may approach a colluding corporation and offer it thechance to cooperate in the cartel investigation under an “affirmative amnesty”program.195 “Second-in cooperators with a proven record of cleaning house andoffering full cooperation . . . become the most likely candidates for affirmativeamnesty.”196

2. Calculating the Antitrust Division Cooperation Discount

a. Three Key Factors

There are three key variables that determine the magnitude of the AntitrustDivision’s cooperation discount: “(1) the timing of the cooperation; (2) the valueand significance of the information provided; and (3) whether the [corporation]

188. Gary R. Spratling, Deputy Assistant Attorney Gen., DOJ Antitrust Div., The Corporate Leniency Policy:Answers to Recurring Questions, Presented at the ABA Antitrust Section 1998 Spring Meeting (Apr. 1, 1998), at13, available at http://www.justice.gov/atr/public/speeches/1626.pdf.

189. See id.190. See Hammond & Barnett, supra note 136, at 22.191. Thomas O. Barnett, Assistant Attorney Gen., DOJ Antitrust Div., Seven Steps to Better Cartel

Enforcement, Presented at the 11th Annual Competition Law & Policy Workshop, European Union Institute (June2, 2006), at 8, available at http://www.justice.gov/atr/public/speeches/216453.pdf; see also Hammond, Sec-ond-In Cooperation, supra note 136 at 9 (describing Division success “in a strategy of ‘cartel profiling’ techniquesaimed at ferreting out violations that sprout ‘cartel trees’”).

192. Barnett, supra note 191, at 9.193. See supra note 163 and accompanying text.194. See supra note 161 and accompanying text.195. See Hammond, Second-In Cooperation, supra note 136, at 11.196. Id. at 14.


brings forward evidence of other collusive activity and receives an additionalAmnesty Plus discount.”197 The first two factors are most important in determiningthe size of the discount.198

b. United States v. Crompton Corporation

In its paper Measuring of the Value of Second-In Cooperation in Corporate PleaNegotiations, the Antitrust Division offered as an example of the rewards forexceptional second-in cooperation United States v. Crompton Corporation.199

Crompton Corporation (“Crompton”), a manufacturer of rubber chemicals locatedin Middleburg, Connecticut, colluded with other major rubber chemical producersto monitor and inflate the price of certain rubber chemicals.200 The DOJ viewedCrompton’s cooperation as “exemplary,” meriting a very substantial discount(59%) off the low end of the Sentencing Guidelines.201 The DOJ stated thatCrompton’s independent board of directors left “no stone unturned in its commit-ment to investigate, identify and report antitrust violations after the rubberchemical investigation commenced,”202 and pointed out that “[w]ithin hours oflearning of the investigation, [the company] secured a massive amount of docu-ments” for the Division, and it “immediately searched for and secured foreign-located documents.”203 Crompton “conduct[ed] simultaneous raids of two of itsown foreign offices and the office of a joint venture . . . to ensure the preservationof relevant and probative documents.”204 It also produced over 500,000 documentsand made available for interview more than thirty witnesses.205

“In Crompton, three high-level employees were carved out of the corporate pleaagreement.”206 However, those three individuals’ subordinates who engaged inillegal conduct still received full protection in exchange for their cooperation aspart of Crompton’s corporate plea.207 The fine range under the SentencingGuidelines was between $121 million and $242 million.208 “Crompton’s coopera-tion discount of 59% was applied to the minimum [Sentencing] Guideline fine of$121 million, resulting in a fine of $50 million.”209 Crompton illustrates theimportance of the minimum of the Sentencing Guideline as a starting point: had the59% discount been applied to the maximum Sentencing Guideline, the fine would

197. Id. at 11.198. See Hammond & Barnett, supra note 136, at 10.199. Plea Agreement, United States v. Crompton Corp., No. CR-04-0079 MJJ (N.D. Cal. Mar. 28, 2004).200. See id.201. Hammond, Second-In Cooperation, supra note 136, at 2.202. Id. at 10.203. Id. at 13.204. Id.205. See id.206. Id. at 8.207. See id.208. See id. at 6.209. Id.


have been $132 million.210 At the mid-point, the fine would have been $75 million.At the high end of the Sentencing Guidelines, Crompton’s discounted fine wouldhave been $100 million, or twice what it in fact paid under the Division’sCorporate Leniency Program.211 For second-in cooperating corporations that offernew and significant evidence, “the Division will typically carve out only thehighest level culpable individuals as well as any employees who refuse tocooperate.”212 The difference or swing for Crompton between the potentialmaximum Sentencing Guideline fine and its actual discounted fine was $192 mil-lion, and all but three employees received non-prosecution assurances.213 Cromp-ton thus highlights the type of timely and global cooperation credit the AntitrustDivision values and has awarded in cartel investigations, and confirms the fairnessthat “exemplary” cooperation be measured off the minimum or low end of theSentencing Guidelines.

G. The Antitrust Division Leniency Policy as a Global Model

The success of the Antitrust Division’s Corporate and Individual LeniencyPrograms has led other countries to adopt leniency programs. Whereas in 1993only the United States and Canada had leniency policies,214 today more than fiftynon-U.S. jurisdictions have adopted leniency programs modeled in significant partafter the Antitrust Division’s leniency program.215 Former Deputy AssistantAttorney General Gary R. Spratling has described the “convergence in policies” asbeing not only beneficial for global law enforcement coordination and reporting ofinternational cartels, but as having made the goal of simultaneously seekingamnesty in multiple jurisdictions more attractive to corporations.216 There is noreason to believe that an FCPA leniency policy would not serve as a model forother jurisdictions and advance global, responsible investigations and self-reporting of corruption and cooperation with law enforcement authorities world-wide.

III. THE DECISION BY CORPORATIONS TO SELF-REPORT MISCONDUCT, INCLUDING

FCPA VIOLATIONS, BY CORPORATE EMPLOYEES AND AGENTS

As described in greater detail above, the Sentencing Guidelines seek to establish“incentives for organizations to maintain internal mechanisms for preventing,detecting, and reporting criminal conduct”217 by sanctioning corporations whose

210. See id.211. See id.212. Id. at 8.213. See id. at 6-8.214. See Spratling & Arp, supra note 137, at 72.215. Email from Scott D. Hammond to Robert W. Tarun (Apr. 29, 2010) (on file with authors).216. Spratling & Arp, supra note 137, at 72.217. U.S.S.G. MANUAL § 8A1.1, ch. 8, Introductory Cmt.


agents engage in criminal conduct, while offering mitigated sanctions for thecorporation having undertaken certain remedial measures. Yet, the imposition ofextraordinary fines, such as those in the recent, well-publicized charges againstSiemens AG, Kellogg, Brown & Root LLC, BAE Systems plc, and Daimler AG,may well deter corporations in certain instances from undertaking broad investiga-tions and voluntarily reporting the misconduct of their employees and agents tolaw enforcement. This disincentive, combined with the uncertainties over thebenefits of self-reporting and cooperation, may cause members of boards ofdirectors and audit and special committees thereof, striving to satisfy theirfiduciary duties to their corporations and their corporations’ stockholders, to ask iffully investigating malfeasance by corporate employees and agents, and voluntar-ily reporting it to and cooperating with law enforcement, is in the corporations andtheir stockholders’ best interests. For some FCPA violations, there is a significantrisk that corporate decision-makers may answer “no” to that question.

A. Understanding Why Corporations Self-Report Detected Misconduct:A Model of Corporate Decision Making

Scholars have evaluated the optimality of various corporate liability legalregimes, particularly in regards to monitoring, investigation and reporting bycorporations.218 In doing so, they have explored the dynamics and conditionsunder which the imposition of liability on corporations, through criminal penalties,may chill corporate monitoring, investigating and self-reporting of misconduct. Acomplete examination of this voluminous body of academic writing is beyond thescope of this Article. However, a brief review of the model developed byProfessors Jennifer Arlen and Reinier Kraakman219 provides insight into whycorporations may opt or decline to report voluntarily crimes committed by theiremployees and agents.

With respect to the criminal law’s deterrent function, sanctions affect the costsand benefits of engaging in criminal behavior, thereby incentivizing wrongdoers to

218. See generally Baer, supra note 8; Kimberly D. Krawiec, Organizational Misconduct: Beyond thePrincipal-Agent Model, 32 FLA. ST. U. L. Rev. 571 (2005); Amitai Aviram, In Defense of Imperfect CompliancePrograms, 32 FLA. ST. U.L. REV. 763 (2005); Vikramaditya S. Khanna, Should the Behavior of Top ManagementMatter?, 91 GEO. L. J. 1215 (2003); Donald C. Langevoort, Monitoring: The Behavioral Economics of CorporateCompliance with Law, 2002 COLUM. BUS. L. REV. 71 (2002); Kobayashi, supra note 19; Vikramaditya S. Khanna,Corporate Liability Standards: When Should Corporations be Held Criminally Liable?, 37 AM. CRIM. L. REV.1239 (2000) [hereinafter Khanna, Corporate Liability Standards]; William S. Laufer & Alan Strudler, CorporateIntentionality, Desert, and Variants of Vicarious Liability, 37 AM. CRIM. L. REV. 1285 (2000); William S. Laufer,Corporate Liability, Risk Shifting, and the Paradox of Compliance, 52 VAND. L. REV. 1343, 1405-10 (1999);James D. Cox, Private Litigation and the Deterrence of Corporate Misconduct, 60 LAW & CONTEMP. PROBS. 1(1997); Jennifer Arlen & Reinier Kraakman, Controlling Corporate Misconduct: An Analysis of CorporateLiability Regimes, 72 N.Y.U. L. REV. 687 (1997); Daniel R. Fischel & Alan O. Sykes, Corporate Crime, 25 J.LEGAL STUD. 319 (1996); Jennifer Arlen, The Potentially Perverse Effects of Corporate Criminal Liability, 23 J.LEGAL STUD. 833 (1994).

219. See generally Arlen & Kraakman, supra note 218.


engage in or refrain from violating applicable laws.220 Although a corporation istreated as a “person,” albeit an artificial one, for many purposes,221 a corporationas an entity itself does not and cannot engage in criminal behavior; rather, its

220. See Thomas S. Ulen, Firmly Grounded: Economics in the Future of the Law, 1997 WIS. L. REV. 433, 442“[S]ubject to limitations dictated by his risk preference, the rationally self-interested criminal commits the crimeif the expected benefit exceeds the expected cost and refrains if the reverse is true.”); JEREMY BENTHAM, THE

THEORY OF LEGISLATION 325 (Trubner, 1864) (noting that “[t]he evil of the punishment must be made to exceedthe advantage of the offence”); cf. Craig S. Lerner & Moin A. Yahya, “Left Behind” After Sarbanes-Oxley, 44 AM.CRIM. L. REV. 1383, 1385 (2007) (describing an “ideal entrepreneur” as risk-averse with respect to criminal laws,so that he or she “will pay the certain costs of compliance rather than risk being found guilty of a crime, even whena purely rational (or risk- neutral) individual would engage in the criminal behavior because the low probability ofdetection renders the expected penalty less than the cost of compliance,” and demonstrating that increases insanctions combined with a dilution of the mens-rea requirement create an adverse selection problem that drivesaway such ideal entrepreneurs). But see David Hess & Cristie L. Ford, Corporate Corruption and ReformUndertakings: A New Approach to an Old Problem, 41 CORNELL INT’L L.J. 307, 311, 330-31 (2008) (focusing onnature of and need to reform organizational norms); William T. Allen, Commentary on the Limits of Compensa-tion and Deterrence in Legal Remedies, 60 LAW & CONTEMP. PROBS. 67, 77 (1997) (“Thus, where the penalty isstrictly monetary, rational deterrence of violations and public health, safety, and welfare regulation is possible inprinciple. Where criminal law violations are involved, however, matters get even more complicated. Criminallaw, with its penal sanctions, cannot be (or at least are not) dealt with by corporations or their management withthe same calculus as violations of civil rights. For good reason, corporate directors will not direct management tocalculate the costs and benefits of compliance with criminal law. Nor will their lawyers advise them that they maysafely do so. The pedagogic message of criminal sanctions is ‘take all necessary steps to avoid the proscribedact.’”). See generally Richard A. Posner, An Economic Theory of the Criminal Law, 85 COLUM. L. REV. 1193(1985); Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. POL. ECON. 169, (1968).

Throughout this Article, unless otherwise indicated, we assume that all actors are rational. However, whendealing with criminal sanctions, boards of directors may be generally risk averse to some degree. See Lucinda A.Low et al., The Uncertain Calculus of FCPA Voluntary Disclosures, Presented at the American ConferenceInstitute 17th National Conference, Foreign Corrupt Practices Act (Mar. 27-28, 2007), at 2, available athttp://www.abanet.org/intlaw/spring07/materials.html (scroll down page for hyperlink to paper) (“In the wake of[certain high-profile criminal prosecutions of corporations], compliance expectations have increased, and the riskcalculus of companies that find themselves in violation of corporate regulatory laws (even for inadvertentviolations), their management, and boards of directors, has become more conservative.”). If true, then a legalregime with self-reporting may provide a benefit in the form of doing away with “risk-bearing costs.” Kaplow &Shavell, supra note 15, at 584-85, 597; see also Julia Schiller, Note, Deterring Obstruction of Justice Efficiently:The Impact of Arthur Andersen and the Sarbanes-Oxley Act, 63 N.Y.U. ANN. SURV. AM. L. 267, 305 (2007)(“From the company’s perspective, self-reporting is advantageous because it reduces risk. The company can dealwith wrongdoing by paying a certain, and sometimes lower penalty, rather than risk a higher penalty if thegovernment discovers wrongdoing independently.”).

221. See Citizens United v. FEC, 130 S. Ct. 876, 899-900 (2010) (corporations, while not natural persons, mayengage in speech protected by the First Amendment); First Nat’l Bank v. Bellotti, 435 U.S. 765, 780 n.15 (1978)(corporations are “persons” within the meaning of the Fourteenth Amendment); G.M. Leasing Corp. v. UnitedStates, 429 U.S. 338, 353 (1977) (corporations as artificial persons are protected by the Fourth Amendmentagainst unlawful searches and seizures). But see United States v. Doe, 465 U.S. 605, 612 (1984) (corporation notprotected from self-incrimination under the Fifth Amendment). See generally Tr. of Dartmouth Coll. v.Woodward, 17 U.S. 518, 636 (1819).

Under the U.S. Criminal Code, an “organization” is defined to be “a person other than an individual.” 18 U.S.C.§ 18 (2006). For purposes of the Sentencing Guidelines, “[t]he term [organization] includes corporations,partnerships, associations, joint-stock companies, unions, trusts, pension funds, unincorporated organizations,governments and political subdivisions thereof, and non-profit organizations.” U.S.S.G. MANUAL § 8A1.1 cmt. 1.For convenience to the reader, in this Article we use the term “corporation” synonymously with that of“organization” as defined and used in the Sentencing Guidelines.


agents do.222 Nevertheless, for a variety of reasons,223 courts may hold a corpora-tion liable for the acts committed by the corporation’s agents that benefit thecorporation and are within the scope of their agency.224

Sanctioning corporations for the intentional acts of their agents affects howcorporations themselves behave. In response to the risk of being held liable for themisconduct of individuals, corporations may implement “policing measures”:

[E]ntity liability can induce the firm to undertake a variety of actions thatincrease the probability that wayward agents will be sanctioned, which[Professors Arlen and Kraakman] term “policing measures.” For example,firms often will be better than government officials at monitoring or investigat-ing agent misconduct, in which case entity liability can deter wrongdoing byinducing firms to undertake such activities. Moreover, once misconduct isdetected, entity liability can induce firms to report misconduct. This prospectserves as a deterrent by ensuring that culpable agents will be officiallyprosecuted once misconduct is detected.225

Investigating and reporting to law enforcement criminal activity of corporateemployees and agents are examples of “policing” measures.226

Effective compliance programs, however, present a dilemma for corporations.As noted above, compliance programs that monitor, investigate and ultimately leadto the reporting of employee and agent wrongdoing “increase the probability that

222. See United States v. Fullmer, 584 F.3d 132, 161 n.14 (3d Cir. 2009); United States v. LaGrou Distrib. Sys.,Inc., 466 F.3d 585, 591-92 (7th Cir. 2006). The Sentencing Guidelines expressly recognize this fact. See U.S.S.G.MANUAL ch. 8, Introductory Cmt. (“Organizations can act only through agents and, under federal criminal law,generally are vicariously liable for offenses committed by their agents.”). For further discussion of liability withrespect to organizations, see the CORPORATE CRIMINAL LIABILITY article in this issue.

223. See Arlen & Kraakman, supra note 218, at 692-694; Khanna, Corporate Liability Standards, supra note218, at 1243-45; Laufer & Strudler, supra note 218, at 1295-98; John C. Coffee, Jr., “No Soul to Damn: No Bodyto Kick”: An Unscandalized Inquiry into the Problem of Corporate Punishment, 79 MICH. L. REV. 386, 447-48(1981). Commentators frequently assert that the lack of assets of individual corporate agents justifies imposingliability on corporations. See Krawiec, supra note 218, at 575, n.6, 613.

224. New York Cent. & Hudson River R.R. Co. v. United States, 212 U.S. 481, 493-94 (1909); United States v.Cincotta, 689 F.2d 238, 242 (1st Cir. 1982), cert. denied, 459 U.S. 991 (1982); United States v. Koppers Co., 652F.2d 290, 298 (2d Cir. 1981), cert. denied, 454 U.S. 1083 (1981).

225. Arlen & Kraakman, supra note 218, at 693; see also Kobayashi, supra note 19, at 736 (“If crimescommitted by employees are manifestations of agency costs, the imposition of corporate liability under thesecircumstances is not directly designed to deter, but to provide an incentive for the corporation to monitor, detect,and prevent crimes committed by agents acting within the scope of their employment.”). In particular, “[p]olicingmeasures are . . . particularly relevant to intentional misconduct, which is often uniquely difficult to detectbecause it is deliberately hidden.” Arlen & Kraakman, supra note 218, at 706.

Professors Arlen and Kraakman distinguish “policing measures” from “preventative measures,” which areefforts undertaken by the corporation to deter agents from engaging in misconduct by increasing the costs ofengaging in criminal activity, but not the likelihood that the corporation will be subjected to sanctions. See id. at701. These categorizations are not mutually exclusive. See id. at 701 n.33.

226. See Arlen & Kraakman, supra note 218, at 706. Specifically, such efforts are ex-post policing measures, asthey occur after the criminal acts have been committed. See id. Robust compliance programs will encompass bothex-ante and ex-post policing measures. See John S. Moot, Compliance Programs, Penalty Mitigation and theFERC, 29 ENERGY L. J. 547, 559 n.81 (2008).


wayward agents will be sanctioned;” thus, expending more on and/or implement-ing more effective or robust corporate compliance and monitoring programs willtend to increase the likelihood of detecting employee and agent wrongdoing.227 Tothe extent corporate representatives find this threat credible,228 compliance andethics programs may deter corporate employees and agents from engaging incriminal activity.229 But assuming that the corporation reports detected crimes tolaw enforcement officials,230 it will likely be sanctioned for its agents’ wrongdo-ing.231

In her article that first explored this “perverse effect,” Professor Arlen focusedon the impact that these conflicting incentives have under a legal regime of strictvicarious liability—i.e., one that holds a corporation vicariously liable for the actsof its employees and agents regardless of the level of care undertaken by thecorporation232 Professors Arlen and Kraakman subsequently analyzed in greaterdetail how the imposition of sanctions under varying liability regimes affectsspecific corporate behaviors, including adoption and implementation of policingmeasures.233 Their insights show that sanctions may deter corporations fromundertaking efficient policing measures in two simpler corporate sanction legalregimes: strict vicarious liability234 and duty-based liability.235 More complexlegal regimes may alleviate, but likely do not cure, these shortcomings.236

227. See Arlen, supra note 218, at 842.228. See infra note 234.229. See Arlen, supra note 218, at 842.230. See id. at 842 n.34.231. See id. at 836; Atlen & Kraakman, supra note 218, at 708.232. See Arlen, supra note 218, at 840-41. Professor Arlen concluded that “[i]f corporate enforcement

expenditures increase a corporation’s expected criminal liability by more than they reduce it, then imposing strictvicarious liability on a corporation will not cause it to increase its enforcement expenditures—no matter how largethe fine.” Id. at 843.

