Justice News

Assistant Attorney General Leslie R. Caldwell Delivers Remarks Highlighting Foreign Corrupt Practices Act Enforcement at The George Washington University Law School
Washington, DC
United States
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Thursday, November 3, 2016

Remarks as prepared for delivery

Thank you, Dean Susan Karamanian, for that kind introduction.  It is nice to be back at my alma mater. 

Two and a half years ago I was privileged to become the Assistant Attorney General for the Department of Justice’s Criminal Division, where more than 700 talented prosecutors work each day on all manner of cases, in courtrooms around the country and in countries around the world.  

Most people who interact with the Department of Justice around the country do so through the U.S. Attorney’s Offices.  Most of those offices focus, as they should, on the crime that takes place in their geographic districts. 

But at the Criminal Division, our focus is on subject matter rather than geography.  And as crime has become less and less confined to geographic borders, whether between judicial districts or internationally, the role of the Criminal Division has really grown, to the point where we really are a cutting edge leader in prosecuting major white collar crime.  Because we have no geographic limits, we have a national and international vantage point on crime of all types, from organized crime, to cyber, to white collar and everything else. 

And it’s with that vantage point that we have been able to shape the way the department has approached important and emerging issues in the area of white collar crime.

Today, I’d like to talk with you about three areas that I thought were of particular importance when I began my term as Assistant Attorney General, and share with you my perspective on what the Criminal Division has accomplished and where we are headed in the future.  These three areas are: first, I wanted to sharpen the focus of our ongoing fight against international corruption; second, I wanted to increase transparency in charging decisions with respect to corporate prosecutions; and, third, I wanted to encourage and foster meaningful corporate compliance and cooperation.

International corruption has long been a priority for the Department of Justice.  From the start of my time as Assistant Attorney General I made clear that this area would remain a commitment, not only by going after those individuals and corporations who engage in bribery as a way to gain a business advantage, but also by prosecuting the bribe takers.  

Corruption is far more harmful than can be measured numerically.  The World Bank estimates that more than $1 trillion is paid every year in bribes, which amounts to about 3 percent of the world economy.  But beyond the stunning waste, we all know that when corruption takes hold, the fundamental notion of playing by the rules gets pushed to the side, and individuals, businesses and governments instead begin to operate under a fundamentally unfair—and destabilizing—set of norms.  This undermines confidence in the markets and governments, and destroys the sense of fair play that is absolutely critical for the rule of law to prevail.  This is particularly acute in emerging economies, where corruption stifles economic development that would lift people out of poverty, improve infrastructure and better people’s lives.  And the fruits of corruption can prop up autocratic and oppressive rulers even in poor and wealthier countries alike.  

The effects of foreign corruption are not just felt overseas.  In today’s global economy, the negative effects of foreign corruption flow back to the United States.  American companies are harmed by global corruption when they are denied the ability to compete in a fair and transparent marketplace.  Instead of being rewarded for their efficiency, innovation and honest business practices, U.S. companies suffer at the hands of corrupt governments and lose out to corrupt competitors.   

International corruption also presents broader public safety concerns.  Indeed, criminal networks of all kinds, including narcotics traffickers, cyber criminals, terrorists and human traffickers, often take advantage of countries whose commitment to the rule of law is weakened by the corruption of its officials.  And, as we’ve seen in the more extreme cases, corrupt regimes have created safe havens for criminals and terrorists by giving them a secure base from which they can orchestrate their activities.

This is why the fight against international corruption has been, and continues to be, a core priority of the Department of Justice.  It has been a core priority for the Criminal Division, and our commitment to the fight against foreign bribery is reflected in our robust enforcement record in this area, which includes charges against corporations and individuals alike from all over the world.  Since 2009, the Criminal Division’s Fraud Section has convicted more than 65 individuals in FCPA (Foreign Corrupt Practices Act) and FCPA-related cases, and resolved criminal cases against more than 65 companies with penalties and forfeiture of approximately $4.5 billion.  

