David, thank you for that warm introduction. It is truly a pleasure to be here. I want to thank my friend Sam Flax for inviting me to speak with you today, and I also want to thank Ilene Reid, WMACCA’s executive director, for the excellent job she has done in organizing this event, and for being so accommodating about my schedule today, which unfortunately prevented me from being able to join you earlier.
Since I became Assistant Attorney General, in April 2009, I have spoken to many audiences about the recent reinvigoration of our criminal enforcement efforts; and in this era of heightened enforcement, I think organizations like WMACCA, which allow business leaders and lawyers to come together and share ideas, serve an especially important function. So I’m absolutely honored to be here, and to take part in your Annual Meeting Luncheon.
During my many years in private practice, I represented dozens of companies and executives in criminal and regulatory proceedings. So I have some sense of your roles and responsibilities. As general counsels and in-house attorneys, you have a keen understanding of the importance of compliance within a corporation. As the lawyers responsible for ensuring that the companies you work for always act within the bounds of the law, you are necessarily on the front lines of your organizations’ compliance efforts. And in the heightened enforcement era we are in, your jobs have never been more critical than they are today.
The focus of your Annual Meeting this year – individual liability for corporate executives and in-house counsel – is extremely important, and I commend you for devoting your attention to it. I know that the possibility of criminal liability can be a source of intense worry for corporate counsel. Although criminal charges are much rarer than civil lawsuits in the corporate world, the stakes are, of course, much higher.
The Criminal Division, as some of you may know, prosecutes cases all across the country, in every district – often, though not always, with the U.S. Attorney’s Office in that district. Our nearly 600 lawyers prosecute cases involving everything from Medicare fraud and money laundering to international narcotics trafficking and gang violence, and from child pornography and cybercrime to public and corporate corruption. Many of these crimes, for good reason, are not foremost in the minds of corporate counsel. Devising strategies on how to dismantle Mexican drug cartels, for example – an issue that my team and I are constantly working on – is not something that many of you are likely to have occasion to worry about in the course of your day. At least I hope not! So what kind of federal criminal liability might a corporation have to worry about? How might the Criminal Division’s enforcement efforts affect you?
As an initial matter, in the Criminal Division we have dramatically increased our enforcement of the Foreign Corrupt Practices Act in recent years. That statute, which was once seen as slumbering, is now very much alive and well. In fact, over the last two years, we have charged more than 50 individuals with FCPA-related offenses and collected nearly $2 billion in FCPA-related fines and penalties – by far the most people charged and penalties imposed in any similar period. We have brought these cases against some of the largest corporations in the world. As just one example, in November we resolved a wide-ranging FCPA investigation involving the freight forwarding company Panalpina World Transport, its U.S. subsidiary, and five oil and gas service providers. They agreed to pay combined criminal penalties of $156 million.
Just as important as the collection of fines and penalties, we have aggressively pursued individual executives under the FCPA. For example, we recently charged the president and the CFO of Lindsey Manufacturing Company with FCPA violations for participating in a scheme to bribe officials of the state-owned electrical utility in Mexico. We also recently arrested the former CEO and the former vice president of business development of LatiNode, a Miami-based telecommunications company, and charged them in connection with bribes made by LatiNode employees to officials of the state-owned telecommunications company in Honduras.
The Fraud Section of the Criminal Division has primary responsibility within the Department for enforcing the FCPA. We recently promoted a .ew head of the Section’s FCPA Unit and two assistant chiefs, and we have also increased the number of line prosecutors in the Unit, attracting high caliber attorneys with extensive experience – including Assistant U.S. Attorneys with significant trial and prosecutorial experience and attorneys from private practice with defense-side knowledge and experience. These changes have significantly increased our FCPA enforcement capabilities.
In addition to expanding the unit within the Fraud Section that handles FCPA cases, we have made changes across the rest of the Fraud Section as well. In January 2010, we hired a new Section Chief, and over the last 22 months we’ve hired dozens of additional prosecutors into the Section, who join an already exceptionally dedicated and talented team.
