[Senate Hearing 111-1005]
[From the U.S. Government Publishing Office]




                                                       S. Hrg. 111-1005
 
       EXAMINING ENFORCEMENT OF THE FOREIGN CORRUPT PRACTICES ACT

=======================================================================



                                HEARING

                               before the

                    SUBCOMMITTEE ON CRIME AND DRUGS

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 30, 2010

                               __________

                          Serial No. J-111-115

                               __________

         Printed for the use of the Committee on the Judiciary



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                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin       CHARLES E. GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         JON KYL, Arizona
RICHARD J. DURBIN, Illinois          LINDSEY GRAHAM, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHN CORNYN, Texas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
ARLEN SPECTER, Pennsylvania
AL FRANKEN, Minnesota
            Bruce A. Cohen, Chief Counsel and Staff Director
               William D. Smith, Republican Chief Counsel
                                 ------                                

                    Subcommittee on Crime and Drugs

                 ARLEN SPECTER, Pennsylvania, Chairman
HERB KOHL, Wisconsin                 LINDSEY GRAHAM, South Carolina
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin       CHARLES E. GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         JEFF SESSIONS, Alabama
RICHARD J. DURBIN, Illinois          TOM COBURN, Oklahoma
BENJAMIN L. CARDIN, Maryland
AMY KLOBUCHAR, Minnesota
CHRISTOPHER COONS, Delaware
               Hannibal Kemerer, Democratic Chief Counsel
                  Walt Kuhn, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     2
    prepared statement...........................................    74
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     1

                               WITNESSES

Andres, Greg, Deputy Assistant Attorney General, Criminal 
  Division, U.S. Department of Justice, Washington, DC...........     3
Koehler, Mike, Assistant Professor of Business Law, Butler 
  University, Indianapolis, Indiana..............................    12
Volkov, Michael, Partner, Mayer Brown, LLP, Washington, DC.......    16
Weissmann, Andrew, Partner, Jenner & Block, LLP, New York, New 
  York...........................................................    14

                         QUESTIONS AND ANSWERS

Responses of Greg Andres to questions submitted by Senators Coons 
  and Klobuchar..................................................    25
Responses of Mike Koehler to questions submitted by Senator 
  Specter........................................................    32

                       SUBMISSIONS FOR THE RECORD

Andres, Greg, Deputy Assistant Attorney General, Criminal 
  Division, U.S. Department of Justice, Washington, DC, statement    45
Koehler, Mike, Assistant Professor of Business Law, Butler 
  University, Indianapolis, Indiana, statement...................    54
Volkov, Michael, Partner, Mayer Brown, LLP, Washington, DC, 
  statement......................................................    75
Weissmann, Andrew, Partner, Jenner & Block, LLP, New York, New 
  York, statement................................................    86


       EXAMINING ENFORCEMENT OF THE FOREIGN CORRUPT PRACTICES ACT

                              ----------                              


                       TUESDAY, NOVEMBER 30, 2010

                                       U.S. Senate,
                           Subcommittee on Crime and Drugs,
                                Committee on the Judiciary,
                                                     Washington, DC
    The Subcommittee met, pursuant to notice, at 10:21 a.m., 
Room 226, Dirksen Senate Office Building, Hon. Arlen Specter, 
Chairman of the Subcommittee, presiding.
    Present: Senators Leahy, Klobuchar, and Coons.

 OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Senator Specter. Good morning, ladies and gentlemen. The 
Criminal Law Subcommittee will now proceed with this hearing 
focusing on sentencing under the Foreign Corrupt Practices Act.
    I regret the delay, but we just started the third vote this 
morning, and I voted at the outset so I could come and begin 
this hearing. We hate to keep people waiting, but voting is our 
priority activity. That comes ahead of all other items.
    Less than a month ago, I noted the media reports about the 
resolution of a case under the Foreign Corrupt Practices Act. 
It involved six oil and gas companies and a prominent freight-
forwarding company, which agreed to pay some $236 million in 
criminal and civil penalties in what was reputed to be one of 
the largest corporate bribery cases ever to focus on a single 
industry.
    My eye was caught by that for a number of factors. One was 
the concern, which I had expressed some time ago, on the 
handling of a case involving Siemens AG, which was prosecuted 
under the Foreign Corrupt Practices Act, with the criminal 
information specifying, quote, ``Siemens' employees sometimes 
carried cash in suitcases across international borders to pay 
bribes.''
    Siemens received billions of dollars' worth of government 
contracts because of these payments. Siemens' conduct was 
egregious, staggering, brazen, and systematic, and there exists 
a corporate culture in which bribery was tolerated and even 
rewarded at the highest levels of the company.
    The total criminal fine was $450 million. Siemens also 
reached a settlement of a related civil complaint by the SEC 
and agreed to pay $350 million in disgorgement of profits. When 
added to fines paid in connection with related cases brought by 
German officials, Siemens will pay a combined total of more 
than $1.6 billion in fines, penalties and disgorgements.
    Siemens enjoyed revenues that year of $105 billion and 
income of approximately $8 billion. Now, while $1.6 billion is 
a lot of money, it is not when you take a look at the other 
figures involving Siemens.
    I have been concerned about law enforcement for a long time 
and have had some experience in the field and am convinced that 
the only impact on matters of this sort is a jail sentence. 
Fines added to the cost of doing business end up being paid by 
the shareholders. Criminal conduct is individual.
    Nobody likes to pay fines, but it does not amount to a 
whole lot in the context of what is going on here. So I thought 
it would be useful to ask the Department of Justice to come in 
to see how many answers they could give.
    Oversight is a major function of Congress. Oversight of the 
criminal law is a major function of the Judiciary Committee; 
and, with all we have to do, we do not do very much of it, do 
not do very much of it at all.
    Some of us have some substantial experience in this line of 
work. The experience has been slightly more than doubled in the 
last 10 seconds, with the arrival of Chairman Senator Leahy.
    Patrick, I was making a comment about money fines, talking 
about Siemens' $1.6 billion income over $100 billion profits 
over $8 billion, and this hearing was motivated by an article 
which appeared less than a month ago about six oil and gas 
companies agreed to pay $236 million criminal and civil 
penalties.
    I made the point that fines come out of the corporation, 
come out of the shareholders. It does not deal with the 
individual conduct of violating the law, and expressed my own 
view that the only effective way to deal as the deterrent is 
with jail sentences.
    So I was just saying, as you walked in, we brought the 
Department of Justice in. Oversight is a very big function. You 
are the Chairman. I was the Chairman. You were the Chairman 
before that.
    Senator Leahy. We have gone back and forth.
    Senator Specter. Well, we do not do a whole lot of 
oversight, because we have so much else to do. But I was just 
on that point.
    It is fairly well publicized that District Attorney Leahy 
or Prosecutor Leahy in Burlington was tougher then than he is 
now, which is hard to believe, but he was, and I was DA of 
Philadelphia. We had been at the national DA's convention in 
Philadelphia, I was the host, in 1870-1970.
    [Laughter.]
    Senator Specter. Patrick, I yield to you.

