Thank you for that kind introduction, Homer. I want to commend you on the excellent job you have done in chairing this event. And I also want to thank Frédérique and the American Conference Institute for organizing such a productive conference, and for inviting me here to address you for a second year in a row. I am truly delighted to be here.
When I spoke with you last year, I had been the Assistant Attorney General for the Criminal Division for seven months. We were on the cusp then of making significant changes in the Fraud Section and the FCPA Unit, and I told you about some of the efforts we were beginning to undertake. One year later, I’m proud to say that our FCPA enforcement is stronger than it’s ever been – and getting stronger. To give you just one metric, in the past year, we’ve imposed the most criminal penalties in FCPA-related cases in any single 12-month period – ever. Well over $1 billion.
I am aware that, for some of you, as we have become more aggressive, you have become more worried.
On one hand, I want to tell you this afternoon that you are right to be more concerned. As our track record over the last year makes clear, we are in a new era of FCPA enforcement; and we are here to stay. On the other hand, I want to impress upon you that you should not wait in worry for us to come knocking on your door. There are many steps that you can be taking that would put your organization in a better position for the day we do come knocking, or that could prevent us from coming at all.
Perhaps it’s no surprise that in the last 19 months, as we’ve stepped up our FCPA investigations and prosecutions, there are some who have stepped up their criticism of the Act itself. No doubt, some of the criticisms and suggestions out there are worth debating, and you should know that we do take serious commentary into account. For example, I am aware that some practitioners and others would like to see, in the FCPA area, an amnesty program similar to the one that exists in the realm of antitrust. Although I think there are significant differences between foreign bribery and antitrust violations, I can at least tell you that we listen to considered suggestions of this kind.
I am also aware, however, of much less thoughtful commentary. For example, there are some who have suggested recently that FCPA enforcement is "bad for business." To me, this is a little like saying that our public corruption prosecutions are "bad for government." It’s exactly upside down. As Attorney General Holder explained to an audience earlier this year, bribery in international business transactions weakens economic development; it undermines confidence in the marketplace; and it distorts competition.
So let me be perfectly clear about the Justice Department’s views on that topic: FCPA enforcement is not bad for business; it is, instead, vital to ensuring the integrity of our markets. Our FCPA enforcement program serves not only to hold accountable those who corrupt foreign officials, but in doing so it also serves to make the international business climate more transparent and fair for everyone. FCPA enforcement both roots out foreign corruption and deters it from taking hold in the first place.
Another unfounded criticism that I’m aware of is that FCPA enforcement puts American businesses at a competitive disadvantage vis-à-vis their foreign counterparts. I could not disagree more. First, we do not only prosecute U.S. companies and individuals under the FCPA. Indeed, over the last five years, more than half of our corporate FCPA resolutions have involved foreign companies or U.S. subsidiaries of foreign companies.
Second, the United States, through its FCPA enforcement efforts, leads by example; and other countries are following. For instance, the United Kingdom passed a landmark anti-bribery law earlier this year, sending a clear message to the British business community that the U.K will not tolerate bribery in international commerce. Moreover, the United States recently submitted itself to a rigorous and transparent six-month peer review process by the OECD’s Working Group on Bribery in International Business Transactions. The OECD evaluators from Argentina and the U.K. met not only with U.S. government officials, but also with representatives from 19 companies in high-risk industries, business associations, accounting and auditing firms, and non-governmental legal experts. As the first country (along with Finland) to undergo this review, we have put our enforcement program on display for all our foreign counterparts to see. And while the OECD had some constructive suggestions, it strongly commended us for our exemplary enforcement efforts – and for the extraordinary commitment of the United States to combating foreign bribery.
In front of such a sophisticated audience, I do not need to catalogue all the ways in which we have increased the pace and reach of our FCPA enforcement efforts over the past year. You have been following along. So let me instead highlight just three ways in which we have changed our approach.
First, we have reconstituted our FCPA team. At this time last year, I announced to you that the Fraud Section’s then-deputy chief in charge of the FCPA Unit had decided to pursue other opportunities; and the Chief of the Section had several months earlier made the same decision. We were therefore faced with big shoes to fill. But shortly after I addressed you, and following a nationwide search, I announced the selection of Denis McInerney to lead the Fraud Section. Denis had been a deputy chief of the criminal division in the U.S. Attorney’s Office in the Southern District of New York; served as an associate independent counsel on the Whitewater investigation of the 1990s; and was for many years after that a partner at Davis Polk & Wardwell. He is a remarkable lawyer, with tremendous energy, and he is an enormous asset to the Criminal Division.
