[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




                               BEFORE THE

                         AND HOMELAND SECURITY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION


                             JUNE 14, 2011


                           Serial No. 112-47


         Printed for the use of the Committee on the Judiciary

      Available via the World Wide Web: http://judiciary.house.gov

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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             DEBBIE WASSERMAN SCHULTZ, Florida
TREY GOWDY, South Carolina

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel

        Subcommittee on Crime, Terrorism, and Homeland Security

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman

                  LOUIE GOHMERT, Texas, Vice-Chairman

BOB GOODLATTE, Virginia              ROBERT C. ``BOBBY'' SCOTT, 
DANIEL E. LUNGREN, California        Virginia
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
TED POE, Texas                       HENRY C. ``HANK'' JOHNSON, Jr.,
JASON CHAFFETZ, Utah                   Georgia
TIM GRIFFIN, Arkansas                PEDRO PIERLUISI, Puerto Rico
TOM MARINO, Pennsylvania             JUDY CHU, California
TREY GOWDY, South Carolina           TED DEUTCH, Florida
SANDY ADAMS, Florida                 SHEILA JACKSON LEE, Texas
BEN QUAYLE, Arizona                  MIKE QUIGLEY, Illinois
                                     DEBBIE WASSERMAN SCHULTZ, Florida

                     Caroline Lynch, Chief Counsel

                     Bobby Vassar, Minority Counsel

                            C O N T E N T S


                             JUNE 14, 2011


                           OPENING STATEMENTS

The Honorable F. James Sensenbrenner, Jr., a Representative in 
  Congress from the State of Wisconsin, and Chairman, 
  Subcommittee on Crime, Terrorism, and Homeland Security........     1
The Honorable Robert C. ``Bobby'' Scott, a Representative in 
  Congress from the State of Virginia, and Ranking Member, 
  Subcommittee on Crime, Terrorism, and Homeland Security........     2
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     4


Greg Andres, Deputy Assistant Attorney General, Criminal 
  Division, U.S. Department of Justice
  Oral Testimony.................................................     6
  Prepared Statement.............................................     8
The Honorable Michael Mukasey, former Attorney General, Partner, 
  Debevoise & Plimpton LLP
  Oral Testimony.................................................    18
  Prepared Statement.............................................    20
George J. Terwilliger, III, Partner, White & Case LLP
  Oral Testimony.................................................    37
  Prepared Statement.............................................    39
Shana-Tara Regon, Director, White Collar Crime Policy, National 
  Association of Criminal Defense Lawyers
  Oral Testimony.................................................    46
  Prepared Statement.............................................    48

               Material Submitted for the Hearing Record

Prepared Statement of Global Witness.............................    78
Prepared Statement of Karen Lissakers, Director, Revenue Watch 
  Institute......................................................    81
Prepared Statement of Global Financial Integrity.................    84
Prepared Statement of Citizens for Responsibility and Ethics in 
  Washington (CREW)..............................................    87



                         TUESDAY, JUNE 14, 2011

              House of Representatives,    
              Subcommittee on Crime, Terrorism,    
                             and Homeland Security,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:03 a.m., in 
room 2141, Rayburn Office Building, the Honorable F. James 
Sensenbrenner, Jr. (Chairman of the Subcommittee) presiding.
    Present: Representatives Sensenbrenner, Gohmert, Goodlatte, 
Poe, Marino, Gowdy, Adams, Quayle, Scott, Conyers, Johnson, 
Chu, Jackson Lee, and Quigley.
    Staff present: (Majority) Sam Ramer, Counsel; Lindsay 
Hamilton, Clerk; Joe Graupensberger, Counsel; Sam Sokol, 
Counsel; and Veronica Eligan, Professional Staff Member.
    Mr. Sensenbrenner. The Subcommittee will come to order.
    Without objection, the Chair is authorized to declare 
recesses during votes today, which I don't anticipate.
    I would like to welcome the witnesses today.
    In 1977, the world was a very different place. The Soviet 
Union was continuing to expand its reach around the world, 
China had only recently been visited by President Nixon, and 
profit-making enterprises were forbidden in that country. Back 
then, the concerns arose about the level of bribery that 
American companies engaged in abroad. The revelations of slush 
funds and secret payments by American corporations were blamed 
for adversely affecting American foreign policy.
    In response, Congress passed the Foreign Corrupt Practices 
Act, or the FCPA. The law sent a strong signal that bribery 
would not be tolerated and businesses would not be able to look 
the other way. The law addressed the issue of foreign bribery 
in three ways. First, it required all publicly held 
corporations, whether U.S. or foreign, to keep accurate books, 
records and accounts. Second, it required these issuers to 
maintain a responsible internal accounting control system. 
Third, it prohibited bribery of foreign officials by U.S. 
corporations and issuers, and these provisions applied to 
corporations as well as to individuals.
    Thirty-four years later, the world has turned upside-down. 
The Soviet Union is shattered, leaving in its wake autonomous 
republics. China has become a global manufacturing power. The 
nature of overseas businesses has changed. Many of these 
countries have some degree of state control over their 
businesses, bringing new relevance to the enforcement of our 
foreign bribery laws.
    In the last few years we have seen a dramatic increase in 
the number of cases prosecuted by the Justice Department under 
the FCPA, including a record number of fines with staggering 
sums. The Wall Street Journal pointed out that FCPA fines made 
up half of all DOJ Criminal Division penalties in fiscal year 
2010. This is a considerable windfall for the Federal 
    Significant concerns about the FCPA and its enforcement by 
the Justice Department are being expressed by the business 
community, and business is already in trouble. Under the Obama 
Administration, America is suffering through a severe and 
prolonged economic downturn. Businesses that are trying to 
comply with the FCPA assert that the law is being enforced in a 
vague and impenetrable manner. Because the risks of prosecution 
are so great, with million-dollar fines and possible prison 
sentences, companies would rather settle with the Justice 
Department than go to court.
    The result is a shortage of court decisions determining the 
limits of the law. Companies must then analyze cases prosecuted 
by the Justice Department and the settlements reached to 
determine how to do business in foreign markets.
    The business community complains that the absence of case 
law interpreting the breadth and scope of the FCPA inflates the 
Department's prosecutorial discretion and confounds industries' 
ability to conform to the law. For instance, there is no clear 
rule on what qualifies as a foreign official, nor what 
percentage of state ownership qualifies a company as an 
instrumentality of the state. Companies lack guidance on how 
expensive a gift must be to be considered a bribe.
    Businesses and corporations are bracing for thousands of 
new regulations from Obamacare and Dodd-Frank. The NLRB is 
trying to tell companies where they are allowed to build things 
in the U.S. We are expecting more onerous regulations from the 
EPA as it administratively legislates where Congress has chosen 
not to. It is no wonder that the business community suspects 
that the Administration is hostile to free enterprise. How are 
businesses supposed to hire when they do not know what their 
costs or legal exposure will be?
    FCPA prosecutions should be effective and fair, and they 
must be predictable. The rules of the road must be communicated 
clearly. Companies should have the same ability to guide 
themselves as motorists do, so that business can start moving 
    As a part of its oversight functions over the Justice 
Department and the criminal laws of the United States, this 
Committee is well suited to examine the impact of the FCPA and 
to ask hard questions about whether the act is succeeding in 
its mission or is needlessly hurting American job creation. I 
look forward to hearing more about this issue and thank all of 
our witnesses for participating in today's hearing.
    It is now my pleasure to recognize for his opening 
statement the Ranking Member of the Subcommittee, the gentleman 
from Virginia, Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman, and I am pleased to 
join you for the Subcommittee hearing on Foreign Corrupt 
Practices Act.
    The Foreign Corrupt Practices Act contains provisions that 
make it unlawful for individuals and corporations to make 
payments or bribes to foreign officials for the purpose of 
obtaining or retaining business opportunities abroad. At the 
time of its passage in 1977, Congress was concerned that such 
bribery harms American businesses, erodes confidence in the 
economic system, rewards corruption instead of efficiency, and 
creates foreign policy problems. These concerns remain.
    In recent years, the Department of Justice has 
substantially increased the number of prosecutions against 
corporations and individual executives and has collected more 
in criminal fines than any other period in the history of the 
law. As a result of the collective efforts of the Department of 
Justice, Department of Commerce, and the Securities and 
Exchange Commission, the United States has investigated and 
prosecuted many foreign bribery cases. In fact, it has 
investigated and prosecuted more cases than any of the other 
38-member countries of the OECD, the Organization of Economic 
Cooperation and Development Convention on Combating Bribery of 
Foreign Public Officials in International Business 
    That is an international agreement aimed at reducing 
corruption in developing countries by encouraging sanctions 
against bribery in international business transactions carried 
out by companies based in the Convention member countries. 
These increased enforcement efforts have raised concerns 
regarding certain provisions of the statute among some in the 
business and legal community. They argue that some of the 
prosecutions are unfair and actually harm U.S. companies and 
ultimately our economy by stifling incentives to do business 
abroad. Some feel that overly-aggressive enforcement places 
U.S. companies at a disadvantage in the global marketplace when 
competing against companies not subject to the U.S. law.
    Specifically, they cite problems with current statutory 
definitions of ``foreign official'' and ``instrumentality.'' 
One of the problems is the contention that the Justice 
Department and the SEC are interpreting the definition of 
``foreign official'' too broadly, especially when it comes to 
payments to companies that are state owned or state controlled. 
Under those circumstances, it may not be immediately apparent 
whether a manager or other employee is to be considered a 
foreign official in the sense contemplated by the law.
    Other recommendations for amending the law include having 
the ability to cite a company's compliance program as an 
affirmative defense against criminal liability. Having this 
would allow companies to rebut the imposition of criminal 
liability for violations if employees or contractors 
responsible for the violation were found to have circumvented 
compliance measures that were in place to identify and prevent 
    As we speak, many companies invest substantial sums, 
perhaps even millions of dollars, in developing sophisticated 
compliance programs in an effort to train employees and in an 
effort to identify actual or potential problems and prevent 
them. They may retain in-house compliance officers and 
monitors, all without the ability to be certain as to what 
conduct is safe and which isn't. The result may often be over-
compliance, but many feel that it is better to be safe than 
    Lack of clear standards and guidance, even the availability 
of the Justice Department's opinion release procedure, may 
often result in companies declining to engage in an array of 
legitimate business activities which not only stifles business 
growth but ultimately our economy. Punishing those companies 
and individuals who are acting in good faith and who are 
already doing everything they can to identify and prevent 
violations of the law runs counter to our basic tenets of 
fairness and justice.
    Another recommendation for change includes limiting 
successor liability. Why should a company be held criminally 
liable for actions of a company that it acquires or merges 
with, especially when actions occurred prior to the acquisition 
or merger and were entirely unknown to the acquiring company 
which had conducted its due diligence review of the offender 
company's operations? This, too, runs counter to our system of 
justice and the principle for punishing only the guilty party.
    Other recommendations have included adding willfulness and 
materiality requirements and limiting parent liability for 
subsidiary's conduct not known to the parent.
    Effective enforcement of the law is crucial to protecting 
and preserving the integrity of international business and 
economic development. As we applaud aggressive enforcement of 
our laws, we must also acknowledge the necessity of 
periodically reviewing those laws in order to ensure that they 
remain fair and just, as well as effective tools against crime 
and corruption, and that is what our witnesses will discuss 
today and why we look forward to their testimony.
    Thank you, Mr. Chairman. I yield back.
    Mr. Sensenbrenner. I thank the gentleman from Virginia.
    The gentleman from Michigan, Mr. Conyers, the Ranking 
Member of the full Committee, is recognized for 5 minutes for 
an opening statement.
    Mr. Conyers. Thank you, Chairman Sensenbrenner.
    You observed that under the dawdling of the Obama 
administration, when we went into an economic decline, I would 
just like to put into the record that in the first year, the 
first month of President Obama being sworn in on January 20, 
2009, the unemployment rate was 598,000. I suppose you are not 
going to blame him for that.
    But in December, when he wasn't in office, the unemployment 
rate was 524,000 people out of work; and in November, it was 
584,000, the people who lost their jobs and were unemployed, a 
small detail.
    Now, to my tremendously competent Subcommittee on Crime 
Chairman, Bobby Scott, about this overly aggressive 
enforcement, there have been 140 cases in 10 years. Will 
somebody explain to me what makes that overly aggressive? I 
don't think so.
    And so I would like to just shed a little different view 
about this thing. To me, there are six points that I wanted to 
    First of all, I want to tell you a suggested amendment that 
I can support, and that is the addition of a compliance defense 
which would permit companies to fight the imposition of 
criminal liability for these FCPA violations if individual 
employees or agents had circumvented compliance measures that 
were otherwise reasonable in identifying such violations.
    But let's look at the clarification of foreign official and 
instrumentality provisions. Without a clear understanding of 
who is a foreign official, this could create a problem, and I 
think I can support that one.
    But now let's start looking at limiting successor liability 
and limiting the parent company liability for acts of 
subsidiary. You don't get--if you buy a house and there is a 
mortgage on it that you didn't find, your liability isn't 
limited. You have got to pay for it. And so why should 
companies with pretty good sized legal assistance have to get 
off because there was something going on that they didn't know 
about? There is no such exception or modification made in the 
general practice of law, and I don't see why it should be here. 
Limiting the parent company liability for acts of the 
subsidiary. Oh, they didn't know they were doing wrong. Yeah, 
right. They have got all the lawyers that they need, and to now 
tell me that they didn't know that their subsidiary was engaged 
in wrongdoing is pretty hard for me to swallow this morning.
    Adding a willfulness requirement for corporations, I am 
against that, too. If they do something wrong, whether we can 
find out who is willful or not, that is up to them to find out 
in court.
    Thank you, Chairman Sensenbrenner.
    Mr. Sensenbrenner. Thank you very much, Mr. Conyers.
    It is now my pleasure to introduce today's witnesses.
    Mr. Greg Andres has served as Acting Deputy Assistant 
Attorney General in the Criminal Division at the Department of 
Justice since late 2009. In that capacity, he supervises the 
fraud section, the appellate section, the capital case unit, 
and the organized crime and racketeering section. He joined the 
Division on detail from the U.S. Attorney's Office for the 
Eastern District of New York, where he has been an Assistant 
United States Attorney since 1999. He graduated from the 
University of Notre Dame and the University of Chicago Law 
School, where he was a member of the University of Chicago Law 
    Judge Michael Mukasey served as Attorney General of the 
United States from November 2007 to January 2009. He joined 
Debevoise as a partner in the litigation practice in New York 
in February 2009, focusing his practice primarily on internal 
investigations, independent board reviews, and corporate 
governance. From 1988 to 2006, Judge Mukasey served as a 
district judge in the U.S. District Court for the Southern 
District of New York, becoming Chief Judge in 2000. Prior to 
his work with the U.S. District Court, he was in private 
practice for 11 years. From 1972 to 1976, he served as an 
Assistant United States Attorney for the Southern District of 
New York and chief of the Official Corruption Unit in 1975 to 
1976. He received his LLB from Yale Law School in 1967, and his 
B.A. from Columbia College 4 years earlier.
    George Terwilliger is a senior partner at White & Case LLP 
and global head of the firm's White Collar Practice Group. Mr. 
Terwilliger served 15 years in public service as a Federal 
prosecutor in the U.S. Justice Department. He served as U.S. 
Attorney for the District of Vermont and as Deputy Attorney 
General. He earned his Juris Doctor from the Antioch School of 
Law in 1978, and his Bachelor's degree from Seton Hall 
University in 1973.
    Ms. Shana-Tara Regon serves as director of White Collar 
Crime Policy for the National Association of Criminal Defense 
Lawyers. She focuses on monitoring and attempting to prevent 
over-criminalization and over-federalization. She also 
coordinates the NACDL's strategic partnership with other 
organizations on multiple Federal, legislative and agency 
initiatives. Prior to joining NACDL, Ms. Regon practiced as a 
white-collar defense lawyer for Shipman and Goodwin LLP in 
Hartford, Connecticut, representing individual and corporate 
clients in state and Federal civil and criminal investigations. 
Before her work at Shipman and Goodwin, Ms. Regon clerked for 
Justice Joette Katz of the Connecticut Supreme Court. She is a 
former president of the District of Connecticut's chapter of 
the Federal Bar Association and a former pupil of the Oliver 
Ellsworth Inn of Court. She received her Juris Doctor degree 
from Western New England College of Law, where she was a Note 
Editor for the Law Review. She also holds a Master of Fine Arts 
and Fiction Writing from the University of New Orleans and a 
B.A. in English from Sweet Briar College.
    Each witness will be recognized for 5 minutes to summarize 
their written statement. Without objection, the full written 
statements will be included in the record at the point of each 
witness' testimony, and the Chair now recognizes Mr. Andres.