233. See generally Arlen & Kraakman, supra note 218, at 706-12.234. See id. at 707-09, 714-15, 717-18; Arlen, supra note 218, at 836. To the extent that ex-post policing

measures such as investigating and reporting malfeasance are compromised, a “credibility problem,” in whichemployees and agents discount or completely disregard a corporation’s threats to disclose misconduct to lawenforcement, may arise. Arlen & Kraakman, supra note 218, at 712-17.

235. See Arlen & Kraakman, supra note 218, at 705, 710-18. The efficacy of a duty-based liability regimedepends on the ability of courts to accurately determine whether a corporation has, in fact, exercised anappropriate amount of care. See id. at 705, 716. Commentators have called into question this premise. See Moot,supra note 226, at 553 n.31; Krawiec, supra note 218, at 580; Laufer, supra note 218, at 1405-19. Cox, supra note218, at 16.

236. For a discussion of composite liability legal regimes, which include the Sentencing Guidelines, see Arlen& Kraakman, supra note 218, at 726-30, 736-45; Krawiec, supra note 218, at 581-82. For a review of adjustedstrict liability regimes, as well as the adjusted quasi-strict liability regime, see Arlen & Kraakman, supra note 218,at 719-25. Professors Arlen and Kraakman also propose “multi-tier” composite reporting regimes, under which acorporation is entitled to full amounts of mitigation only if all (ex-ante and ex-post) policing efforts are adequate.See id. at 736-41.


B. Fiduciary Duties and the Decision to Self-Report Misconduct under theSentencing Guidelines

There is no duty per se under the Sentencing Guidelines on corporations toself-report misconduct of their employees and agents that they detect.237 Instead,as explained above, the Sentencing Guidelines “stipulate reduced sanctions forthose who self-report and/or stiffer penalties for those who do not.”238 This doesnot mean that members of corporate decision making bodies, including the boardof directors and audit and special committees thereof, are unconstrained in theirdetermination of whether to self-report crimes of corporate employees and agentsthat have come to the attention of the corporation. They remain guided in thisendeavor by their fiduciary duties owed under state law to the corporation and itsrelevant constituencies.239 Acting accordingly, those fiduciaries inform them-selves, often also relying upon the advice of inside or outside counsel, of theconsequence of choosing or declining to report misconduct to law enforcementand pursue a strategy that is in the best interests of the corporation and itsshareholders.

Under Delaware law,240 the decision on whether to voluntarily report to law

237. See O’MELVENY & MYERS LLP, FOREIGN CORRUPT PRACTICES ACT HANDBOOK 91 (6th ed. 2009),available at http://www.omm.com/files/upload/OMelvenyMyers_Sixth_Edition_FCPA_Handbook.pdf (“SEC dis-closure obligations aside, a corporation is not legally obligated to report a potential FCPA violation. Whilecorporations do not have Fifth Amendment rights per se, and therefore have no specific right againstself-incrimination, a corporation nevertheless does not have an affirmative duty to incriminate itself.”); Low et al.,supra note 220, at 2 (further observing in the 25 years after the FCPA’s enactment, voluntarily reporting was “notthe norm”); Richard Marshall, Uuuhhh, Look, We Messed Up Here: When It’s Time for GCs to Just “Fess Up”,CORPORATE COUNSEL (Jan. 28, 2010), available at http://www.law.com/jsp/cc/PubArticleCC.jsp?id�1202439516493 (“Generally, there is no legal obligation for a company to self-report.”). This may not accordwith the view of the DOJ or the SEC. See infra note 268. In addition, it may not accord with the generalizedexpectations of corporate managers. See George J. Terwilliger III, FCPA Internal Investigations—Are They WorthIt?, NAT’L L. J. (Jan. 4, 2010), at 12 (“[M]anagers may believe that internal investigations often lead to voluntarydisclosures (though that conventional wisdom need not be followed in many cases) . . . .”). Advice fromexperienced counsel may often counteract any preconceived and erroneous notions of corporate businessmanagers.

238. Innes, supra note 15, at 287.239. For a history of the interplay between federal and state actors in regulating corporate compliance, see

Baer, supra note 61, at 961-72.240. Throughout this Article, for purposes of discussing state corporate law and the fiduciary duties of

directors, we are guided by the law of the State of Delaware as set forth in the Delaware General Corporation Law,see DEL. CODE. ANN. tit. 8, §§ 101, et seq. (1999), and the jurisprudence of the Delaware courts. We note thatDelaware is the state of incorporation for more than half of U.S. publicly-traded companies as well as 63% ofFortune 500 companies. See Delaware Division of Corporations, http://corp.delaware.gov/ (last visited July 2,2010); see also Curtis 1000, Inc. v. Suess, 24 F.3d 941, 948 (7th Cir. 1994) (“Businesses incorporate in Delawarein order to take advantage of that state’s corporation law, and its judicial expertise concerning corporategovernance . . . .”). In addition, Delaware corporate law and the decisions of Delaware’s courts, particularly theDelaware Court of Chancery, influence the law of other jurisdictions. See, e.g., Westar Energy, Inc. v. Lake, 552F.3d 1215, 1225 n.8 (10th Cir. 2009) (noting “the Kansas Corporate Code was modeled after the DelawareCorporate Code and the Kansas Supreme Court relies upon Delaware case law as persuasive authority ininterpreting rights arising under the code”).


enforcement wrongdoing of corporate employees and agents will likely be deemeda business decision that is protected by the business judgment rule241 unless itspresumptions are rebutted.242 “Thus, directors’ decisions will be respected bycourts unless the directors are interested or lack independence relative to thedecision, do not act in good faith, act in a manner that cannot be attributed to arational business purpose or reach their decision by a grossly negligent process thatincludes the failure to consider all material facts reasonably available.”243

To preserve better the protections afforded by the business judgment rule, and tocomply with their fiduciary duties of care and loyalty, and the subsidiary duty toact in good faith,244 directors should endeavor to ascertain the sanctions associatedwith deciding to voluntarily report to law enforcement misconduct by the corpora-tion’s agents, as opposed to remedying such misconduct internally, after investigat-ing all readily available material facts. The board of directors may rationallyaccount for the incentives and penalties established by the Sentencing Guidelinesin implementing a corporate compliance program.245 Similarly, directors may seekto identify alternatives and weigh the costs and benefits associated with eachoption in deciding whether to voluntarily report detected malfeasance.246 In

241. The business judgment rule “is a presumption that in making a business decision the directors of acorporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the bestinterests of the company.” Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).

242. Delaware courts have held that the analogous decision to enter into a settlement agreement, absentcircumstances that warrant the application of enhanced scrutiny, is subject to the business judgment rule. SeeWhite v. Panic, 783 A.2d 543, 552 (Del. 2001) (“The decision to approve the settlement of a suit against thecorporation is entitled to the same presumption of good faith as other business decisions taken by a disinterested,independent board.” (citing, inter alia, Perrine v. Pennroad Corp., 47 A.2d 479, 487 (Del. 1946))); Khanna v.McMinn, No. Civ.A. 20545-NC, 2006 WL 1388744, at *26 (Del. Ch. May 9, 2006) (holding that the plaintiffsallegations did not rebut application of the business judgment rule to the directors’ decision to enter into asettlement agreement).

Importantly, a board’s decision as to whether to report voluntarily the misconduct of corporate agents ismarkedly different from any decision by it to cause the corporation to violate knowingly a legal rule, which is aviolation of fiduciary duties. See In re Walt Disney Co. Deriv. Litig, 906 A.2d 27, 67 (Del. 2006); Desimone v.Barrows, 924 A.2d 908, 934-35 (Del. Ch. 2007); see also Metro Commc’n Corp. BVI v. Advanced MobilcommTechs., Inc., 854 A.2d 121, 131 (Del. Ch. 2004); Gall v. Exxon Corp., 418 F. Supp. 508, 518 (S.D.N.Y. 1976).

243. Brehm v. Eisner, 746 A.2d 244, 264 n.66 (Del. 2000).244. Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006).245. See In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959, 970 (Del. Ch. 1996) (“Thirdly, I note the

potential impact of the federal organizational sentencing guidelines on any business organization. Any rationalperson attempting in good faith to meet an organizational governance responsibility would be bound to take intoaccount this development and the enhanced penalties and the opportunities for reduced sanctions that it offers.”).A corporation’s board of directors will thus also be guided, in part, by the Sentencing Guidelines in creating andimplementing an effective compliance and ethics program.

In addition, Rule 13a-15 of the Exchange Act requires issuers to “maintain disclosure controls and procedures. . . and, if the issuer either had been required to file an annual report pursuant to section 13(a) or 15(d) of the[Exchange] Act for the prior fiscal year or had filed an annual report with the [SEC] for the prior fiscal year,internal control over financial reporting. . . .” 17 C.F.R. § 240.13a-15 (2009).

246. Cf. City Capital Assocs. Ltd. P’ship v. Interco Inc., 551 A.2d 787, 802 (Del. Ch. 1988) (“There must be areasonable basis for the board of directors involved to conclude that the transaction involved is in the best interestof the shareholders. This involves having information about possible alternatives. The essence of rational choice


addition, they must also inform themselves of all material information reasonablyavailable to them before making a business decision and, having so informedthemselves, act with the requisite care in making that decision.247

To enable corporate decision makers to make informed, rational choices,sanctions regimes must convey clearly, and mete out predictably, the reducedsanctions that are imposed on corporations that self-report misconduct. DeputyAssistant Attorney General Scott D. Hammond, who oversees the AntitrustDivision’s enforcement program and has fine-tuned its Corporate Leniency Pro-gram, has written: “A key component in the success of the [Antitrust] Division’scartel enforcement program, particularly the Corporate Leniency Program, istransparency and predictability.”248 Mr. Hammond has further observed that “[i]fcompanies cannot confidently predict how an enforcement authority will apply its

is an assessment of costs and benefits and the consideration of alternatives.”). The benefits of cooperating withlaw enforcement may be found to outweigh the costs. See Saito v. McKesson HBOC, Inc., No 18553, 2002 Del.Ch. LEXIS 125, at *19 (Del. Ch. Oct. 25, 2002). In the specific context of settling claims against the corporation,the Delaware Court of Chancery has recognized that it may be a proper exercise of the directors’ businessjudgment to settle claims, even if doubts remains as to their legal merit, in light of the benefits that come withsettlement and finality. See Khanna, 2006 WL 1388744, at *26 (“It is not, however, outside the realm of businessreasonableness to conclude that Covad was better off settling with Dishnet and putting the Dishnet ordeal behindit than to engage in a drawn-out battle with the risk of losing. There are certainly instances in which settlingclaims—even though of questionable merit—is the prudent course of conduct.”) (footnote omitted).

247. See Brehm v. Eisner, 746 A.2d 244, 259 (Del. 2000), cited by In re Citigroup Inc. S’holder Deriv. Litig.,964 A.2d 109, 122 (Del. Ch. 2009); Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 367 (Del. 1993); see alsoMetro Commc’n Corp. BVI, 854 A.2d at 136 (“It is inferable that a decision to self-refer to the DOJ is not madelightly. Presumably, MetroRED would not have advised the DOJ of potential violations of federal criminal lawwithout a serious discussion among its directors and high-level officers . . . .”). However, “[t]he Board isresponsible for considering only material facts that are reasonably available, not those that are immaterial or outof the Board’s reasonable reach.” Brehm, 746 A.2d at 259. Also, directors who rely in good faith upon corporaterecords or reports in connection with their efforts to be fully informed are protected in part by section 141(e) of theDelaware General Corporation Law, which entitles directors to rely upon the “such information, opinions, reportsor statements presented to the corporation by . . . any other person as to matters the member reasonably believesare within such other person’s professional or expert competence and who has been selected with reasonable careby or on behalf of the corporation,” DEL. CODE. ANN. tit. 8, § 141(e) (1999 & Supp. 2007), including legalcounsel, see Gagliardi v. Trifoods Int’l, Inc., 683 A.2d 1049, 1051 n.2 (Del. Ch. 1996); see also Cinerama, Inc. v.Technicolor, Inc., 663 A.2d 1134, 1142 (Del. Ch. 1994) (“[R]easonable reliance upon expert counsel is a pertinentfactor in evaluating whether corporate directors have met a standard of fairness in their dealings with respect tocorporate powers.”). Therefore, boards of directors are well-advised to seek the input and advice of legal counselas to evaluating the consequences of any decision to proceed or decline to self-report any detected wrongdoing.See ABA COMMITTEE ON CORPORATE LAWS, CORPORATE DIRECTORS GUIDEBOOK 20 (5th ed. 2007) [hereinafterCORPORATE DIRECTORS GUIDEBOOK] (“Obtaining input from competent advisors is a hallmark of a carefuldecision-making process. For this reason, directors who rely in good faith on advisors, professionals, and otherpersons with particular expertise or competence generally enjoy broad protections from liability if the directors’business decisions are challenged.”).

248. Hammond, Second-In Cooperation, supra note 136, at 1. Moreover, aspects of the Antitrust Division’sCorporate Leniency Program combat the “perverse effect” of self-reporting cartel behavior: “[i]t was inrecognition of this concern [as to the risks of disclosing detected misconduct and incurring punishment throughgovernment or private challenges] that the Antitrust Division expanded its Corporate Leniency Program into aguaranteed amnesty program if certain criteria were met.” Stephen Calkins, Corporate Compliance and theAntitrust Agencies’Bi-Modal Penalties, 60 LAW & CONTEMP. PROBS. 127, 142 n.59 (1997).


leniency program, [they] may ultimately decide against self reporting and coopera-tion . . . .”249 The SEC has also stated that it “believes it important to provide themaximum possible degree of clarity, consistency, and predictability in explainingthe way that its corporate penalty authority will be exercised.”250 Currently,responsible directors and their counsel can far better predict the benefits and costsof the Antitrust Division’s Corporate Leniency Program and make informeddecisions in the best interests of the corporation and its shareholders than they canin the FCPA arena in which there is much less transparency and predictability, andno articulated leniency policy.

The economic models developed by Professors Arlen and Kraakman illuminatehow a corporation that has detected wrongdoing answers the complex question ofwhether to voluntarily report such misconduct to law enforcement. For a corpora-tion that has detected wrongdoing by its employees or agents, “short of aregulatory setting that demands such disclosure, the firm’s incentive is to put theproblem quietly behind itself so that the perverse effects of any accompanyingpublic prosecution are unlikely to occur.”251 To promote self-reporting by corpora-tions, the mitigation provided under the composite liability regime “must ensurethat ex post, after wrongdoing is detected, the firm is better off reporting themisconduct—and accepting the [reduced sanction for reporting]—than it is remain-ing silent and risking the default sanction . . . .”252 To do so, the expected costsfrom not voluntarily reporting must be equal to or in excess of the expected costsfrom voluntarily reporting.253

In balancing these expected costs, corporate decision makers examine andestimate both the respective magnitudes of liability in the scenarios of reportingand declining to report misconduct, as well as the likelihood that that lawenforcement will detect misconduct absent self-reporting by the corporation. As tothe penalty imposed, the Sentencing Guidelines were designed to provide greatercertainty, fairness and consistency in sentencing criminal defendants.254 In addi-tion, these aims of the Sentencing Guidelines foster rational decision making, bothas to engaging in criminal activities as well as deciding to enter into plea

249. Hammond, Cornerstones, supra note 136, at 20; see also Spratling & Arp, supra note 137, at 3.250. SEC, Statement of the Securities and Exchange Commission Concerning Financial Penalties (Jan. 4,

2006), available at http://www.sec.gov/news/press/2006-4.htm.251. Cox, supra note 218 at 18.252. Arlen & Kraakman, supra note 218, at 728; see also Kaplow & Shavell, supra note 15, at 584.253. See Arlen & Kraakman, supra note 218, at 729; Innes, supra note 15, at 290; Kaplow & Shavell, supra

note 15, at 584.254. A stated purpose of the United States Sentencing Commission is for it to “establish sentencing policies

and practices for the Federal criminal justice system that . . . provide certainty and fairness in meeting thepurposes of sentencing, avoiding unwarranted sentencing disparities among defendants with similar records whohave been found guilty of similar criminal conduct while maintaining sufficient flexibility to permit individual-ized sentences when warranted by mitigating or aggravating factors not taken into account in the establishment ofgeneral sentencing practices.” 28 U.S.C. § 991(b)(1) (2006).


agreements.255

Further, the outcome of this balancing of expected costs may be altered by theperceived likelihood that law enforcement will independently discover any unre-ported wrongdoing. “[I]ndividuals might not self-report if they perceive a smallrisk of apprehension.”256 As Professors Arlen and Kraakman have shown, thecalculus in weighing expected outcomes entails a comparison between (i) thechance of the misconduct being independently detected by law enforcement absentcorporate self-reporting, and (ii) the percentage reduction of the unmitigatedsanction through self-reporting.257 Their model thus reveals that, in order to induceself-reporting by corporations, all else equal, reduced perceptions as to thelikelihood of independent detection by law enforcement absent corporate self-reporting must be counteracted by increased mitigation.258

255. See Jenia Iontcheva Turner, Judicial Participation in Plea Negotiations: A Comparative View, 54 AM. J.COMP. L. 199, 252 (2006) (“[I]ncreased certainty allows both sides to make a more intelligent plea decision. Itreduces the danger that either side might enter into a plea deal simply due to a miscalculation of the expectedsentence.”); Prepared Testimony of Christopher A. Wray, Assistant Attorney General, Committee on the Judiciary,17 FED. SENT’G REP. 303 (2005) (“At a hearing before the Sentencing Commission last November, there waswidespread agreement among all of the panelists, from professors to public defenders, that advisory guidelineswere not appropriate for the federal justice system. For example, the Practitioners Advisory Group stated that‘rules that are mandatory are valuable in controlling unwarranted disparity, and in providing certainty so thatdefendants can make rational decisions in negotiating plea agreements and in trial strategy.’” (quoting Letter fromPractitioners Advisory Group to the United States Sentencing Commission 12 (Nov. 4, 2004))).

256. Innes, supra note 15, at 288-89 (citing Kaplow & Shavell, supra note 15); accord, Moot, supra note 226,at 574 n.163 (“[T]he probability of detection should play a significant role in penalty calculations and, therefore,the less likely the government would have uncovered the violation on its own the more mitigation credit should beprovided for self-reports.” (citing, Arlen & Kraakman, supra note 218, at 721)).

257. See Arlen & Kraakman, supra note 218, at 747 (“The Sentencing Guidelines provide that a firm thatreports, cooperates, and accepts full responsibility for a wrong is eligible for mitigation of five points. For a largerfirm this may only result in a 50% reduction in the fine if it reports, investigates, and cooperates. This mitigationprovision will induce reporting, therefore, only if a firm that detects and does not report faces at least a 50%chance of getting caught. If the probability that the government detects wrongdoing is lower, the firm has noreason to report.”). Other commentators have indirectly challenged the specific calculus, but not the generalmodel, employed by Professors Arlen & Kraakman. See CORPORATE DIRECTOR’S GUIDEBOOK, supra note 247, at29 (observing that the Sentencing Guidelines “provide for significant fine reductions for corporations withappropriate programs in place to prevent and detect violations of law”); Moot, supra note 226, at 560 (claimingthat the mitigation provisions of the Sentencing Guidelines could “reduce[] substantially” the fine imposed on thecorporation in a “best case” scenario in which wrongdoing involved no high level employees, was not tolerated,occurred despite an effective compliance program and had been self-reported (citing Krawiec, supra note 218, at584 (mitigation provisions may decrease fines “by up to sixty percent”))). Professor Krawiec further argues thatthe Sentencing Guidelines may reduce the sanction to one-twentieth of the original base fine, or increase theoriginal base fine by four hundred percent). Krawiec, supra note 218, at 584.