In addition, shortly before Denis came on board in January, Greg Andres, who was the Chief of the Criminal Division in the U.S. Attorney’s Office in the Eastern District of New York and a leader in the fight against organized crime in Brooklyn, took over as the Deputy Assistant Attorney General overseeing the Fraud Section. Greg is a phenomenal prosecutor, and supervisor, and we are fortunate for his leadership. And just recently, we promoted Charles Duross to be the new deputy chief of the FCPA Unit. Chuck is a hard-charging prosecutor who has focused almost exclusively on FCPA cases since joining the Fraud Section in 2006. Among other accomplishments, he served on the team that successfully prosecuted former Congressman William Jefferson.
Additionally, in the last 19 months, we’ve substantially increased the number of prosecutors in the FCPA Unit. We now have over a dozen attorneys dedicated solely to prosecuting FCPA cases, and we have attracted to the FCPA Unit prosecutors of extremely high caliber and profile. As of this summer, for example, the Unit includes the former terrorism chief in the U.S. Attorney’s Office in Brooklyn. With this new team in place, we are well poised to continue aggressively enforcing the Act.
Although our FCPA Unit stands at the center of our enforcement program, it now also has help from the prosecutors in our Asset Forfeiture and Money Laundering Section (known as AFMLS). As I have described to other audiences, AFMLS recently initiated a new Kleptocracy Asset Recovery Initiative, which will target and recover the proceeds of foreign official corruption that have been laundered into or through the United States. In November of last year, at the Global Forum on Fighting Corruption and Safeguarding Integrity, in Qatar, Attorney General Holder pledged to redouble the U.S. commitment to recovering foreign corruption proceeds. The Kleptocracy Initiative represents a concrete step toward fulfilling that commitment. Once fully implemented, the Initiative will allow the Department to recover assets on behalf of countries victimized by high-level corruption, building on our already robust FCPA enforcement program. This partnership between the FCPA Unit and AFMLS will be an important part of our comprehensive approach to fighting foreign corruption.
United States. In November of last year, at the Global Forum on Fighting Corruption and Safeguarding Integrity, in Qatar, Attorney General Holder pledged to redouble the U.S. commitment to recovering foreign corruption proceeds. The Kleptocracy Initiative represents a concrete step toward fulfilling that commitment. Once fully implemented, the Initiative will allow the Department to recover assets on behalf of countries victimized by high-level corruption, building on our already robust FCPA enforcement program. This partnership between the FCPA Unit and AFMLS will be an important part of our comprehensive approach to fighting foreign corruption.
Second, in the last year, we have prosecuted a large number of historically significant cases. Let me single out two of them. First, as I’m sure you know, in January of this year, we unsealed indictments against 22 defendants in the military and law enforcement products industry. As I have said before, these indictments resulted from the Department’s most extensive use ever of undercover law enforcement techniques in an FCPA investigation, and they represent the single largest prosecution of individuals in the history of our FCPA enforcement efforts. I continue to believe that prosecuting individuals – and levying substantial criminal fines against corporations – are the best ways to capture the attention of the business community.
To give you some historical perspective: In 2004, we charged two individuals under the FCPA and collected around $11 million in criminal fines. In 2005, we charged five individuals and collected around $16½ million. By contrast, last year and this year combined, we’ve charged over 50 individuals and collected nearly $2 billion. Furthermore, today there are approximately 35 defendants awaiting trial on FCPA charges in the United States – in Houston, Miami, Los Angeles, and Washington, D.C. You can draw your own conclusions from these figures.
The second prosecution I want to highlight for you, we resolved less than two weeks ago – the cases against freight forwarding company, Panalpina World Transport; its U.S. subsidiary, Panalpina Inc.; and five oil and gas service companies and their subsidiaries. The Panalpina investigation, which you have likely read about, is significant for a number of reasons. First, it shows that we are increasingly able to take an industry-wide approach to our FCPA investigations. That’s because one way in which corporations obtain credit for their cooperation is by providing us with information about their competitors and their clients. In the case of Panalpina, for example, we opened our investigation in 2006 based on evidence we had obtained from Panalpina’s customers.