The fight against international corruption is one that I’m certain will be continued by whoever succeeds me in this role, but I’m proud to say that, over the past two and a half years, we have made some real progress, as seen in some of the most significant actions in the history of the department’s enforcement of the FCPA.  In December 2014, the French power and transportation company Alstom paid $772 million in criminal penalties in connection with a wide-ranging scheme to bribe officials in more than 10 foreign countries.  Earlier this year, the telecommunications company VimpelCom admitted that it was part of a conspiracy to make more than $114 million in payments to an official in Uzbekistan, and paid a $230 million criminal penalty to the department—part of a nearly $800 million resolution that also included charges by the SEC (Securities and Exchange Commission) and Dutch authorities.  And just last month we announced the first-ever prosecution of a hedge fund when Och-Ziff Capital Management admitted its involvement in a series of schemes to bribe officials all across Africa in order to secure investment opportunities.  These and other cases have shed light on corruption in different industries and in different regions around the world.  And those are just the cases that are now public.  

More fundamentally, we have continued to hold individuals accountable for violating our anti-corruption laws—more than a dozen in the last two and a half years alone.  These individuals run the gamut of actors involved in bribery schemes: corporate executives, middlemen and corrupt officials.  This commitment is perhaps most clearly demonstrated in an ongoing series of prosecutions involving the bribery of officials at PDVSA, Venezuela’s state-owned and controlled energy company.  To date, six individuals have been charged and have pleaded guilty, including the bribe payors who owned companies vying for Venezuelan state contracts and the corrupt officials who accepted the bribes and helped to launder the proceeds of the bribery scheme.  These cases also show that we can, and will, build cases from the ground up using traditional law enforcement techniques, even without the cooperation of the companies or even the country involved.  

These cases have been announced as we have also made significant enhancements to the division’s ability to investigate and prosecute FCPA cases.  For example, the Fraud Section is in the process of adding 10 additional prosecutors to its FCPA Unit, increasing the size of that unit by more than 50 percent.  At the same time, the FBI has established three new squads of special agents devoted to investigating international corruption.

Simultaneously, we have strengthened our coordination with foreign counterparts—sharing leads, making available essential documents and witnesses, and more generally working together to reduce criminals’ abilities to hide behind international borders.  The increase in international collaboration is not only enhancing our own FCPA enforcement efforts, but it is also resulting in growing numbers of anti-corruption enforcement actions by other countries.  

Just last week, we announced the resolution of an investigation into bribery by the Brazilian aircraft manufacturer Embraer.  In related cases, more than a dozen individuals were charged in Brazil and Saudi Arabia for their involvement in Embraer’s misconduct in those countries.

The progress made by the Criminal Division’s FCPA enforcement program is a natural complement to the work being done by our Kleptocracy Asset Recovery Initiative, which is part of our Asset Forfeiture and Money Laundering Section.  The goal of the Kleptocracy Initiative is to trace and forfeit proceeds of foreign official corruption and, where possible, to use the recovered assets to benefit the people harmed.  The FCPA and kleptocracy programs are two sides of the same anti-corruption coin: We work to bring those who pay bribes to justice.  But we also attack corruption at its source by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.  And we work to ensure that the United States is not a safe haven for money stolen by corrupt officials, and that the American financial system is not used by corrupt officials and money launderers as a conduit for the proceeds of their corruption.

The Kleptocracy Initiative is new, and its work can be painstaking and time-consuming, given the need to first identify criminal corruption, then trace proceeds through web after web of shell companies and nominee accounts, many of which are created by sophisticated professionals, like lawyers and accountants, who are skilled at making it very difficult to identify the true owners of a company or an account.  Witnesses also are hard to come by, especially when the kleptocrats or their allies are still in power.  

But despite the short life of the Kleptocracy Initiative, it already has sought to seize or restrain nearly $3 billion in assets, mostly in the United States, including mansions and other real estate, planes, cars, Impressionist art, the rights to the movie “Wolf of Wall Street” and even a glove worn by Michael Jackson.   

The work of the Kleptocracy Initiative was on display this past July, when we announced an action to seize more than $1 billion in assets that were allegedly proceeds from a massive fraud perpetrated on the people of Malaysia by officials running that country’s sovereign wealth fund.  