The analysis of Professors Arlen and Kraakman focused upon large corporations. While smaller firms by theirstatus as such have a lower initial culpability score, they are more likely to have their senior officers involved inany misconduct, thereby to some extent counteracting this benefit. See infra note 333 and accompanying text.

258. In this regard, law enforcement may be expected to assert that the chance of independent detection is, infact, high and that resources devoted by law enforcement authorities to targeted criminal activity create asubstantial likelihood that corporate misconduct will be discovered.


C. Evidence Demonstrating How Corporations Decide Whether toSelf-Report Misconduct, Including FCPA Violations

Framed against the models summarized above, we now turn to analyzing thedecision of a corporation to report detected FCPA violations in light of thesanctions and mitigation provisions of the current Sentencing Guidelines.259

“[V]oluntary disclosures involve significant risks that may be less likely to bepresented if the company simply responds responsib[ly] to FCPA issues internallywithout making a voluntary disclosure.”260 In the exercise of their businessjudgment and in accordance with their fiduciary duties, a board of directors or itscommittee will decide whether to self-report detected misconduct. For the reasonsexplained below, under some circumstances, corporate decision-making bodiesmay decline to self-report FCPA violations of the corporation’s employees andagents.

As an initial matter, we note that this Article does not examine the justificationsfor implementing and maintaining compliance programs. Some commentatorshave posited that the “perverse effects” that sanctions have upon a corporation maysometimes dissuade corporations from establishing and maintaining meaningfulcompliance and ethics programs.261 In contrast, this Article presumes that acorporation’s compliance program has detected bribery conduct by corporateemployees and agents, and focuses exclusively on whether a corporation willdecide to self-report that detected misconduct.262 This Article thus also rejects a

259. The ensuing section draws heavily on and from the literature authored by practitioners and law firms.However, this focus is appropriate because corporate decision makers rely upon and form their beliefs as to thebenefits of self-reporting based on the advice provided by legal counsel.

260. Low et al., supra note 220, at 1.261. See generally Arlen, supra note 218.262. Though commentators continue to debate the benefits of and incentives for maintaining an effective

compliance program, we believe that there are sound reasons to, in essence, treat compliance programs as a fixedvariable for this analysis and decouple self-reporting and ensuing cooperation from the other policing measures.First, a corporation may be required to have internal controls under the federal securities laws. See supra note 245;infra note 301. Second, directors may be required to establish some system of corporate monitoring under aseparate body of law, such as that governing the fiduciary duties of directors and officers to the corporation and,derivatively, its stockholders. Under Delaware law, “the necessary conditions predicate for director oversightliability [are]: (a) the directors utterly failed to implement any reporting or information system or controls; or(b) having implemented such a system or controls, consciously failed to monitor or oversee its operations thusdisabling themselves from being informed of risks or problems requiring their attention.” Stone v. Ritter, 911 A.2d362, 370 (Del. 2006) (approving the standard set forth In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959 (Del.Ch. 1996)). See generally CORPORATE DIRECTORS GUIDEBOOK, supra note 247, at 28-30 (discussing the oversightfunction of the board of directors as to the corporation’s compliance with law, and the board’s establishment ofcompliance programs). Third, there are independent reasons to adopt an effective compliance and ethics programapart from the incentives created by the availability of mitigation under the Sentencing Guidelines. “One role ofcompliance programs is to protect the firm from its employees’ fraud.” Cox, supra note 218, at 14; see also Allen,supra note 220, at 82 (“Moreover, Cox is correct in pointing out that minimizing the combined costs ofmonitoring and sanctions is not the only reason that corporations have compliance programs. They have suchprograms in part because senior agents need information about the functioning of the organization to control it(either for reasons that owners are monitoring them or because they have financial and lawful incentives to do


strict rule of decision that requires a corporation to self-report any and allmisconduct.263

Reported experiences generally validate the predictions of the above-summarized models. “In this era of heightened regulatory scrutiny, in-housecounsel often grapple with the very difficult question of if or when they mustself-report an issue to the government.”264 Pursuant to the economic modelssummarized above, a corporation will self-report the misconduct of its employeesand agents when the expected sanction imposed upon the corporation if it does notself-report the FCPA violation to law enforcement equals or exceeds the expectedsanction imposed upon the corporation if it does self-report the FCPA violation tolaw enforcement.265 In light of the mega-fines increasingly being imposed oncorporations for serious violations of the FCPA,266 the decision on whether toself-report detected FCPA misconduct remains complex, and not necessarilyanswered in the affirmative.267

so).”). Significantly, we do not perceive the existence of compliance and ethics programs as negating the“perverse effects” of policing measures and the balancing of expected sanctions by corporations. See Allen,supra, note 220, at 81 (“[T]he perverse effect Professor Arlen first described does not preclude a corporation’squite sensibly undertaking monitoring and compliance programs . . . . But the fact that this monitoring activitymay expose firms to a heightened risk of fine or damages nevertheless must logically act as an impediment toinvestment in monitoring.”).

263. Cf. Arlen, supra note 218, at 858-60 (assuming that the misconduct would be reported by the corporation,and identifying factors in support of this “honesty assumption”).

Even if a decision is made not to disclose voluntarily detected wrongdoing to law enforcement officials, thisdoes not necessarily mean that corporations should not thoroughly investigate all facts and circumstances inconnection with the underlying misconduct. See Sue Reisinger, Why Are More Companies Self-ReportingOverseas Bribes?, CORPORATE COUNSEL (July 16, 2007), available at http://www.law.com/jsp/cc/PubArticleCC.jsp?id�1184231196297 (quoting the president of a nonprofit anticorruption organization as warning: “‘Adecision not to disclose should not be confused with sweeping the matter under the rug and crossing one’sfingers.’”). A corporation may be required to investigate the reported misconduct to truly understand the full scopeof the wrongdoing, as a prerequisite to any decision to self-report misconduct and in satisfaction of the directors’fiduciary duties. Further, as emphasized before, corporations should immediately cease any prohibited activityand undertake prompt measures to prevent further violations of law. See supra note 12.

264. Marshall, supra note 237 (posing the hypothetical of “should in-house counsel report to the [SEC] whenthey discover that an employee may have bribed a foreign government official?”).

265. See supra notes 252-53 and accompanying text.266. See supra notes 2-6 and accompanying text.267. See Gerber et al., supra note 44, at 55 (“Whether to voluntarily disclose an FCPA violation is a complex

decision, dependent upon the facts of each situation, with no guaranteed outcome.”); Melissa Klein Aguilar,Increased Enforcement of FCPA Violations, COMPLIANCE WEEK (Oct. 7, 2008), available at http://www.complianceweek.com/article/5084/increased-enforcement-of-fcpa-violations (“While there’s still a debate about themerits of voluntary disclosure, observers agree that the decision to self-report must be weighed carefully; once adisclosure is made, that act cannot be undone.”); Gibson, Dunn & Crutcher LLP, 2009 Year-End FCPA Update(Jan. 4, 2010), available at http://www.gibsondunn.com/publications/pages/2009Year-EndFCPAUpdate.aspx(“Given the multitude of factors to consider when making a voluntary disclosure decision [concerning an FCPAviolation], it is often challenging to make such a significant decision with any degree of confidence that aparticular course of action is the right one. This task is made even more difficult by the uncertainty of obtainingany particular benefits for disclosing.”); Lanny A. Breuer, Assistant Attorney Gen., DOJ Criminal Div., PreparedAddress to the 22nd National Forum on the Foreign Corrupt Practices Act (Nov. 17, 2009) [hereinafter Breuer,FCPA Address], at 4, available at http://www.justice.gov/criminal/pr/speeches-testimony/documents/11-17-


The DOJ has repeatedly urged self-reporting of FCPA bribery violations bycorporations.268 Often in doing so, the DOJ points to the mitigation provisions ofthe Sentencing Guidelines as the “carrot” that induces corporations to voluntarilydisclose misconduct to law enforcement.269 However, “[a]lthough it is certain thatcompanies do receive some benefit for self-reporting FCPA violations, the realquestion is whether the company considering a voluntary disclosure is better offfor having made the disclosure, which is not necessar[ily] one-and-the-same.”270

Corporations are aware of the “perverse incentive” from adopting and implement-ing effective preventative and policing measures. As noted by one in-housecounsel:

We’ve all heard the sentencing guidelines described as using the carrot andstick. The idea is to reward good acts and to punish the bad. But, in fact, wemay be somewhat off the mark. Companies today that take aggressive ethics

09aagbreuer-remarks-fcpa.pdf (“Besides those costs, there is still the sometimes difficult question of whether tomake a voluntary disclosure, a question I grappled with as a defense lawyer.”); Low et al., supra note 220, at 24(“Voluntary disclosures of FCPA issues are on the rise, but the decision is not—or should not be—an automaticone. The factors that bear on a decision of whether or not to disclose are multiple and often complex. . . . Al-ready, there is anecdotal evidence that some companies that have made such disclosures may regret them. Counselthat fails adequately to apprise clients of not just the potential advantages but also of the likely disadvantages ofdisclosure may find they have unhappy clients or worse.”).

268. See U.S. ATTORNEYS’ MANUAL § 9-28.800(A) (“The Department encourages such corporate self-policing,including voluntary disclosures to the government of any problems that a corporation discovers on its own.”);Breuer, FCPAAddress, supra note 267, at 4 (“I strongly urge any corporation that discovers an FCPA violation toseriously consider making a voluntary disclosure and always to cooperate with the Department.”); Lanny A.Breuer, Assistant Attorney Gen., DOJ Criminal Div., Prepared Keynote Address to The Tenth Annual Pharmaceu-tical Regulatory and Compliance Congress and Best Practices Forum (Nov. 12, 2009) [hereinafter Breuer,Pharmaceutical Address], at 3, available at http://www.justice.gov/criminal/pr/speeches-testimony/documents/11-12-09breuer-pharmaspeech.pdf (telling pharmaceutical companies that detect an FCPA violation to “seriouslyconsider voluntarily disclosing the violation and cooperating with the Department’s investigation”); see also Lowet al., supra note 220, at 5 (reporting on remarks of Assistant Attorney General Alice S. Fisher and AssistantDirector of Enforcement at the SEC Richard Grime).

269. See Lanny A. Breuer, Assistant Attorney Gen., DOJ Criminal Div., Prepared Remarks to ComplianceWeek 2010—5th Annual Conference for Corporate Financial, Legal Risk, Audit & Compliance Officers (May 26,2010) [hereinafter Breuer, Prepared Remarks], at 5, available at http://www.justice.gov/criminal/pr/speeches-testimony/documents/05-26-10aag-compliance-week-speech.pdf (noting that corporations that self-report miscon-duct and fully cooperate in FCPA investigations will be extended “meaningful credit for having done so”); Breuer,FCPA Address, supra note 267, at 4 (“The Sentencing Guidelines and the Principles of Federal Prosecution ofBusiness Organizations obviously encourage such conduct, and the Department has repeatedly stated that acompany will receive meaningful credit for that disclosure and that cooperation.”); Breuer, PharmaceuticalAddress, supra note 268, at 3 (“Conversely, a voluntary disclosure may result in no action being taken against acompany, or the company may secure other preferred dispositions, such as a deferred or non-prosecutionagreement, or a reduced fine under the Sentencing Guidelines. In this, as in so many areas, doing the right thing, inmy view, also makes good business sense.”).

270. Gibson, Dunn & Crutcher LLP, supra note 267; cf., American College of Trial Lawyers, RecommendedPractices for Companies and their Counsel in Conducting Internal Investigations, 46 AM. CRIM. L. REV. 73, 81(2009) (“Despite the DOJ Memoranda and SEC Guidance . . . , in most cases, the precise benefits of theCompany’s cooperation, if any, cannot be known at the outset of an investigation. Indeed, many companies thathave cooperated with the government have received stiff financial penalties, albeit perhaps lower than if nocooperation had been proffered.”).


and compliance steps run high risks of being beaten with their own acts, beatenwith the carrots that were supposed to lure them to do good things. Moreover,what is offered as a reward may not really be a carrot. Instead of offering realincentives, for the most part we are only shortening the stick that will be usedagainst companies.271

The resulting predicament in which corporations find themselves was accuratelydescribed by a former SEC senior administrator:

Generally, there is no legal obligation for a company to self-report. Whilegovernment officials say they give credit for self-reporting, in-house counseloften fear that the opposite is the case. They may escape government scrutinyif they keep quiet, but if they self-report they will receive no credit and insteadbe punished with a significant fine or worse.272

Specifically with respect to bribery and other corrupt activities of corporateemployees and agents that violate the FCPA, practitioners have advised corpora-tions to engage in a balancing of expected outcomes like that described in theacademic models:

Unfortunately, quantifying the benefits of FCPA voluntary disclosures isdifficult. On the one hand, a voluntary disclosure normally should result in alower penalty than what would have been assessed had the DOJ or SECdiscovered the evidence of the same violation independently or even adeclination of prosecution. On the other hand, disclosing an FCPA violationcreates a near certainty that the DOJ and SEC will look into the issue, whereasthe likelihood of independent DOJ/SEC discovery of the matter may be remotein some cases.273

The DOJ has acknowledged the concerns of corporate counsel that “there is notenough certainty in the voluntary disclosure process.”274 Moreover, in balancing

271. Joseph E. Murphy, Beating Them with Carrots and Feeding Them Sticks (Sept. 8, 1995), in U.S.Sentencing Comm’n, Corporate Crime in America: Strengthening the “Good Citizen” Corporation: Proceedingsof the Second Symposium on Crime and Punishment in the United States (1995), at 391, quoted in Baker, supranote 77, at 317.

272. Marshall, supra note 237273. Low et al., supra note 220, at 8; see also Gerber et al., supra note 44, at 55 (“If the company fails to

disclose and the potential violation is later discovered, the government is likely to view the company’s decisionwith disfavor and assess a penalty accordingly. If the company discloses, the resulting investigation could beextremely costly, with no assurance that the penalty ultimately imposed will be mitigated by the voluntarydisclosure.”); Posting of Mike Koehler, Voluntary Disclosures and the Role of FCPA Counsel, FCPA ProfessorBldg (Dec. 1, 2009), available at http://fcpaprofessor.blogspot.com/2009/12/voluntary-disclosures-and-role-of-fcpa.html (“A company deciding whether or not to voluntarily disclose to the government will thus have to weighthe risk of the government finding out about the conduct in the absence of the company’s voluntary disclosure(and thus likely assume the risk of a harsher fine/penalty) [versus] voluntarily disclosing the conduct to thegovernment, yet being able to take advantage of the above mentioned ‘carrots’.”).

274. See Alice S. Fisher, Assistant Attorney Gen., DOJ Criminal Dir., Prepared Remarks at the American BarAssociation National Institute on the Foreign Corrupt Practices Act (Oct. 16, 2006), at 5, available at


the expected sanctions associated with the decision to self-report or refrain fromself-reporting uncovered misconduct, including FCPA violations, corporationsshould account for numerous variables.275 Practitioners opine that a key variableof that analysis is the likelihood that the government will detect the misconduct276

—advice that accords with the implications of the models summarized previ-ously.277 Indeed, the relatively low expected sanction arising from a perceivedsmall probability that law enforcement will independently detect unreported wrongdoingmay dissuade corporations from undertaking expensive, internal investigations.278

We now examine in further detail, below, three variables that may affect theexpected values of reporting and not reporting an FCPA violation, therebyinfluencing a corporation’s decision on whether to self-report bribery conduct byits agent(s) that it has detected through its compliance and ethics program: (i) theprobability of independent detection by law enforcement; (ii) the availability ofmitigation; and (iii) the relative sizes of the potential sanctions.279

1. Probability of Independent Detection by Law Enforcement

An important factor for some corporate decision makers in deciding whether toself-report an internally-discovered FCPA violation is the perceived likelihoodthat, with the corporation having already detected the underlying misconduct, lawenforcement agencies will learn of the wrongdoing absent corporate self-reporting.280 The probability that the DOJ or SEC will independently detectwrongdoing is influenced not only by the nature and magnitude of the allegedbribery scheme,281 but also by the actions of both law enforcement agencies and

http://www.justice.gov/criminal/fraud/pr/speech/2006/10-16-06AAGFCPASpeech.pdf) (“I know that there is aconcern out there that there is not enough certainty in the voluntary disclosure process. And, frankly, there aregood reasons for that.”). Ms. Fisher continued, noting “that there is always a benefit to corporate cooperation,including voluntary disclosure.” Id. at 6.

275. See O’MELVENY & MYERS LLP, supra note 237, at 91. Reisinger, supra note 263.276. See Marshall, supra note 237 (“[A] key consideration will be whether the government is likely to find out

about the problem in any event.”); see also Gibson, Dunn, & Crutcher LLP, supra note 267 (“Because voluntarydisclosure makes the government aware of alleged improper conduct that it otherwise may have never discoveredon its own, the likelihood of the government uncovering the misconduct through other means, such as awhistleblower, foreign government investigation, tip from a competitor or business partner, or industry-wideinvestigation, is a critical factor in determining whether to make a voluntary disclosure.”); Reisinger, supra note263 (reporting a experienced practitioner as “acknowledging that if you don’t self-report, you are playing theFCPA lottery game— ‘gambling that this won’t come to light’”).

277. See supra notes 256-57 and accompanying text.278. See Terwilliger, supra note 237.279. See generally Kaplow & Shavell, supra note 15, at 602 (identifying reasons why actors may not report

misconduct truthfully).280. See supra notes 256-57 and accompanying text.281. See Gerber et al., supra note 44, at 60 (“The scope of the behavior at issue, including the amount of

improper payment(s), the number of improper payments, the number of individuals involved in the potentialwrongdoing, and the geographic scope of the activity, impacts the likelihood of independent discovery by the DOJand/or SEC. The more widespread the conduct, and the greater the value and number of illicit payments, thestronger the considerations may be in favor of voluntary disclosure.”).


third parties. These latter two factors may support an inference that the chances oflaw enforcement will uncover an FCPA violation without the corporation voluntar-ily disclosing such wrongdoing are high. Ultimately, though, certain corporatedecision makers may perceive the likelihood that select FCPA violations, particu-larly those that are not subject to being disclosed under the federal securities law orby whistleblowers, will be independently detected by law enforcement as beinglow, thereby militating against self-reporting.

a. Actions by Law Enforcement Increasing the Probability of IndependentDetection by Law Enforcement

Actions and new initiatives undertaken by law enforcement, both in the UnitedStates and in concert with authorities outside the United States, increase theprobability that authorities will independently detect bribery conduct before orwithout self-reporting by the corporation.282 The number of DOJ and SECenforcement actions for FCPA violations sharply increased from 2004 to 2009283—and even more dramatically when compared to the time period prior to 2000.284 Tobe certain, the U.S. government is devoting substantially more attention and

282. See Low et al., supra note 220, at 5.283. See Transcript of Press Conference Announcing Siemens AG and Three Subsidiaries Plead Guilty to

Foreign Corrupt Practices Act Violation (Dec. 15, 2008) [hereinafter Siemens Press Conference Transcript],available at http://www.justice.gov/opa/pr/2008/December/08-opa-1112.html (“Second, there is no question thatthe Department has in recent years significantly increased its FCPA enforcement. From 2001 to 2004, theDepartment resolved or charged 17 FCPA cases. For the period of 2005 to 2008, that number is 42 resolutions,representing an increase of more than 200 percent within these four years as compared to the prior four-yearperiod.”).

Law firms have collected statistics on the number of FCPA enforcement actions brought by the DOJ and theSEC. Gibson, Dunn & Crutcher LLP reports that in 2004, the DOJ brought two enforcement cases and the SECbrought three enforcement cases. In each of 2005 and 2006, the DOJ brought seven enforcement actions, whilethe SEC brought five and eight enforcement actions, respectively. The number of enforcement actions brought bythe DOJ and the SEC dramatically increased in 2007: the DOJ brought eighteen enforcement actions, and the SECbrought twenty. The volume of enforcement cases brought by the DOJ increased steadily from then: the DOJinstituted twenty and then twenty-six enforcement actions in 2008 and 2009, respectively. Since 2007, there hasbeen a decline in the number of enforcement actions brought by the SEC, with the SEC initiating thirteen andfourteen enforcement actions in 2008 and 2009, respectively. See Gibson, Dunn, & Crutcher LLP, supra note 267(also reporting “that [the] DOJ has [at] least 130 open FCPA investigations”).