While the Fraud Section is central in our fight against financial fraud and corporate corruption, outside the Fraud Section we are also taking aggressive steps to combat financial and other crimes that may be relevant to the corporate community. In our Asset Forfeiture and Money Laundering Section, for example, we hired a new Chief of the Section last July, and we recently established a new Money Laundering and Bank Integrity Unit dedicated to prosecuting financial criminals. As I have explained to other audiences, this new Unit targets financial institutions and their managers who violate the Bank Secrecy Act and other laws; professional money launderers and gatekeepers who provide their services to criminal organizations, such as drug cartels; and individuals using new and sophisticated money laundering techniques, such as virtual currency. In the past year-and-a-half, the Section has resolved significant cases against some of the most well-known banking institutions in the country. To give two examples: In December 2009, Credit Suisse admitted to systematically evading U.S. sanctions against Iran, Sudan, Burma, Libya, and Cuba, over the course of a decade. As part of a deferred prosecution agreement with the government, Credit Suisse forfeited $536 million dollars. And last August, also as part of a deferred prosecution agreement, Barclays Bank agreed to forfeit $298 million in connection with having moved or permitted to be moved hundreds of millions of dollars through the U.S. financial system on behalf of banks in these same countries.
Another Criminal Division Section that often becomes involved in matters touching upon corporate crime is our storied Public Integrity Section. Earlier this month in a Public Integrity case, for example, Paul Magliocchetti, the founder and former president of PMA Group Inc., a lobbying firm, was sentenced to 27 months in prison for using his friends and family to make hundreds of thousands of dollars in illegal campaign contributions for the purpose of enriching himself and his firm.
I have necessarily described to you just the tip of the iceberg.
But I think you can see even from this sketch that the Department is more committed than ever to rooting out corporate malfeasance and that, as a result, there are plenty of potential pitfalls for corporations that are not diligent about compliance.
We have many tools at our disposal, and we are intent on using them.
For example, we have devoted significant resources over the past year to the increased use of sensitive investigative techniques in the white collar context.
We recently hired a new Director of the Office that reviews and approves all applications for federal wiretaps across the country, and we have also substantially increased the number of attorneys in the unit that handles them.
As I have said before, if we find credible evidence of criminal conduct – by corporate executives or the lawyers and accountants who advise them – we will not hesitate to charge it. Indeed, as I am sure you are aware, a grand jury in the District of Maryland recently indicted Lauren Stevens, a former in-house attorney for a major pharmaceutical company, charging her with obstructing justice in connection with an investigation by the Food and Drug Administration into the off-label marketing of a pharmaceutical drug. That case is being prosecuted by the Civil Division’s Office of Consumer Litigation and the U.S. Attorney’s Office in Boston.
Of course, I cannot speak about pending cases, including the case against Ms. Stevens. I can say, though, that as corporate counsel, your actions have consequences, both good and bad. You are the gatekeepers for your organizations, which means that you are both the first line of defense against potential criminal liability and the ones best positioned to identify problem areas, and fix them. As members of WMACCA who have come here today, you have shown a level of commitment to your profession and your responsibilities that I believe will serve you well. I would not expect you to be working in an organization that is lax about compliance. However, to the extent that you do, or think that improvements can be made, you are the primary agents for such change.
With that in mind, let me offer you the following challenge: To lead your corporations by example. I have often seen, from the vantage point of my corporate clients and now as the head of the Criminal Division, corporations that lie in wait for regulators or law enforcement to come knocking on their doors. I believe that you, my friends – particularly you – can and should do more. As the lawyers charged with protecting your corporations from criminal liability, the way I see it, your only incentive should be to ensure that your organization is conducting business responsibly, in every corner of the globe where it operates.
There will always be rogue employees who decide to take matters into their own hands. They are a fact of life. But when the right tone is set at the top – in the executive suite and in the general counsel’s office – you significantly reduce the risk of criminal conduct. And your jobs become easier. We are not interested in prosecuting corporations or executives or lawyers who are working hard to do the right thing. We are not interested in making cases for their own sake. We bring cases only when the facts and the law convince us that we can prove guilt beyond a reasonable doubt. Indeed, just as we will not shy away from bringing any case when the circumstances warrant, we also aim to reward responsible corporations – corporations that maintain strong compliance programs and remedy and disclose wrongdoing when they discover it.
So, friends, I encourage you to own the task of deterring and preventing crime within your organizations and to lead them down the path of responsibility and compliance. You will always be better off for having done so.
The Department of Justice is committed to rooting out corporate crime. I am personally committed to it. I hope you will be too.
Let me commend you again on your excellent program and thank you for your invitation to come here today. I am delighted to take any questions. I’m certain I haven’t answered them all.