    Mr. Andres. Good morning, Chairman Sensenbrenner, Ranking 
Member Scott----
    Mr. Sensenbrenner. Can you pull your mic up a little bit 
closer and make sure that it is turned on? We will reset the 
    Mr. Andres. Okay. Good morning, Chairman Sensenbrenner, 
Ranking Member Scott, and distinguished Members of the 
Subcommittee. Thank you for providing me with the opportunity 
to speak to you today about the Department of Justice's 
enforcement of the Foreign Corrupt Practices Act. I am 
privileged to appear before you on behalf of the Department of 
    As the FCPA's legislative history made clear, corporate 
bribery is bad for business. In our free market system it is 
basic that the sale of products should take place on the basis 
of price, quality, and service. The Department of Justice is 
committed to fighting foreign bribery through continued 
enforcement of the FCPA, and by providing guidance to 
corporations and others on our enforcement actions.
    Foreign corruption remains a problem of significant 
magnitude. The World Bank estimates that more than $1 trillion 
in bribes are paid each year, roughly 3 percent of the world 
economy. Some experts have concluded that bribes amount to a 20 
percent tax on foreign investment. In the end, corruption 
undermines efficiency and good business practices.
    Recently, a Federal jury in the Central District of 
California heard evidence of bribes paid by an American company 
to Mexican officials. At issue were bribes, including a 
$297,500 Ferrari Spyder, a $1.8 million yacht, and payments of 
more than $170,000 toward one official's credit card bills. 
This conduct does not amount to good business practice.
    In recent years, the Department has made great strides in 
prosecuting foreign corruption in all corners of the globe, 
against both foreign and domestic companies. These cases have 
often involved systematic, longstanding schemes in which 
significant sums of money were paid. They did not involve 
single bribe payments of nominal sums. For example, the 
Department's prosecution of Daimler AG involved hundreds of 
improper payments worth tens of millions of dollars to foreign 
officials in almost two dozen countries. Similarly, the 
Department's prosecution of Siemens AG, a German corporation, 
and three of its subsidiaries involved over $800 million in 
improper payments in a variety of countries.
    When the Department seeks to enforce the FCPA against 
corporate entities, we do so pursuant to the internal 
procedures known as the Principles of Federal Prosecution Of 
Business Organizations. These Principles require Federal 
prosecutors to consider nine factors when assessing whether to 
pursue charges against a business entity. Those factors include 
the existence and effectiveness of a corporation's pre-existing 
compliance program, as well as remedial actions and a company's 
    Many have commented about the recent increase in FCPA 
enforcement actions. At least one likely cause for this 
increase in cases is disclosures by companies consistent with 
their obligations under the Sarbanes-Oxley Act, which requires 
senior corporate officers to certify the accuracy of their 
financial statements. This has led to more companies 
discovering FCPA violations and making the decision to disclose 
them to the SEC and the Department of Justice.
    Of note, the United States' treaty obligations also impact 
the Department's enforcement of the FCPA.
    The Department also takes seriously our obligation to 
provide guidance in this area. Our goal is not simply to 
prosecute FCPA violations, but also to prevent corruption at 
home and abroad and promote a level playing field in business 
transactions. Senior officials from the Department and others 
often speak publicly about our enforcement efforts, 
highlighting relevant considerations and practices. In 
addition, through our Opinion Release Procedure, the Department 
advises companies on how to comply with the FCPA. This 
procedure is unique in U.S. criminal law.
    The Department is proud of our FCPA enforcement record, and 
of our continued partnership with the SEC and the Departments 
of State and Commerce. We look forward to working with Congress 
as we continue our important mission to prevent, deter, and 
prosecute foreign corruption.
    Thank you.
    [The prepared statement of Mr. Andres follows:]


    Mr. Sensenbrenner. Thank you, Mr. Andres.
    Judge Mukasey?