Shearman & Sterling LLP has reported similar findings with specific regard to corporations. “By our count, atleast 66 corporations have disclosed investigations . . . and the Department of Justice has stated that [at] least 120companies are under investigation, up from 100 at the end of last year.” Shearman & Sterling LLP, FCPA Digest:Cases and Review Releases Relating to Bribes to Foreign Officials under the Foreign Corrupt Practices Act of1977 (Oct. 2009) [hereinafter 2009 Bribes to Foreign Officials], at i, available at http://shearman.com/files/upload/fcpa_digest.pdf. In 2008, the DOJ and SEC charged corporations in eighteen matters, a decrease from thetwenty-five charged in 2007. See id. at v. For 2009, if the number of actions is aggregated (both as againstcorporate families as well as to avoid double countries of actions brought by both the DOJ and SEC), then the DOJand SEC brought 11 actions in 2009 (of 48 total aggregated actions from 2002 through and including 2009). See2010 Trends & Patterns, supra note 7, at 4.

284. See Weiss, supra note 38, at 482 (“Traditionally both the DOJ and the SEC engaged in minimalenforcement of the FCPA. Indeed, from 1978 to 2000, the SEC and the DOJ averaged approximately three FCPAprosecutions per year, and the rare case that went to trial typically resulted in minimal penalties.”) (footnotes


resources of the DOJ, the SEC and its new Foreign Corrupt Practices Act Unittowards increased FCPA enforcement.285 U.S. law enforcement is also increas-ingly cooperating with and involving law enforcement authorities in foreignjurisdictions.286 Press releases announcing the recent mega-settlements enteredinto by Siemens AG, Kellogg Brown & Root LLC, and BAE Systems plc eachexpressly acknowledged the importance of coordination between U.S. and foreignlaw enforcement authorities.287

Investigation strategies being used by law enforcement may also increase thelikelihood of independent detection of FCPA violations. Both the DOJ and theSEC, acting with counterparts from foreign jurisdictions, are targeting specificindustries or geographic markets for potential FCPA violations.288 By conductingthese focused investigations, the DOJ and SEC will not only gain greater expertiseas to the business realities of a particular industry, but also may “glean informationabout other companies involved in the same or similar activities within theindustry.”289 Recent examples include oil and gas and pharmaceutical industries;future investigations may be aimed at corporations operating in Silicon Valley,290

omitted) (further discussing changes in the form of resolution towards an increasing number of settlements,non-prosecution agreements and deferred prosecution agreements).

285. See Khuzami, supra note 41 (announcing formation of specialized Foreign Corrupt Practices Act Unit ofthe SEC); Aguilar, supra note 267 (“The Justice Department and the SEC have stepped up their resources aimed atfighting bribery and corruption. Meanwhile, the Federal Bureau of Investigation has also devoted an entire taskforce to FCPA enforcement.”); see also 2010 Trends & Patterns, supra note 7, at 9-10 (noting increases inresources for enforcement as well as changes in agencies’ leadership).

286. See generally Eric Holder, U.S. Attorney General, Remarks at the Opening Plenary of the VI MinisterialGlobal Forum on Fighting Corruption and Safeguarding Integrity (Nov. 7, 2009) [hereinafter Holder Speech],available at http://www.justice/gov/ag/speeches/2009/ag-speech-091107.html. (recognizing international coop-eration and offering three measures to be undertaken together by law enforcement of various nations to combatcorruption); Siemens Press Conference Transcript, supra note 283 (noting that the DOJ is “now working with [its]foreign law enforcement colleagues in bribery investigations to a degree that we never have previously” andciting several examples of cooperation among law enforcement agencies of various nations in combatingcorruption of non-U.S. government officials); 2009 Bribes to Foreign Officials, supra note 283, at xix-xx(collecting several examples of cross-border cooperation by law enforcement authorities).

287. See DOJ, BAE Press Release, supra note 5; DOJ, Kellogg Brown & Root Press Release, supra note 4;DOJ, Siemens Press Release, supra note 3.

288. See Breuer, Pharmaceutical Address, supra note 268, at 1 (emphasizing that the Criminal Division of theDOJ will begin focusing on applying and enforcing the FCPA against the pharmaceutical industry based on, inpart, the full or partial nationalization of the pharmaceutical industry outside of the United States and, hence, theprevalence of foreign officials in that commercial context); SEC, Speech by SEC Staff: Remarks at NewsConference Announcing New SEC Leaders in Enforcement Division (Jan. 13, 2010), available at http://www.sec.gov/news/speech/2010/spch011310newsconf.htm (Cheryl J. Scarboro, Chief of the SEC’s ForeignCorrupt Practices Act Unit, stating that the Foreign Corrupt Practices Act Unit “will also conduct more targetedsweeps and sector-wide investigations, alone and with other regulatory counterparts both here and abroad”); seealso 2010 Trends & Patterns, supra note 7, at 8-9.

289. Gerber et al., supra note 44, at 57.290. Bruce Carton, SEC Opens FCPA Unit in San Francisco, COMPLIANCE WEEK (May 19, 2010), available at

http://www.complianceweek.com/blog/carlton/2010/05/19/SEC-Opens-FCPA-Unit-in-SanFrancisco (quoting SECAssistant Regional Director Tracey L. Davis).


and financial institutions doing business in China.291

b. Disclosure Under Applicable Laws or by Others Increasing the Probabilityof Independent Detection by Law Enforcement

The likelihood that law enforcement will independently discover FCPA briberyconduct increases to the extent that the underlying misconduct is known bywhistleblowers and other third parties, who may directly or indirectly reveal thewrongdoing to law enforcement.292 Whistleblowers may noisily leave the corpora-tion and expose FCPA violations of their former co-workers.293 FCPA violationsmay form the basis of civil litigation.294 They may also be reported to lawenforcement authorities by competitors or corporations within a single industry,sometimes because they are being investigated for their own FCPA violations.295

Reporting by competitors may be a particular risk when law enforcement authori-ties target a particular industry or foreign jurisdiction.296

291. See Aguilar, supra note 267.292. See Gerber et al., supra note 44, at 60. Recently-proposed legislation contains language that would

provide financial rewards to individuals who give information leading to sufficiently large monetary sanctions forsecurities violation, including the FCPA. See James Tillen et al., Whistleblower Rewards Could DrasticallyChange FCPA Practice, available at http://www.corporate.compliance.insights.com/2010/whistleblower-rewards-could-drastically-change-fcpa-practice (Apr. 1, 2010) (analyzing the restoring American Financial Stability Actof 2010). “The huge financial incentive for a whistleblower in FCPA cases changes the dynamics and timing of acompany’s voluntary disclosure decision. It will become more difficult to justify a ‘wait and see’ approach todisclosure if any one of a number of employees are well-placed to line their own pockets by beating the companyto the punch.” Id.

293. See Aguilar, supra note 267 (providing the example of a claim alleging FCPA violations filed by awhistleblower with the U.S. Department of Labor but coming before the Fraud Section of the DOJ). In 2007,Baker Hughes Inc. paid then-record penalties of $44 million for violations of the FCPA—a case that began with aformer employee’s filing of a civil complaint that alleged he had been improperly terminated for refusing toparticipate in a scheme to bribe Nigerian officials. See Reisinger, supra note 263.

Individuals may be further incentivized to report misconduct under the recent guidelines adopted by the SEC.See SEC ENFORCEMENT MANUAL § 6.1.1(a)(1)(ii), at 124 (2010) (directing the SEC staff, in evaluating the level ofcooperation provided by individuals, to assess “[t]he timeliness of the individual’s cooperation, including whetherthe individual was first to report the misconduct to the Commission . . . .”). The SEC has acknowledged thepotential importance of reporting by individuals: “‘There is no substitute for the insiders’ view into fraud andmisconduct that only cooperating witnesses can provide. That type of evidence can expand our ability to conductour investigations more swiftly, and to act quickly to file charges, freeze assets, and protect investors.’” PressRelease, SEC, SEC Announces Initiative to Encourage Individuals and Companies to Cooperate and Assist inInvestigations (Jan. 13, 2010) (quoting Robert Khuzami, Director of the SEC Division of Enforcement), availableat http://www.sec.gov/news/press/2010/2010-6.htm.

294. See Amir Efrati, Bribe Case Focuses on Negotiator for Alcoa, WALL ST. J., Apr. 6, 2010, at B1 (notingthat the “criminal investigation involving Alcoa was triggered by a 2008 private civil lawsuit filed by Alba in theU.S.” in which it was alleged that Alcoa and its agent conspired to overcharge Alba and, as part of that allegedscheme, paid kickbacks to a senior official at Alba).

295. See Aguilar, supra note 267 (“In some cases, prosecutors springboard from a voluntary disclosure by onecompany to open investigations into others in the same industry. For example, a voluntary disclosure by one issuerthat implicates a third-party vendor could spur an investigation into other companies that use the same vendor. Inother words, Smith says, if a competitor makes a disclosure, ‘you’ve just been invited to the party.’”)

296. See Gerber et al., supra note 44, at 57 (describing the enforcement initiative beginning with Vetco GrayControls, Inc.).


Significantly, the federal securities laws may require corporations to publiclydisclose FCPA violations. In dealing with disclosure of FCPA violations, corpora-tions may not simply deem FCPA misconduct to be immaterial because of therelatively insignificant monetary amounts involved, and should carefully considerthe application of a “qualitative materiality” standard.297 Moreover, SOX requirescorporations subject to its provisions to disclose “an assessment . . . of theeffectiveness of the internal control structure and procedures of the issuer forfinancial reporting.”298 Any “significant changes in internal controls,” and certaincorrective actions must be included in the report.299 Chief executive and financialofficers of such corporations must certify that they have disclosed to the corpora-tion’s auditors and audit committee any significant deficiencies in, and any fraudinvolving employees with a significant role in the corporation’s internal con-trols.300 To the extent that FCPA misconduct calls into question the strength andsufficiency of a corporation’s internal controls, auditors and accountants mayrescind previously granted opinions, or balk at issuing an opinion for the upcomingreporting period. These actions may bring the FCPA violation to the attention oflaw enforcement.301 Corporations must also evaluate whether disclosure is gener-ally required under Section 10(b) and 14(a) of the Exchange Act, and Exchange

297. See SEC Staff Accounting Bulletin No. 99-Materiality, 64 Fed. Reg. 45150 (Aug. 12, 1999); see alsoDoty, supra note 18, at 1240 n.23 (discussing same and Press Release, SEC, Statement of the Securities andExchange Commission Concerning Financial Penalties (Jan. 4, 2006), available at http://www.sec.gov/news/press/2006-4.htm).

298. 15 U.S.C. § 7262(a)(2) (2006).299. 15 U.S.C. § 7241(a)(6) (2006).300. 15 U.S.C. § 7241(a)(5) (2006). As part of their certifications, signing officers must also attest that certain

public securities filings of the corporation “fairly present in all material respects the financial condition and resultsof operations” of the corporation. 15 U.S.C. § 7241(a)(3) (2006). In addition to those certifications provided underRule 302, Section 906 of SOX requires the chief executive officer and chief financial officer of an issuer to certifythat certain periodic reports fully comply with Exchange Act requirements and that the information therein “fairlypresents, in all material respects, the financial condition and results of operations of the issuer.” 18 U.S.C. §1350(b). Violations of Section 906 certifications may be punished criminally. See 18 U.S.C. § 1350(c).

301. See Gerber et al., supra note 44, at 56 (“The Sarbanes-Oxley Act of 2002 . . . , with its stringentself-examination requirements, has contributed greatly to the increase in voluntary disclosures of FCPAviolations.”); Aguilar, supra note 267 (quoting Bruce Karpati, an Assistant Enforcement Director in the SEC’sNew York regional office, as saying that “SOX, which requires management to make representations about theirinternal controls over financial reporting and requires auditors to inspect them as well, ‘has been a major impetusfor cases’”); Cox, supra note 218, at 18 (noting that the withdrawal by independent auditors of previouscertifications essentially “forces” the reporting company to disclose detected violations of law); Doty, supra note18, at 1243 n.36 (noting in support of observation that there is greater pressure to self-report FCPA violations that,“‘[a]s a result of Sarbanes-Oxley requirements and strong agency encouragement to disclose voluntarily andpromptly, the pressure for doing so is stronger than ever’” (quoting Homer E. Moyer, Jr., Audit Committees andthe Foreign Corrupt Practices Act, in Foreign Corrupt Practices Act 2006, at F-46 (ABA 2006))).

The FCPA itself requires issuers to “devise and maintain a system of internal accounting controls sufficient toprovide reasonable assurances that,” among other things, “transactions are recorded as necessary . . . to permitpreparation of financial statements in conformity with generally accepted accounting principles or any othercriteria applicable to such statements . . . .” 15 U.S.C. § 78m(b)(2)(B).


Act Rule 10b-5.302

Further, disclosure of detected FCPA wrongdoing may be mandated in thecontext of mergers and acquisitions, for both targets and acquirers.303 For example,Titan Corporation (“Titan”) entered into and publicly disclosed a merger agree-ment that contained representations and warranties, qualified by its knowledge ofcompliance with the FCPA.304 These remained unchanged despite several amend-ments to the merger agreement and proxy statement.305 In settling an enforcementaction in which the SEC alleged violations of the FCPA, Titan paid over $15million in disgorgement and prejudgment interest, and the SEC “highlight[ed] theimportant principle that disclosures regarding material contractual terms such asrepresentations may be actionable by the [SEC].”306 Acquirers that conductreasonable due diligence, establish an effective compliance and ethics programshortly after closing, and remediate promptly detected FCPA violations are betterpositioned to receive a mitigated sanction—even more so to the extent thatculpable, prior owners no longer benefit from any wrongdoing.307

If a corporation must publicly disclose an FCPA violation pursuant to SOX or inthe context of a merger or acquisition, or if whistleblowers or the corporation’sauditors will disclose the FCPA violation, then the corporation will be stronglyincentivized to self-report wrongdoing to law enforcement.308 Stated differently,these scenarios present “easier” decisions for the corporation, because the possibil-ity of obtaining a mitigated sanction is likely less costly than the near certainty ofbeing liable for the larger, default sanction.309

c. Perceived Likelihood of Independent Detection by Law Enforcement

Apart from situations when disclosure is practically mandated or independentdetection by law enforcement agencies is almost inevitable, significant doubtsremain about the ability of law enforcement to uncover FCPA violations absent

302. 17 C.F.R. § 240.10b-5 (2009).303. See Gerber et al., supra note 44. For a discussion of the FCPA due diligence obligations of acquirers, see

O’MELVENY & MYERS LLP, supra note 237, at 57-65; Poston et al., supra note 23, at 13-29.304. See Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and

Commission Statement on Potential Exchange Act 10(b) and Section 14(a) Liability, SEC Rel. No. 51283 (Mar. 1,2005), available at http://www.sec.gov/litigation/investreport/34-51238.htm.

305. See id.306. Id.307. See 2009 Bribes to Foreign Officials, supra note 283, at xxiii–xxiv.308. See Gerber et al., supra note 44, at 57 (noting with respect to disclosure of FCPA violations under the

federal securities laws or in the initial public offering and merger and acquisition contexts that “the issue may nolonger be whether to disclose it to the SEC Enforcement Division and/or the Fraud Section of the DOJ’s CriminalDivision, but instead when and how to do so in order to meet the enforcement agencies’ expectations whileachieving maximum benefit for the company”).

309. See id. at 56 (“If a company is otherwise obligated to make such information public, it may beadvantageous to also disclose a potential FCPA violation to the respective enforcement arms of the SEC and theDOJ, in order to gain the ‘benefit’ from self-disclosure promised by the government, whatever that may be in agiven case.”).


self-reporting. Recently, Lanny Breuer, Assistant Attorney General of the Crimi-nal Division, explained:

Although many of these cases come to us through voluntary disclosures, whichwe certainly encourage and will appropriately reward, I want to be clear: themajority of our cases do not come from voluntary disclosures. They are theresult of pro-active investigations, whistleblower tips, newspaper stories,referrals from our law enforcement counterparts in foreign countries, and ourEmbassy personnel abroad, among other sources.310

Still, of the 25 new FCPA cases filed from 2005 through 2007, eighty-four percent,or 21 of those cases, arose after corporations self-reported their agents’ miscon-duct.311 “[I]n 2006 alone, 17 of 22 newly disclosed FCPA investigations werevoluntarily disclosed to the DOJ or SEC after the companies conducted internalinvestigations.”312

While global coordination and enforcement have increased remarkably,more than one-half of the 38 nations that were signatories to the OECD havenot yet undertaken any meaningful enforcement of it.313 Specifically, Transpar-ency International reports that only four countries—Germany, Norway, Swit-zerland and the United States—are active enforcers of anti-bribery statutes.314

Three major jurisdictions of FCPA focus, China, India and Russia, have noteven signed the OECD.315 Therefore, notwithstanding an increased anti-corruption commitment by law enforcement authorities in the United Statesand elsewhere, and more robust compliance oversight, there remains a very

310. Breuer, FCPA Address, supra note 267, at 3; see also Siemens Press Conference Transcript, supra note283 (Assistant Director of the FBI Joseph Persichini stating: “The FBI is taking a proactive and aggressiveapproach at investigating violations of FCPA. We no longer rely on companies or individuals to self report, or forwhistleblowers to call a hotline.”).

311. See Reisinger, supra note 263 (“An increasing number of businesses are taking Fisher’s advice. In fact,from 2005 to 2007, some 21 of 25 new FCPA cases were self-reported, according to a case digest published byShearman & Sterling.”); Shearman & Sterling LLP, Recent Trends & Patterns in FCPA Enforcement (Feb. 13,2008) [hereinafter 2008 Trends & Patterns], at 8, available at http://www.shearman.com/files/upload/FCPA_Trends.pdf (reporting that “44 of the 68 newly disclosed FCPA investigations in 2005-2007 werevoluntarily disclosed to the SEC or the DOJ following internal investigations by the companies”); see also PriyaCherian Huskins, FCPA Prosecutions: Liability Trend to Watch, 60 STAN. L. REV. 1447, 1449 (2008) (observingthat “[m]uch of this increase in activity may result from the tendency of companies in the post-Sarbanes Oxleyworld to conduct internal investigations and ‘self-report’ violations in hopes of gaining leniency from regula-tors”). One 2006 study of 63 convictions for violations of the FCPA also noted the prevalence of self-reporting.See Segal, supra note 15, at 186-195.

312. O’MELVENY & MYERS LLP, supra note 237, at 92-93.313. See Richard H. Girgenti, More Nations Bringing Bribery & Corruption Enforcement Actions, ETHISPHERE

(Jan. 12, 2009), available at http://ethisphere.com/more-nations-bringing-bribery-corruption-enforcement-actions/ (reporting results of study by Transparency International).

314. See Transparency International, OECD Anti-Bribery Convention Progress Report 2009, at 8, available athttp://www.transparency.org/news_room/in_focus/2009/oecd_pr_2009 (scroll down page for hyperlink to re-port).