Because we think this is such an important initiative, we have added resources, including increasing by more than 50 percent the number of prosecutors who will be devoted to investigating and prosecuting kleptocracy matters.  These new prosecutors will work together—often in coordination—with their colleagues to advance the Criminal Division’s fight against international corruption.  

I would next like to turn to the related issue of transparency, as it has been one of my priorities to increase transparency regarding charging decisions in our corporate prosecutions.  

Corporate counsel and practitioners have long raised concerns about what is a perceived lack of transparency, and even arbitrariness, in how the department decides when to bring charges or to seek some lesser resolution in cases involving corporations.  I agree that transparency is very important. Transparency is what enables the public to understand why particular results are reached in particular cases and helps to reduce any incorrect perception that our enforcement decisions may be unreasoned or inconsistent.  Transparency also informs corporate actors and their advisors what conduct will result in what penalties and what sort of credit they can receive for self-disclosure and cooperation with an investigation.  

But criminal prosecutions are also about deterring the conduct of future would-be wrongdoers, and I believe transparency plays an important part in achieving deterrence.  Being transparent about our expectations and the consequences of corporate misconduct is another way the Criminal Division can promote lawful corporate behavior.

That is why, earlier this year, I announced a one-year pilot program in the Fraud Section’s FCPA Unit, which provides guidance to our prosecutors for corporate resolutions in FCPA cases, and which is designed to motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section and, where appropriate, remediate flaws in their controls and compliance programs.  The pilot program guidance explains the credit available to companies that voluntarily self-disclose FCPA misconduct, fully cooperate with investigations and remediate.  The pilot program dovetails with a change we made to the Filip Factors, making voluntary disclosure a separate factor to be evaluated in making corporate charging decisions, including in non-FCPA cases.

The guidance provided by the pilot program is designed to enable companies to make more rational decisions when they learn of foreign corrupt activity by their agents and employees.  Companies now understand that in any eventual investigation, a decision not to disclose wrongdoing will result in a significantly different outcome than if the company had voluntarily disclosed the conduct and cooperated in our investigation.

And what we’re seeing is that the pilot program is having an effect.  Although I can’t share precise figures, anecdotally we’ve seen an uptick in the number of companies coming in to voluntarily disclose potential FCPA violations. 

Perhaps one thing that’s motivating these companies is that they’ve seen that there are very real upsides to coming in and cooperating.  In the pilot program we said that companies who meet certain criteria—including timely disclosure and full cooperation—are eligible to receive an outright declination.  And over the last six months, we have furthered our commitment to transparency and have made public a number of declination letters to show that this result is attainable for companies that come in and cooperate.    

But we remain committed to ensuring that those who violate the law don’t profit from their crimes, even when we decline to prosecute.  That is why the pilot program requires that companies disgorge the proceeds of bribery in order to be eligible for the full benefits, including possible declination, of the program.  In most of our FCPA cases, we work in parallel with the SEC, and disgorgement of proceeds is usually part of the SEC resolution.  Under the pilot program, even when the SEC is not involved in an investigation, disgorgement is still a prerequisite.  Last month, for example, we announced separate resolutions with two private companies, where we declined to prosecute significant FCPA violations, and disgorgement was required.  We make those resolutions public, partly to show others that the pilot program provides real benefits, and partly so that the public understands that corporate wrongdoers are not being allowed to keep profits earned through bribery.  I believe that increased transparency in our FCPA charging decisions will continue to encourage voluntary corporate self-disclosure of overseas bribery, and thus more prosecutions of the individuals responsible for those crimes, and ultimately less crime.  

Beyond the pilot program, we have also sought over the past couple of years to more clearly communicate our analysis and evaluation of the considerations laid out in the nine Filip Factors.  Arriving at a corporate resolution requires a unique balancing of the Filip Factors in each case.  In each of our corporate resolutions—be it a guilty plea, deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA)—we provide a written explanation of the key factors that led to our decision.  The factual statements filed with resolution documents typically include a detailed recitation of the misconduct, as publicly admitted by the company.  The actual agreements outline the factors that were significant in determining the type of resolution, such as the corporation’s cooperation—if any—and remedial measures.  We publicly announce corporate resolutions and pleas, and make the documents available on our website.  We are trying to provide the public with a greater insight into our thought processes, analyses and conclusions. 

