Negotiating Bribery: Toward Increased Transparency, Consistency, and Fairness in Pretrial Bargaining Under the Foreign Corrupt Practices Act

56 Pages Posted: 1 Nov 2013 Last revised: 26 Sep 2014

See all articles by Peter Reilly

Peter Reilly

Texas A&M University School of Law

Date Written: August 25, 2014

Abstract

Wal-Mart is one of the wealthiest and most powerful companies in the world. And billionaire gambling magnate Sheldon Adelson is one of the wealthiest and most powerful individuals in the world. So what do these two have in common besides wealth and power? They are both being investigated for possible violations of the U.S. Foreign Corrupt Practices Act (“FCPA”), a federal law prohibiting the payment of bribes to foreign government officials to obtain (or retain) business. If either party is ultimately indicted, the case might not be addressed through a traditional courtroom trial. Instead, the matter could be resolved through an Alternative Dispute Resolution vehicle currently being employed by the U.S. Department of Justice: The Deferred Prosecution Agreement (“DPA”) or the Non-Prosecution Agreement (“NPA”).

The use of such agreements is not guaranteed; rather, they are awarded to defendants through elaborate negotiations with the Justice Department. Indeed, Forbes magazine describes parties who are accused of wrongdoing, but who ultimately manage to secure an NPA or DPA, as parties that have been “inducted into Club Fed Deferred.”

According to the Department of Justice, DPAs and NPAs are said to occupy an “important middle ground” between declining to prosecute on the one hand, and obtaining a conviction on the other. Since 2000, the Department has dramatically increased its use of DPAs and NPAs, entering into a total of 257 publicly-disclosed agreements during that time. Monetary recoveries related to DPAs and NPAs over that thirteen-year period total more than $37 billion. And while they might seem similar to plea bargains, DPAs and NPAs are substantively quite different. In a plea bargain, defendants negotiate for a lesser charge, penalty, or sentence, but they ultimately accept guilt and conviction. With DPAs and NPAs, on the other hand, there are no looming trials, no guilty pleas, and no convictions.

Instead, DPAs and NPAs represent the opportunity for the ultimate negotiation: It’s an opportunity for parties accused of FCPA violations to agree to clean up their respective acts, usually by (1) adopting or enhancing internal anti-corruption programs; (2) carrying out self-policing audits and investigations; and (3) voluntarily disclosing compliance issues and information to federal authorities. In addition to agreeing to implement various rules, policies, and procedures to prevent bribery from taking place, the accused parties oftentimes agree to pay hefty monetary fines. In exchange, the Justice Department agrees to hold off (perhaps forever) on prosecution. Ultimately, if all aspects of the negotiated agreement are successfully carried out, the initially-accused party can move forward without fear of further legal consequences on the matter.

But here is the problem: This ultimate negotiation between prosecutor and accused can sometimes be unfair to the point where any “bargaining” taking place is merely illusory. This is because in many instances, the government has too much power, too much leverage, and too much discretion in presenting, negotiating, and implementing DPAs and NPAs. There is not enough transparency or consistency within these two negotiation processes. As Federal Appeals Court Judge Harry T. Edwards warned nearly three decades ago: Settling matters through Alternative Dispute Resolution is not always “fair and just.” Indeed, former DOJ prosecutor David Pitofsky points to an “imbalance of negotiating power” that prosecutors have in these processes, stating:

"One of the problems with the process of negotiating a deferred prosecution agreement is that it is not really a negotiation. Any push back by the company on a provision that the government requests is not only going to be shot down, but the government may see it as a reflection that the company’s claimed contrition is not genuine. So, you don’t even want to make the argument for fear that it will cause the government to look at you differently and decide that a deferral isn’t appropriate."

This article will explore the factors that contribute to less-than-optimal transparency, consistency, and fairness in pre-trial bargaining under the Foreign Corrupt Practices Act. The article will conclude with recommendations to strengthen the current system and make it more fair.

The article is divided into four Parts: Part I will discuss the extent of the bribery problem worldwide; the history of the FCPA; and the reasons behind the recent dramatic increase in FCPA enforcement.

Part II will discuss the elements that make up FCPA ‘jurisprudence’ given that so few cases are litigated in court; the history of using DPAs and NPAs to address corporate wrongdoing; and the development of the guidelines and principles underlying DOJ prosecutors’ charging decisions with respect to corporate law enforcement.

Part III will delve more deeply into the guidelines underlying DOJ prosecutors’ charging decisions, questioning if recent steps taken by DOJ have mistakenly led to a decrease in procedural protections offered by the Department to parties accused of corporate wrongdoing, thereby resulting in increased negotiation power imbalances. This Part will also consider whether a corporate “compliance defense” similar to that enacted in the United Kingdom would be an appropriate and effective way to counterbalance DOJ’s superior negotiation power in the FCPA context. Finally, this Part will discuss potential consequences of increasing judicial review within the DPA and NPA negotiation and implementation processes.

Part IV will discuss possible solutions to the overall dilemma posed by the article, namely, how to increase transparency, consistency, and fairness in pre-trial negotiations between DOJ and parties accused of FCPA violations.

Keywords: Negotiation, Deferred Prosecution Agreement, Non-Prosecution Agreement, Foreign Corrupt Practices Act

Suggested Citation

Reilly, Peter, Negotiating Bribery: Toward Increased Transparency, Consistency, and Fairness in Pretrial Bargaining Under the Foreign Corrupt Practices Act (August 25, 2014). 10 Hastings Bus. L. J. 347 (2014). Available at SSRN: https://ssrn.com/abstract=2347632

Peter Reilly (Contact Author)

Texas A&M University School of Law ( email )

1515 Commerce Street
Fort Worth, TX 76102

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