315. See id. at 56-60.


small navy to patrol a very large ocean.316

2. Availability of Mitigation under the Sentencing Guidelines

A corporation will be further disincentivized from voluntarily disclosing FCPAviolations to law enforcement to the extent that the corporation believes that it willnot, despite having self-reported the misconduct, qualify for a fully mitigatedsanction. Disclosure is not the only condition to mitigation, and a corporation mustsatisfy other factors to obtain the maximum amount of mitigation available underthe Sentencing Guidelines.317

a. Limited Mitigation Because the Corporation Lacks an EffectiveCompliance and Ethics Program

Significantly, when deliberating whether to self-report detected misconduct, acorporation may believe that it will not be entitled to full mitigation because theDOJ or a court will not agree that the corporation had in place an effectivecompliance and ethics program. Even with the commentary of the SentencingGuidelines and plea agreements entered into with, and opinions from, the DOJ,uncertainty exists as to what constitutes an effective compliance and ethicsprogram that qualifies for a mitigated sanction.318 Nor do previous DOJ resolu-tions inspire confidence, as “corporations almost never have qualified for asentence reduction for having an effective compliance and ethics program.”319

Moreover, the decision to self-report only arises once wrongdoing has occurred

316. See Terwilliger, supra note 237, at 12 (“Viewed realistically, and despite Justice Department statisticsindicating that an ever-greater percentage of its new cases are initiated through other than voluntary disclosures,the risk of liability for a corrupt payment scheme arising in some distant land remains relatively low.”); Segal,supra note 15, at 186 (“The chances of being detected are low.”); see also Hess & Ford, supra note 220, at 312-13(collecting evidence on prevalence of corruption).

In addition, improvements in investigative techniques and strategies, and increased global cooperation amonglaw enforcement authorities, is not necessarily a complete substitute to, and indeed may complement, a leniencypolicy—a relationship demonstrated by the antitrust context. See Hammond, Evolution of Criminal AntitrustEnforcement, supra note 131, at 8, 15-17.

317. See supra notes 61-66 and accompanying text; Low et al., supra note 220, at 2, 8 (noting that this, plusprosecutorial discretion and law enforcement’s use of other enforcement tools preclude any quantification of theeffect of disclosure on the sanction imposed—an uncertainty exacerbated by, among other things, the lack oftransparency regarding law enforcement agencies’ pending FCPA enforcement actions).

318. See Baker, supra note 77, at 321. This uncertainty may be alleviated somewhat by the DOJ’s “ABBOpinion,” see DOJ, FCPA Opinion Procedure Rel. No. 04-02 (July 12, 2004), available at http://www.justice.gov/criminal/fraud/fcpa/opinion/2004/0402.pdf, which sets forth twelve elements to a “rigorous anti-corruptioncompliance code.” Id. at 2-3.

319. Gibson Dunn & Crutcher LLP, U.S. Sentencing Commission Amends Requirements for an EffectiveCompliance and Ethics Program (Apr. 13, 2010), available at http://www.gibsondunn.com/Publications/Pages/USSentencingCommissionAmendsRequirementsForEffectiveComplianceEthicsProgram.aspx; see also Bow-man, supra note 61, at 684 (noting that, as of the date of its publication, only three corporations qualified for asentence reduction for having effective compliance programs, and concluding that “the promise of a markedlyreduced fine for an effective compliance program is a carrot that virtually no one ever really gets to eat”).


and been detected.320 While one isolated incident arguably does not preclude thefinding of an effective compliance program,321 “[r]ecurrence of similar miscon-duct creates doubt regarding whether the organization took reasonable steps tomeet the requirements of this guideline.”322 Fully appreciating what it hasdetected, a corporation must then evaluate whether, in light of such malfeasance,the DOJ will conclude that it implemented and maintained an effective complianceand ethics program.

b. Limited Mitigation Because the Corporation has Unreasonably Delayed inReporting the Misconduct

To seek to avail itself of the maximum mitigated sanctions, the corporation mustalso believe that it will not be perceived, in the eyes of law enforcement, as having“unreasonably delayed reporting the offense to appropriate governmental authori-ties.”323 The risk of such a dispute, particularly in the context of alleged FCPAmisconduct, is not insignificant because there are many legitimate reasons why acorporation may not immediately report malfeasance it discovers shortly afterlearning of it. Commentators have stressed the importance of thoroughly under-standing the facts and legal risks before acting324—unquestionably sound advicethat, nevertheless, may contravene the obligation to report misconduct promptly ifthe corporation seeks to qualify for a mitigated sanction. This tension is particu-larly true in investigating FCPA violations, which reach across borders and usuallyinvolve careful concealment by wrongdoers.325

320. See Arlen & Kraakman, supra note 218, at 707; see also Bowman, supra note 61, at 685 (describing theprerequisite of an effective compliance program as a “Catch-22” and asking, “[a]fter all, if the program really hadbeen effective, should it not have prevented the commission of the crime?”).

321. See U.S.S.G. MANUAL § 8B2.1(a)(2) (“The failure to prevent or detect the instant offense does notnecessarily mean that the program is not generally effective in preventing and detecting criminal conduct.”).

322. Id. § 8B2.1 Application Note 2(D).The DOJ has previously voiced its opinion that the occurrence of misconduct by corporate agents despite the

existence of a corporate compliance program “may suggest that the corporate management is not adequatelyenforcing its program.” See McNulty Memorandum, supra note 93, at 1213. For a discussion of the role thathindsight bias may play in biasing determinations towards the conclusion that the misconduct was preventable,see Langevoort, supra note 218, at 113.

323. See supra note 63 and accompanying text. Similarly, the decision on whether to prosecute a corporationtakes into account, as one factor, “timely and voluntary disclosure of wrongdoing.” U.S. ATTORNEYS’ MANUAL

§ 9-28.300. Further, in evaluating the effectiveness of any compliance program, one of the factors that the DOJwill consider is “the promptness of any disclosure of wrongdoing to the government.” Id., § 9-28.800 cmt.

324. See Marshall, supra note 237 (“[A] hasty decision to self-report before the facts are clear is imprudent.”).325. Similar concerns have been expressed in regards to the 2010 revisions to the Sentencing Guidelines. See

Gary Fields, Plan Would Soften White-Collar Fines, WALL ST. J., Jan. 29, 2010, at A3 (noting that Susan Hackett,General Counsel and Senior Vice President for the Association of Corporate Counsel, “said the issue that ‘maycause people the most heartburn’ is the requirement that federal regulators be called in promptly. Companiescould call authorities too quickly, only to discover there was no criminal wrongdoing, she said.”).


c. Limited Mitigation Because of the Involvement of Certain High-LevelCorporate Officials

Third, a downward departure for an effective compliance and ethics programmay not be available if certain high-level officials “participated in, condoned, or[were] willfully ignorant of” a violation of the FCPA.”326 FCPA misconduct mayinvolve high level foreign government officials, as demonstrated by recenthigh-profile enforcement actions.327 The involvement of such senior executivesmay preclude the corporation from obtaining a fully mitigated sentence, and thuscorporations may be deterred from self-reporting FCPA violations.328

Commentators have criticized the Sentencing Guidelines as not affordingsufficient mitigation to promote optimal levels of monitoring, investigating andreporting by corporations “big and small.”329 This may be true for larger corpora-tions since firms with 5,000 or more employees330 are more likely to incur a higher,initial culpability score331 and, thus, any mitigation decreases the overall sanction—equal to the product of the base fine and the culpability score—by a lesserpercentage.332 But smaller corporations may also be disadvantaged, albeit by adifferent provision of the Sentencing Guidelines: the unavailability of mitigation ifhigh-level corporate officials are involved in the wrongdoing, which has a greaterlikelihood of applying to wrongdoing committed by executives at small corpora-tions.333

3. Relative Sizes of Potential Sanctions

Increases in the size of the mitigated sanction relative to that of the unmitigatedsanction, assuming that there is no change in the probability of independentdetection by law enforcement agencies, may create a disincentive for corporations

326. See supra note 64 and accompanying text.327. See, e.g., DOJ, Kellogg Brown & Root Press Release, supra note 4 (noting that KBR’s former CEO

participated in bribing Nigerian government officials); Siemens Press Conference Transcript, supra note 283(Director of the SEC’s Division of Enforcement Linda Chatman Thomsen remarking that “‘[t]he scope of thebribery scheme [involving Siemens AG] is astonishing, and the tone set at the top at Siemens was a corporateculture in which bribery was tolerated and even rewarded at the highest levels of the company’”).

328. The 2010 Amendments to the Sentencing Guidelines allow for a mitigated sanction (specifically, a threelevel mitigation of the culpability score) even though high-level executives were involved in the misconduct ifcompliance personnel directly reported to the corporation’s board of directors, the corporation’s complianceprogram detected the misconduct prior to discovery or reasonable likelihood of discovery by third parties, and thecorporation promptly reported the violation to law enforcement authorities. See 2010 Amendments to theSentencing Guidelines, supra note 62, at 17-18.

329. Arlen & Kraakman, supra note 218, at 746; see generally Khanna, Corporate Liability Standards, supranote 218, at 1269-81 (categorizing criticisms of the Sentencing Guidelines).

330. U.S.S.G. MANUAL § 8C2.5(b)(1).331. See Cindy Alexander et al., Regulating Corporate Criminal Sanctions: Federal Guidelines and the

Sentencing of Public Firms, 42 J. L. & ECON. 393, 396 (1999).332. See Arlen & Kraakman, supra note 218, at 746 n.143.333. See Krawiec, supra note 218, at 614 n.149.


to report voluntarily detected FCPA violations. Stated differently, at some thresh-old difference between the default and mitigated sanctions, a corporation will betempted to “gamble”334 at remedying the misconduct internally and not self-reporting. These conditions may occur for at least two reasons: (i) sizeable finesare imposed equally under either reporting scenario (i.e., those that are not subjectto mitigation) such that the incentives created by the mitigated portion of the finefail to overcome the expected benefits from not reporting and assuming the risk ofbeing punished with an unmitigated fine; and (ii) reporting entails unique costs.

The imposition of significant fines that are not subject to mitigation may causethe decision on self-reporting to be dominated by the decrease in expected sanctionresulting from the possibility of not being detected. In particular, the DOJ recentlyannounced its policy to seek regularly forfeiture of the proceeds of illicit activi-ties.335 Disgorgement to the SEC of profits arising from the underlying conductthat violated the FCPA may, as it has in several recent high-profile cases, comprisea significant portion of the overall sanction imposed against a corporation.336 Thecorporation may be exposed to significant civil litigation regardless of whether themalfeasance of its employees is self-reported to or independently detected by lawenforcement. Upon disclosure of the FCPA misconduct to the public, parallel ortag-along civil litigation, such as derivative shareholder and securities class actionlitigation, may ensue.337 Further, upon reporting to or being detected by law

334. Terwilliger, supra note 237, at 12 (describing election to forego internal investigations as potentiallyrisking the corporation’s economic future); see also supra note 276.

335. See Breuer, FCPA Address, supra note 267, at 5 (stating that “[e]arlier this year, [he] directed all ourattorneys to speak with their supervisors and determine in every case whether forfeiture is appropriate” as the DOJ“will seek forfeiture in all appropriate cases going forward”). Mr. Breuer expressly invoked the speech made tendays earlier by U.S. Attorney General Eric Holder at the Sixth Ministerial Global Corruption Forum on FightingCorruption and Safeguarding Integrity held in Doha, Qatar, wherein Mr. Holder advocated that law enforcementfrom various nations should cooperate to prevent corrupt foreign officials from retaining their ill-gotten proceeds.See id. at 5-6; see also Holder Speech, supra note 286, at 2.

336. See Reisinger, supra note 263 (observing that in 2004, the SEC started forcing corporations that violatedthe FCPA to disgorge any profits attributable to such wrongdoing). For example, in 2005, Titan Corp. paid athen-record $13 million in criminal fines but also $15.5 million in disgorgement. See id. In 2007, Baker Hughes,Inc. paid $11 million in criminal fines, plus $10 million in civil fines, as well as another $23 million in disgorgedprofits. See id. In 2008, Siemens AG agreed to pay approximately $350 million in disgorged profits to settle thecharges brought by the SEC, an amount that does not include profits paid to German law enforcement agencies.See SEC, Siemens Press Release, supra note 3. Then, Halliburton Co. agreed to pay $177 million indisgorgement. See SEC, KBR and Halliburton Press Release, supra note 4.

337. See Poston et al., supra note 23, at 14 (“FCPA prosecutions almost always spawn lawsuits against acompany’s officers and directors by its angry shareholders.”); Gibson, Dunn & Crutcher LLP, supra note 267(identifying specific examples of securities fraud and shareholder derivative litigation, commercial litigationinitiated by sovereign nations or market players, and employment litigation arising out of FCPA violations); seealso 2009 Bribes to Foreign Officials, supra note 283, at 350-409. For a recent example of shareholder derivativelitigation asserting that the board of directors breached their fiduciary duties by failing to prevent and detectpurported bribery of foreign government officials, and the role of corporate codes of ethics in satisfying oversightduties, see In re Dow Chem. Co. Deriv. Litig., No. 4349-CC, 2010 WL 66769, at *12-13 (Del. Ch. Jan. 11, 2010)(dismissing claim that directors violated their oversight duties under Caremark in connection with alleged briberyof Kuwaiti officials in connection with the transaction). In particular, the Delaware Court of Chancery explained


enforcement, the DOJ and SEC often inquire into related or other areas, therebyincreasing the risks and costs borne by the corporation.338

The costs attributable to sanctions other than fines and penalties imposed underthe law may further increase the sanctions imposed under both reporting alterna-tives.339 A corporation’s reputation may significantly suffer if an FCPA violationcomes to light through either independent detection by law enforcement orself-reporting by the corporation.340 In contrast, concerns about sanctions otherthan the imposition of fines and other monetary penalties, such as revocation ofexport licenses and debarment from government contracts,341 may militate stronglyin favor of self-reporting misconduct if such punishments can thereby be avoided.342

Other non-monetary benefits may accrue to a corporation only if it self-reports thewrongdoing of its employees and agents.343

Pursuing a strategy of obtaining a mitigated sanction may create unique costs.344

To be sure, a corporation’s directors, officers, employees and legal department willdevote substantial time and attention to investigating and resolving purportedFCPA misconduct—resources that otherwise could be devoted towards moredirect forms of wealth creation. A self-reporting company will also be expected tocooperate fully with law enforcement, a process that can impose substantial costs,

that “[p]laintiffs cannot simultaneously argue that the Dow board ‘utterly failed’ to meet its oversight duties yethad ‘corporate governance procedures’ in place without alleging that the board deliberately failed to monitor itsethics policy or its internal procedures.” Id. at *13, n.85.

Notably, in the antitrust context, typical civil liability in the form of joint-and-several liability and trebledamages is limited for leniency applicants to single damages based on the commerce done by the applicant SeeAntitrust Criminal Penalty Enhancement and Reform Act of 2004, Pub. L. No. 108-237, 118 Stat. 661 (2004). OnJune 9, 2010, President Barack Obama extended for ten years these restrictions on civil liability for antitrustleniency applicants. See Pub. L. No. 111-190.

338. See Low et al., supra note 220, at 11.339. We note that, regardless (and likely prior to) its decision on whether to self-report misconduct, the

corporation should appropriately discipline those offending employees and agents. This may be a painful thoughnecessary step.

340. See O’MELVENY & MYERS LLP, supra note 237, at 94 (“Even if the government agrees to a favorablesettlement after its own investigation, the company will still suffer the reputational damage of public disclosure ofthe violation . . . .”); Reisinger, supra note 263 (“FCPA violations today carry ‘a lot of risks—the size of thecriminal fines, the substantial cost of the internal investigation,’ agrees Kenneth Resnick, general counsel of GEOil & Gas, a General Electric Co. subsidiary based in Florence, Italy. ‘But perhaps the largest penalty is to acompany’s reputation.’”); Garrett, supra note 17, at 879-80. (“Even for firms without extensive reliance ongovernment contracts or licensing, the reputational effects of an indictment, much less a conviction, may besevere.”).

341. See supra note 49.342. See Reisinger, supra note 263; see also infra note 393 (explaining Siemens AG’s plea as potentially

driven by risks of debarment in Europe).343. See Gerber et al., supra note 44, at 63 (observing that “[s]elf-disclosing violations to government

enforcement agencies allows the company to set the timing and tone of the disclosure,” and that “voluntarydisclosure presents a tone of cooperation and commitment to FCPA compliance”). This may, in turn, better allowthe corporation to mitigate the negative impact that FCPA violations may have on its reputation. See id.

344. Not voluntarily reporting may have its own unique costs, such as the costs of potentially going to trial ifthe misconduct is independently detected and a resolution cannot be reached.


both in time and expenses devoted to cooperation, on a corporation.345 Forexample, Siemens reportedly spent approximately $1 billion in internal investiga-tion and cooperation costs.346

Practitioners have also noted a “recent trend in settlements . . . for the govern-ment to require independent monitors at company cost to ensure that the companyhas in place sufficient internal controls to detect and deter future FCPA violations.This can be a cumbersome and disruptive process.”347 Monitors, which may be acondition of a deferred prosecution agreement notwithstanding a thorough internalinvestigation and voluntary reporting of misconduct, continue to oversee acorporation’s business and affairs, and even “may become involved in uncoveringand remedying new criminality totally unrelated to the agreement.”348 Theirappointments impose substantial costs and burdens on corporations.349

One may argue that the increasing trend of corporations to self-report demon-strates that sufficient incentives exist to report FCPA violations. Certainly, therehas been a significant, recent rise in the number of FCPA violations self-reported tolaw enforcement. This surge has been attributed to many factors,350 including thedefault sanction imposed for not reporting.351 The reasons militating in favor ofself-reporting, however, do not apply with equal force to all would-be reporters ofFCPA violations. For example, it has been previously observed that many priorself-reports came from acquirers of corporations whose agents had violated theFCPA,352 who are better positioned to obtain a significantly reduced fine, or even adeferred or non-prosecution agreement, by arguing that the new acquirer shouldnot be held liable for the mistakes for which neither it nor its compliance and ethicsprogram participated in, were responsible for or could have prevented.353

More fundamentally, even if there has been a rise in the number of self-reports,since the overall volume of FCPA violations—reported and unreported—is un-

345. See O’MELVENY & MYERS LLP, supra note 237, at 94; Low et al., supra note 220, at 9.346. See Vardi, supra note 23, at 74 (detailing forensic and legal fees and expenses that totaled “nearly $1

billion”).347. O’MELVENY & MYERS LLP, supra note 237, at 94; see also 2010 Trends & Patterns, supra note 7, at 15

(“Since late 2004 and until very recently, virtually every FCPA corporate case resulted in the imposition of amonitor. . . . In some recent cases, the U.S. authorities have not insisted on a monitor or have agreed to a‘monitor-lite’ of some sort. It is difficult to describe this as a ‘trend,’ as each determination was likely extremelyfact-based.”).

348. Garrett, supra note 17, at 898.349. See Baer, supra note 8 at 1069-72; Peter Spivack & Sujit Raman, Regulating the ‘New Regulators’:

Current Trends in Deferred Prosecution Agreements, 45 AM. CRIM. L. REV. 159, 185-86 (2008).350. See Low et al., supra note 220, at 2-6.351. See Aguilar, supra note 267.352. See 2008 Trends & Patterns, supra note 311, at 2. (“The final development is a spike in self-reporting of

FCPA problems discovered as part of merger or acquisition activity.”).353. See Marshall, supra note 237 (explaining that “[a]nother key factor in deciding whether to self-report is

how favorable an account can be given by the company if it reports to the government,” and that “[t]hegovernment is more likely to react favorably if: . . . [t]he company’s culpability is minimal and/or it is an innocentvictim of the misconduct”).


known, one cannot tell if this increase in the number of self-reports of FCPAviolations, while positive, is meaningful. “Pointing to two or three indictments [forFCPA violations] in a recent year is like using three speeding tickets issued on aninterstate highway to make a case that speeding is under control. Without anoverall traffic rate, one cannot know whether three speeding tickets are too few ortoo many.”354 As a result of this uncertainty and the factors previously noted, therestill remains “every reason to believe that much more misconduct is unearthedwithin the corporate setting than is publicly disclosed.”355

Therefore, even assuming that a significantly reduced sanction were available toself-reporting corporations, corporations may rationally conclude based on theunique facts of their immediate situation that it is in their best interests and those oftheir shareholders to resolve internally any detected misconduct. In the specificcontext of FCPA violations, several factors may point towards a decision not toself-report: (i) the relatively low probability that the government will indepen-dently detect the malfeasance; (ii) the potential unavailability of a mitigatedsanction; and (iii) the relatively large sanctions that will be imposed under eitherreporting scenario, particularly due to forfeiture to the SEC and follow-on civillitigation. The benefits of self-reporting FCPA violations to law enforcementauthorities are thus, at best, unclear, particularly at the critical time when the boardis deciding whether to report the detected misconduct.356 Indeed, “‘[t]he benefitsof reporting are not very obvious,’ says Mary Spearing, an FCPA defense lawyer,who says executives are now questioning voluntary disclosure in instances whenSarbanes-Oxley isn’t forcing it. ‘You are embarking on an expensive relationship,and you wonder how much worse it would be if they didn’t self-report orcooperated [only] if they got caught.’”357 Certain corporate decision makers maydecide, after balancing the expected sanction for voluntarily reporting misconductagainst the expected sanction for declining to do so, to reporting voluntarily selectforms of malfeasance under certain circumstances.358

354. Segal, supra note 15, at 177.355. Cox, supra note 218, at 18.356. See Gerber et al., supra note 44, at 56 (“Unfortunately, what the ‘real, tangible benefit’ of voluntary

disclosure will be is impossible to know at the time the disclosure is made.”); Low et al., supra note 220, at 2(same); see also O’MELVENY & MYERS LLP, supra note 237, at 93 (same).