STATEMENT OF HON. PATRICK LEAHY, A U.S. SENATOR FROM THE STATE 
                           OF VERMONT

    Senator Leahy. Well, thank you, and I will be very brief. I 
was here just to compliment Senator Specter. As he said, we 
have served together almost 30 years in the Senate. We did 
first meet on that national DA's meeting in Philadelphia, where 
he hosted it and did, as usual, a superb job. We became friends 
and have stayed friends.
    There are only a handful of Senators who have served on 
this committee for 30 years, five full terms, and Senator 
Specter is one of them. He has been Committee Chairman. He has 
been Chairman of the Juvenile Justice Subcommittee, the 
Chairman of the Terrorism Technology and Government Information 
Subcommittee, Chairman of the Crime and Drug Subcommittee.
    You have all these titles, but they do not really talk 
about everything he has done. He passed the Career Criminal 
Act. He saved the juvenile justice program from elimination, 
something that today, it is hard for anybody to think that such 
a valuable piece of legislation might have disappeared. If it 
had not been for his herculean efforts, it would have.
    We worked closely on a bipartisan investigation on what 
went wrong at Ruby Ridge. We worked together to protect 
constitutional rights, those guaranteed by the First, the 
Second, the Fourth, Fifth, Sixth, Eighth, Ninth Amendments, 
including work on press shield legislation here.
    So my point being here is just to compliment him, and I 
will step out of the way, because he has chaired so many 
hearings.
    I found this in the archives, and this may have been the 
hearing, the first hearing you ever conducted. It is a hearing 
before the Subcommittee on Juvenile Justice, 97th Congress, 
first session, April 1, 1981. Strom Thurmond was the Chairman. 
Mac Mathias, Paul Laxalt, Bob Dole, Alan Simpson, John East, 
Jeremiah Denton--I am just naming people who have left us 
since--Joe Biden, Ted Kennedy, Bob Byrd, Howard Metzenbaum, 
Dennis DeConcini, Max Baucus, Howell Heflin, and you and I 
somewhere down near the bottom on both sides. So I just wanted 
to give you that.
    I want to speak more on the floor about Senator Specter, 
but I just wanted to come here and compliment him.
    Senator Specter. Well, thank you very much, Mr. Chairman. 
Those are high words of praise and I appreciate them very much.
    Senator Klobuchar, would you care to make an opening 
statement?
    Senator Klobuchar. No. Just that I agree with everything 
that Senator Leahy said about you, Mr. Chairman.
    Senator Specter. Well, thank you.
    We will proceed now to the acting Deputy Assistant Attorney 
General, the Criminal Division, the honorable Greg Andres. Mr. 
Andres comes to this position with a very extensive background 
in law enforcement. He was an assistant United States attorney 
in the eastern district of New York for more than a decade; 
served as chief of the criminal division there for 3 years; 
previously was deputy chief of the criminal division and deputy 
chief of the organized crime and racketeering section; graduate 
of Notre Dame and University of Chicago Law School; Law Review 
member; clerk to a Federal judge.
    We welcome you here--good morning, Senator Coons--and look 
forward to your testimony.

STATEMENT OF HON. GREG ANDRES, ACTING DEPUTY ASSISTANT ATTORNEY 
GENERAL, CRIMINAL DIVISION, DEPARTMENT OF JUSTICE, WASHINGTON, 
                               DC