    Judge Mukasey. Thank you, Mr. Chairman.
    Good morning, Chairman Sensenbrenner, Ranking Member Scott, 
and Members of the Committee. Thank you very much for hearing 
me today on behalf of the U.S. Chamber Institute for Legal 
Reform on the important subject of the Foreign Corrupt 
Practices Act.
    I should say at the outset that none of us is against--or I 
should say none of us favors the kinds of cases described by 
Mr. Andres. The question is what can be done to detect, deter, 
and prevent the incidence of that kind of behavior.
    For all the merits of the FCPA in curbing corrupt business 
practices, and they are substantial, more than 30 years of 
experience have shown ways in which the law and its enforcement 
can be improved. In my written testimony I describe six 
possible amendments to help do that. Today I would like to 
concentrate and highlight two in particular, the addition of a 
compliance defense, and a clarification of the meaning of the 
terms ``foreign official'' and ``instrumentality'' in the FCPA. 
These improvements I think are likely to raise the standards 
that businesses follow and will give more focus and certainty 
to help them better comply with the FCPA.
    The law does not now provide a compliance defense--that is, 
an affirmative defense that would allow companies to rebut 
criminal liability for violations if the people responsible 
evaded compliance measures that were otherwise reasonably 
designed to identify and prevent such violations. A company can 
now be held liable for violations committed by rogue employees, 
agents or subsidiaries even if the company has a state-of-the-
art FCPA compliance program.
    It is true that the DOJ or the SEC may look more favorably 
on a company with a strong FCPA compliance program when 
deciding whether to charge the company or what settlement terms 
to offer, and a compliance program can be taken into account by 
a court at the sentencing of a corporation convicted of an FCPA 
violation. But those benefits are subject to unlimited 
prosecutorial discretion, or are available only after the 
liability phase of a prosecution is over, or both. There is 
also no guarantee that a strong compliance program will be 
given the weight it deserves.
    The system now in place has conflicting incentives. On the 
one hand, an effective compliance program can hold out a 
qualified promise of indeterminate benefit should a violation 
occur and be disclosed. On the other hand, if all that can be 
achieved is a qualified and indeterminate benefit, there is a 
perverse incentive not to be too aggressive lest wrongdoing be 
discovered, and there is a resulting tendency of standards to 
sink to the level of the lowest common denominator, or at best 
something that is only a slight improvement over it. This 
Catch-22 policy doesn't really serve anyone's interest.
    Here I think it is useful to look for guidance to another 
statutory system in which companies now do have a compliance 
defense under U.S. law, and I am speaking of the system we use 
to combat improper workplace discrimination based on race, sex, 
religion, and national origin. Under Title 7 of the Civil 
Rights Act of 1964, there can be no corporate liability if a 
company has an anti-discrimination policy and provides a way 
for employees who have been subject to workplace discrimination 
to get redress. Dozens, if not hundreds, of cases are resolved 
every year based on this compliance program defense. I think 
the lesson here is that having a compliance defense actually 
diminishes the overall incidence of discrimination because it 
encourages employers to have robust systems of compliance. 
Otherwise, it would look like the interests that are served by 
the FCPA are given more weight in a statutory scheme than the 
interests served by the Civil Rights laws, which of course is 
not the case. And I think we should draw a lesson from Title 7 
on how best to achieve the goals of the FCPA statute.
    The FCPA prohibits corrupt payments or offers of payment to 
foreign officials, but it does not provide adequate guidance as 
to who is a foreign official. The term is defined to include 
any officer or employee of a foreign government or any 
instrumentality thereof, but the FCPA doesn't define what an 
instrumentality is. The DOJ and the SEC considers everyone who 
works for an instrumentality, from the most senior executive to 
the most junior mailroom clerk, to be a foreign official. Two 
judges recently rejected defense motions arguing that employees 
of state-owned enterprises are not foreign officials under the 
FCPA, and in doing so, the courts indicated that there are 
limits on the definition of instrumentality, but neither court 
clarified what those limits are.
    If the definitions of these fundamental statutory terms 
vary by circumstance and by case, and therefore have to be 
decided by a jury rather than as a matter of law, it becomes 
impossible for companies to figure out in advance what conduct 
may and may not provide a meaningful risk of violating the 
FCPA. This approach creates uncertainties and puts up barriers 
to U.S. businesses trying to sell their goods and services 
abroad, particularly in countries where many companies are 
partly owned or controlled by the state. It also makes it 
difficult for companies to focus their monitoring and 
compliance programs on clearly identifiable situations 
involving foreign officials and foreign instrumentalities.
    The FCPA therefore should be amended to clarify the meaning 
of ``foreign official,'' indicate the percentage of ownership 
by a foreign government that would qualify the entity as an 
instrumentality. We think majority ownership is the most 
plausible threshold.
    The reforms that I described today and in my written 
testimony, by providing greater clarity and certainty to the 
business community, would reinforce incentives for compliance 
and help ensure that companies operating in the U.S. or listed 
on its securities exchanges adhere to high legal and ethical 
standards when they do business abroad. The result will be a 
statute that is both stronger and fairer.
    Thank you very much.
    [The prepared statement of Judge Mukasey follows:]


    Mr. Sensenbrenner. Thank you, Judge Mukasey.
    Mr. Terwilliger?

                   PARTNER, WHITE & CASE LLP

    Mr. Terwilliger. Thank you, Mr. Chairman, Ranking Member 
Scott, Mr. Conyers.
    Mr. Sensenbrenner. Mr. Terwilliger, could you move the mic 
closer and make sure it is on? And reset the clock, please.
    Mr. Terwilliger. Thank you. Mr. Chairman, Ranking Member 
Scott, Mr. Conyers, it is always a privilege to be asked to 
join the Committee in this room. I thank you and the Committee 
Members for the privilege of coming back.
    At the outset, I would like to put my further remarks in 
this context. I favor the fair enforcement of sensible anti-
corruption statutes because corrupt markets cannot be free 
markets. In international commerce specifically, a level 
playing field is essential to free market competition, and I 
believe American businesses are well positioned to succeed in 
free and fair competition.
    Today I endeavor to bring to our discussion my experience 
both in public service and in the private practice of law which 
you so kindly made reference to, Mr. Chairman.
    The Department of Justice and the Securities and Exchange 
Commission are realizing the enforcement goal of driving 
companies into far greater compliance with the FCPA than has 
ever before been achieved. But there is another less desirable 
effect that results from the combination of greatly stepped up 
enforcement combined with the uncertainty of the precise legal 
parameters of conduct subject to the requirements and 
proscriptions of this statute. That hidden effect is the cost 
imposed on our economic growth when companies forgo business 
opportunity out of concern for FCPA compliance risk. This hurts 
the creation of jobs and the ability of U.S. companies to 
compete with companies elsewhere that do not have to concern 
themselves with uncertainties of the terms and requirements of 
the FCPA.
    I and the practice group which I chair at White & Case 
guide companies through comprehensive FCPA risk assessments and 
counsel companies seeking to create or improve robust 
compliance programs. We also advise companies on FCPA matters 
in the context of contemplated or ongoing business transactions 
and projects. I am able to draw on this personal experience and 
with confidence convey to the Committee that there is hidden 
cost borne of the uncertainties attached to FCPA compliance 
risk. In calculating the risk arising from FCPA compliance 
obligations against the benefits of a given business venture, 
uncertainties exist as to the requirements of the FCPA and its 
interpretation and application by enforcement authorities.
    When faced with that uncertainty, companies sometimes forgo 
deals they could otherwise do, take a pass on contemplated 
projects, or withdraw from ongoing projects and ventures. 
Companies making such decisions are not doing so because they 
are generally risk-averse. They are doing so by the simple 
reasoning that the risk of non-compliance, as defined by the 
statute and those charged with its enforcement, cannot be 
calculated with sufficient certainty.
    Thus, I commend consideration of legislative reform that 
can help to clarify ambiguity in the statute and its 
application. Others, both here today and in other fora, have 
suggested terms of the statute that would benefit from further 
definition or clarification. I would add to those suggestions 
these further considerations.
    First, I believe it is worthy to consider providing by 
statute a post-closing period of repose for companies involved 
in acquisitions during which they would be shielded from FCPA 
enforcement while undertaking a review of FCPA compliance in 
the acquired business and undertaking steps to remediate 
potential FCPA issues that are discovered as a result of that 
    Providing that an acquiring company would have a period of 
time from the date of acquisition to conduct a thorough 
assessment, remediate existing misconduct and impose its 
compliance policies upon the acquired company is consistent 
with the core objectives of FCPA enforcement and presents no 
hazard to the fundamental objectives of the statute itself.
    Second, a statutory safe-harbor provision in the law could 
provide companies that strive for anti-corruption compliance 
with increased certainty that their efforts will provide them 
with some level of protection from FCPA liability. Such a 
provision could shield from criminal liability companies that 
operate demonstrably robust compliance programs and that self-
report any misconduct that arises despite their best efforts. 
It makes no sense to me to engage in criminal prosecution of a 
company that operates a state-of-the-art compliance program and 
that investigates, corrects and self-reports its own non-
compliant circumstances.
    My written statement contains additional detail as to these 
suggestions and further observations on proposals outlined by 
others. I look forward to answering any questions the 
Subcommittee may have and to discussing these matters with 
Members today or members of staff on any other occasion.
    Thank you.
    [The prepared statement of Mr. Terwilliger follows:]


    Mr. Sensenbrenner. Thank you, Mr. Terwilliger.
    Ms. Regon?