357. Vardi, supra note 23, at 76 (second alteration in original).358. One practitioner has commented that smaller scale corruption may not warrant self-reporting. See

Reisinger, supra note 263 (quoting experienced practitioner as stating “that for ‘a single instance[of bribery] and low-level [bribe] amount,’ companies may not need to self-report. For anything moreserious, . . . those ‘problems require you to walk in [to government offices] and report, especially if you are apublic company.’”); see also Arthur F. Matthews, Defending SEC and DOJ FCPA Investigations and ConductingRelated Corporate Internal Investigations: The Triton Energy/Indonesia SEC Consent Decree Settlements, 18NW. J. INT’L L. & BUS. 303, 454 (1998) (reviewing a corporation’s decision to remedy internally a “small foreignbribe”).


d. Representative Director and Executive Factual Scenarios

The precise magnitude of the disincentives under the Sentencing Guidelines toreport detected FCPA violations is impossible to calculate with certainty across allpossible forms of bribery and corruption activities and, in any event, is likely tovary depending on the specific risk profile of the corporation and the particularfacts and circumstances of each case. Companies can of course learn of serious orrelatively minor misconduct.359

In the wake of SOX, heightened vigilance of outside auditors and potentialdirector personal liability, disinterested and independent corporate decision-making bodies—such as boards of directors and audit committees of U.S. publiccorporations—are likely to be generally risk averse. Public companies, moreover,are subject to the disclosure requirements of the federal securities laws, includingthe obligations imposed by SOX. If a public corporation detects egregious FCPAviolations that are subject to significant sanctions, then these disinterested,independent and risk-averse corporate decision-making bodies will investigate andself-report such misconduct to law enforcement, particularly to seize upon anychance for a mitigated sanction.360 This scenario, emblematic of most of the recent“mega-fine”361 FCPA resolutions, will frequently result in the corporation self-reporting the misconduct. The same disinterested, independent and risk-aversecorporate decision-making bodies of U.S. public companies may reach a differentconclusion about minor or isolated bribery violations, especially if the reportingobligation is unclear. Some corporate decision making bodies may decide not toself-report certain bribery conduct to law enforcement, and instead simply seek tocure FCPA violations internally.

Directors and/or executives may generally fit into six categories: (a) directorswho are both mindful of their fiduciary duties and risk adverse—and elect to self-report and fully cooperate with respect to most if not all misconduct; (b) directorswho are mindful of their fiduciary duties and elect to weigh the benefits ofdisclosure where disclosure is an option; (c) executives and/or managers who aremindful of their fiduciary duties but in light of the guidelines, costs and outcomesof recent, highly publicized FCPA resolutions remain reluctant to fully investigatepotential matters, are leary of the benefits of protracted costly investigation,self-disclosure and full cooperation—but do remediate; (d) executives who are lessrisk adverse and are concerned about disclosure to their boards as they see noindividual protection nor convincing corporate benefits under the current FCPA

359. In each of the examples, we assume that the corporate decision making body is disinterested, independentand adhering to their fiduciary duties.

360. The incentive to self-report misconduct will be particularly intense if the corporation will be severelydamaged by a revocation of its export-import license(s) or debarred from government contracting. See supranotes 341-42 and accompanying text.

361. For purposes of this Article, a “mega-fine” is defined as combined prosecutorial and regulatory finesexceeding $100 million.


enforcement regime; (e) directors who favor minimal disclosure and remediationand opt to let the DOJ or SEC see if they can prove international bribery conduct;and (f) directors and/or executives who are wayward and/or unaware of theanti-bribery risks and legal requirements and will not report in most if not allevents. The FCPA policy proposed in this Article is most likely to persuadeuncertain directors and executives in categories (b) through (e) to self-reportbribery conduct.

Though some FCPA resolutions demonstrate that corporations can avoid convic-tion by initiating a prompt and thorough internal investigation and fully cooperat-ing with the government,362 considerable uncertainty remains as to the precisebenefits of disclosing and cooperating.363 In light of this uncertainty, corporationsmay be tempted to restrict their internal investigations to what they perceive to bethe minimum to placate law enforcement, or to disclose less than all of the relevantunderlying facts and FCPA violations.364 The risk that a corporation will engage insuch strategic behavior is increased to the extent that the corporation believes that(i) it will not receive a deferred or non-prosecution agreement, or anothermitigated sanction, and if the costs of conducting an internal investigation and fullcooperation are sufficiently high; or (ii) full disclosure of the underlying facts,particularly as uncovered in the course and as a result of a thorough internalinvestigation, would enable law enforcement to state a case against the corporationwhen, in the absence of such robust disclosure and cooperation, federal lawenforcement could not.365

IV. THE DOJ FRAUD SECTION AND FCPA LENIENCY

A. Extraordinary Corporate Investigation and Cooperation Benefits to theDOJ and SEC

An FCPA leniency policy along the lines of the Antitrust Division’s CorporateLeniency Program would impart significant benefits to law enforcement through

362. See, e.g., Deferred Prosecution Agreement, United States v. Statoil ASA, No. 06-CR-00960-RFH-1(S.D.N.Y. Oct. 13, 2006); Deferred Prosecution Agreement, Schnitzer Steel Industries, Inc. (Oct. 16, 2006).

363. See supra notes 356-57 and accompanying text.364. Cf. O’MELVENY & MYERS LLP, supra note 237, at 98 (“Under some circumstances, a company may

consider making a partial or ‘discreet’ disclosure—i.e., disclosing certain FCPA violations but not others that wereunearthed during the investigation. A company typically does so at its own peril, because the government willtypically request information on all prior potential violations of the Act and expect them to be disclosed.” (citingas an example cautioning against this approach the decision in Stolt-Nielsen, S.A. v. United States, 442 F.3d 177,180-86 (3d Cir. 2006))).

365. A corporation inclined not to fully disclose FCPA violations may fail to engage optimally outside legalcounsel and financial advisers, particularly if the corporation understands in advance that those counsel andadvisers will strongly advise the corporation to self-report, more so (in the case of non-lawyers) independentlyreport themselves, the detected wrongdoing.


increased self-reporting and cooperation by corporations.366 The DOJ and SEChave received extraordinary assistance from multinational corporate cooperatorsin FCPA investigations, including: making employees available for DOJ and/orSEC investigations; production of voluminous documents from the parent andsubsidiaries around the world; retention of forensic accountants who assisted bothcompanies and the government in investigations; extensive database searches forcritical documents; translation of voluminous documents; disclosure of culpablethird parties including agents, consultants, joint venture parties, teaming agentsand distributors; production of documentary evidence that leads to industry-wideinvestigations; cooperation with foreign law enforcement authorities; and makingemployees available for criminal trials in the United States. Still, in light of thehuge costs of such cooperation, directors may reasonably question the ultimatebenefits to the corporations and their shareholders, and seek clarity.

United States v. Siemens perhaps best illustrates the cooperative lengths andexpense to which a multinational company has gone to assist not only the U.S.government, but a foreign government in a public corruption matter. As a result ofa raid of Siemens in Munich in 2007, the German conglomerate undertook a globalcorruption investigation in 34 countries.367 Its efforts included: more than 1,750interviews and over 800 informational meetings; more than 1.5 million hours ofbillable time by outside counsel and accounting professionals; the collection andpreservation of over 100 million documents; and the restructuring and remediationof its global operations.368 Conservatively, the Siemens internal investigation isestimated to have incurred direct costs of approximately $1 billion.369 Theseefforts of course do not include the indirect costs of business interruption anddisruption to management and employees in a multi-year worldwide investigation.In many FCPA settlements, the DOJ has sought to impose on a corporation amonitor for years, who often has or retains a substantial legal and forensic team.Monitorships can cost companies millions of dollars after the conclusion oflengthy, expensive investigations.370

Other mega- and substantial-fine FCPA cases have involved significant internalinvestigative and cooperative efforts by the defendant corporation. For example, inregards to Daimler AG, the DOJ described Daimler’s cooperation in the investiga-tion as “excellent,” pointing out that the vehicle manufacturer “conducted aworldwide internal investigation, involving dozens of countries and every major

366. See Kaplow & Shavell, supra note 15, at 603 (“The incentives to report one’s conduct frequently seemweak, because the reduction in penalties for parties who admit harmful behavior is often modest even when theprobability of punishment for those not reporting their violations is substantially less than one. When this is thecase, increasing incentives for reporting harmful acts would induce more reporting and raise welfare.”).

367. See Sentencing Memorandum, United States v. Siemens AG, No. 08-CR-367 (D.D.C. Dec. 12, 2008).368. See id. at 19, 22-24.369. See supra note 346.370. See supra notes 347-49 and accompanying text.


market in which the corporation does business.”371 As a result of this internalinvestigation, 45 employees departed Daimler AG and/or its subsidiaries.372

Further, in FCPA cases in which substantial fines (though less than mega-fines)have been imposed, defendant corporations have often been required to pledge tolaw enforcement substantial, and even continuing, cooperation after havingconducted a thorough internal investigation.373

The DOJ has increasingly offered a variety of plea incentives to cor-porate cooperators including: deferred prosecution agreements;374 non-prosecution agreements;375 felony conviction of a subsidiary in lieu of the parentcompany;376 periodic payments;377 and books and records and internal controlsviolations instead of bribery violations.378 Still, the actual criteria governing adecision to prosecute leave much to prosecutorial discretion.379 Also, these finesare essentially negotiated at the end of investigations and long after the decision toself-report misconduct—without the prior benefit of specific DOJ FCPA policyguidance or clear criteria to corporate boards or managements. These incentivesmay thus not engender a fully informed and rational decision-making process by acorporation considering whether to self-report misconduct.380

B. A Leniency Policy Proposal for FCPA Offenses381

To provide greater certainty and predictability to corporations on the benefits ofself-reporting FCPA violations of employees and agents, and thereby sharpen and

371. Sentencing Memorandum, United States v. Daimler AG, No. 1:10-CR-00063-RJL (D.D.C. Mar. 24,2010) at 15 (subsection entitled “Daimler’s Cooperation and Remediation Efforts”).

372. See id.373. See, e.g., Deferred Prosecution Agreement, United States v. Willbros Group Inc., No. H-08-287 (S.D.

Tex. May 14, 2008); Press Release, DOJ, “Control Components, Inc. Pleads Guilty to Foreign Bribery Chargesand Agrees to Pay $18.2 Million Criminal Fine (July 31, 2009), available at http://www.justice.gov/opa/pr/2009/July/09-crm-754.html.

374. See, e.g., Deferred Prosecution Agreement, United States v. Willbros Group Inc., No. H-08-287 (S.D.Tex. May 14, 2008).

375. In January 2010, the SEC formally recognized these tools in its revised SEC ENFORCEMENT MANUAL. Seesupra note 99 and accompanying text.

376. See, e.g., United States v. Diagnostic Prods. Corp., No. 05-cr-482 (C.D. Cal. 2005); see also infra note393.

377. See, e.g., Deferred Prosecution Agreement, United States v. Willbros Group Inc., No. H-08-287 (S.D.Tex. May 14, 2008).

378. See, e.g., Sentencing Memorandum, United States v. Daimler AG, No. 1:10-cr-00063-RJL (D.D.C.Mar. 22, 2010).

379. See Garrett, supra note 17, at 856-57 (“All sides agree that for good or ill, federal prosecutors exercisevast discretion; Professor John C. Coffee, Jr. commented that they have ‘something close to absolute power’ whennegotiating organizational settlements.” (quoting John C. Coffee, Jr., Deferred Prosecution: Has It Gone TooFar?, NAT’L L. J., July 25, 2005, at 13)); Warin & Boutros, supra note 24, at 123-24.

380. See Baer, supra note 61, at 975-90; Warin & Boutros, supra note 24, at 132-33.381. The penalty aspects of the proposed program and policies would not have retroactive application.


influence corporate decision making on whether to self-report such misconduct,382

we propose an FCPA leniency policy patterned after the Antitrust Division’sCorporate Leniency Program. The anti-bribery leniency policy set forth belowsignificantly rewards corporations and their affiliates that promptly and responsi-bly investigate,383 remediate and disclose, and fully cooperate with the U.S.government. For corporations and their affiliates that disclose misconduct beforeany investigation begins, the proposed leniency policy envisions credit approach-ing the type of credit the Antitrust Division awarded Crompton: a substantialdiscount off of the minimum of the fine range under the Sentencing Guidelines andimmunity for most corporate officers. It also recognizes the enormous benefits thatU.S. law enforcement authorities receive when a multinational corporation con-ducts a thorough FCPA internal investigation, discloses the results of the same, andcooperates and works with either the DOJ or SEC in gathering additional requestedinformation. At the same time, it punishes corporations that fail to responsiblyinvestigate credible allegations of improper payments or fail to undertake promptlyeffective remedial measures including termination of improper payment activity.

It is beyond dispute that DOJ and SEC resources are especially limited in lightof the scope, complexity and challenges of the investigation and prosecution ofinternational bribery activity. The dedicated group of skilled DOJ and SECattorneys and FBI agents who investigate such bribery would be overwhelmed butfor corporate self-reporting, cooperation and follow-on investigation. In particular,the proposed FCPA leniency policy allows the DOJ to prosecute certain high levelexecutives (chief executive officers, chief financial officers, chief legal officers and

382. This is not to say that companies could not be rewarded by other reforms. We do not address in this Articlethe creation of an adjusted strict liability regime, with an evidentiary privilege, like that found in environmentallaw. See Krawiec, supra note 218, at 577 (“Firms can still be encouraged to engage in internal policing andcooperation with government authorities through some combination of evidentiary privilege rules and reducedsanctions for cooperation with government investigations.”); id. at 578-79 (“Fears that firms will fail toimplement internal policing measures under a strict vicarious liability system can be further alleviated throughrules that reward organizations for post-offense reporting and cooperation. For example, if organizations areoffered reduced penalties in exchange for self-detection and reporting, the incentive to implement policingmeasures under a strict liability regime may be substantially increased.”). Nor do we address creating a privateright of action to the FCPA, see generally, Koehler, supra note 21, at 420-21 (summarizing pending legislation ofTHE FOREIGN BUSINESS BRIBERY PROHIBITION ACT, H.R. 2152); Daniel Pines, Amending the Foreign CorruptPractices Act to Include a Private Right of Action, 82 CAL. L. REV. 185 (1994), a reward system that incentivizeswhistleblowers, see Tillen, supra note 292 (describing the program contained in the Restoring American FinancialStability Act that rewards whistleblowers who aid the SEC in investigating, among other things, FCPAviolations), and see generally Matt A. Vega, The Sarbanes-Oxley Act and the Culture of Bribery: Expanding theScope of Private Whistleblower Suits to Overseas Employees, 46 HARV. J. ON LEGIS. 425 (2009), the adoption ofcommon principles, see David Hess & Thomas W. Dunfee, Fighting Corruption: A Principled Approach; The C2

Principles (Combatting Corruption), 33 CORNELL INT’L L. J. 593, 615-25 (2000), or the establishment of a “publicshaming” regime, see Segal, supra note 15, at 199-203. We note that the proposed FCPA leniency policy does notpreclude adoption of these other reforms.

383. Corporations must reasonably “scope” FCPA investigations in terms of geography and time frame.Otherwise, there is a risk that the DOJ will reject a narrow, internal investigative effort, costing the corporation farmore. See TARUN, supra note 17, at 146.


chief compliance officers) who originate and/or are leaders of bribery schemeswhile allowing culpable and cooperating subordinates to receive leniency ornon-prosecution agreements. This assures a greater likelihood of timely, meaning-ful corporate cooperation by middle level and lower level executives who will beno longer uncertain about their legal status vis-a-vis the Fraud Section of theCriminal Division.384

Sections a, b and c of the proposed anti-bribery leniency policy set forth belowgenerally track in form and substance the Corporate Leniency Program of theAntitrust Division. Section d, the language and content of which comes fromrecent FCPA resolutions, provides a new incentive for corporations to implementrigorous anti-corruption policies and procedures. Section e addresses the calcula-tion of fines, proposed program with discounts and two new potential bases forupward departures. The proposed FCPA leniency policy, of course, does not meanthat the DOJ should negotiate deferred or non-prosecution agreements withcompanies or individuals in cases in which the evidence does not meet its chargingstandard, e.g., the conduct “constitutes a federal offense and . . . the admissibleevidence will probably be sufficient to obtain and sustain a conviction.”385

1. Proposed FCPA Leniency Policy

a. Leniency Before an Investigation Has Begun—Part A

Leniency (i.e., non-prosecution) shall be granted to a corporation and itsaffiliates, and certain corporate employees and agents, reporting improper pay-ment(s) to a foreign official before an investigation has begun, if the followingeight conditions are met:

(a) At the time the corporation comes forward and reports the improperpayment activity, the Fraud Section has not received credible information fromany other source about the improper payment activity being reported by thecorporation;(b) The corporation elects within sixty (60) days after receiving and verifyingpreliminary allegations of improper payments to conduct a thorough internalinvestigation, to disclose fully all material underlying facts and the results ofthe investigation to the DOJ and/or SEC, and to fully cooperate with theagency(ies);(c) The corporation, upon its discovery of the improper payment activitybeing reported, takes steps to reasonably investigate and, thereafter, takeprompt and effective action to terminate the activity;(d) In reporting improper payment activity, the corporation with candor and

384. Siemens is one corporation that instituted an internal leniency program among its employees to encouragethem to report and cooperate in Siemens’ investigation with the German and U.S. governments. See SentencingMemorandum, United States v. Siemens AG, No. 08-CR-367, at 19-20 (D.D.C. Dec. 12, 2008).

385. U.S. ATTORNEYS’ MANUAL § 9-27.220A (emphasis added).


completeness discloses all material underlying facts and provides full, con-tinuing and complete cooperation to the Fraud Section throughout theinvestigation;(e) The confession of improper payment activity is truly a corporate act, asopposed to isolated confessions of individual executives or employees;(f) If possible, the corporation makes restitution to injured parties—dependingon whether the corporation was active or passive and whether the host orforeign country prosecutes the officials who participated in the acts of bribery;(g) The corporation has not been named in an FCPA enforcement proceeding,including a deferred prosecution agreement or a non-prosecution agreement, ineight (8) years; and(h) Corporate employees or agents who are not leaders or originators ofbribery activity, who fully disclose improper payment activity to and cooperatefully with the corporation and the Fraud Section and who have not receivedany compensation or other benefits arising from or related to the improperactivity from any person or entity other than the corporation shall not beprosecuted.

b. Alternative Requirements for FCPA Leniency—Part B

If a corporation comes forward to report improper payment activity to a foreignofficial and does not meet all eight of the conditions set out in Part A, above, thenthe corporation or its affiliates, whether it or they come forward before or after aninvestigation has begun, may be granted leniency (i.e., non-prosecution) if thefollowing seven conditions are met:

(a) The corporation elects within sixty (60) days after receiving and verifyingpreliminary allegations of improper payments to conduct a thorough internalinvestigation, to disclose fully all material underlying facts and the results ofthe investigation to the DOJ and/or SEC, and to fully cooperate with theagency(ies);(b) The Fraud Section, at the time the corporation comes forward, does not yethave evidence against the corporation that is likely to result in a sustainableconviction;(c) The corporation, upon its discovery of the improper payment activitybeing reported, takes prompt and effective action to terminate the activity;(d) In reporting improper payment activity, the corporation fully discloses allmaterial underlying facts and provides full, continuing and complete coopera-tion that assists the Fraud Section in its investigation;(e) The confession of improper payment activity is truly a corporate act, asopposed to isolated confessions of individual executives or officials;(f) If possible, the corporation agrees to make restitution to injured parties—depending on whether the corporation was active or passive and whether thehost or foreign country prosecutes the corporate officials who participated inthe acts of bribery; and(g) The Fraud Section determines that granting leniency would not be unfair


to others, considering the nature of the illegal activity, the confessing corpora-tion’s role in it, and when the corporation comes forward.