    Mr. Andres. Thank you, Chairman Specter and distinguished 
members of the Subcommittee. Thank you for the opportunity to 
appear before you today to discuss the Department of Justice's 
enforcement of the Foreign Corrupt Practices Act.
    The investigation and prosecution of transnational bribery 
is an important priority for the Department of Justice, and we 
have been hard at work. In particular, over approximately the 
last 2 years, we have substantially increased the number of our 
prosecutions against corporations and individual executives. We 
have collected more in criminal fines than in any other period 
in the history of our FCPA enforcement. We are proud of our 
accomplishments, and others have taken note, as well.
    On October 20, 2010, following a rigorous official review, 
the Organization for Economic Cooperation and Development, 
known as the OECD, applauded the Departments of Justice, 
Commerce and State, and the SEC for our collective efforts in 
the fight against foreign bribery.
    In its official report, the OECD's working group on bribery 
in international business transactions noted that the United 
States has investigated and prosecuted the most foreign bribery 
cases among the partners to the anti-bribery convention.
    The OECD's report makes clear that the United States' 
success in enforcing the FCPA has far outpaced any other 
country's enforcement of its foreign bribery laws. We remain 
committed to this effort. We are grateful for the 
Subcommittee's interest and to the Chairman for inviting the 
criminal division to discuss the department's progress.
    FCPA enforcement is as strong today as it has ever been, 
and we believe it is getting stronger. In the past year alone, 
we have prosecuted and entered into corporate resolutions with 
some of the world's largest corporations. But that is only part 
of the story.
    We are also vigorously pursuing individual defendants who 
violate the FCPA, and we do not hesitate to seek jail terms for 
these offenders, when appropriate. The department has made the 
prosecution of individuals a critical part of its FCPA 
enforcement strategy. We understand well that it is an 
important and effective deterrent.
    Paying large criminal penalties cannot be viewed as and is 
not simply the cost of doing business. Corporate prosecutions 
and resolutions do not and cannot provide a safe haven for 
corporate officials. And every agreement resolving a corporate 
FCPA investigation explicitly states that it provides no 
protection against prosecution for individuals.
    The department has charged over 50 individuals with FCPA 
violations since January of 2009. Today, there are 
approximately 35 defendants awaiting trial on FCPA charges in 
the United States; specifically, in Houston, Miami, Los 
Angeles, Santa Ana, and Washington, DC. By contrast, in 2004, 
the department charged only two individuals with FCPA 
violations.
    FCPA enforcement has always been important and it is 
particularly critical today. The World Bank estimates that more 
than $1 trillion in bribes is paid each year, $1 trillion. This 
amounts to approximately 3 percent of the world's economy.
    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.
    Thus, FCPA enforcement is vital to ensuring the integrity 
of the world's markets and to ensuring sustainable development 
globally. At the Department of Justice, together with our 
partners at other Federal agencies and around the world, we 
have made combating transnational bribery a priority.
    We look forward to working with Congress as we continue our 
important mission to prevent, deter, and prosecute foreign 
corruption. Thank you for listening. And I will be pleased to 
take any questions you may have.
    [The prepared statement of Mr. Andres appears as a 
submission for the record.]
    Senator Specter. Mr. Andres, you talk about collecting more 
in criminal fines than anyone else, prosecuted more cases than 
other countries who are parties to the convention, and you say 
you do not hesitate to go after individuals.
    But whom have you sent to jail?
    Mr. Andres. Senator, thank you for the opportunity to 
address this issue. I know it is important to you and that you 
have spoken forcefully about it, and it is important to the 
department.
    As I mentioned, since January of 2009, we have charged more 
than 50 individuals. Approximately 35 of those have been----
    Senator Specter. I have heard that and I have heard about 
charges and I know what charges are, but come to question, who 
is going to jail?
    Mr. Andres. Sir, to give you specific examples, Jack 
Stanley, as part of the KBR prosecution, was an officer and 
director, was sentenced to 84 months imprisonment for his 
involvement in the bribery of Nigerian officials to obtain 
engineering, procurement and construction contracts.
    John Warwick and Charles Jumet, executives in a Virginia 
engineering firm, were both charged with conspiring to violate 
the FCPA's anti-bribery provisions. Warwick pled guilty and was 
sentenced in June of 2010 to 37 months imprisonment. Co-
defendant Charles Jumet was charged with conspiring to violate 
the FCPA and making false statements to Federal agents. He was 
sentenced to 87 months imprisonment.
    In September 2010, three former employees and a partner of 
Nexus Technologies were sentenced for their involvement in a 
conspiracy to bribe officials of the Vietnamese government. One 
defendant was sentenced to 16 months imprisonment, another to 9 
months imprisonment.
    Christian Sapsizian, from February of 2000 through 
September of 2004, Sapsizian, a French national and vice 
president for Latin America for Alcatel, conspired with others 
to pay more than $2.5 million in bribes to senior Costa Rican 
officials. On September 23, 2008, he was sentenced to 30 months 
imprisonment.
    There are, of course, others, as well, Senator. I am happy 
to provide other examples.
    I would say this, though, with respect----
    Senator Specter. I wish you would. I counted up your 
recitation, I get six jail sentences. Staff has prepared a long 
list of prosecutions and fines, without any jail sentences at 
all, from November 4, 2010.
    The Noble Corporation, fines of more than $2.5 million; 
Panalpina, Inc., fines of more $70 million; Pride Forasol, more 
than $32 million; Shell Nigeria, $30 million; Tidewater, $7.35 
million; Transocean, $13.44 million. But nobody went to jail in 
those cases.
    Mr. Andres. Senator, Gerald Green and Patricia Green were 
two defendants that went to trial. They were each sentenced to 
6 months imprisonment, 6 months of home confinement.
    Senator Specter. Are you saying that those jail sentences 
were handed down from cases I just enumerated?
    Mr. Andres. No. Senator, the cases that you referred to 
are, obviously, corporate dispositions and in some of those, 
the investigation, particularly in the Panalpina-related cases, 
are ongoing. In fact, there is ongoing litigation with respect 
to those employees of those corporations.
    With respect to the prosecution of corporations and 
individuals, it is not an either/or proposition for the 
department. We seek to prosecute both corporations and 
individuals who have violated the FCPA.
    With respect to those cases, there are a number of 
challenges for charging individuals in this particular area.
    Senator Specter. My time is almost up. Did anybody go to 
jail in the Siemens case?
    Mr. Andres. Senator, as we have said before, in the Siemens 
case, that investigation is ongoing. There are a number of 
prosecutions ongoing in Germany.
    Senator Specter. Are there individuals who are being 
prosecuted?
    Mr. Andres. That investigation is ongoing, Senator.
    Senator Specter. Are there any individuals being 
prosecuted?
    Mr. Andres. No individuals in the United States have been 
charged yet with respect to the Siemens matter. But as has been 
made clear in the court documents filed, the government has 
attempted to obtain information about individual defendants.
    In our sentencing memoranda----
    Senator Specter. Well, I am going to conclude, because I do 
not want to go past the red light. I will return to this on the 
second round.
    Senator Klobuchar.
    Mr. Andres. Thank you, Senator.
    Senator Klobuchar. Thank you very much, Mr. Chairman, and 
thank you for convening this important hearing and for your 
skillful chairmanship of this Subcommittee over the last 
several months.
    Thank you, as well, Mr. Andres, for your work and your 
enforcement efforts, and especially the criminal penalties in 
the most egregious cases that you mentioned.
    I am taking a little different tact here, because I do 
appreciate that you have ramped things up with some of these 
most egregious cases. And as a former prosecutor, I certainly 
realize that enforcement of the law can make a difference and 
it changes practices.
    But, also, one of the basic principles of due process is 
that people in companies have to be able to know what the law 
is in order to comply with it. And I will tell you that I have 
heard from many very good standing companies in my State that 
they do not always know what behavior will trigger an 
enforcement action.
    As we know, the goal is not just to punish bad actors after 
a violation is committed, but rather to prohibit actions from 
happening in the first place. So a lot of my questions are 
focused on how we can incentivize corporations to make sure 
they have appropriate compliance procedures in place and that 
they voluntarily disclose violations when a rogue employee 
violates the law.
    I head up the Subcommittee on Exports and Commerce, a big 
believer in the President's focus of trying to double exports. 
I believe this is the way that we are going to get ourselves 
out of this economic downturn. And I have a State where we 
truly believe in exporting all over the world and it is what I 
think has given our State a leg up when you look at our 
unemployment rate compared to other States.
    At the same time, I have heard a lot of concerns about any 
little conduct is going to trigger some kind of investigation. 
So my first question is--and in your testimony, you detailed 
several of the large cases that DOJ has prosecuted over the 
last few years.
    While many of these cases, clearly, these egregious cases 
may be clear-cut, I have heard from some businesses that 
additional guidelines laying out best practices would help them 
operate with more certainty.
    Have you given any thought to increasing the guidance you 
give businesses, especially in situations covered by the FCPA 
that are not so clear or fall into gray areas?
    Mr. Andres. Yes, Senator. As you may know, there is a 
unique procedure under the current law that allows companies to 
seek an advisory opinion under the FCPA. So that allows 
companies to provide facts and information to the department 
and we are able to give them an advisory opinion as to specific 
conduct and whether that conduct violates the FCPA.
    I believe that procedure is unique among the criminal laws. 
Those opinions are published and available to companies to 
analyze them, to understand where the government is focusing 
its enforcement, and what specifically violates the law.
    One other area where the government is particularly 
transparent in this area is with the publication and filing of 
our non-prosecution agreements, deferred prosecution 
agreements, information, and indictments. We have a Website at 
the Department of Justice----
    Senator Klobuchar. And do you think there is more that you 
can do, though? Because this is what I keep hearing of their 
concerns, of relatively minor things, and they are just not 
sure if it is a gray area or not. That what you are doing is 
not enough?
    Mr. Andres. Again, the best procedure is the advisory 
opinions, but officials from the department speak routinely 
about the Foreign Corrupt Practices Act, and our filings are 
rather detailed in specifically what we are looking for by way 
of compliance.
    The OECD's good practice guidance also provides information 
about the appropriate compliance procedures, and the sentencing 
guidelines also reference compliance procedures.
    Senator Klobuchar. Has the department established or 
considered establishing a self-disclosure program, such as is 
offered by the department with the antitrust amnesty program, 
to encourage those companies that discover FCPA violations 
through their compliance efforts to disclose them to the 
department?
    It seems to me like that would be a way of advancing anti-
corruption efforts.
    Mr. Andres. Many of our cases rely on the self-disclosure 
and cooperation of corporations, and we encourage that. Self-
disclosure and cooperation are two of the nine factors that the 
government considers as part of the principles of Federal 
prosecution of business entities when we are making our 
charging decisions and we are deciding how to resolve cases.
    We do not believe that immunity is appropriate, just as we 
do not believe that a bank robber should get immunity for 
disclosing that he robbed a bank. The fact alone that a company 
discloses their involvement in criminal activity or that of an 
employee in criminal activity does not amount necessarily to 
getting a pass for those crimes.
    We think the antitrust provisions are different, because in 
that field, obviously, it takes two or more competitors to 
collude to fix prices. There is not the same incentives or the 
same criminal conspiracies necessarily at work with respect to 
the FCPA.
    But I will say this. In many of the cases that we resolve, 