    Ms. Regon. Thank you. Good morning, Chairman Sensenbrenner, 
Ranking Member Scott, and distinguished Members of the 
Subcommittee. My name is Shana Regon, and I am director of 
White Collar Crime Policy for the National Association of 
Criminal Defense Lawyers.
    NACDL is the country's largest organization of criminal 
defense lawyers, and we work to ensure justice and due process 
for all of those accused of crimes.
    Despite its more than 30-year history, there is vast 
disagreement and uncertainty about the meaning of many of the 
FCPA's key provisions. Because there has been so little 
judicial scrutiny of FCPA enforcement theories, right now the 
FCPA essentially means whatever the DOJ and SEC says it means.
    Significantly, DOJ has been allowed to use the law as if it 
were virtually a strict liability statute, meaning that actual 
knowledge of wrongdoing does not need to be proved. Such an 
application is inconsistent with notions of fundamental 
fairness. In addition, because the reach of the FCPA is so vast 
and its provisions so amorphous, DOJ now oversees and regulates 
virtually all American companies and individuals seeking to do 
business abroad in ways those who created the FCPA never could 
have envisioned.
    The purpose of the FCPA is laudable. It was originally 
designed to prohibit U.S. companies and individuals from 
offering bribes to foreign government officials for the purpose 
of unfairly obtaining business opportunities. But explicit 
commercial bribery is not the only kind of situation in which 
the FCPA can be applied. Because the law vaguely prohibits 
giving anything of value, it can unfortunately be used to 
criminalize all kinds of perfectly legitimate business 
    Also, DOJ, as you have heard from my other colleagues this 
morning, has taken a very broad view of who qualifies as a 
foreign official. Recent prosecutions have involved payments to 
mid-level employees of state-owned companies. This expansive 
definition of foreign official makes doing business in many 
areas of the world automatically rife with potential criminal 
    Take this example. A U.S. company is trying to win a 
contract with a partially state-owned Chinese hospital in order 
to provide it with rubber gloves. In an effort to create 
goodwill and foster a business relationship between the 
parties, managers of the U.S. company take their Chinese 
counterparts out to dinner to talk about the potential deal. 
Maybe they pay for the car service in order to pick everyone 
up. Are these FCPA violations? Perhaps they fly the Chinese 
managers to the U.S. for a site visit to the factory, and 
provide them with a hotel room during their stay. While they 
are close by, they take their guests to visit a famous landmark 
or tourist destination. What about a small gift when, months 
into the negotiations, one of the Chinese managers announces 
the birth of his son? What about giving a contribution to their 
favorite charitable cause in China?
    The truth is, U.S. companies and the individuals working 
for them do not have any real way of knowing whether any of 
these activities could expose them to criminal liability under 
the FCPA. Right now, a careful criminal defense lawyer would 
advise her client that it depends entirely on the opinions of 
the DOJ or SEC at a particular moment in time.
    It is also worth emphasizing that, although the statute 
contains a willfulness requirement for individuals in the anti-
bribery provisions, the government has increasingly relied on 
the willful blindness doctrine as a substitute for proving 
willfulness and knowledge in FCPA prosecutions. This doctrine 
has been extended to cases where no actual knowledge existed.
    The practical effect of this doctrine is that the CEO of an 
American company can be held personally, criminally liable for 
the actions of his employee halfway across the world, whether 
he knew about them or not. This doctrine dangerously 
eviscerates the mens rea requirements Congress meant for the 
statute to provide.
    NACDL is not advocating that American companies or 
individuals be permitted to bribe officials in other countries 
in order to get business done. Commercial corruption is a very 
real problem in the global marketplace, and advocating for 
reform in the FCPA context is absolutely not advocating for 
commercial bribery. But here is the reality: right now, 
Americans cannot ascertain with any degree of confidence what 
kinds of conduct are legal. The result is that companies are 
over-complying at great cost, and individuals have no real idea 
of what is prohibited and what is not.
    We need more clarity in the law. While it is true that the 
government has yet to prosecute someone solely for a $100 
dinner, nothing in the statute prevents them from doing so, and 
nothing in their own enforcement policies or procedures 
prevents them from doing so. Punishing American businesses who 
are acting in good faith and throwing in jail supervisors who 
had no way of knowing about a payment half a world away could 
not have been what Congress intended, nor can that be a 
commonsense approach in this difficult economic climate that 
has cost many Americans their jobs and imperiled our Nation's 
status in the global economy.
    The FCPA is emblematic of the general problem of over-
criminalization. While the FCPA properly seeks to prevent 
serious misconduct, its language and application have led to 
unintended consequences. NACDL appreciates your efforts to 
consider and address these issues, and we join many 
organizations, on both the left and the right, in the call for 
some much-needed commonsense reform in this area, particularly 
reforms that will strengthen the mens rea requirements of the 
statute and bring clarity, uniformity and fairness to its 
    Thank you.
    [The prepared statement of Ms. Regon follows:]