In addition to their use as enforcement tools, our plea agreements, DPAs and NPAs provide a transparent explanation of the department’s expectations when it comes to compliance programs.  Companies seeking to measure their own compliance programs need look no further than many of the resolutions we have made publicly available.  There is perhaps no more transparent guidance to a specific corporation than the terms in a DPA or NPA, especially when we set forth remedial or compliance measures we expect.
 
Over the course of my career, I have found that when it comes to affecting corporate conduct, nothing has a more powerful impact than concrete examples.  Such examples have traditionally stemmed from publicized corporate prosecutions, as it is more challenging to publicize investigations in which we decline to file charges.  

The challenge we continue to work to address is how to appropriately publicize these cases while taking into consideration the legitimate concerns of the companies and individuals who were under investigation.  We are continuing to look for additional ways to better inform the community about cases in which we decline to prosecute, as there is often as much to learn from a decision not to bring charges as a decision to prosecute.  We seek not just to prosecute, but to encourage and reward good corporate citizenship, and increasing transparency can play an important role in achieving that goal. 

Finally, I would like to talk about a third priority—again closely related to the two topics I’ve just discussed—corporate compliance.  

The department has long placed emphasis when reaching corporate resolutions on the existence or lack of an effective corporate compliance program.  A consistent theme of the fraud, corruption, money laundering and sanctions cases we’ve brought over the years has been a failure of corporate compliance.  In this day and age—more than a decade after the Sarbanes-Oxley Act—very few companies don’t have any compliance program.  Indeed, there’s been a marked improvement in compliance programs over the years, where in the past even large corporations had only rudimentary programs in place.  Indeed, it’s increasingly rare to see a case in which a company has a feeble corporate compliance program.  Instead, what we encounter more often are companies with compliance programs that seem strong on paper but are much weaker in practice.

Over the past 20 years in particular, the role of compliance has evolved, becoming more sophisticated, industry-specific and metrics-oriented.  Many companies have tailored their compliance programs to make sense for their businesses, risk factors, geographic regions and their work.  But some have not.  

There is no doubt that monitoring compliance on a global scale is a difficult, but difficulty cannot be used as an excuse to turn a blind eye to problematic business practices.  Compliance programs must be put into place and—more importantly—communicated repeatedly and enforced properly throughout the entire organization.

The emphasis on compliance must be heard not only in the executive suites at headquarters, but wherever the company operates around the globe.  Under the department’s internal guidance, the Principles of Federal Prosecution of Business Organizations, prosecutors must consider “the existence and effectiveness of the corporation’s pre-existing compliance program.”  As all of you know, the United States Sentencing Guidelines also expressly include a company’s corporate compliance program as a factor in corporate sentencing in criminal cases.

We recognized that as prosecutors, we were not best-positioned to evaluate whether a given company’s compliance program really worked, as opposed to looked good on paper.  We also recognized that we might not be best suited to evaluate the quality of remediation proposed or undertaken by a company, or to recommend future remediation.  That is why, last year our Fraud Section hired a compliance consultant—a former federal prosecutor with extensive compliance expertise in a range of different industries—to evaluate corporate compliance and remediation programs.  Our compliance consultant is not simply assisting us in analyzing the compliance programs of companies in resolution negotiations, she has also helped prosecutors improve how we approach investigations.  

With the benefit of the experience of the compliance consultant, we are able to conduct more exacting interviews of compliance personnel and other witnesses.  But the compliance consultant also brings with her a real-world understanding of the corporate compliance function in companies in different industries, both big and small.  

In the last two and a half years, I believe we have made significant progress in the three areas I have described.  And I am sure that my successor will continue the fight against international corruption and will do so transparently, in particular to encourage corporate and individual compliance with the law. 

Updated November 3, 2016