some of which we decline to prosecute, self-disclosure is a 
very important factor and we believe that the current factors 
that the department follows under the principles of business 
organizations give sufficient motivation to self-disclose and 
cooperate.
    Senator Klobuchar. Companies are obligated to disclosure, 
is that right, when they hear about things?
    Mr. Andres. They are not obligated to disclosure.
    Senator Klobuchar. They are not.
    Mr. Andres. They make a decision to disclose and in return 
for their disclosing and their investigating, in large part, 
their own criminal conduct, they get meaningful credit with the 
department and that credit goes into the decision whether to 
file an information or charge the company, whether to enter a 
deferred prosecution or a non-prosecution agreement.
    Senator Klobuchar. How many disclosures has the DOJ 
received since 2007?
    Mr. Andres. I would not know the specific number. I can get 
that for you, Senator. But it is significant. We are getting a 
significant number of disclosures from corporations about their 
own criminal conduct. I think that, in part, relates to the 
passage of the Sarbanes-Oxley legislation, which encourages 
corporations to review their own books and records.
    Senator Klobuchar. Well, I will look forward to getting 
that, as well as working with you going forward. And I will 
have some more questions for the second round.
    Thank you.
    Mr. Andres. Thank you, Senator.
    Senator Specter. Senator Coons.
    Senator Coons. Thank you, Senator Specter, and thank you 
for bringing forward this important hearing today and this 
focus on this important area of transnational illegal activity.
    Mr. Andres, I would be interested in hearing more about the 
impact on the other signatories to the anti-bribery convention 
of your ramped-up enforcement efforts by the department.
    I will commend you for being more aggressive in pursuing 
this area, but I will also share some of the questions of 
Senator Klobuchar about standards and process.
    But, first, I just wanted to ask--a number of these very 
large transnational cases have involved cooperation with 
allies, Germany, Venezuela, Switzerland, others. What success 
have we had in urging other signatories to step up their 
activities comparable to ours? What strains has it produced on 
some of our alliances? And then what impact does it have on the 
activity of elected officials or government officials in other 
countries?
    Mr. Andres. Thank you, Senator Coons. We have made 
significant efforts abroad through our participation in 
international organizations, through our cooperation with other 
law enforcement agencies abroad, and through our own 
prosecution of foreign corporations.
    First, the United States is a leader in the OECD and 
particularly in the working group on bribery. The United States 
has just undergone what they call the phase three review, in 
which we have a peer review of our own enforcement practices.
    The last stage of the review related to--or one of the 
prior stages--what laws are on the books, and now the 
concentration is on who is prosecuting companies.
    Other countries and other signatories to that convention 
will also now undergo the peer review. And through our own 
efforts and the efforts of others at the OECD, pressure has 
been brought upon other countries to also prosecute foreign 
bribery.
    I would cite to the BAE resolution and the Department of 
Justice's longstanding relationship with the serious fraud 
office in the United Kingdom. Also, on the Siemens matter, we 
cooperated and we worked and continue to work with the German 
authorities. In the Innospec matter, we also worked with the 
serious fraud office.
    In some cases, we are not only prosecuting foreign 
companies, we are also extraditing foreign individuals to bring 
them back to the United States.
    So I would say that our work abroad has been important. I 
would also note that the attorney general himself visited the 
OECD to stress the importance of its work, as did the assistant 
attorney general for the criminal division, Lanny Breuer.
    We are working with our partners and, particularly through 
organizations like the OECD, we think we are having an effect.
    Lastly, I would just point to the recent passage of the 
U.K.'s law on bribery, which is viewed as aggressive, and that, 
I think, is the outgrowth, not just, obviously, of the United 
States, but our work at the foreign organizations like the 
OECD.
    Senator Coons. Has there been any reported appreciable 
change in the conduct or behavior of public officials overseas 
in response to our more aggressive enforcement or, as some 
companies have suggested, is this simply putting U.S.-
headquartered companies at a disadvantage in not actually 
having some positive or desirable impact on the conduct of 
foreign officials?
    Mr. Andres. It is hard to quantify specifically what the 
effect would be on foreign officials. I will say that we are 
clearly prosecuting foreign companies. Approximately half the 
cases that we have brought over the last 2 years have been 
against foreign companies.
    I will say that there is clearly an increased awareness in 
places like China and Russia. We have been invited to speak and 
have spoke to officials from the Department of Justice, in 
China about these issues. We have also worked with the Chinese 
delegation that came to the United States and, in coordination 
with the Chamber of Commerce, addressed some of these issues.
    So I think there clearly is a heightened awareness around 
the world and people are taking notice, and, hopefully, that 
will have an effect on foreign officials.
    Senator Coons. And are there other remedies the department 
is seeking, debarment, exclusion from government contracting or 
other remedies, that are also potentially part of the solution 
to the ongoing challenges you face?
    Mr. Andres. Sure. With respect to debarment, I think it is 
important to remember that the Department of Justice is not the 
agency that is in charge of debarment; that is, it is not 
within our jurisdiction.
    Our role is to investigate and to prosecute violations of 
the Foreign Corrupt Practices Act. Debarment decisions are made 
by the officials at the various contracting government 
agencies.
    Secondly, debarment is not or was not intended to be 
punitive or punishment, but, rather, a means for government 
agencies to protect themselves against unscrupulous and poorly 
performing contractors. The debarment authorities make the 
decision whether the company is a presently responsible 
contractor.
    So the debarment decision is clearly not one within the 
Department of Justice. Our job is to make sure that the facts 
of our investigation are transparent and that we communicate 
that information to the debarring authority so that they will 
have all the available information to make their own decisions.
    Again, we publish and file all of our agreements. They are 
rather explicit as to the criminal conduct at issue, and, 
hopefully, those allow the debarring officials to make the 
appropriate decisions.
    Senator Specter. Thank you, Senator Coons.
    Mr. Andres, I am not going to take a second round, because 
we got started late and have another panel and we are going to 
be running into the later activities.
    I will pursue a couple of questions with you informally, 
and I am not looking for answers now. But you commented--if 
there are individual prosecutions as to Siemens, I would like 
to pursue that, to the extent you can tell us. Those are 2008 
matters, and I would like to pursue the question as to where 
you are going on this case.
    It was reported less than a month ago with the fines, and I 
ask you for your comments later about the deterrent effect when 
you have publicity--you cannot control the publicity, but you 
can control when you announce a disposition of cases.
    But it certainly gives the appearance on Siemens, with 
fines only, in the most recent case, with fines only, that it 
is not a matter for jail sentences, and you have to find some 
way to publicize your other good works on jail sentences.
    Senator Klobuchar, would you care to question further?
    Senator Klobuchar. I just wanted to follow-up on a few 
things that--and I will try to be quick here--that Senator 
Coons raised about the other countries. And I know in your 
testimony, you noted that the United States' success in 
enforcing the FCPA has far outpaced any other country's 
enforcement of its foreign bribery laws and that you have been 
working with our trading partners, as you discuss with them, to 
encourage them to enhance their effort.
    Again, I have heard from a number of businesses in my 
State--and this was not an organized discussion, this is over a 
year of people bringing up what is making it difficult for them 
to export, when all we want to do is create jobs in this 
country. I have heard from businesses who remain concerned that 
they just want an even playing field and that not enough is 
being done to ensure that some of the other countries who are 
trading are also enforcing similar laws.
    Can you discuss in further detail what our government is 
doing to ensure a level playing field for our companies 
competing overseas?
    Mr. Andres. Again, it is primarily through our work in 
international organizations like the OECD and our peer review 
process of other countries. When our prosecutors go to the 
OECD, they talk to other prosecutors from around the world 
about the prosecutions in their own countries and there are 
questions posed to each of those prosecutors about why they are 
not prosecuting bad actors and corporations in their own 
countries.
    Again, we also are pursuing many foreign companies with 
prosecutions here in the United States. To some extent, 
underlying these criticisms about the level playing field, I 
think, is the notion or the claim that our FCPA enforcement has 
been bad for business in the United States.
    We at the Department of Justice disagree with that. Foreign 
bribery cannot be good for business, and good compliance is a 
good way for companies to make sure that there is not waste, 
fraud and abuse. So we think that good compliance is good for 
corporations and that our enforcement is not bad for business 
and that we are leveling the playing field by attacking foreign 
bribery both here in the United States and abroad.
    Senator Klobuchar. Well, I would never want to say that 
foreign bribery and letting it go is a good thing. I do not 
think that at all. And certainly, the examples of the cases you 
mentioned are good examples of good work you are doing.
    I just believe that there is a problem with companies not 
being so afraid of what is going to happen if they disclose for 
minor things. And so what I hope you are open to doing going 
forward is to at least have some discussion about this. I know 
you believe there is enough guidance for them. I do not think 
that they think that there is.
    If we could just have a discussion of that going forward 
with I do not know who, but if you would be open to that, I 
think that would be helpful with a number of companies and 
others. Again, these are companies that they have told me that 
they cannot sleep at night because they are worrying about this 
and they are just trying to follow the law, but it is very 
difficult for them to figure out what is following the law.
    So if we could have some discussion going forward on this, 
I think it would be helpful, because, again, I know we share 
this mutual belief that we want our country to be strong. We do 
not want bad bribery, but at the same time, we want clear 
rules.
    So I might have some additional questions--I know that the 
Chairman wants to move on here--about Mr. Weissmann's testimony 
and your response to some of his points. But I would just hope 
you would be open to discussing this going forward.
    Mr. Andres. We are certainly open to that, Senator. Thank 
you.
    Senator Klobuchar. Thank you.
    Senator Specter. Thank you, Senator Klobuchar.
    Senator Coons, do you have any further questions?
    Mr. Coons. I will simply, if I might, add I have some 
personal experience from private practice in exactly this 
issue. Working for an excellent company, trying to deliver good 
compliance was, at times, a challenge, because of the moving 
target of knowing exactly what the compliance standards were.
    This was a number of years ago. Your advisory opinions, I 
think, have helped significantly. But I think we will listen 
attentively to the other panels for some clarity about what the 
current challenges are and would welcome an opportunity to 
continue to work with you and the department on helping clarify 
exactly what constitutes good compliance so that in-house 
counsel can sleep at night and compliant companies can more 
actively and effectively export.
    Mr. Andres. Thank you, Senator.
    Senator Coons. Thank you.
    Senator Specter. Thank you very much, Mr. Andres.
    We call the second panel now, Professor Koehler, Mr. 
Weissmann, Mr. Volkov.
    Our first witness is Michael Koehler, Assistant Professor 
of Business Law at Butler University in Indianapolis; expertise 
in the Foreign Corrupt Practices Act evidenced by his 
publications in the Georgetown Journal of International Law and 
the Indiana Law Review.
    He practiced law in this area; graduate of the University 
of Wisconsin Law School and the University of South Dakota.
    Thank you for appearing as a witness today, Professor 
Koehler, and the floor is yours.