In applying condition (g), the primary considerations shall be: (i) how soon thecorporation comes forward after receiving and verifying preliminary allegations ofimproper payments; (ii) whether the corporation originated the improper paymentactivity or was the leader in, or originator of, the activity; and (iii) any FCPAenforcement history. The burden of satisfying condition (g) shall be low if thecorporation comes forward when the Fraud Section has just begun an investigationinto the improper payment activity, increasing as the Fraud Section approachesobtaining credible evidence that is likely to result in a sustainable conviction.

c. FCPA Leniency for Corporate Directors, Officers, and Employees

The DOJ recognizes that the prosecution of individuals serves an importantfunction in deterring other corporate employees and agents from engaging inimproper payment activities.386 If a corporation qualifies for leniency under Part A,above, then directors, officers, and employees of the corporation and its affiliateswho admit their involvement in the improper payment activity as part of thecorporate confession,387 other than the parent corporation’s chief executive officer,chief financial officer, chief legal officer, and chief compliance officer who wereleaders in or originators of, or directly participated in or condoned, the improperpayment activity, will receive leniency, in the form of not being charged criminallyfor the illegal activity. If a corporation does not qualify for leniency under Part A,above, then only those directors, officers, and employees who come forwardpromptly, and not to include the parent corporation’s chief executive official, chieffinancial officer, chief legal officer and chief compliance officer of the corporationwho are leaders in or originators of, or directly participated in or condoned, theimproper payment activity, will be considered for immunity from criminal prosecu-tion on the same basis as if they had approached the Fraud Section individually.

d. Rigorous FCPA Compliance Program and Internal Controls

In order to promote rigorous FCPA compliance programs and internal controlsystems, which are essential to the long-term eradication of international corporatecorruption, the Fraud Section will reward corporations that have adopted andimplemented, at the time of the improper payment activities, the following: (a) asystem of internal accounting controls designed to ensure that the company makes

386. See supra note 20. Indeed, “[t]he [Antitrust] Division has long emphasized that the most effective way todeter and punish cartel activity is to hold culpable individuals accountable by seeking jail sentences.” Hammond,Recent Developments, supra note 130, at 2.

387. Such admission by such directors, officers and employees of the corporation must be made with candorand completeness, and they must continue to assist the Fraud Section throughout the investigation. For suchpersonnel who refuse to cooperate, the DOJ could carve them out of the leniency or non-prosecution agreements.


and keeps fair and accurate books, records and accounts; and (b) a “rigorous”anti-corruption compliance program with policies and procedures designed todetect and deter violations of the FCPA and other applicable anti-corruption laws.For purposes of this policy, a rigorous anti-corruption compliance program mustbe comprised of at least the following elements:388

1. A clearly articulated, written corporate policy against violations of theFCPA and other applicable anti-corruption laws.2. A system of financial and accounting procedures, including a system ofinternal accounting controls, designed to ensure the maintenance of fair andaccurate books, records and accounts.3. Promulgation of compliance policies and procedures designed to reduce theprospect of violations of FCPA, other applicable anti-corruption laws and thecorporate compliance code. These policies and procedures shall apply to alldirectors, officers and employees and, where necessary and appropriate,outside parties acting on behalf of the corporation in foreign jurisdictions,including agents, consultants, representatives, distributors, teaming partnersand joint venture partners (collectively referred to as “outside agents andbusiness partners”).4. The assignment of responsibility to one or more senior corporate officersfor the implementation and oversight of compliance with policies, standardsand procedures regarding the FCPA and other applicable anti-corruption laws.Such corporate official(s) shall have the authority to report matters directly tothe corporation’s Board of Directors, its Audit Committee, QLCC or corporatebody charged with equivalent responsibilities. For corporations with 250 ormore employees, agents or business partners in a geographic region (e.g., AsiaPacific, Europe, Middle East, Africa), there shall be one or more regionalcorporate officials responsible for the implementation and oversight of compli-ance with policies and procedures in each region.5. Mechanisms designed to ensure that the code of conduct and compliancepolicies and procedures of the corporation regarding the FCPA and otherapplicable anti-corruption laws are effectively communicated to all directors,officers and employees and, where necessary and appropriate, outside agentsand business partners. These mechanisms shall include at least the following:(A) live anti-corruption training at least every 18 months for all directors andall employees, agents and business partners who interact with governmentofficials, directly or indirectly; (B) annual certifications by all directors,employees, agents and business partners, attesting to their understanding andcompliance with the corporation’s anti-corruption program; and (C) quarterlyreports by compliance officials to the corporation’s Board of directors, itsAudit Committee or the equivalent.6. An effective internal corporate system for reporting suspected criminal

388. Many of the twelve elements are reproduced and adopted, in whole or in part, from remedial complianceprogram requirements outlined in FCPA resolutions. See, e.g., Deferred Prosecution Agreement, United States v.Daimler AG, 10-CR-00063-RJL (D.D.C. Mar. 24, 2010) (Attachment C, Corporate Compliance Program).


conduct and/or violations of the compliance policies, standards and proceduresregarding the FCPA and other applicable anti-corruption laws for directors,officers, employees, and outside agents and business partners.7. Appropriate internal corporate disciplinary procedures to address at leastthe following: violations of the FCPA, other applicable anti-corruption laws ora corporation’s code of conduct by directors, officers, employees, and outsideagents and business partners.8. Appropriate due diligence requirements pertaining to the retention andoversight of agents and business partners.9. Appropriate due diligence requirements pertaining to the acquisition of andmerger with other corporations.10. Standard provisions in agreements, contracts, and renewals thereof withall outside agents and business partners which are designed to preventviolations of the FCPA and other applicable anti-corruption laws, whichprovisions include: (A) anti-corruption representations and undertakings relat-ing to compliance with the FCPA and other applicable anti-corruption laws;(B) rights to conduct audits of the books and records of the agent or businesspartner to ensure compliance with the foregoing; and (C) rights to terminate anoutside agent or business partner as a result of any violation of anti-corruptionlaws, and regulations or representations and undertakings related to suchmatters.11. An internal audit program specifically designed to address the FCPA andcorruption risks of the corporation and its affiliates.12. Every two years, testing of the code of conduct and compliance policiesand procedures designed to evaluate their effectiveness in detecting andreducing violations of the anti-corruption laws and the corporation’s internalcontrols system.

The burden shall be on a corporation seeking a rigorous FCPA complianceprogram discount to establish a contemporaneous record of each of the aboveelements, e.g., annual teaming partner certifications, director training PowerPointsand sign-in sheets. The fact that a corporation has uncovered multiple violations ofanti-corruption laws shall not, by itself, mean that its code of conduct andcompliance policies and procedures were not rigorous, or that its internal controlswere inadequate, and therefore it is ineligible for a rigorous FCPA complianceprogram discount. However, the longer, more far reaching and systemic themisconduct, the more likely a corporation cannot meet its burden of establishingwith written documentation a contemporaneous rigorous FCPA or other anti-corruption compliance program.

All new hires and new employees as a result of a merger or acquisition shallreceive the FCPA or anti-corruption training described in Element 5 above withinsix months of the date of their new employment. If the individuals identified ashaving violated FCPA or anti-corruption laws have been employed by the corpora-tion or any of its affiliates six months or longer without having received the type ofFCPA or anti-corruption training described in Element 5 above, or without having


executed the above-referenced certifications, there shall be a rebuttable presump-tion that the corporation does not qualify for a rigorous FCPA compliance programdiscount.

e. Cooperation and Compliance Program Discounts, Third-Party Assistance,Calculation of Fines, Upward Departures, and Debarment and Suspensionunder FCPA Leniency Policy

i. Cooperation Discounts

A corporation qualifying for leniency before an investigation has begun (Part A)shall be eligible for a 40% cooperation discount off the low-end or minimum of thefine range under the U.S. Sentencing Guidelines.

A corporation qualifying for leniency after an investigation has begun (Part B)may be eligible for a 20% cooperation discount off the low end or minimum of thefine range under the U.S. Sentencing Guidelines.

ii. Rigorous FCPA Compliance Program Discount

A corporation shall be eligible for an additional 20% compliance programdiscount if it had in place at the time of the improper payment activity(ies) arigorous FCPA compliance program satisfying the criteria set forth in (d), above.

iii. Third Party Investigation and Prosecution Assistance Discount

A corporation qualifying for leniency under Part A or Part B shall be eligible foran additional 20% cooperation discount if it provides information leading to theinvestigation and prosecution of another company, or its officers or employees.

iv. Calculation of Fines

The calculation of any DOJ fine shall be based on an analysis of bribes and/ortransactions in the territory of the United States or with a territorial connection tothe United States.

The combined discounted DOJ fine under Part A or Part B leniency, theRigorous FCPA Compliance Program Discount, and/or the Third Party Investiga-tion and Prosecution Assistance Discount, shall represent the total amount payableto the United States government, that is, to the DOJ and/or SEC.389 Absentexceptional circumstances, the total amount shall be split evenly between the DOJand SEC.

389. The proposed leniency policy would not bar private litigants from seeking monetary relief; cooperatingcorporations would be barred from denying the essential bribery claims (though these corporations would be freeto contest jurisdiction and damages).


v. Investigation and Termination Plus

In the event of a conviction, the DOJ shall recommend at sentencing a 10%upward departure from the maximum Sentencing Guideline fine for a corporationwhose parent corporation’s chief executive officer, chief financial officer, chieflegal officer or chief compliance officer was in receipt of credible allegations of theimproper payment activity, and failed to conduct a prompt and reasonableinvestigation using qualified and experienced counsel.390

In the event of a conviction, the DOJ shall recommend at sentencing an additional10% upward departure from the maximum Sentencing Guideline fine for a corporationwhose parent corporation’s chief executive officer, chief financial officer, chief legalofficer or chief compliance officer was in receipt of credible allegations of improperpayment activity, and failed to implement effective remedial measures, includingimmediate termination of the improper payment activity.

vi. Debarment and Suspension by United States and Foreign Governments

The DOJ shall assist a corporation qualifying for leniency under Part A or Part Bwherever possible to avoid suspension and debarment as a U.S. or foreigngovernment contractor unless there is evidence sustainable to obtain a convictionthat the chief executive officer, chief financial officer, chief legal officer or chiefcompliance officer of the parent corporation knowingly participated in or approvedimproper payment activity with foreign officials.

The Fraud Section of the DOJ and the FCPA unit of the SEC shall work withforeign law enforcement authorities to promote and establish similar leniencypolicies offering investigation, disclosure, cooperation, third party assistance andcompliance program discounts to apply in determining foreign fines or penalties. Aforeign law enforcement agency may not recover a fine for which the United Stateshas asserted or intends to assert a fine claiming a territorial connection to theUnited States. If a foreign government does so, a United States corporation391 shallbe entitled to a credit, or set off or refund from the DOJ or SEC fine for any relatedfine paid to a foreign government. The refusal of a foreign government toprosecute corrupt officials for which evidence sustainable to obtain a convictionexists shall be considered an additional leniency factor in assessing the appropriatefine against a United States corporation, or a foreign subsidiary of same.

390. Among other things, such FCPA counsel should be sufficiently independent and disinterested in order toexercise his or her own independent, professional judgment. Qualified and experienced FCPA counsel need notnecessarily be counsel outside of the corporation.

391. For purposes of this Paragraph, a “United States corporation” shall mean any business entity headquar-tered in or formed under the laws of any jurisdiction or instrumentality of the United States.


2. Principal Impact of FCPA Proposed Leniency Policy on Four Major FCPAPlea Resolutions

Federal plea agreements with corporate defendants include a calculation of thefine under the now advisory Sentencing Guidelines. The normal three-step processinvolves a calculation of the offense level, calculation of the culpability score andcalculation of fine range. The relevant facts392 and mega-fine calculations forSiemens, KBR, BAES and Daimler are summarized below.

a. Siemens AG

In December 2008, Siemens Aktiengesellschaft (Siemens AG) and three of itssubsidiaries, pleaded guilty to FCPA-related violations. The parent was notrequired to plead guilty to a bribery violation, thereby likely avoiding mandatorydebarment in Europe.393 As part of the plea agreement, Siemens AG agreed to paya $448.5 million fine and three of its subsidiaries each agreed to pay a $500,000fine, for an aggregate total DOJ fine of $450 million.394 Over a six-year period,Siemens AG made improper payments totaling $1.36 billion, of which $805.5 mil-lion were intended for foreign government officials.395 Additionally, $554.5 mil-lion were for unknown purposes and $341 million constituted direct payments tobusiness consultants for unknown purposes.396 These payments took place in over10 countries.397 Siemens also agreed to pay a $856 million fine to the Munichprosecutor’s office.398 It additionally agreed to pay $350 million in disgorgementof profits to the SEC.399

As the United States Attorney for the District of Columbia in Washington, D.C.,commented, “[t]o its credit, Siemens has taken extraordinary steps to reveal its long-standing, systemic criminal conduct and it has fundamentally restructured its operations

392. The factual background is based only on publicly available information.393. See generally Peter B. Clark & Jennifer A. Suprenant, Siemens–Potential Interplay of FCPA Charges and

Mandatory Debarment under the Public Procurement Directive of the European Union, Presented at the ABANational Institute on White Collar Crime (Mar. 5, 2009), available at http://www.cadwalader.com/assets/article/030409ABASiemensPotentialInterplay.pdf.

394. See DOJ, Letter Detailing Terms of Plea Agreement, United States v. Siemens Aktiengesellschaft (Dec.15, 2008), ¶ 5, available at http://www.justice.gov/opa/documents/siemens.pdf; DOJ, Letter Detailing Terms ofPlea Agreement, United States v. Siemens S.A. (Argentina) (Dec. 15, 2008), ¶ 5, available at http://www.justice/gov/opa/documents/siemens-argentina-letter.pdf; DOJ, Letter Detailing Terms of Plea Agreement, United Statesv. Siemens Bangladesh Limited (Dec. 15, 2008), ¶ 5, available at http://www.justice.gov/opa/documents/siemens-bangladesh-letter.pdf; DOJ, Letter Detailing Terms of Plea Agreement, United States v. Siemens S.A. (Venezuela)(Dec. 15, 2008), ¶ 5, available at http://www.justice.gov/opa/documents/siemens-venezuela-letter.pdf.

395 See Criminal Information, United States v. Siemens Aktiengesellschaft, No. 08-CR-367-RJL, ¶ 90,available at http://www.justice.gov/opa/documents/siemens-ag-info.pdf.

396. See id.397. See generally id.398. See DOJ, Siemens Press Release, supra note 3.399. See id.


to make them honest and transparent going forward.”400 The Criminal Division assertsthat Siemens received a penalty that was 67% to 84% less than what it otherwise couldhave faced had it not provided extraordinary cooperation and carried out extensiveremediation.401 This position, however, overlooks the facts that the SEC imposed onSiemens a $350 million disgorgement of profits, Siemens paid an $856 million German-government fine, the offense level was increased by two levels for “significant conductoutside [the] U.S. jurisdiction,” and the DOJ and SEC combined have nowhere near theresources necessary to investigate one company’s activities in 34 countries or commit1.5 million hours to a single investigation.402

1. Calculation of Offense Level

§ 2B1.1(a)(2) Base Offense Level 6

§ 2B1.1(b)(1)(P) Loss of $400 Million or more 30

§ 2B1.1(b)(2)(C) Over 250 victims 6

§ 2B1.1(b)(9) Significant conduct outsideU.S. jurisdiction

2

TOTAL: 44

2. Calculation of Culpability Score

§ 8C2.5(a) Base Culpability Score 5

§ 8C2.5(b) 5,000 or more employees and higherlevel personnel involvement;pervasive tolerance

5

§ 8C2.5(a)(2) Full cooperation and acceptanceof responsibility

�2

TOTAL: 8

3. Calculation of Fine Range

Greater of the amount from table in U.S.S.G. § 8C2.3(a)(1)and (d), correspondence to offense level of 44 ($72,500,000),or the recurring loss/gain from the offense, $843,500,000,U.S.S.G. § 8C2.4(a)(2).

$843,000,000

Multiplier, culpability score of 8 (U.S.S.G. § 8C2.6) 1.6 to 3.2

Fine Range (U.S.S.G. § 8C2.7) $1,350,000,000to $2,700,000,000

Actual DOJ Fine $450,000,000

Actual SEC Fine $350,000,000

400. Id. Siemens’ cooperative efforts were detailed earlier in this Part V, supra.401. See Breuer, Prepared Remarks, supra note 269, at 5.402. See supra notes 367-68 and accompanying text.


Actual German Government Fine $856,000,000

Actual World Bank Fine $100,000,000

COMBINED FINES: $1,756,000,000

Proposed FCPA Leniency Policy Fine:(@ 20% cooperation discount, e.g.,$1,350,000,000 x 80%)

$1,080,000,000

b. Kellogg Brown & Root LLC

In February 2009, Kellogg Brown & Root LLC (KBR), a global engineering,construction and services company based in Houston, pleaded guilty to FCPA violationsin connection with a decade-long scheme to bribe Nigerian officials in connection withcontracts worth over $6 billion.403 The company admitted to having paid agents in theU.K. and Japan over $182 million for paying bribes to foreign government officials.404

KBR agreed to pay the DOJ a $402 million criminal fine.405 It, along with its formerparent company, Halliburton, also agreed to pay $177 million in disgorgement of profitsto the SEC.406 KBR additionally agreed to cooperate in the ongoing DOJ investiga-tion.407 KBR’s former president and chief executive officer Albert Jack Stanley wasindicted in 2008 for related activity, and he entered a plea agreement under which heagreed to a seven-year prison sentence.408

1. Base Fine: Based upon U.S.S.G. § 8C2.4 and U.S.S.G. § 2C1.1(d)(1)(B), the base fine is $235,500,000, whichcorresponds to the value of the benefit KBRreceived in return for the unlawful payments.



§ 8C2.5(b)(1)(A) 5,000 or more employees 5and individuals within higher levelpersonnel participated in, condonedor were willfully ignorantof the offense andtolerance of the offense bysubstantial authority personnelwas pervasive

403. Criminal Information, United States v. Kellogg Brown & Root LLC, No. H-09-071 (S.D. Tex. Feb. 6,2009), available at http://fcpaenforcement.com/FILES/tbl_s31Publications/FileUpload137/5714/KBRCriminalInformation.pdf.

404. See DOJ, Kellogg Brown & Root Press Release, supra note 4.405. See id.406. See id.407. See id.408. See id.; Plea Agreement, United States v. Stanley, No. H-08-597, ¶ 19 (S.D. Tex. Sept. 3, 2008).