    Mr. Sensenbrenner. Thank you very much.
    The Chair is going to defer his questions until the end.
    And to begin, the Chair recognizes the gentleman from 
Pennsylvania, Mr. Marino, for 5 minutes.
    Mr. Marino. Thank you, Mr. Chairman.
    Welcome, guests.
    Deputy Andres, I am going to begin with you, and then we 
will go to your left. What is the number one obstacle in the 
way of enforcement today on corruption, and what is your 
recommendation to alleviate that obstruction?
    Mr. Andres. Foreign bribery cases are difficult for a 
variety of reasons. Obviously, in prosecuting those cases, we 
need to rely on evidence from abroad, which takes time. We make 
MLAT requests from our foreign partners to get that evidence. 
But they take longer, and they are harder to detect than 
domestic cases, because much of the conduct often takes place 
    So I think the statute of limitations, I know the 
Department has discussed recommendations in the past to extend 
the statute of limitations so that we had a longer period of 
time to investigate those cases, so that we could root out the 
problem of foreign corruption, which is a substantial problem. 
There has been much discussion about the increased enforcement 
of foreign bribery, but I think that discussion fails to 
recognize the size and magnitude of the problem, which are 
    Mr. Marino. Thank you.
    General Mukasey, the same question, but could you expand a 
little bit on--you brought up two points that you would like to 
see implemented?
    Judge Mukasey. Yes.
    Mr. Marino. Please.
    Judge Mukasey. I think the availability of a compliance 
defense actually might help the problem that Mr. Andres just 
identified by allowing companies to generate more information 
on a voluntary basis to help prosecute those cases that have to 
be prosecuted abroad. If companies have vigorous enforcement 
and oversight mechanisms that they can rely on to avoid 
prosecution themselves, they are perfectly available to provide 
information with respect to foreign actors who may very well 
deserve to be prosecuted.
    The definition, the issue of definition I think is a major 
problem for reasons that were referred to in Ms. Regon's 
testimony. If we don't know who a foreign official is, 
everything from providing a cab ride to somebody who worked 
late on up is going to make it very difficult for a company to 
function, and as she pointed out, a defense lawyer has to err 
on the side of caution in advising her clients on what they can 
and can't do, which inhibits the conduct of business.
    Mr. Marino. Thank you.
    Attorney Terwilliger, do you want me to repeat the 
question? I saw you jotting some notes, so I think you know 
what I am looking for.
    Mr. Terwilliger. Thank you. Actually, I think a point worth 
making in terms of obstacle to enforcement and achieving the 
objectives of the statute is that companies are actually much 
better positioned to gather more information more quickly 
overseas than the Justice Department or the SEC is. And as a 
result of that, policies that favor companies who do 
investigate themselves and who do engage in voluntary 
disclosure is an aid to enforcement rather than an obstacle.
    I believe, frankly, the Justice Department could do more to 
encourage such self-investigation, voluntary disclosure and so 
forth. And frankly, the Congress ought to pay attention to 
things like Dodd-Frank and the SEC whistleblower program, which 
are undercutting internal compliance measures, including the 
self-reporting which can lead to voluntary disclosure.
    Mr. Marino. Thank you. And Attorney Regon, you brought out 
some good points as to where this type of investigation would 
go. But where do you draw the line when it comes to gifts, 
between that and corruption?
    Ms. Regon. Thank you, Congressman Marino. That is an 
excellent question, and I think probably DOJ might know it when 
they see it. I think Ferraris and water ski jets and millions 
of dollars of payment for direct quid pro quo can be strong 
evidence of explicit commercial bribery. But unfortunately, 
with a statute that is written so broadly, all sorts of 
legitimate business activities and normal legitimate business 
payments can get swept into this. And I think that three out of 
the four witnesses today have spoken to the Committee about our 
fear that the language is providing DOJ with the ability to 
bring in too much of this legitimate business activity.
    Certainly, I don't think you heard any of the witnesses 
today advocate on behalf of direct explicit commercial bribery. 
It does harm American businesses. But there is a line, and it 
is recognizable between that and perhaps giving a charitable 
donation to someone because they asked and you have been in a 
business dealing with them for 5 years, or giving a cab ride 
home to an employee.
    Mr. Sensenbrenner. The time of the gentleman has expired.
    The gentleman from Virginia, Mr. Scott, is recognized for 5 
    Mr. Scott. Thank you, Mr. Chairman.
    Judge Mukasey, you talked about the compliance defense. Are 
you asking for a total defense or required mitigation?
    Judge Mukasey. I think we are asking for a defense, but it 
would be an affirmative defense. Understand that the state of 
play in a trial would be that there would be a proved 
violation, and then the question would be whether the 
compliance mechanism that the company had in place was 
reasonably designed, if complied with, to have detected the 
violation that took place.
    It is an uphill climb for a company to establish that 
defense. All that we are asking is that they should be allowed 
to try.
    Mr. Scott. What should be the mens rea requirement for an 
individual, the CEO, and for the corporation?
    Judge Mukasey. The mens rea requirement should be what it 
is in connection with crimes generally, that you have to--what 
I used to say when I was a prosecutor and when I was AG is you 
shouldn't prosecute any case in which you can't tell yourself 
that the person who is accused of committing it, when he put 
his head on the pillow that night, didn't tell himself or 
should not have told himself, hey, I committed a Federal crime 
today. If you can't say that somebody knew that and had every 
reason to know it, then the case should not be prosecuted.
    That is the mens rea requirement. It has to be something 
that somebody can clearly identify with a straight face as 
having been a criminal act.
    Mr. Scott. What about the corporation?
    Judge Mukasey. The corporation, in a sense there is no such 
thing as the corporation. They are just a bunch of people. So 
there has got to be somebody who identifiably had the knowledge 
or who knew facts to which he voluntarily and purposely closed 
his eyes, and this trenches on the willful ignorance issue that 
has come up recently.
    Mr. Scott. You can have a rogue individual who commits the 
crime. When should the corporation be responsible for that?
    Judge Mukasey. When that individual is in a policymaking 
    Mr. Scott. Mr. Andres, you have mentioned six-figure 
bribery cases, and we have also heard about free meals and cab 
rides. Are de minimis cases ever brought?
    Mr. Andres. They are not, sir. And just to clear the 
record, the Department of Justice has never prosecuted somebody 
for giving a cup of coffee to a foreign official, a martini, 
two martinis, a lunch, a taxi ride, or anything like that. And 
it is not clear that those acts in and of themselves would 
evidence an intent to bribe somebody.
    If one looks at the Department's actions----
    Mr. Scott. Would you object to a provision excluding de 
minimis transactions?
    Mr. Andres. I would, for a few reasons. One, small de 
minimis payments paid over time on multiple occasions can 
amount to a more significant bribe if, in fact, there is an 
intent to bribe. I think the relevant consideration is not the 
amount of the bribe but rather the intent, whether it is an 
intent to bribe. I think that both the Department of Justice 
and the government need to be clear that all bribery, just as 
in domestic bribery, is inappropriate.
    So I don't think it is appropriate to have an exception for 
a smaller bribe. But I would also note that this talk of taxis 
and meals is not reflected in our enforcement actions. The 
cases that we have prosecuted----
    Mr. Scott. But one of the things we are hearing is people 
don't know where the line is, and if you were to put something 
in the code to help people ascertain where that line is, it 
would be helpful. That is why I asked about a de minimis, and 
you have suggested you don't want that in there, which brings 
the cab rides and meals back in play.
    Mr. Andres. I believe that a reflection of the Department's 
enforcement actions, our public comments on our website provide 
adequate guidance with respect to the statute. I don't think 
anybody seriously believes that providing a taxi ride to 
somebody is, in fact, a violation of the Foreign Corrupt 
Practices Act. We have prosecuted cases in which people have 
turned over suitcases full of cash, hundred-dollar bills 
amounting to a million dollars. How someone would have the 
impression that we are prosecuting----
    Mr. Scott. Well, let me have Judge Mukasey comment on it.
    Judge Mukasey. The taxi ride example is for real. It 
occurred at a company in which somebody worked overtime, was 
given a taxi because the trains had stopped running, and then 
some nervous counsel found out about it, reported it to the 
Justice Department and was told that it probably wasn't a 
violation but to go back and investigate the entire 
circumstances of the relationship with that company and come up 
with a result of that investigation to determine that no 
illegal payments had been made. A couple of hundred thousand 
dollars later it was determined that, in fact, there had been 
no violation. But that couple of hundred thousand dollars could 
have been used for a lot better purposes than conducting an 
unnecessary investigation.
    Mr. Sensenbrenner. The gentleman's time has expired.
    The Vice-Chairman of the Committee, the gentleman from 
Texas, Mr. Gohmert?
    Mr. Gohmert. Thank you, Mr. Chairman.
    I would like to follow-up on that, General Mukasey. One of 
the problems that I hear--and, of course, you have been a 
judge, and you listen for little words that prick up your ears. 
When I hear words like ``I don't think that would be a 
violation,'' that doesn't give companies much assurance if 
somebody in a legal position with the government says I don't 
think it is, or I think it is. It seems like we ought to have a 
clear enough line that people don't have to think. They can say 
yes, it is or it isn't.
    And I appreciate the statement that all bribery is illegal, 
Mr. Andres, and there should not be an exception for smaller 
bribery. The thing is, we can define bribery. And as in the 
example that General Mukasey has mentioned, a taxi ride, if you 
say, for heaven's sake, anything under this amount obviously is 
not bribery, then that gives companies a clear line where they 
know they can do this and not have to spend $200,000 because 
there may be a young prosecutor or a young FBI agent that 
thinks I can make a name going after this big company.
    And, of course, we know that because of the Director's 5-
year up or out policy, we eliminated thousands and thousands of 
years of experience in the FBI supervisory positions. So like 
in many cases, or some cases at least, you go from people with 
25 years or more to 5 or 6 years being the supervisor. When you 
had experienced people in charge they would say, ``Give me a 
break. You know, a $10 taxi ride is not bribery. We are not 
going to do that.'' When you have got a 5-year supervisor going 
I have got a career in front of me, I want to get the 
Director's attention, then it seems like there is more room to 
have FBI agents or prosecutors more aggressive than they should 
    I am for punishing crime. I was known as a hang 'em high-
type judge. But I do believe in having the law clear enough so 
people don't have to worry about it.
    General Mukasey, let me ask you. If the DOJ doesn't give 
information about how it is making charging decisions, is that 
in effect treating every company as a potential law breaker 
where they can't make adequate plans for the future?
    Judge Mukasey. Obviously, I think the more information that 
is available on how these decisions are made, the easier it is 
for people to function. But there is a difference between 
saying this is how we do it on a general and non-binding basis, 
and actually having a legal provision in the statute that is 
clear to everybody as a basis for governing your behavior going 
forward. It is one thing for somebody like Mr. Andres, who is 
very experienced and makes sane and rational decisions, to say, 
well, this is not the way I would do it, but that doesn't 
necessarily govern the behavior of everybody out there, and it 
certainly doesn't control what goes through the mind of a 
corporate attorney who is worrying about the possibilities for 
his company going forward.
    Mr. Gohmert. Have you ever drafted specific language that 
you think would help make the law tighter?
    Judge Mukasey. I believe the Chamber has submitted a bill.
    Mr. Gohmert. Did you participate in that?
    Judge Mukasey. I did not participate in it. I reviewed it.
    Mr. Gohmert. Okay. Saying you reviewed it doesn't tell me 
    Judge Mukasey. Well, it says----
    Mr. Gohmert. You can review it and think it is crazy.
    Judge Mukasey. The language is that $250 is presumptively 
    Mr. Gohmert. So you like the language?
    Judge Mukasey. Which seems about right. I do.
    Mr. Gohmert. Okay. Thank you.
    Mr. Andres, why should a company ever be criminally 
prosecuted if it does a compliance program that meets all the 
reasonable standards of Chapter 8 guidance? I mean, obviously 
they can have rogue people that do things, but I believe in 
holding the people accountable that commit crimes and make 
mistakes. But if the company has done everything appropriately 
and legally, why not go after individuals instead of a company 
that didn't know about the incident? It seems like it is a 
strict liability standard. Please.
    Mr. Andres. Congressman, the Department does not prosecute 
corporations based on the acts of a single rogue employee. It 
hasn't, certainly not in this field. And again, when you----
    Mr. Gohmert. But it could.
    Mr. Andres. Not under the guidelines that are provided 
under the Principles of Federal Prosecution of Business 