STATEMENT OF MIKE KOEHLER, ASSISTANT PROFESSOR OF BUSINESS LAW, 
            BUTLER UNIVERSITY, INDIANAPOLIS, INDIANA

    Mr. Koehler. Thank you, Senator Specter, other members of 
the subcommittee. Thank you for that introduction.
    I also run a Website called fcpaprofessor, and part of my 
mission with that Website is to ask the ``why'' questions that 
are increasingly present in this era of aggressive enforcement. 
So given that mission, I, obviously, commend Chairman Specter 
for calling this hearing and I am grateful to have this 
opportunity to participate.
    The FCPA is a fundamentally sound statute that was passed 
by Congress in 1977 for a very specific and valid reason, and 
my prepared statement provides a brief overview of the 
legislative history on that issue.
    That the FCPA is a fundamentally sound statute does not 
mean that FCPA enforcement is fundamentally sound. And the 
recent article I wrote in the Georgetown Journal of 
International Law, ``The Facade of FCPA Enforcement,'' details 
several pillars which constitute this current facade 
environment that exists.
    One pillar that I would like to talk about today is the 
pillar which is very frequent, that is where seemingly clear-
cut cases of corporate bribery, per the Department of Justice's 
own allegations, are not resolved with FCPA anti-bribery 
charges, and it is this facade pillar that I would like to talk 
about today, because I really think it undermines the rhetoric 
that DOJ uses when it describes its FCPA enforcement program 
and it undermines the deterrence that proper FCPA enforcement 
can achieve.
    So despite numerous public statements during this era of 
the FCPA's resurgence that the DOJ will vigorously pursue 
violators and that paying bribes to get foreign contracts will 
not be tolerated, the undeniable fact is that in the most 
egregious cases of corporate bribery, the DOJ does not charge 
FCPA anti-bribery violations. And the Siemens and the BAE 
enforcement actions that have already been alluded to here 
today are perfect examples of those.
    Not only is it that these companies were not charged with 
FCPA anti-bribery violations, but the deterrence message is 
also undermined when one analyzes the extent of U.S. Government 
business these companies have done in the immediate aftermath 
of the bribery scandals.
    Using recovery.gov, one will find that Siemens alone has 
been awarded numerous Federal Government contracts with U.S. 
stimulus dollars in the immediate 12 months after the bribery 
scandal. And one will also find that BAE, this month alone--not 
only was BAE not charged with FCPA anti-bribery violations, but 
this month alone, BAE, according to its Website, has secured 
$50 million in U.S. Government contracts, including, in 
September 2010, securing a $40 million contract from the FBI, 
the same exact government agency that investigated BAE for its 
improper conduct.
    So deterrence is not achieved when a company that bribes is 
not charged with FCPA anti-bribery violations. Deterrence is 
not achieved when a company settles a matter for an amount less 
than the business gained through bribery, nor is deterrence 
achieved when the U.S. Government continues to award 
multimillion dollar contracts to the same companies that are 
engaged in these bribery schemes.
    There has been a bit of discussion today about a potential 
debarment penalty. I believe that a debarment penalty in 
egregious cases of corporate bribery that legitimately satisfy 
the FCPA's anti-bribery elements should be considered, and I 
would note that H.R. 5366 recently passed the House. That is 
now in the Senate.
    However, because of the facade of FCPA enforcement, this 
bill, as currently drafted, will, in my opinion, be an impotent 
bill.
    I would next like to discuss the prosecution of individuals 
rather quickly. The key to achieving deterrence in the FCPA 
context is prosecuting individuals, again, to the extent the 
individuals' conduct legitimately satisfies the elements of an 
FCPA anti-bribery violation.
    For corporate employees with job duties providing an 
opportunity to violate the FCPA, it is easy to dismiss 
corporate money being spent on fines and penalties. It is not 
easy to dismiss hearing of an employee with your same job 
background being sent to Federal prison for violating the FCPA.
    So during this era of the FCPA's resurgence, clearly, the 
DOJ has prosecuted more individuals, but, again, a ``why'' 
question needs to be asked, and Chairman Specter has asked many 
of these ``why'' questions already when it comes to the lack of 
individual prosecutions in Siemens, BAE, Daimler and some other 
cases.
    I would also like to note that just because prosecuting 
individuals adequately deters and could, thus, be a cornerstone 
of the DOJ's FCPA enforcement program, when one looks at the 
numbers that the DOJ has cited, i.e., 50 individual 
prosecutions over the last couple of years, one will find the 
following: 24 individuals are in one case, the so-called Africa 
Sting case, where FBI agents posing as a president of Gabon, 
had largely owners of small companies engaged in fictitious 
business transactions; and, another 22 individuals are in a 
group of cases where the foreign officials are employees of 
state-owned or----
    Senator Specter. Professor Koehler, how much more time will 
you need?
    Mr. Koehler. Just about 30 seconds, Chairman. Another 22 
individuals are in cases where the so-called foreign officials 
are employees of state-owned or controlled companies, and 
interpretation, I believe, is contrary to the intent of 
Congress in enacting the FCPA.
    The issue is not whether FCPA enforcement is good or bad 
for any one constituency, but whether the DOJ, in many cases, 
is enforcing the FCPA consistent with its provisions.
    So these are some of the issues I think that need to be 
examined, and the time to examine them is now. So thank you for 
the opportunity to participate in these hearings, and I would 
be happy to take any questions.
    [The prepared statement of Mr. Koehler appears as a 
submission for the record.]
    Senator Specter. Thank you, Professor Koehler. Our next 
witness is Mr. Andrew Weissmann, co-chair of the white collar 
defense investigation practice at Jenner & Block. Mr. Weissmann 
had been director of the Enron task force and the chief of the 
criminal law division of the United States Attorney's office 
for the eastern district of New York, has been chief of the 
criminal division there; has overseen a wide array of white 
collar crime investigations.
    We thank you for joining us, Mr. Weissmann, and the floor 
is yours.