§ 8C2.5(b)(2) Full cooperation in theinvestigation

�2

TOTAL: 8


Base fine: $235,500,000

Multiplier, culpability score of 8 (U.S.S.G. § 8C2.6) 1.6 to 3.2

Fine Range (U.S.S.G. § 8C2.7) $376,800,000 to $753,600,000

Actual DOJ Fine: $402,000,000

Actual SEC Fine: $177,000,000

COMBINED FINES: $579,000,000

Proposed FCPA Leniency Policy Fine:(@20% cooperation discount, e.g.,$376,000,000 x 80%)

$301,000,000

c. BAE Systems plc

In March 2010, BAE Systems plc (“BAES”) pleaded guilty to conspiring todefraud the United States by impairing and impeding its lawful functions, tomake false statements about its FCPA compliance program, and to violate theArms Export Control Act and the International Traffic in Arms Regulations.409

Among other things, BAES admitted that it retained “marketing advisors” toassist in securing sales of defense items and providing substantial benefits to aforeign government official of the Kingdom of Saudi Arabia. BAES agreed topay a $400 million criminal fine to the United States and to pay a fine of $50million to the U.K. Serious Fraud Office. While BAES agreed to providecontinuing cooperation, the DOJ press release did not detail any cooperationby BAES.410

1. Calculation of Offense Level

§ 2C1.1(a)(2) Base Offense Level 12

§ 2C1.1(b)(2) Benefit ReceivedOver $200,000,000

�28

§ 2C1.1(b)(3) High LevelDecision Maker

�4

TOTAL 44

409. See DOJ, BAE Press Release, supra note 5.410. See DOJ, Letter Detailing Terms of Plea Agreement, United States v. BAE Systems plc (Mar. 1, 2010),

¶ 10, available at http://www.justice.gov/criminal/pr/documents/03-01-10bae-plea-%20agreement.pdf.




§ 8C2.5(b) 5,000 or more employeesand higher levelpersonnel involvement;pervasive tolerance

5

§ 8C2.5(g)(3) Acceptance ofresponsibility411

�1

TOTAL 9


Base Fine: Greater of the amount from the table inU.S.S.G. ¶ 8C2.4(a)(1) & (d) corresponding toOffense level of 44 ($72,500,000), or the Pecuniaryloss/gain from the offense ($200,000,000)

$72,500,000or

$200,000,000

(U.S.S.G. § 8C2.4(a(2)):

Multipliers, culpability score of 9 (U.S.S.G. § 8C2.6)Fine Range (U.S.S.G. § 8C2.7)

1.8-3.6

Using Offense Level 44 ($72,500,000) $130,500,000to $261,000,000

Using gain/loss ($200,000,000) $360,000,000to $720,000,000

Actual DOJ Fine $400,000,000

Actual U.K. Serious Fraud Office Fine $50,000,000

COMBINED DOJ AND U.K. FINES $450,000,000

Proposed FCPA Policy Leniency $288,000,000Fine (@20% cooperation discount,e.g., $360 million x 80%)

d. Daimler AG and Three Subsidiaries

On April 1, 2010, Daimler AG and three subsidiaries, DaimlerChrysler ChinaLtd. (DCCL), DaimlerChrysler Automotive Russia SAO (DCAR), and DaimlerExport and Trade Finance GmbH (ETF), resolved an FCPA investigation, andDaimler AG agreed to pay $93.6 million in criminal fines and penalties to theDOJ and $91.4 million in disgorgement of profits to the SEC.412 The parent

411. The compliance and remediation efforts of BAES are described in more detail in the DOJ’s SentencingMemorandum. See Sentencing Memorandum, United States v. BAE Systems plc, No. 1:10-cr-00035-JDB (Feb.22, 2010), at 11-13, available at http://www.justice.gov/criminal/pr/documents/03-01-10%20bae-sentencing-memo.pdf.

412. See DOJ, Daimler Press Release, supra note 6.


company, Daimler AG, and its subsidiary, DaimlerChrysler China Ltd. (DCCL),each received a deferred prosecution agreement; the Russian subsidiary, DaimlerChrysler Automotive Russia SAO (DCAR), and its Germany subsidiary, Exportand Trade Finance GmbH (ETF), each pleaded guilty to a criminal information.413

According to court documents, Daimler AG and its subsidiaries made hundreds ofimproper payments worth over fifty million dollars to foreign officials in at least 22countries.414 Daimler’s cooperation was described by the DOJ as “excellent” andinvolved a global investigation in “dozens of countries.”415 Daimler AG agreed toan independent compliance monitor for a period of three years.416 Set forth below are theactual U.S.S.G. analyses of the parent corporation and each named subsidiary.

i. Daimler AG

Daimler AG entered into a DPA and agreed to the filing of a criminalinformation charging the parent with one count of conspiracy to violate the booksand records provisions of the DOJ FCPA and one count of violating thoseprovisions.417 Daimler AG agreed to pay a DOJ penalty of $93,600,000, orapproximately 20% below the bottom of the applicable Sentencing Guideline finerange of $116,000,000, utilizing the following analysis:

1. The 2006 U.S.S.G. are applicable to this matter.

2. Base Offense. Based upon U.S.S.G. § 2C1.1, the total offense level is 38, calculated asfollows:

(a)(2) Base Offense Level 12

(b)(1) Specific Offense Characteristic(More than one bribe) �2

(b)(2) Specific Offense Characteristic(Value of Benefit Received� $50,000,000. Based on transactionswith U.S. nexus, taking thegreater of the corrupt paymentor the benefit received foreach transaction pursuant toU.S.S.G. § 2C1.1., comment. (n.3)) �24

TOTAL 38

413. Id.414. United States’ Sentencing Memorandum, United States v. Daimler AG, No. 1:10-CR-00063-RJL, at 4-5

(D.D.C. Mar. 24, 2010).415. Id. at 15.416. United States’ Sentencing Memorandum, United States v. Daimler AG, No. 1:10-CR-00063-RJL, at 9-10

(D.D.C. Mar. 24, 2010).417. Deferred Prosecution Agreement, United States v. Daimler AG, No. 1:10-CR-00063-RJL, at ¶¶ 10-11

(D.D.C. Mar. 24, 2010).


3. Base Fine. Based upon U.S.S.G. § 8C2.4(a)(1), the base fine is $72,500,000 (fine correspond-ing to the Base Offense level as provided in Offense Level Table)

4. Calculation of Culpability Score. Based upon U.S.S.G. § 8C2.5, the culpability score is8, calculated as follows:

(a) Base Culpability Score 5

(b)(1) The organization had 5,000 or moreemployees and tolerance of theoffense by substantial authoritypersonnel was pervasive throughoutthe organization

�5

(g) The organization fully cooperated inthe investigation and clearlydemonstrated recognition and affirmativeacceptance of responsibility forits criminal conduct �2

TOTAL 8

5. Calculation of Fine Range:

Base Fine $72,500,000

Multipliers, culpabilityscore of 8 1.6-3.2

Fine Range $116,000,000/$232,000,000

6. Agreed Fine: $93,600,000

(19% below the low endof the applicable Sentencing Guidelines fine range:$116,000,000.)

The DPA acknowledged the “extensive investigation of corrupt payments made byDaimler in various countries of the world.”418

ii. DaimlerChrysler China Ltd. (DCCL)

DaimlerChrysler China Ltd. (DCCL) also entered into a DPA and agreed to thefiling of a criminal information charging it with one count of conspiracy to violatethe anti-bribery provisions and one count of violating these provisions. In light ofthe parent’s $93,600,000 DOJ penalty, the parties agreed to offset credit anypenalty against this or the two other subsidiaries. The parties agreed that if DCCL’s

418. Id. at 7.


conduct were analyzed separately from that of its parent, the following sentencingguideline analysis would apply:

1. The 2006 U.S.S.G. are applicable to this matter.



(b)(1) Specific Offense Characteristic (More than one bribe) �2

(b)(2) Specific Offense Characteristic(Value of Benefit Received � $400,000 but� $1,000,000 based on transactions with U.S.nexus, taking the greater of the corrupt paymentor the benefit received for each transactionpursuant to U.S.S.G. § 2C1.1., App. Note 3) �14

TOTAL 28

3. Base Fine. Based upon U.S.S.G. § 8C2.4(a)(1), the base fine is $6,300,000 (finecorresponding to the Base Offense level as provided in Offense Level Table).

4. Culpability Score. Based upon U.S.S.G. § 8C2.5, the culpability score is 5, calculated asfollows:


(b)(3) The organization had 50 or more employees andtolerance of the offense by substantial authoritypersonnel was pervasive throughout the organization �2

(g) The organization fully cooperated in the investigationand clearly demonstrated recognition andaffirmative acceptance of responsibilityfor its criminal conduct �2

TOTAL 5


Base Fine $6,300,000

Multipliers,culpability score of 5

1.0-2.0

Fine Range $6,300,000/$12,600,000

6. Discounted and Credited Fine: $5,040,000

(A 20% reduction below the bottom of theSentencing Guidelines (i.e., $6,300,000)results in a monetary penalty in theamount of $5,040,000.)


While a 20% discounted $5,040,000 penalty would be assessed against DCCL if itwere fined separately, the DOJ agreed to set off or credit the subsidiary’s penaltyfrom the $93,600,000 DOJ penalty.419

iii. Daimler Russia (DCAR)

Daimler Russia (DCAR) pleaded guilty to a criminal information charging thecompany with one count of conspiracy to violate the anti-bribery provision andone count of violating those provisions.420 In light of the parent’s $93,600,000DOJ penalty, the parties agreed to offset credit any penalty against this and those ofthe other two subsidiaries, but also agreed that the following sentencing analysisapplied to DCAR.



(b)(1) Specific Offense Characteristic (Morethan one bribe) �2

(b)(2) Specific Offense Characteristic (Valueof Benefit Received � $7,000,000 and� $20,000,000 based on transactionswith U.S. nexus, taking the greater ofthe corrupt payment or the benefitreceived for each transaction pursuantto U.S.S.G. § 2C1.1., comment. (n. 3)) �20

TOTAL 34




(b)(3) The organization had200 or more employeesand tolerance of theoffense by substantial authoritypersonnel was pervasive throughoutthe organization �3

419. Deferred Prosecution Agreement, United States v. DaimlerChrysler China Ltd., No. 1:10-CR-00066-RJL,at 5 (D.D.C. Mar. 24, 2010).

420. Plea Agreement, United States v. DaimlerChrysler Automotive Russia SAO, No. 1:10-CR-00064-RJL, at1-2 (D.D.C. Mar. 24, 2010).


(g) The organization fully cooperatedin investigation investigation andclearly demonstrated recognitionand affirmative acceptance ofresponsibility for its criminalconduct �2

TOTAL 6


Base Fine $28,500,000

Multipliers, culpability score of 6 1.2-2.4

Fine Range $34,200,000/$68,400,000

Discounted and Credited Fine $27,360,000421

The parties agreed that the $27,360,000 penalty against Daimler Russia would beoffset422 against the parent’s $93,600,000 DOJ penalty.

iv. Export and Trade Finance GmbH (ETF)

ETF pleaded guilty to a criminal information charging a conspiracy to violatethe anti-bribery provision and one substantive count of violating the provisions.423

Specifically, the parties agreed that the $29,120,000 penalty against ETF would beoffset against the parent’s $93,600,000 DOJ penalty, but that the following ETFsentencing analysis applied:

1. Base Offense. Based upon U.S.S.G. § 2C1.1, the total offense level is 36,calculated as follows:


(b)(1) Specific Offense Characteristic (More than one bribe) �2

(b)(2) Specific Offense Characteristic(Value of Benefit Received � $20,000,000and � $50,000,000 based on transactionswith U.S. nexus, taking the greater of the corruptpayment or the benefit received for eachtransaction pursuant to U.S.S.G. § 2C1.1.,comment. (n. 3)) �22

TOTAL 36

421. The parties agreed that the offenses of conviction should be grouped together for purposes of sen-tencing pursuant to U.S.S.G. MANUAL § 3D1.2 (2009). See Plea Agreement, United States v. DaimlerChryslerAutomotive Russia SAO, No. 1:10-CR-00064-RJL, at 5 (D.D.C. Mar. 24, 2010).

422. Id. at 5-6.423. See Plea Agreement, United States v. Daimler Export Trade Finance GmbH, No. 1:10-CR-00065-RJL, at

1-2 (D.D.C. Mar. 24, 2010).





(b)(3) The organization had 10 or more employeesand an individual within substantialauthority personnel participated in,condoned, or was willfully ignorantof the offense �1

(g) The organization fully cooperated in theinvestigation and clearly demonstratedrecognition and affirmative acceptanceof responsibility for its criminal conduct �2

TOTAL 4


Base Fine $45,500,000

Multipliers, culpability score of 4 0.8-1.6

Fine Range $36,400,000/$72,800,000424

v. Daimler AG and Subsidiaries: Low End of Guidelines—Discount Analysis

Daimler AG Low End U.S.S.G. Figure: $116,000,000

• Proposed 20% Leniency Policy Discount: $23,200,000

• Net Leniency Fine: $92,800,000

Daimler China Low End U.S.S.G. Figure: $6,300,000

• 20% Leniency Policy Discount: $1,260,000


Daimler Russia Low End U.S.S.G. Figure: $34,200,000



Export and Trade Finance Low End U.S.S.G. Figure: $36,400,000



424. The parties agreed that the offenses of conviction should be grouped together for purposes of sentencingpursuant to U.S.S.G. MANUAL § 3D1.2 (2009). See Plea Agreement, United States v. Daimler Export TradeFinance GmbH, No. 1:10-CR-00065-RJL, at 5 (D.D.C. Mar. 24, 2010).


COMBINED DOJ AND SEC FINE IMPOSEDAGAINST DAIMLER AG AND THREESUBSIDIARIES:

$185,000,000

Combined Proposed 20% Discount Leniency $154,320,000Policy Fine as to Daimler AG and Three Subsidiaries:

e. Commentary Regarding Proposed FCPA Leniency Policy Application to Sie-mens, KBR, BAE Systems and Daimler AG

The above review demonstrates the breadth of internal investigations andcorporate cooperation provided to U.S. law enforcement. It illustrates the potentialbenefits provided under a transparent and clear FCPA leniency policy to four large,multinational corporations that paid mega-fines under the Sentencing Guidelines,notwithstanding in at least three cases substantial cooperation. The parentsSiemens AG and Daimler AG were not required to plead guilty to FCPA briberycounts, thereby likely avoiding mandatory government debarment in the EuropeanUnion and possibly elsewhere. Significantly, all four corporations would not havemaximized the discounts available under the proposed leniency policy. Forexample, the four, plus the majority of public companies today, likely would notcurrently satisfy the twelve element anti-corruption compliance program andthereby be eligible for a 20% rigorous compliance program discount under theproposed FCPA leniency policy.425 Further, though much of the egregious evi-dence in Siemens, KBR, BAES and Daimler may have essentially compelledcooperation with government agencies such as the DOJ or SEC, other factualsituations may present more latitude in deciding whether to fully investigate,disclose or cooperate. It is a general goal of the proposed FCPA leniency policy toimprove the quality of FCPA and anti-corruption compliance by offering clear andsubstantial benefits to cooperating corporations but also making clear to corpora-tions that failing to address and respond to credible bribery allegations may provevery, very costly.

The above calculations assume that neither Siemens AG nor KBR nor BAES norDaimler AG voluntarily disclosed misconduct or began to fully cooperate beforeany U.S. investigation began. Thus, all four would have been ineligible for theproposed 40% leniency discount for companies that voluntarily disclose and fullycooperate. Had KBR, for example, voluntarily disclosed and cooperated under thispolicy, it would have reduced its fine by $402 million and paid only $176.9million. Significantly, the DOJ awarded Daimler AG the proposed leniencypolicy’s 20% below the low end of guidelines discount for its substantialcooperation. Its three subsidiaries were given the same 20% cooperation discount

425. See Mark Mendelsohn, Remarks at the 24th Annual Nat’l Inst. on White Collar Crime (Feb. 25, 2010)(indicating that below the Fortune 500 companies, many corporations do not have strong FCPA complianceprograms).


with a credit or setoff against the parent’s $93 million criminal fine.Siemens AG and Daimler AG, German aktiengesellschaften, and BAE Systems

plc, a U.K. public limited company, would not under the proposed leniency policybe subject to the Investigation or Termination Plus penalties, which are limited toUnited States corporations.426 Depending on facts unknown to the public, KBR, aU.S. corporation, could be subject to one or both of those penalties.427 Nothing inthe public record suggests that any of the four corporations has assisted in theinvestigation and prosecution of another corporation, its officers or employees.Therefore, none would have qualified for a 20% third party investigation andprosecution assistance discount.

Since Albert Jack Stanley, the convicted former president and chief executiveofficer of KBR, was an organizer or leader of the bribery conduct in Nigeria, heremains prosecutable for criminal charges under the proposed anti-bribery le-niency program. His plea agreement and indeed any sentence he receives as anoriginator or leader of improper payment activity would not be affected under theFCPA leniency policy. The leniency policy is not intended to in any way deter orlessen the prosecution or sentencing of the most senior officers of a corporationwho were originators or leaders of, direct participants in or condoners of improperpayment activities.

Notwithstanding extraordinary cooperation and investigation in at least three out ofthese four mega-fine cases428 and the likelihood that the full scope of their misconductwould never have been discovered by United States or other law enforcement agencies,at least three of the four corporations429 still received combined DOJ and SEC fineswithin their respective United States Sentencing Guidelines ranges. A major FCPAleniency program carrot—the proposed 20% “after the investigation begins” cooperationdiscount off the low end of the Sentencing Guidelines—approaches the cooperationdiscount Daimler and its subsidiaries, in fact, received from the DOJ, but which discountwas erased by the SEC’s $91.4 million disgorgement stick. It is much less than the 59%discount that the Antitrust Division awarded Crompton Corporation as a second-incooperator. The four FCPA mega-settlements, along with the substantial tangible andintangible costs of global internal investigations, may lead other boards of directors toconclude that the uncertain benefits of voluntary disclosures, global investigations andcontinuing cooperation are outweighed by the enormous costs to the corporation and itsshareholders. Corporations and their decision makers should be able to expect acoordinated, transparent fine and sanction policy from the United States government.

426. The $1.080 billion fine would be split by the German and U.S. governments, e.g., each receiving$540 million, and the DOJ and SEC would split the latter, each receiving $270 million.

427. The SEC v. Halliburton Co. and KBR, Inc. complaint, available at http://www.sec.gov/litigation/complaints/2009/comp20897.pdf, suggests that there was no due diligence of the two foreign agents who received over$180 million. It is possible that a 10% penalty could apply here, increasing the fine by $18 million.

428. BAES’s cooperative efforts were not characterized by the DOJ as either prompt or extraordinary.429. Siemens AG’s U.S. fines totalled $800 million, but it also was required to pay a German-government fine

of $856 million and a World Bank fine of $100 million.


V. CONCLUSION

The Antitrust Division has, through its Corporate Leniency Program, achievedan enviable record in securing landmark fines and motivating corporations andtheir executives to disclose illegal anti-competitive conduct to and cooperate earlywith U.S. law enforcement authorities. The Division’s transparent and predictablepolicies have informed directors and counsel alike of the risk of cartel conductdetection and the specific rewards of thorough investigation, self-reporting and fullcooperation. The Division has fostered self-reporting of cartel behavior world-wide, thereby increasing law enforcement’s ability to enforce antitrust laws and topromote competition compliance on a global scale.

If law enforcement policies are less transparent and predictable, then boards ofdirectors and their counsel are less able to weigh the costs and benefits ofresponsibly investigating, disclosing misconduct to the government and cooperat-ing fully with its agencies, and improving FCPA compliance resources. But ifthose policies present and promote clear and predictable benefits from disclosurethat reduce risks to companies and their directors, officers, and employees, thenmore multinational corporations will investigate, disclose, cooperate and remedi-ate, and embrace strong corporate governance principles. The proposed FCPAleniency policy for the Fraud Section of the Criminal Division will encouragemore informed decision making by all corporate decision makers, greater volun-tary disclosure, investigation and cooperation, stronger anti-corruption complianceprograms and internal controls systems, and a fairer administration of justice.Finally, it may serve as a model for other countries that have even fewer resourcesto combat bribery, increase global law enforcement coordination and informmultinational corporations how to best resolve corruption investigations world-wide.


Documents

VOLUME 47 SPRING 2010 NUMBER 2 · twenty-fifth annual survey of white collar crime editor’s note introductory essay aproposal for a united states department of justice foreign corrupt