Mike Koehler

Corporate compliance officers and general counsel should focus their attention on enforcement actions that take the U.S. Foreign Corrupt Practices Act in new directions, said Mike Koehler, author of the FCPA Professor law blog.

In a recent interview with Corporate Counsel, Koehler talked about changing case law and enforcement theories related to the FCPA, as well as his new book, “Strategies for Minimizing Risk Under the Foreign Corrupt Practices Act and Related Laws.”

A former senior counsel at Foley & Lardner in Milwaukee, Koehler is now an associate professor at the Southern Illinois University School of Law. He also previously taught business law at Butler University.

Here are excerpts from his interview, which has been edited for style, length and clarity:

CC: Why did you feel the need to write a new book? What has really changed about the FCPA since your 2014 effort, “The Foreign Corrupt Practices Act in A New Era”?

MK: Nothing has changed in terms of the actual statute. However, in many enforcement actions the U.S. Securities and Exchange Commission advances a theory of prosecution—that issuers have an obligation to prevent and detect improper payments—that is not even in the statute.

And there have been several developments in terms of FCPA case law, ever-expansive SEC and [U.S. Department of Justice] enforcement theories, new inventions in terms of resolution vehicles such as declinations with disgorgement, new DOJ policy and ever-expanding enforcement agency compliance expectations around the world. 

Are there new FCPA trends, risks or management strategies that weren't there four or five years ago? 

Those tasked with compliance within a business organization should focus not so much on the large instances of corporate bribery because in some of these cases the simplistic “just don't bribe” narrative is actually spot-on. Rather, compliance professionals should focus on enforcement actions that seemingly take the statute in a new direction and involve unique interpretations of laws that are not subjected to judicial scrutiny. The recent internship and hiring practice actions are notable, as are the continued stream of corporate hospitality, travel and entertainment actions.

The underlying conduct in these actions is often “normal,” but what makes it objectionable to the enforcement agencies is the identity of the person it is directed to, that is, an alleged foreign official. From a risk management standpoint, this means that compliance needs to be a team sport and that various individuals within a business organization need “FCPA goggles” to spot risk unique to their job function. The book utilizes this approach through various issue-spotting scenarios and skills exercises.

You have often written about the “revolving door” that allows FCPA prosecutors to move into multimillion-dollar partnerships in private law firms. What's wrong with this happening, and how would you remedy it if you could?

Imagine a foreign country where enforcement of a specific law is vested in the hands of a few individuals and where these few individuals investigate, prosecute and resolve all cases. And they enforce the law against business organizations largely behind closed doors. When these individuals leave government service, they often take lucrative jobs providing defense and compliance services to business organizations that are subject to the enforcement climate the individuals helped create and champion. Would you have concerns with such a system?

That pretty much describes modern FCPA enforcement. The FCPA is a fundamentally sound statute that is not always enforced in fundamentally sound ways. There is much cynicism regarding various FCPA enforcement issues, and in my contact with FCPA professionals this is a top concern I frequently hear.

Since 2011, I have suggested a prohibition on government enforcement attorneys who hold supervisory and discretionary authority from providing FCPA defense or compliance services for five years after leaving government service. I believe the legitimacy and credibility of the government's FCPA enforcement program hinge on this policy proposal being adopted.

Please talk about the concept of a “compliance defense” and why you think the U.S. should adopt the idea.

The DOJ and SEC have long recognized that no compliance program can prevent all improper conduct. The enforcement agencies take the position that pre-existing compliance is relevant to their internal deliberations and conclusions, but allowing a compliance defense would elevate this issue to an actual statutory amendment.

Many other OECD Convention [Organisation for Economic Co-operation and Development] countries have compliance defense concepts embedded in their anti-bribery laws. And many former high-ranking DOJ and SEC officials support an FCPA compliance defense. However, the DOJ and SEC oppose such a defense presumably because it would take away their leverage in hard enforcement actions.

But the main value of a compliance defense is to best motivate soft FCPA enforcement. Let's face it, compliance is a cost center within business organizations, and expenditure of finite resources on FCPA compliance is an investment best sold if it can reduce legal exposure, not merely lessen its impact.

Current government incentives represent mere “baby carrots” when what is needed to better incentivize more robust FCPA compliance are real carrots. An FCPA compliance defense is a real carrot that would better incentivize compliance across the business landscape.