 STATEMENT OF ANDREW WEISSMANN, PARTNER, JENNER & BLOCK, LLP, 
                          NEW YORK, NY

    Mr. Weissmann. Good morning, Chairman Specter, members of 
the committee, and staff. I testify today on behalf of the 
United States Chamber of Commerce and the Chamber's Institute 
for Legal Reform.
    I do not take issue with the basic premise of the FCPA. The 
original goals of the FCPA, that is, to deter and punish 
corrupt transactions overseas that undermine public confidence 
in business and government alike remain important.
    Rather, I suggest improvements to that statute that will 
provide greater notice of what is prohibited, greater 
incentives to organizations to have robust compliance programs, 
and be fairer in implementation.
    I briefly discuss here two possible reforms. The first is 
to add an affirmative compliance defense that would be 
available to companies that maintain rigorous FCPA-compliant 
systems. Such a defense is already included in the new anti-
bribery law in the United Kingdom.
    Second, it would be important to clarify the definition of 
a, quote, ``foreign official,'' unquote, within the meaning of 
the FCPA. As the law does not make clear who qualifies as a 
foreign official, it is, thus, not clear to which transactions 
the statute will apply.
    One of the reasons it is important to have a clearer 
statute, particularly in the FCPA arena, is that corporations 
cannot typically take the risk of going to trial and, thus, 
there is a dearth of legal rulings on the provisions of the 
FCPA as it applies to organizations.
    Thus, the government's interpretation can be the first and 
the last word on the scope of the statute as it applies to a 
company. The lack of judicial oversight, expansive government 
interpretation of the FCPA, and the increased enforcement that 
you heard about from Mr. Andres have led to considerable 
concern and uncertainty about how and when the FCPA applies to 
overseas business activities. And the solution is not to do 
away with the FCPA.
    Rather, it is to think about whether there are ways to 
modify it to make it clear what is and is not prohibited and to 
enact legislation that encourages businesses to be vigilant and 
compliant.
    So to address the first idea, which is a compliance 
defense, the problem with the existing FCPA statute is that it 
does not provide for a defense if individual employees 
circumvent compliance measures that are reasonably calculated 
to identify and prevent FCPA violations.
    Currently, companies may receive credit from the Department 
of Justice for a compliance program, but that would be only at 
the discretion of the government and unclear up front how that 
discretion will be exercised; or, at sentencing, it can be a 
factor to be given a reduced sentence under the United States 
sentencing guidelines.
    That is not sufficient. The statute should be modified, as 
it is in the United Kingdom, to mandate consideration of 
compliance programs during the liability discussion of an FCPA 
prosecution. For instance, a company that has done due 
diligence before it acquires another company and discovers an 
historic FCPA issue at that acquired company should not bear 
criminal responsibility for that other company's actions.
    Similarly, as another hypothetical, which I think is quite 
real in practice, an organization that has an ideal compliance 
program has done nothing wrong as a company, when an employee 
nevertheless flouts that program a bride. The company, as 
opposed to an individual, has committed no wrong that we, as a 
society, want to deter or punish. But that is the current state 
of the law.
    Remember that it will only take--for the Department of 
Justice to bring an FCPA case--one employee at any level of the 
organization to bring a case regardless of the diligence of 
that company.
    Such a defense will bring the FCPA in line with a series of 
Supreme Court cases in the civil context, where the Court has 
placed limitations on the application of respondent superior 
and determined that it should not apply where the company can 
show that it took specific steps to prevent the offending 
employee's actions.
    Having such a defense would incentivize companies to deter 
FCPA violations, identify FCPA violations, and self-report such 
violations. It will also serve to make companies not victims of 
rogue employees. And to be clear, such a defense distinguishes 
responsible companies from irresponsible companies.
    It would do nothing, for instance, in the next Enron. The 
next bad company that comes along is not going to be helped one 
iota by having such a defense.
    Then just briefly, since I see I am over time, the statute 
as currently written provides no meaningful way of identifying 
who an instrumentality of a foreign government is. In my 
written testimony, I provide examples of how that particular 
provision could be rectified to provide clear guidance to make 
the statute fairer; so that companies that are bent on applying 
the law and staying on the right side of the law can do so in 
advance, without having to worry about being prosecuted.
    Thank you.
    [The prepared statement of Mr. Weissmann appears as a 
submission for the record.]
    Senator Specter. Thank you, Mr. Weissmann.
    Our final witness is Mr. Michael Volkov, litigation partner 
at Mayer Brown; has an extensive background in law enforcement; 
was an assistant U.S. attorney for 17 years here in DC and, 
before that, worked on this Committee with Senator Hatch and 
chief counsel of the Crime, Terrorism and Homeland Security 
Committee.
    Thank you very much for joining us, Mr. Volkov, and we look 
forward to your testimony.