Organizations. We look at how pervasive the conduct is. If the 
employee is a high-ranking official in the company, that is a 
different issue. But if it is a rogue employee on a lower 
level, we would not prosecute that under our own principles.
    Let me address your point about the compliance defense. The 
Department would oppose an affirmative compliance defense for a 
few reasons. First, we already take into consideration a 
company's compliance program. We take it into consideration and 
review it, and it is a serious consideration. Over the last 20 
years the Department has developed a series of broader factors 
that we consider that includes compliance, that includes 
cooperation and self-disclosure. To review only compliance 
would be a substantial change in the way that the Department 
has done business over several Attorney Generals for more than 
20 years.
    The affirmative defense of compliance is also a novel 
concept. It is not one that is well defined, either here or 
otherwise, and it could lead to paper compliance; that is, a 
company having a compliance program on paper that is not 
rigorous and that doesn't help to prevent bribery.
    And one last point. Critics or proponents of the compliance 
defense have relied on foreign law to support that position. 
They have turned to the UK Bribery Act, which has been 
criticized by many in the business community here in the United 
States. But more importantly, it is not yet in effect. So there 
is no precedent to follow to say that the UK Bribery Law and 
its affirmative compliance defense would be effective here in 
the United States.
    Secondly, they point to Italian law and their Foreign 
Corrupt Practices Act, which also has a compliance defense. 
That provision has been roundly criticized in the international 
circles. The OECD said that that defense provided little 
assistance in determining what an acceptable model is in a 
particular case. That defense has actually never been applied 
in practice.
    So if we take on this affirmative compliance defense, we, 
in effect, create a loophole, because as even the proponents of 
the defense say, no compliance program is perfect. It would 
allow necessarily for some bribery to occur. So I think that 
given that it is a novel and somewhat risky approach, the time 
is not right to adopt such a compliance defense.
    Mr. Gohmert. Thank you, Mr. Chairman.
    Mr. Sensenbrenner. The gentleman from Michigan, Mr. 
Conyers, is recognized for 5 minutes.
    Mr. Conyers. Thank you, Chairman Sensenbrenner.
    Welcome back to the Committee, General Mukasey.
    Judge Mukasey. It is a pleasure to be here.
    Mr. Conyers. You have a few more lawyers than you had when 
we last saw you before us. Let's see, you are down to only 700 
now. And you were up over 100,000 the last time I saw you here.
    Judge Mukasey. I had the benefit of 100,000 then, only 700 
    Mr. Conyers. Yeah. Let me ask you, was it during--was it 
when you were Attorney General that we had this taxi ride case 
happen that cost a couple of hundred thousand bucks?
    Judge Mukasey. I don't know precisely when that happened.
    Mr. Conyers. But it could have been during your watch.
    Judge Mukasey. It is conceivable.
    Mr. Conyers. Okay. Now, of all people, I know you are not 
telling us here today that ignorance of the law is an excuse. 
If you don't know that it is against the law, if you don't know 
that something you are doing is against the law, does that 
excuse you?
    Judge Mukasey. No. The----
    Mr. Conyers. Right. Ignorance of the law is no excuse. So 
how can you say that you didn't prosecute anybody if they went 
to bed at night and they didn't know they were violating the 
law? You ask people before they are indicted whether they ever 
went to bed and thought they were violating the law?
    Judge Mukasey. That they either knew or should have known 
by the standards of society as we accept them. We didn't----
    Mr. Conyers. Right. So ignorance of the law is no excuse.
    Judge Mukasey [continuing]. Is okay to sell drugs or rob 
    Mr. Conyers. Yeah. Ignorance of the law is no excuse, is 
    Judge Mukasey. No.
    Mr. Conyers. All right. Now, why in the cases of bribery do 
we need to have a de minimis rule? In local law enforcement, 
prosecutors statewide, Feds--look, you mean that if there is 
just a little bit of bribery and it is really low, that we 
ought to have a threshold? What on earth--corporations have 
more lawyers than anybody else, the ones sitting here. What do 
they need to know how low the crime has got to be before it is 
prosecutable? I don't think that they deserve to know that. 
Nobody is prosecuting people for how many drinks or a meal that 
you brought them, or gave them a ride. Everybody knows that 
that doesn't have any logic.
    And so I ask the Association of Criminal Defense Lawyers 
witness, give me some examples of over-criminalization of the 
Foreign Corrupt Practices Act.
    Ms. Regon. Certainly, Mr. Conyers. I think the problem that 
we all----
    Mr. Conyers. Just give me the examples.
    Ms. Regon. Sure. The example is that the law is written so 
expansively that----
    Mr. Conyers. No. Give me the examples. Give me an instance 
of where one case was ever brought by the Department of Justice 
which it would constitute over-criminalization.
    Ms. Regon. Respectfully, sir, I am probably not aware of 
absolutely every single----
    Mr. Conyers. No, of course you are not. I will tell you why 
you are not.
    Ms. Regon. A number of them--they have increased their 
    Mr. Conyers. I will tell you why you are not, is because 
only 140 cases have been brought in 10 years.
    Ms. Regon. And they have increased their enforcement 10-
fold in the last 5 years, and so I did not----
    Mr. Conyers. And that averages 14 cases a year. Is that 
over-criminalization to you?
    Ms. Regon. A statute that allows the government to 
prosecute someone as broadly as the statute currently allows 
    Mr. Conyers. I said is 14 cases a year over-prosecution to 
    Ms. Regon. A statute with no reasonable limitation is over-
    Mr. Conyers. Just answer my question, okay?
    Ms. Regon. I am, sir. A statute that provides no reasonable 
limitation to prosecutorial discretion is over-criminalization. 
I have testified here today that I am concerned more about the 
prosecutions to come than the prosecutions----
    Mr. Conyers. You haven't----
    Mr. Sensenbrenner. The gentleman's time has expired.
    The Chair recognizes the gentleman from Texas, Mr. Poe?
    Mr. Poe. Thank you, Mr. Chairman.
    Thank you for being here.
    Similar to my friend, Mr. Gohmert, in my other life I was a 
felony court judge for 22 years in Texas, heard everything from 
stealing to killing, and several death penalty cases, and I 
don't like crooks. But on this situation, I want to talk about 
the world as it is, not the way that we wish that it were.
    Let me start with China. China seems to have, to me, 
through their government, a systematic philosophy of 
corruption. They will do anything they can, anywhere in the 
world, to get their way. They will steal from the United 
States. They will pay bribes. They will do it all. They are 
dealing with a philosophy that any means necessary to get it 
the Chinese way.
    We, on the other hand, believe in the rule of law, that 
some things are actually things we shouldn't do, like bribery. 
The Chinese are effective in their philosophy. Here we are 
building the nation of Iraq. Just got back from Iraq last 
night, and when I was there I learned that, of course, the 
Chinese are going to rebuild their oil drilling system. I 
suspect--my opinion--maybe some money changed hands for the 
Chinese to be doing that instead of American oil companies. I 
don't know.
    And compliance seems to be part of the issue here. We want 
our American companies to operate within the law. We set the 
law, and we need to make sure that it is effective. It disturbs 
me that we give the Justice Department too much discretion on 
who they want to go after and who they don't want to go after. 
There doesn't seem to be a rule of thumb except they use their 
discretion whenever they want to. I think that is a universal 
problem. I was a prosecutor for 8 years, and I see that that is 
a problem with the prosecution side.
    Ms. Regon, I am going to let you finish your answer that 
ran out of time. Tell me why compliance is a better idea than 
what we have under the current system, from your point of view.
    Ms. Regon. Thank you, sir, for the opportunity to answer 
that question. And I think it is because what the criminal law 
really seeks to do is try to prevent misconduct from occurring 
in the first place, and to deter those individuals and 
corporations who would engage in crimes otherwise not to do so. 
And so I think a robust compliance program protects companies 
and individuals from engaging in misconduct because it educates 
them about what that misconduct would be. It trains them to 
avoid it. It trains them to identify it. And it also provides a 
reporting mechanism when misconduct does occur, even if it is 
perhaps on the other side of the ocean, not from the American 
    And it also--usually a good compliance program will provide 
an opportunity for a whistleblower to say safely, without 
retaliation, there is some misconduct happening. And then it 
provides the company with a nice structure about what to do if 
that kind of thing happens.
    That seems to me a commonsense way of both preventing these 
kinds of misconduct from happening and also for providing 
remedial measures when it does happen. You end up deterring the 
conduct from happening to begin with. You--individuals don't 
end up being sort of surprised in a gotcha game about what was 
prohibited and what wasn't if there is a good, robust 
compliance program.
    Mr. Poe. Follow-up question. The global economy where we 
have U.S. companies trying to compete worldwide, especially 
with companies or countries that don't follow any rules except 
to win, do you think that that would help international 
competition? Would it hurt as far as United States companies 
go, Ms. Regon?
    Ms. Regon. Well, I think that the Department of Justice 
should be congratulated on being the world's enforcer on 
foreign corruption. I think other countries look at our 
international corruption laws and think that we are doing the 
best job. And so I congratulate them on that.
    I think the discussion here today has been not to sort of 
make it easier for anyone, including American businesses or 
anyone internationally, to bribe in order to get business done. 
I think the discussion here today is how to give individuals 
and companies clarity about what the law means and what it 
doesn't so that we can all go out and conduct business, 
stimulate our economy, stimulate economic growth throughout the 
globe without engaging in corruption or without being fearful 
that a cab ride or other legitimate business activities could 
be criminalized, and that clarification is needed today.
    Mr. Poe. I agree with you on that. I am certainly not 
advocating that we loosen the standards for American companies. 
They just need to have some absolute certainty as to what is a 
violation, what is not, and when they will be prosecuted, and 
if they do something this will happen, as opposed to too much 
discretion on the part of what something means and what a bribe 
happens to be. Maybe Congress has a responsibility to define 
what bribery is, although we all know what it is. It needs to 
be somewhat definite.
    Thank you, Mr. Chairman. I yield back the remainder of my 
    Mr. Sensenbrenner. Thank you.
    The gentlewoman from California, Ms. Chu?
    Ms. Chu. Thank you, Mr. Chair.
    Mr. Andres, you clearly articulated the reason that the 
Department of Justice doesn't agree with passing statutory 
language authorizing a compliance defense. However, is it my 
understanding that you consider a compliance program a factor 
in determining a company sentence for bribery offenses?
    Mr. Andres. Both at the sentencing phase and at the 
charging phase, that is, a decision whether or not to enter 
into--charge a company, to enter in some resolution, or to 
decline prosecution in the first place. We certainly take into 
consideration a company's compliance program.
    And just to amplify that a little, there are, of course, 
cases where we decide not to prosecute or not to require a 
company to enter into a resolution, because they have strong 
compliance programs. You don't read about those because we 
don't issue a press release when we decide not to prosecute. So 
there is certainly--that certainly is an important factor that 
we take into consideration.
    Ms. Chu. Are there currently any guidances that are 
available to companies that articulate or describe what you 
believe to be a strong compliance program?
    Mr. Andres. Sure. There are a variety of different 
reference materials, including the United States Sentencing 
Guidelines, and OECD good practice guides that dictate or 
describe things that are important for a valid and robust 
compliance program. They talk about things such as having an 
articulated policy against foreign bribery, having standards 
and procedures designed to reduce violations of their policies, 
to have senior officials charged with implementation and 
oversight, and a variety of other factors that are detailed in 
those various resources.
    Ms. Chu. If--well, are those guidelines readily available?
    Mr. Andres. They are readily available. I think another 
point with respect to guidance, every time the Department has 
entered into a resolution with a company dating back to, I 
believe, 1988, we published those detailed plea agreements, 
resolutions and other documents on our website. So you could go 
back and look on our website and see, for example, in the 
Daimler case, what the specific resolution was, what issues 
there were with compliance, what modifications we may have 
asked from that company or any of the other companies that we 
prosecuted. All those documents are available on the 
Department's website.
    Ms. Chu. How could we incentivize corporations to have 
these kinds of compliance programs, then?
    Mr. Andres. I think we incentivize companies by giving them 
credit for their compliance programs, which, as I said, we do. 
As I mentioned, there are instances where we decide not to 
prosecute a company because of compliance. There are other 
factors that go into the mix as well, such as cooperation, 
self-disclosure, and remediation. But clearly, by making 