The Panalpina cases are also instructive for what they say about the value of cooperation. I told you last year that we would give corporations "meaningful credit" for voluntarily disclosing their conduct and cooperating with our investigation. If you have any doubt about what "meaningful credit" is, look closely at the documents disclosed with the Panalpina resolutions. You will see the range of options available to us in recognition of a company’s cooperation, and you will also see what it means to really cooperate with the government. To give you a sense, Panalpina engaged counsel to lead investigations encompassing 46 jurisdictions, hired an outside audit firm to perform forensic analysis, and promptly reported the results of its internal investigation in over 60 meetings and calls with the Department and the SEC. In part because of its extensive cooperation, we entered into a deferred prosecution agreement with the Panalpina parent company.
Noble Corporation, one of the oil and gas service companies involved in our investigation, voluntarily disclosed its conduct and also provided extensive cooperation to the Department and the SEC. In part for those reasons, we entered into a non-prosecution agreement with the company, and Noble paid a criminal penalty substantially below the bottom of the guidelines range.
In resolving these investigations, we entered into five deferred prosecution agreements, one non-prosecution agreement, and accepted two guilty pleas; and, in this instance, no defendant was required to maintain a compliance monitor. The global resolution of these cases shows, as I said, the range of options available to us. But, perhaps more importantly for you, it also shows the range of options available to corporations that are serious about cooperation and prevention.
Finally, this year has seen a substantial increase in our cooperation with our foreign counterparts. Our participation in the OECD review process, for example, has helped us to foster closer relationships with other members of the Working Group on Bribery. And these partnerships have yielded results. In last March’s resolution of the BAE Systems case, for example, in which BAE Systems plc, a U.K. company, pleaded guilty to corruption-related offenses, and agreed to pay a $400 million criminal fine, the Justice Department benefited substantially from assistance by the U.K.’s Serious Fraud Office. The same is true of the Innospec case, also resolved last March, in which Innospec Inc. pleaded guilty and agreed to pay a $14.1 million criminal fine. Partnerships like the one we have with the Serious Fraud Office are critical to our transnational approach to combating foreign bribery, and we intend increasingly to rely on our foreign partners in future cases.
In a climate in which FCPA enforcement matters; in which the United States is pursuing foreign bribery vigorously, both here and abroad; and in which the government stands ready to reward sincere cooperation, what should you and your clients be doing? Let me offer you three suggestions.
First, take a hard look at your organization’s FCPA compliance practices. It is never too early to undertake such a review. You will rest easier if you satisfy yourselves that your company is behaving responsibly and in full compliance with the law. Or, if you discover problems before we do, and then work to fix them, you will receive a benefit for having done so.
Second, if your compliance program is lacking, strengthen it. This includes finding ways to tighten internal controls and encouraging a culture of compliance. The OECD’s recently adopted "Good Practice Guidance on Internal Controls, Ethics, and Compliance" is an excellent place to start. Establishing a top-notch compliance program will not only help to prevent misconduct from occurring, but it will also improve your position with us in any eventual investigation.
Finally, voluntarily disclose wrongdoing if you discover it. As a former defense lawyer, I understand that the question of whether to self-report is a difficult one. But I can assure you that if you do not voluntarily disclose your organization’s conduct, and we discover it on our own, or through a competitor or a customer of yours, the result will not be the same. Of course, voluntary disclosure is not the only factor we consider in deciding how to resolve a particular case. We take into account all the factors set forth in the Principles of Federal Prosecution of Business Organizations, and we consider the particular facts and circumstances of each individual case. But there is no doubt that a company that comes forward on its own will see a more favorable resolution than one that doesn’t.
Foreign bribery has a severe, negative impact on international democratic institutions, the worldwide marketplace, and American businesses. The Justice Department is firmly committed to investigating and prosecuting foreign bribery wherever it occurs – because rooting out foreign bribery matters. It matters for the health of democratic institutions across the globe and it matters for the strength of international commerce. At the same time, we are also determined to reward responsible behavior. If you are equally committed to conducting business transparently and free of foreign corruption, we can be strong partners in this fight. I hope you will join us in the months and years ahead. Thank you.