    STATEMENT OF MICHAEL VOLKOV, PARTNER, MAYER BROWN, LLP, 
                         WASHINGTON, DC

    Mr. Volkov. Thank you, and good morning, Chairman Specter 
and members of the committee. Thank you for this opportunity to 
discuss with you the enforcement of the Foreign Corrupt 
Practices Act.
    At the outset, I want to say that it is an honor to appear 
before the Subcommittee for the first time since I left the 
Judiciary Committee staff in 2005. I have many, many fond 
professional and personal memories of the work I was able to do 
here as part of the Committee staff, and it is nice to return.
    In the last 5 years, FCPA enforcement has risen to 
unprecedented levels. The Justice Department has sent a very 
strong message and the business community is well aware of the 
need for compliance.
    But to increase compliance, the Justice Department needs to 
review and modify its voluntary disclosure process. For most 
corporations, the decision to make a voluntary disclosure is 
complicated by the uncertainty of the ultimate punishment or 
the benefit of making such a disclosure.
    The Justice Department provides no clarity as to that 
point. There simply is no guarantee for what benefits a 
corporation will earn for voluntary disclosure. Now, you do not 
need an economist or you do not need any smart person to know 
that in the absence of clarity and transparency, companies may 
not accurately weigh the pros and cons of voluntary disclosure; 
hence, the sleepless nights of company officials.
    What I am proposing is a more balanced enforcement 
approach. One is to increase the incentive to comply with the 
law and to distinguish between corporations that engage in 
flagrant violations, like Siemens, like Daimler, of the FCPA 
and those that seek to comply in good faith, but, nonetheless, 
as Mr. Weissmann was outlining, can be held liable for the 
actions of a few employees.
    In my view, these two goals can be accomplished by adopting 
a corporate self-compliance limited amnesty program. Now, I 
want to acknowledge here that former Federal Judge Stanley 
Sporkin is a mentor and the so-called father of the FCPA, who 
comes from Pennsylvania, has articulated a very similar 
proposal for many years.
    He is no shrinking violet when it comes to enforcement 
matters. Judge Sporkin's proposal consists of the following 
elements: a participating company agrees to conduct a full and 
complete review of the company's compliance with the FCPA for 
the 5 previous years; the internal review is then conducted 
jointly by a major accounting firm, law firm, or with a 
specialized accounting firm; the company further agrees to 
disclose the results, to come into the Justice Department and 
the SEC and say what it found, disclose it to the investors, 
and disclose it to the public.
    If the company discovers any violations in the audit, the 
company agrees to take all steps necessary to eliminate the 
problems and implement the appropriate controls to prevent 
future violations. The company would then subject itself to an 
annual review for 5 years to ensure that compliance was being 
maintained.
    The company would then also be required to retain an FCPA 
compliance monitor, who would annually certify--certify, under 
oath, under penalty of perjury, to the SEC and the DOJ that the 
company was in compliance.
    Now, in exchange for these actions, the SEC and DOJ would 
agree not to initiate an enforcement action against the company 
during this period, except--and this is a big exception--for 
those flagrant or egregious violations, meaning where a 
company's culture, like Siemens, where a company's business 
depends upon and was built upon a bribery scheme; not in a 
situation where companies are trying in good faith to comply 
and are not--and make a mistake, make a mistake as to what 
their interpretation of the law is.
    Now, I wanted to turn to one other issue, which two of the 
Senators or two of the members had referred to, and that is the 
international efforts against bribery and corruption. One 
glaring omission in this overall enforcement scheme is that the 
bribe-takers themselves, the people taking the money in the 
government are not prosecuted.
    Could you imagine here in the United States if we had that 
situation, where people taking the bribes would not be 
prosecuted? At its inception, the FCPA was the only statute of 
its kind anywhere in the world, but we live in a different 
place now.
    The United Kingdom recently enacted the Anti-Bribery Act, 
which will become effective in April 2011. I was surprised to 
learn that Italy, in 2001, had enacted an anti-bribery act very 
similar in terms of being strict in terms of enforcement.
    Now, look, the United Kingdom's act is even more stringent 
than the FCPA. But international efforts against bribery and 
corruption need to increase. There is just no question about 
it.
    You cannot be the only enforcer in the world and expect to 
clean up the world. That is not our role. We need to put more 
emphasis on helping other countries improve their enforcement 
programs.
    Next week, I am participating in a conference here at the 
World Bank, titled ``The International Corruption Hunters 
Alliance,'' at which all the countries, many, many countries 
are sending representatives, prosecutors, investigators, and 
public officials to try and put together some meaningful 
enforcement programs. This is a good thing and we should 
support it as much as we can.
    It is important to note that if all the signatories, 39 
signatories, to the anti-bribery convention----
    Senator Specter. Mr. Volkov, how much more time will you 
need?
    Mr. Volkov. This is my last point. If all the signatories 
to the anti-bribery convention enforced the law, that is 75 
percent of the world's exports would be under that type of 
enforcement regime.
    Thank you, and look forward to answering your questions.
    [The prepared statement of Mr. Volkov appears as a 
submission for the record.]
    Senator Specter. Thank you, Mr. Volkov.
    Professor Koehler and Mr. Volkov, you have both zeroed in 
on Siemens. Mr. Volkov, do you think that there ought to be 
individual jail sentences in Siemens?
    Mr. Volkov. Well, Mr. Chairman, I think you have raised a 
really important point with the department, which is--and this 
may be against my client's interests, but I will tell you, 
quite honestly, that if I were a prosecutor and I have the 
corporation's cooperation, the first thing I am going to do is 
find the five worst actors in that corporation.
    The corporation is what had handed me all the evidence that 
I need, and I am going to have them indicted. I do not 
understand why that did not happen. I cannot give you an 
explanation for that. But you have certainly made a very 
important point.
    Why, in the most significant cases, is nobody going to 
jail? And I cannot say that I disagree with your concern.
    Senator Specter. When you see all the publicity on Siemens, 
a big fine and $100 billion in revenues, $8 billion in profits, 
and no jail sentence, what effect does that have? Is this not 
really a signal that you can violate the act and pay a fine?
    Mr. Volkov. Well, I would hope that that is not the result. 
I will tell you, in terms of counseling clients, I get the 
sleepless calls that Senator Klobuchar referred to, which was I 
have people who call me very, very in good faith, who want to 
comply, but yet have difficulty because of the uncertainties 
surrounding the law or the absence of clear statements.
    I would say that there has been a shockwave sent through 
the world community by the Siemens case. On the other hand, I 
know from my experience as a prosecutor, when somebody goes to 
jail and you are a high level executive--when Bernie Ebbers 
went to jail or when any of those officials went to jail, that 
was a big deal when he went to jail for life.
    When Bernie Madoff goes to jail for 50 years, that is a big 
deal. That sends a message. You are right. I cannot say what 
the marginal difference would be, but I will tell you this. The 
size of the fine in that case was no laughing matter in terms 
of many companies.
    Senator Specter. Professor Koehler, you talked at some 
length about Siemens. Have you become conversant with the facts 
and what individuals did in that case?
    Mr. Koehler. Yes, very much so. One of the things I do as 
an academic is I analyze every single FCPA enforcement action 
there is. So I am very familiar with the facts of that case.
    The DOJ's----
    Senator Specter. What do you think about a 2008 case----
    Mr. Koehler. Well, it is ironic that in the case----
    Senator Specter. I am not finished with my question.
    Mr. Koehler. Sorry.
    Senator Specter. With a 2008 case and the giant fines and 
those characterizations which I read earlier out of the 
indictment and no jail?
    Mr. Koehler. It is highly ironic in the case that the 
Department of Justice terms the most egregious case of 
corporate bribery the FCPA has ever seen, that there is no 
individual prosecutions.
    I guess it would be one thing if these prosecutions were 
just commenced, as in the Panalpina cases last month, but as 
you know, we have been going on nearly 2 years now.
    The DOJ's sentencing memorandum says that compliance, 
legal, internal audit, and corporate finance departments all 
played a significant role in the conduct at issue.
    Now, for foreign nationals, there are some jurisdictional 
issues that must be met, but the Department of Justice has 
never shied away from pursuing incredibly broad----
    Senator Specter. I will not ask you to be specific in the 
open hearing, although you are not subject to liability for 
what you testify at a hearing, but we will proceed with you 
privately as to the inquiries you have made and what you know.
    What I intend to do is to confront the department with that 
and see if we can get answers. We do not have their files and 
the inquiries you made look to be promising and we would like 
to have the benefit of that, if you would be willing to give us 
a hand on that. Would you?
    Mr. Koehler. I would be happy to assist, yes.
    Senator Specter. Mr. Weissmann, overall, I have listened 
with care to your recommendations for modifications and I think 
you make some good points when you talk about a compliance 
defense, talk about rogue employees.
    There, you have the totality of the conduct of the 
corporation exonerated. Before my red light goes on, I will ask 
you the question. That is, overall, do you think that the act 
is fairly well balanced and fairly well enforced or too tough?
    Mr. Weissmann. I think there is no question that many of 
the cases that were brought up today, such as Siemens, fall 
far, far, far into the--that it is amply warranted for the 
application of the statute.
    The problem is that every company in America and many 
companies overseas worry about the statute daily. And so 
regardless of what the Department of Justice is doing, people 
think about the statute and could their conduct fall on one 
side of it versus the other and will they be subject to an 
investigation.
    So it is a difficult question to answer, because I have 
seen many prosecutions where you say, of course, that seems 
like a just result and should have been warranted, but there 
are many companies that are hurt by the ambiguities in the 
statute and what I think is the over-breadth of some of its 
provisions on a daily basis.
    Senator Specter. Thank you, Mr. Weissmann.
    Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Mr. Chairman. It 
has been an interesting discussion. And since I brought up the 
sleepless nights, I want to point out this is not my major 
concern here.
    When I have sleepless nights about legislation, I do not 
think my constituents feel sorry for me. But I used it as an 
example that there are companies that are trying to comply.