decisions based on compliance factors, which we do, and to the 
extent that we can publicize that and make the business 
community aware of the fact that we take that into 
consideration, I think we provide the right incentives.
    Ms. Chu. Let me ask about something else, which is that in 
2004 DOJ initiated two FCPA investigations, and SEC initiated 
three. However, last year DOJ brought 48 investigations, and 
the SEC brought 26 investigations. I am trying to get the 
reason for this, get an understanding of what is the problem. 
Is the problem bigger, or is the enforcement greater?
    Mr. Andres. I think the problem is as big as it has ever 
been, if not bigger. I think we have become aware of more cases 
for a variety of different reasons.
    One, the world is smaller. We can communicate with our 
foreign law enforcement partners through emails and otherwise 
much more easily than previously.
    Secondly, at least one reason why there are more cases--I 
don't think it is the sole reason--is that CEOs of corporations 
are complying with other laws such as the Sarbanes-Oxley law, 
which requires them to verify their financial statements. In 
doing that and getting confidence as to the credibility of 
those financial statements, they are detecting problems with 
foreign bribery, and in many instances they are disclosing that 
to the Department of Justice.
    So I think, again, the problem is a substantial one. That 
certainly has led to more enforcement. But there is a variety 
of factors which has led to the increase.
    Ms. Chu. And how would these new proposals address this 
    Mr. Andres. The proposals?
    Ms. Chu. Yeah.
    Mr. Andres. Well, again, the Department is concerned about 
the proposals with respect to a compliance defense or another 
definition of a foreign official, because they provide some 
possibility for loopholes, that some bribery becomes 
acceptable. And I think just as in domestic bribery, the Unites 
States needs to send a clear message that bribery is 
    Ms. Chu. Thank you. I yield back.
    Mr. Sensenbrenner. The gentleman from South Carolina, Mr. 
Gowdy, is recognized for 5 minutes.
    Mr. Gowdy. Thank you, Mr. Chairman.
    Mr. Andres, you are not suggesting that current DOJ has 
placed more of an emphasis or is more concerned about these 
prosecutions than predecessor DOJs, are you?
    Mr. Andres. Far from it. Many of the investigations that 
are now coming to resolution have been ongoing for some time. 
So I think it is not necessarily an appropriate barometer to 
say that if we have had X number of resolutions in this year, 
it is because there is more enforcement now. Those 
investigations take time.
    Mr. Gowdy. Right. Just like when other witnesses have come 
before Judiciary and we have noticed a downturn in 
investigations and prosecutions, it would also be unfair for us 
to suggest that the current DOJ isn't concerned about those 
lines of cases, right?
    Mr. Andres. Again, it is hard to comment on these things 
generally. But suffice to say, at least with respect to the 
FCPA prosecutions, those investigations are often longstanding. 
They take some time. So it may be that prosecutions resulting 
in resolutions now have gone on for years.
    Mr. Gowdy. All right. In response to an earlier question, 
you said DOJ isn't prosecuting cup of coffee cases, or that is 
at least a pretty good paraphrase of what you said. And my 
concern isn't whether or not you are or are not prosecuting cup 
of coffee cases. The question is whether or not you can, 
because one is a declination issue and the other is a 
jurisdictional issue, and I think those are very, very 
different and require a different analysis.
    So can you prosecute cup of coffee cases?
    Mr. Andres. Just so I am clear, with respect to whether or 
not we can, there are within the statute exceptions for 
reasonable and bona fide promotional expenses. There are also 
other exceptions that cover legitimate business expenses. So if 
a cup of coffee is given to a foreign official without an 
intent to bribe that individual, we would not be able to bring 
that case because there is not the requisite intent to bribe.
    Mr. Gowdy. What do you do with a different standard, the 
different mens rea standard for corporations and individuals? 
Do you support having a willful requirement for corporations, 
or not?
    Mr. Andres. Well, with respect to that distinction, I would 
say that in our enforcement, I am not aware of any cases where 
companies have complained that they have been held accountable 
for any conduct that is other than willful conduct. But I think 
it is also important to recognize that in the FCPA, in the 
legislation, the statute, the standard with respect to 
corporations talks about corruptly. So the word ``willfully'' 
is replaced by the word ``corruptly,'' and I think those two 
words are very similar. In large part they encompass the same 
type of conduct.
    Mr. Gowdy. Professor Terwilliger, do you see any issues 
with not having a willful requirement for corporations in 
conjunction with not also affording them a compliance defense?
    Mr. Terwilliger. Certainly, sir. And I have been accused of 
a lot of things, but being an academic is not one of them. It 
is a pleasure to be here with you today.
    The problem with a willfulness requirement for corporations 
is just what General Mukasey mentioned. Corporations can't 
think; only individuals can think. And therefore any ascribing 
of an intent to a corporation is really artificial because the 
corporation itself is artificial.
    It seems to me that all of that kind of debate surrounds 
much more the question of definitions of the statute than it 
does the exercise of prosecutorial discretion. I think the 
Justice Department generally does a fairly good job of 
exercising its discretion.
    What the Congress' job is, if I may, is to define the 
parameters in which that discretion is exercised, and that is 
where there is uncertainty. And when and under what 
circumstances a corporation itself and its shareholders should 
be penalized because employees go off on some bribery scheme 
that, in spite of having a good compliance program, in spite of 
having complete buy-in by a CEO and so forth, that to me is an 
enforcement policy question that rests right here, not in the 
Justice Department.
    Mr. Gowdy. Ms. Regon, there are other crimes that are 
strict liability crimes, but you don't think this should be 
added to the list? There are contraband cases, child 
pornography, under-age sex cases that are strict liability 
crimes. Why is this different?
    Ms. Regon. Well, I think it is up to the Congress to 
determine which crimes are or are not strict liability crimes, 
and I do believe that 30 years ago the Congress who created the 
FCPA did not intend it to be so. It is certainly within your 
province to decide when that is appropriate and when that 
    I think the problem here is you have a statute where that 
was not the intent. It does contain a willfulness requirement, 
at least for individuals, in the anti-bribery provisions. I 
think that when the Congress included that word, I think that 
they meant it, and I think that, unfortunately, because the 
statute is otherwise written fairly expansively, it does allow 
DOJ and SEC to treat the statute as if it is a little bit--to 
sort of prosecute to the fullest extent that the law allows.
    You know, they do a good job, they do their jobs, and they 
will take as much as the Congress gives them. And I think that 
that doesn't mean to suggest bad faith on the part of 
prosecutors. It just means that any one of us, given our job, 
will do it to the expansive limitations that are given to them. 
And unfortunately, there aren't as many limitations in the 
statute as there should be.
    Mr. Gowdy. Thank you, Mr. Chairman.
    Mr. Sensenbrenner. The gentleman's time has expired.
    The gentleman from Georgia, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Terwilliger, you just said something that is very 
profound. You said corporations can't think, and I wish that 
you had been the attorney who could have argued that to the 
U.S. Supreme Court in the Citizens United case. [Laughter.]
    Mr. Johnson. But I would like to turn now to Ms. Regon and 
ask you, have you ever been a prosecutor before?
    Ms. Regon. I have not, sir.
    Mr. Johnson. But would it be fair to say that the looser 
the law, then the more prosecution discretion comes into play?
    Ms. Regon. Certainly.
    Mr. Johnson. And then to narrowly draw the law means less 
prosecutorial discretion.
    Ms. Regon. It means less discretion. It doesn't necessarily 
mean less prosecutions.
    Mr. Johnson. Well, it could result in less prosecution 
    Ms. Regon. I think if DOJ means what it says here today, 
which is that it is really focused on explicit commercial 
bribery, and I think Mr. Andres promised that the DOJ would 
never prosecute a company for the rogue acts of an employee 
overseas, I think if they meant that, then they wouldn't mind 
that the statute was so narrowed because they would still be 
allowed to prosecute explicit commercial bribery. I think that 
they enjoy a certain broader amount of discretion so they can 
in the future bring the kinds of cases they want to bring.
    Mr. Johnson. Yes, but my problem is that, okay, while we 
want to narrowly draw statutes to limit prosecutorial 
discretion in cases of legalized crime, because there are two. 
There is legalized crime, there is legal crime and illegal 
    Ms. Regon. Well, I am not----
    Mr. Johnson. The illegal crime is the blue collar type of 
crime, the burglaries, robberies, rapes, murders, those kinds 
of things, theft, shoplifting, drug dealing. That is illegal 
crime. Some would argue that things like white-collar crime are 
legal crime, and they argue that it is legal crime because the 
prosecutions for that kind of misconduct are not as vigorous as 
they should be.
    So in the case of legalized crime or legal crime, I am 
bothered by the notion that we need clarification, and I am 
bothered by the fact that there has not been a whole lot of 
prosecutorial activity in this arena, FCPA, in the past. And so 
it just seems kind of fishy. We are trying to let some folks 
off the hook for legal crime.
    Ms. Regon. Congressman Johnson, if I may respond to that, I 
think that there are a number of people who have been 
prosecuted for white-collar crimes and that are, in fact, 
serving what in effect are life sentences, and they would----
    Mr. Johnson. There have been some examples made.
    Ms. Regon. Yes. They would disagree that white-collar crime 
is not real crime.
    Mr. Johnson. There have been some examples made, some of 
which I disagree with, some of which I feel like people were 
treated too harshly by the criminal justice system for white-
collar crime just to make them an example, and I can feel your 
pain in terms of representing clients who may fall on the wrong 
side of political correctness, and I hear what you are saying. 
But I do not think to amend the law in this case would prevent 
prosecution discretion from being misused from a political 
    Ms. Regon. Sir, I would like to respond to really what I 
feel is the heart of your question, which is I think that both 
blue collar criminals and white-collar criminals or those who 
are accused of those sorts of crimes, they both deserve 
constitutional fairness. They both deserve fair notice of what 
is against the law before they are prosecuted for potentially 
    Mr. Johnson. But nobody----
    Mr. Sensenbrenner. The gentleman's time is expired.
    Will the witness continue her answer? And then I will 
recognize the gentlewoman from Florida.
    Ms. Regon. Thank you, Chairman, very much.
    The Constitution requires fair notice to each of us about 
what the law prohibits and what the law does not. We do this 
because we think it deters conduct. We do this because it is 
fair, because it provides due process notification to all of 
us, and I think that is important to anyone accused of any type 
of crime. NACDL represents those accused of all types of 
crimes, including burglary and rape and child----
    Mr. Johnson. I realize that.
    Ms. Regon. The full panoply of crimes, and I don't think 
that there is a difference between----
    Mr. Johnson. But legally----
    Mr. Sensenbrenner. The gentleman's time has expired.
    Mr. Johnson. Legal crimes----
    Mr. Sensenbrenner. The gentleman's time has expired.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Sensenbrenner. The gentlewoman from Florida, Ms. Adams.
    Ms. Adams. Thank you, Mr. Chairman.
    Mr. Andres, does DOJ have definitions for foreign official 
instrumentality? Do you have that in your agency?
    Mr. Andres. So in addition to the statute, foreign official 
as defined in the statute, there are now several decisions by 
district courts, two in California, recently one in Miami, 
which have further amplified the definition of foreign 
official. And beyond that I would say that it is important when 
we think about that concept that the foreign official 
definition in the statute is consistent with our own treaty 
    So, yes, there is a definition in the statute.
    Ms. Adams. What about DOJ?
    Mr. Andres. We follow the definition----
    Ms. Adams. You don't have any tweaks to it whatsoever when 
you are determining whether or not to file?
    Mr. Andres. We don't support a change in the definition of 
foreign official, again because----
    Ms. Adams. What about instrumentality?
    Mr. Andres. Same answer, because we are fearful that that 
will--there is a bright line rule with respect to who 
constitutes a foreign official. We think if companies are not 
paying bribes, that there is really no fear of prosecution from 
FCPA enforcement.
    Ms. Adams. Well, I have listened to the different 
conversations, different questions, and you said that you 
publish when you have your decisions on how you came about your 
decisions. What about when you decide not to file? Is there 
some area in which you have that information so that people can 
go to that area and find out if it is consistent, is there any 
irregularities based on decisions made whether or not to file?
    Mr. Andres. So that is a difficult area for the government. 
We don't, in large part, because we don't want to penalize a 
company or an individual that has been investigated and not 
prosecuted, that there may be some prejudice from that. But let 
    Ms. Adams. Can you tell me how many cases maybe in the last 
year that you have had come to your agency where you wanted to 
