SSRN

04/20/2011

FCPA Sanctions: Too Big to Debar?

I recently co-authored an article that examines the Foreign Corrupt Practices Act (FCPA) and asks, are some federal contractors too big to debar? I answer this question in a recent guest post on the FCPA Blog (here). The article may be downloaded in its entirety here.* 

Here are a few of the initial reviews: 

"Provocative"

A "valuable contribution"

"Love it"

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*I’d like to thank Professor Koehler for lending his valuable insight and expertise to this article. You can read his commentary on the article at the FCPA Professor blog here. I'd also like to thank the following websites for helping promote our article:

Abstract: The Foreign Corrupt Practices Act (FCPA) criminalizes bribery of foreign government officials; the frequency of enforcement actions and severity of fines levied against corporations under the FCPA have significantly increased in the last few years. There is an ongoing problem, however, with the sanctions for FCPA violations: enforcement authorities (DOJ and SEC) and contracting officials have limited themselves to fines, civil penalties, and occasional imprisonment of individual violators. Debarment from future federal government contracts, even temporarily, is an unused sanction for FCPA violations, even though Congress provided for this punishment by statute. Debarment offers a far more potent deterrent than fines and penalties, as multinational contractors that conduct business with the U.S. are much less likely to view the sanction as merely a cost of doing business. If ridding foreign markets of corruption truly is a top priority of the U.S., it seems both unfair and imprudent for federal agencies to continue awarding lucrative, multibillion-dollar contracts to firms recently prosecuted for fraudulently obtaining such contracts overseas. 

Enforcement officials shy away from debarring entities that violate the FCPA due to the short-term inconvenience of an agency’s inability to transact business with its favorite contractor, its inability to demand favorable bids from contractors when the field of potential bidders has thinned, the resulting job loss, and the risk of overdeterring companies that might otherwise pursue lucrative opportunities in emerging markets. This is the "too big to debar" problem – the federal government is too dependent on a particular set of large, private-sector corporations for equipment and services. In addition to the virtual immunity from debarment enjoyed by these firms when they violate the FCPA, the fines imposed for engaging in foreign corrupt practices comprise a tiny fraction of the potential revenue generated by lucrative contracts with the U.S. and foreign states. When discounted by the low probability of detection, these sanctions are far too low to deter unlawful activity. 

Debarment would deter potential wrongdoers and incapacitate actual offenders. The deterrent would induce more firms to comply with the law, which would allow the “too big to debar” problem to diminish over time. To help illuminate these concerns and lend support to the thesis, this Article will examine the third largest FCPA-related enforcement action to date: the BAE Systems case. On March 1, 2010, BAE Systems paid approximately $400 million in fines for its corrupt practices abroad. In the 365 days that followed however, the federal government awarded BAE contracts in excess of $58 billion dollars. The U.S.’s refusal to debar BAE because of the potential “collateral consequences” provides a case study on the benefits and drawbacks of deterring foreign corruption through suspension and debarment. This Article concludes that the U.S. must begin to diversify its portfolio of federal contractors so that prosecutors may leverage the legitimate threat of suspension and debarment to more effectively deter foreign corruption.

 

 

Posted at 09:37 AM in Administrative Agency, Administrative Law, Bribery, Congress, Corruption, FCPA, Law, Legal Scholarship, Legislation, Politics, SSRN, Suspension and Debarment, White Collar Crime | | Comments (0)

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01/09/2011

Comment, Honest-Services Fraud: The Supreme Court Defuses the Government's Weapon of Mass Discretion in Skilling v. U.S.

I recently wrote a legal commentary discussing the Supreme Court’s 2010 decision in Skilling v. United States and its impact on the honest-services fraud statute, which was selected for publication in the summer 2010 issue of the South Texas Law Review (51 S. Tex. L. Rev. __). 

The most recent version is available for download at SSRN.* 

*Special thanks to the following websites for helping promote my Comment:

Abstract: For over two decades federal prosecutors wielded a weapon of mass discretion in their fight against corruption: the honest-services fraud statute. Although prosecutors welcomed the statute's ambiguous text, judges, defendants, and scholars struggled for more than two decades to answer a number of difficult constitutional questions arising from the honest-services fraud theory. In 2010, the Supreme Court used Skilling v. United States - a case that chronicles the events that led to the epic collapse of former energy giant Enron - to defuse the Government’s “weapon of mass discretion” by limiting honest-services fraud to cover only schemes involving bribery or kickbacks, thereby placing more subtle forms of dishonesty, such as undisclosed self-dealing, outside the statute's reach.

This Comment discusses the case’s impact on the fallen Enron CEO’s fight for freedom, in addition to its impact on two other petitioners who successfully challenged the honest-services fraud statute in 2010. I also examine the rights of the defendants whose convictions or plea agreements were premised on an application of the statute now declared unconstitutional, as well as analyze the decision’s impact on pending and future cases of honest-services fraud. 

Finally, I explain why Congress will likely supersede Skilling by amending § 1346 to expressly criminalize schemes involving an individual’s failure to disclose their self-dealing; analyze the proposed “Honest Services Restoration Act” (HSRA), which was drafted to accomplish this goal; and conclude that, although not perfect, the proposed language contained in the HSRA adequately addresses the major constitutional concerns surrounding the use of honest-services fraud to prosecute undisclosed self-dealing.

 

Posted at 06:13 PM in Comment, Congress, Current Affairs, Enron, Honest Services Fraud, Jeff Skilling, Law, Legislation, SCOTUS, SSRN, Statutory Interpretation, White Collar Crime | | Comments (0)

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