    My major concern is if we have an uneven playing field that 
is hurting American business while we balance the obvious need 
to have this law on the books and to enforce it and to go after 
egregious bribery.
    So I guess my first question is of you, Mr. Volkov. You 
brought up how we get other countries to also enforce their 
statute. How do you think we do that? You said you were going 
to this conference, but what would be the best way, whether it 
is with agreements we have with those countries, conventions? 
How do you think we do that?
    Mr. Volkov. Well, already, some issues have been raised in 
terms of our mutual assistance treaties and the process being 
very difficult to secure evidence or share information back and 
forth. That is one issue.
    There also is just a lack of basic information on 
prosecution and expertise. What happens frequently is that our 
government ends up training people. It had to prosecute and 
investigate corruption-type cases and those folks then go out, 
somewhat like here, into the private sector and they go out and 
they go and make more money and do not stay as government 
prosecutors in these other countries.
    I think it requires the efforts that the Administration has 
already done, which is to work with the other countries, but I 
think there is also some basic groundwork that needs to be 
done.
    For example, they do not even know--countries do not even 
know how to share information across law enforcement agencies. 
They do not know who to contact. They do not know who are even 
the points of contact among various countries. And I think we 
have to continue to encourage those types of efforts.
    Senator Klobuchar. And when Senator Specter was asking you 
about the compliance ideas and you mentioned the judge's ideas, 
is it your argument that, in fact, if you made some changes to 
the statute to better encourage compliance, that it would be 
easier, in fact, to root out some of the bad actors who could 
then be prosecuted criminally in an easier fashion?
    Mr. Volkov. Absolutely. And I think that Mr. Weissmann's 
points are all good, particularly with regard to the foreign 
officials.
    Senator Klobuchar. And that was my next question, is if you 
agreed with some of his proposals, as well.
    Mr. Volkov. Absolutely. Here is one of the ironies, to Mr. 
Weissmann's point. One of the hardest countries to go into and 
to conduct business is China, because, basically, all of my 
clients assume that everybody they deal with there is a foreign 
official, because they are a state-owned enterprise under this 
broad definition.
    I do not think that was the intent when the FCPA was 
passed, to prevent--to put businesses----
    Senator Klobuchar. What year was it passed?
    Mr. Volkov. That was 1977 was the original.
    Senator Klobuchar. That was before we were doing a lot of 
business----
    Mr. Volkov. With China.
    Senator Klobuchar.--in these countries.
    Mr. Volkov. Right.
    Senator Klobuchar. Mr. Weissmann, if we could just follow-
up on that point. I was looking at your testimony here and you 
talked about some of the issues that arise, like is a payment 
to a professor to speak at a conference for prospective clients 
an FCPA violation. What if the professor works at a university 
that receives public grants or is state-run? What if the 
professor works for a Chinese company that is owned, in part, 
by the state?
    For example, I heard about what if a nurse attends a 
conference and then gets some money for a cab ride home because 
the metro has stopped, is she a state official for those 
purposes. Could you elaborate on some of the issues and how we 
could try to fix that to make it clearer?
    Mr. Weissmann. Sure. It is important to note that the FCPA 
has no materiality requirement and no de minimis exception. So 
$10 can be enough. And there is no balancing as there is in SEC 
rules to determine whether the violation was material to the 
company. So it is really a broad statute.
    One of the things, to address your prior question, that 
could be done to help put people on an even playing field is to 
look at the U.K. bill and realize that there are two provisions 
that it has that we do not have. One, there is the compliance 
defense, which I will not bore you with; and, the other is that 
the U.K. bill actually punishes the foreign officials and 
imposes liability for soliciting abroad.
    That does not exist in the United States. And if you are 
trying to figure out ways to put America on an even playing 
field, one is to have similar laws. And since often what you 
see in these cases is not that companies are actively trying to 
solicit, but they are, in many ways, the victim of the company 
saying--the country saying this is what you need to do. If 
there was greater enforcement, including in the United States, 
on those people, that would help, as well.
    In terms of who a foreign official is, the statute provides 
some guidance, but gives no guidance on the ambiguous word, 
which is an instrumentality of a foreign government. So one 
example that I think is useful is to think about if that were 
applied here, potentially, anybody who works for Bloomberg 
Media or, potentially, General Motors could be considered a 
public official for the purposes of the FCPA.
    Senator Klobuchar. Why is that?
    Mr. Weissmann. Because in Bloomberg Media, since my 
hometown is New York, the mayor of New York has a substantial 
stake in that company, and so it could be considered a public 
company, in which case, all employees of that instrumentality 
would be covered by the FCPA.
    Similarly, General Motors, if you take it a month ago, 
would have been majority owned by the public. And even now, 
with a non-majority stake, the Department of Justice has taken 
the view that even in cases where it is a non-majority 
ownership, that that is sufficient to trigger being a foreign 
official for the purposes of the FCPA.
    So what could help is having actual rules. And one example 
of how this could be solved is in the accounting literature, 
there are strict rules about when you are a third party for 
purposes of accounting, whether you are actually controlled by 
the company, what percentage ownership you have for determining 
whether you are dealing with a third party or whether you are 
going to be determined to be dealing with yourself, 
essentially. And those kinds of analogies could be used to 
provide clear guidance, particularly in an area where there is 
criminal liability at stake.
    So, ironically, you have very clear rules for SEC and 
accounting literature, but not in the case of the criminal 
statute, such as the FCPA.
    Senator Klobuchar. Thank you.
    Senator Specter. Thank you, Senator Klobuchar.
    Senator Coons.
    Senator Coons. Thank you, Senator. I just simply wanted to 
commend you, Senator Specter, for pursuing aggressively, in 
egregious cases such as Siemens, where there is a failure to 
charge individually or pursue individually, to thank the 
members of the Committee who have--the members of the 
testifying panel today for your input.
    I would welcome an opportunity to work with the Committee 
on potential amendments to the act that would allow 
clarification on the definition of foreign official, the 
creation of a compliance defense.
    There are egregious offenders and we do need to continue to 
pursue aggressively foreign corruption. I am interested in what 
might someday happen as our allies begin to join us, the 
Italians, the U.K. government, others, and then how we would 
begin to harmonize the actual enforcement.
    Today, we are the only nation that is extending an 
extraterritorial reach and going after the citizens of other 
countries, we may someday find ourselves on the receiving end 
of such transnational actions.
    If I might, just one last question, Mr. Volkov. Any 
suggestions about what we might be doing to strengthen our 
regime in terms of its effectiveness for transnational 
jurisdiction and how we might harmonize it with what we see the 
U.K. doing, and, yes, I was surprised to learn, as well, Italy?
    Mr. Volkov. Yes. Well, I think there is a lot going on 
already. I think that the 36 other signatories need to be 
cajoled, be whatever needs to be done to try to persuade them 
to adopt some kind of law.
    The extraterritorial reach that you mention with regard to 
the United States law is very significant, but wait until you 
see what happens in England. In England, all you have to do is 
be doing business, in quotes, meaning--and what that means, you 
do not have to have a principal place of business, you do not 
have to be doing anything.
    If you sell your product in England, you are subject to 
their anti-corruption and anti-bribery restrictions, which are 
much stricter with regard to--are about to be--with regard to 
hospitality and just providing, let us say, food at an event or 
whatever. It makes it much more difficult.
    The one point I wanted to go back to, which I did not have 
a chance to clarify, is that Judge Sporkin's proposal is--and I 
have nothing against Mr. Weissmann. He is a colleague and I 
love him, but I do not favor creating a defense, because the 
defense requires the corporation to go to trial. The defense 
requires the corporation to get indicted.
    We have already seen what happened with Arthur Andersen and 
the demise of a company, the demise of hundreds of thousands of 
jobs in the Houston community. What we are saying with Judge 
Sporkin's proposal is let us do it up front, do the compliance, 
certify to it, and we will give you this--you have to report to 
us on a yearly basis, and I bet you almost--many of my clients 
would choose that option, because they would rather be safe 
than sorry. And so they want to have a compliance program that 
does not require them to get indicted and then raise it as a 
defense.
    That is the difference that we have, because we are trying 
to distinguish between good faith actors and those that are the 
egregious, flagrant cases.
    Senator Coons. What would be the mechanism for actually 
acting on Judge Sporkin's proposal?
    Mr. Volkov. Well, it could be done--in other words, how 
could it get implemented?
    Senator Coons. Right.
    Mr. Volkov. Well, the Department of Justice--and you will 
notice this in reaction to a lot of the criticism coming from 
Chairman Specter and others--has said, ``Oh, well, now we are 
going to take a look and see if there should be some kind of 
leniency program like the antitrust division's leniency 
program.''
    They can implement this on their own. They could do it 
tomorrow. This is an exercise of prosecutorial discretion. They 
could do it tomorrow.
    Now, to the extent they need statutory changes, obviously, 
they would have to come to Congress. But they could do it right 
now and there is no reason for them to not do it right now, 
because like I said, I mean, it is good for business, for me, 
but it is not good for the country in terms of American 
business and making it competitive, because we are spending 
more and more time with clients, dedicating hours and hours to 
just these types of questions.
    I have a nurse. Can I give her a sandwich to eat at a 
conference? Can I do that? And they have to call up the law 
firm and ask them.
    Senator Coons. Well, I appreciate the Chamber's advocacy on 
this and the testimony of every member of the panel, and thank 
you for that clarification.
    Thank you very much, Mr. Chairman, for the chance to ask 
questions.
    Senator Specter. Thank you, Senator Coons.
    Anything further?
    [No response.]
    Senator Specter. Thank you very much, Professor Koehler, 
Mr. Weissmann, and Mr. Volkov.
    That concludes the hearing.
    [Whereupon, at 11:42 a.m, the hearing was adjourned.]
    [Questions and answers and submissions for the record 
follow.]
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