take a look but then you changed your mind or whatever and 
decided maybe it didn't fall into the parameters or didn't 
quite make that bright line test, about how many cases that 
would be this year alone?
    Mr. Andres. I don't have those numbers, and I can try and 
provide them. I will say one other thing about guidance. In the 
FCPA there is a unique feature in the law called the procedure, 
or an opinion procedure process. It is unique to the FCPA. If a 
company has a question about who constitutes a public official, 
or if some particular conduct, they have the ability to ask the 
Department of Justice for an advisory opinion as to whether or 
not that conduct will violate the statute.
    So if there is a question about a payment being made or 
whether somebody constitutes a----
    Ms. Adams. Such as the taxi cab ride that cost $200,000 to 
    Mr. Andres. If, in fact, that is true, then yes, you could 
ask the question, and the Department would be obligated under 
the statute to give you an opinion as to whether or not that 
    Ms. Adams. So just curious. Would it be fair to say, in the 
absence of court involvement in FCPA cases, judges will have 
the opportunity to define the limits in the FCPA, and therefore 
DOJ alone gets to define what the law means?
    Mr. Andres. I don't think that is right. There is judicial 
oversight. We just finished----
    Ms. Adams. I said in the absence of it.
    Mr. Andres. I'm sorry?
    Ms. Adams. In the absence of judicial oversight, in the 
absence of the court involvement, then you would be making all 
those definitions and defining.
    Mr. Andres. Yes, but every one of these cases is negotiated 
with experienced defense counsel. And so we take a great amount 
of time to speak to defense lawyers who are very experienced in 
this field in making decisions about how to come to 
resolutions. So there is ample opportunity for them to address 
these issues with the Department.
    Ms. Adams. Judge, I see maybe you wanted to add something?
    Mr. Mukasey. I would simply point out that none of those 
cases are binding on any other case. So, yes, they provide an 
interesting case study for somebody who would like to make a 
future decision, but there is no guarantee that it is going to 
come out the same way.
    Ms. Adams. Interesting. So it all falls back to DOJ and the 
decisions that they decide to make based on what?
    Mr. Andres. We decide based on the definition of a foreign 
official in the statute. And while an opinion release may not 
be binding on a separate party, nothing precludes that party 
from asking the Department the particulars of his or her case 
so that they can have clarity about what the law is. We feel 
that that procedure has the ability to provide explicit 
    Ms. Adams. Would it be possible, just say in the last year, 
for you to provide to the Committee the amount of cases that 
were brought to your attention and that were not filed upon, 
and the reasons and rationale why you did not file those cases?
    Mr. Andres. We certainly can try to figure out the number 
of cases we declined, the various factors that went into----
    Mr. Sensenbrenner. Will the Department submit this 
information in writing to the Committee?
    Mr. Andres. To the extent that we can--to the extent that 
we can gather that information, we will certainly try to.
    Mr. Sensenbrenner. Without objection, when the information 
is received, it will be made a part of the record.
    And the gentlewoman's time has expired.
    The gentlewoman from Texas, Ms. Jackson Lee.
    Ms. Jackson Lee. Mr. Chairman, thank you, and I thank you 
and the Ranking Member, Mr. Scott, for holding the hearing. It 
is extremely important for this Committee to be diligent in 
oversight. And if there is a Committee that has a broad reach, 
it is the Judiciary Committee in terms of the layers of laws 
that we have to address.
    So let me try to probe as quickly as I can to the 
Department of Justice. Tell me how many attorneys and staff, to 
your best knowledge, are assigned to the Foreign Corruptions 
    Mr. Andres. Well, I am going to--I can obviously get that 
number in particular, but I am going to say there are probably 
between 15 and 20 lawyers in the Department of Justice in 
Washington that are assigned to those cases and do those cases 
primarily. When we, in fact, prosecute a case, we often partner 
up with the local U.S. Attorney's Office. So----
    Ms. Jackson Lee. So you add resources when it happens to 
fall within a different jurisdiction.
    Mr. Andres. That is right.
    Ms. Jackson Lee. So any given time, you could have 10--
excuse me--you could have 15, 20, 25 if you are working on a 
case, or more. I mean, I would imagine there is some 
flexibility there.
    Mr. Andres. Fifteen or 20 in Washington who are dedicated 
solely to this mission, the prosecution of foreign bribery, and 
then lawyers, prosecutors in offices throughout the United 
States who will supplement our trial team if we go to trial, or 
in the investigative team.
    Ms. Jackson Lee. Do you think that is an excessive amount?
    Mr. Andres. Certainly not in light of what the problem is, 
that is the size and magnitude of foreign bribery and the way 
that that negatively impacts on American business, which isn't 
to say I am asking for more resources, but only to say the 
problem is significant.
    Ms. Jackson Lee. So your prosecution, however, is of U.S. 
companies that engage in bribery. Is that correct?
    Mr. Andres. No. That I think is a common misconception. 
Our--the FCPA allows us to prosecute a range of different 
companies, both foreign and domestic. In fact, one of the ways 
that we are hopeful that we are helping American businesses is 
by the prosecution of foreign companies who are engaged in 
    Ms. Jackson Lee. And give me the nexus. If I am in a 
foreign country and I am a foreign company from elsewhere, what 
is the nexus for suing that company for bribing? And I would 
add to it that there is an American company trying to do 
business, I am bribing, I get the business, but I am a foreign 
country--excuse me--foreign company in a foreign country, the 
same country that this United States business is in.
    Mr. Andres. So, for example, if you are a foreign company 
who is listed on an exchange in the United States, then we 
can--you fall within the jurisdiction. Eight of the 10 largest 
FCPA settlements in the history of the statute are against 
foreign companies, which isn't to say that we target----
    Ms. Jackson Lee. And is the action based upon a bribery, 
does it have to impact a U.S. company, or because it is on an 
exchange you have the jurisdiction?
    Mr. Andres. No, it doesn't have to impact an American 
company necessarily.
    Ms. Jackson Lee. But the bribery, of course, is one that 
undermines the normal course of business.
    Mr. Andres. Clearly it affects the level playing field, and 
we believe----
    Ms. Jackson Lee. Give me some--and my time is running, so I 
am interrupting. Give me some, one or two cases and your 
assessment of whether you have been excessive.
    Mr. Andres. So, for example, the Siemens case involved 
improper payments of over $800 million in four countries, and 
that bribery scheme lasted over 6 years. That was a company 
that we prosecuted.
    Ms. Jackson Lee. Right. What was the settlement? What was 
the result?
    Mr. Andres. The settlement was a payment, I believe, of 
approximately over $800 million settlement with respect to the 
payments that were made----
    Ms. Jackson Lee. And what would be your answer to the 
question that it is antiquated and over-broad?
    Mr. Andres. I don't believe that is true, and I don't 
believe change is necessary to the statute. Again, given the 
magnitude of the problem and the possibility that some change 
to the statute could either send a message that we were 
sanctioning some type of bribery or producing loopholes which 
would further----
    Ms. Jackson Lee. Thank you.
    Mr. Andres [continuing]. Impact American business.
    Ms. Jackson Lee. Thank you.
    May I get Ms. Shana-Tara Regon? What is your opposition, or 
what do you think we can do to improve? Frankly, let me tip my 
hand and say that I think it is a valuable purpose for this 
act. What are your arguments against its utilization?
    Ms. Regon. Congresswoman Lee, we would agree that the act 
itself started off with a laudable goal, and that is to prevent 
explicit commercial bribery abroad, and we are certainly not 
here to suggest that there shouldn't be anti-corruption laws on 
the books. We are suggesting that those that do exist have 
understandable and rational limitations, that the people who 
are subject to those laws are able to understand by reading the 
law what is prohibited and what is not so that they can then 
conform their conduct to the law and not violate it. That is, 
unfortunately, not the case with this statute.
    Ms. Jackson Lee. Mr. Chairman, may I just thank General 
Mukasey for being here? I wanted to pose a question, but he 
knows the great respect that I have for him and thank him for 
his service that he rendered as Attorney General and on the 
Federal bench, and I will look forward maybe to engaging with 
you on this question.
    Mr. Mukasey. Thank you very much. Good to see you again.
    Ms. Jackson Lee. Thank you. Good to see you.
    Mr. Sensenbrenner. The gentlewoman also knows that the 
gavel is bigger than normal. [Laughter.]
    Ms. Jackson Lee. But I know you won't throw it. Thank you, 
Mr. Chairman. [Laughter.]
    Mr. Sensenbrenner. The gentleman from Arizona, Mr. Quayle.
    Mr. Quayle. Thank you, Mr. Chairman.
    Mr. Andres, in 2006 Macau became the number one gambling 
market in the world, surpassing Las Vegas, and it was recently 
reported that gambling revenue in Macau rose about 42 percent 
in May, and year over year, and it is expected to continue to 
grow in this manner.
    Has the DOJ looked into the gambling practices in Macau and 
if there is any illegal activity occurring in that arena?
    Mr. Andres. I am not sure that would be appropriate for me 
to comment on any ongoing investigation to the extent there was 
one. So I am not sure that is a question I am able to answer.
    Mr. Quayle. Okay. Let me go to another subject. Now, when 
you are trying to decide whether a company is an 
instrumentality of the state, what sort of ownership structure 
or ownership percentage do you have to be there to fall within 
that definition? Because one of the things I am wondering is if 
under that guidance, is GM considered an instrumentality of the 
    Mr. Andres. So there are a variety of factors which we look 
at, and ownership is not the sole factor. In deciding whether 
or not an instrumentality constitutes, or a foreign official 
constitutes an entity bribing against which we could prosecute, 
we look at the characterization, the foreign state's 
characterization of the entity and its employees, the foreign 
state's degree or control over the entity, the purpose of the 
entity, the state law, the creation. So the fact alone that GM, 
that there is some government investment in GM would not, under 
the tests we use, qualify it as an instrumentality of the 
United States.
    Mr. Quayle. So just the ownership stake does not actually 
trigger that. You would actually say, well, if there was some 
communication with the board and various members of the 
government basically being able to control or influence, as you 
will, where a company goes, would that then fall under that 
    Mr. Andres. Yes. So ownership is one of several factors 
that we consider, but it is not the sole factor. Just to give 
you an example, in the recent prosecution of Lindsay 
Manufacturing, they were bribing a state-owned electric company 
in Mexico, and in the constitution, the Mexican constitution 
dictated that people had a right to electricity. So that was 
one of the factors that we considered, the country's own 
constitution and how it defined what the responsibilities of 
the entity were, the instrumentality.
    Mr. Quayle. Okay. Thank you.
    Mr. Terwilliger, the SEC recently implemented new rules 
pursuant to the Dodd-Frank bill which encourages whistleblowers 
to actually go directly to the SEC, which circumvents the 
internal corporate compliance requirements. Now, given your 
experience conducting these internal investigations, can you 
speak to the appropriateness of the whistleblower provision 
included in the Dodd-Frank bill? And also I would like to get 
specific in terms of how they are allowing the monetary 
sanctions that the government receives, the whistleblower gets 
a percentage of that, and how that would influence and have, I 
think, maybe a possible perverse effect on whistleblowing going 
    Mr. Terwilliger. Thank you, Mr. Quayle. And I think it is--
I commend you for attention to that issue, and the Committee's 
attention to it, because what we are really talking about here 
and the fundamental need for reform is to address the impact on 
the American economy and American businesses which create the 
jobs that Americans so desperately need right now. And, yes, 
having a level playing field in the world for competition is 
good for American business, but wasting money on compliance 
efforts that get nothing at the end of the day is problematic.
    And the uncertainty that attaches to the parameters of the 
FCPA costs tremendous amounts of money not just to hire lawyers 
to try to figure out where they are and to discuss them in a 
reasonable basis with the Justice Department in the context of 
an enforcement action, but even to decide whether, for example, 
given your example, an instrumentality in a similar situation 
to General Motors is, in fact, an instrumentality of the 
government or not, and therefore enhanced compliance procedures 
would be needed if a U.S. company was engaged in business with 
it. Those uncertainties as to those questions create a lot of 
hidden cost and may have a U.S. company say, look, I am not 
going to spend $200,000 to find that out; I am going to leave.
    In terms of the whistleblower act, the fundamental problem 
with the whistleblower statute and its impact on compliance 
programs is this. Companies need to know if something wrong is 
being done in their operations, and they need to know it in a 
timely way so they can remediate it, take corrective action 
and, if appropriate, disclose it to the government and accept 
the consequences.
    The whistleblower statute encourages employees to go around 
the company and instead go to the SEC. Why should someone who 
stands to gain a percentage of a recovery act in a manner that 
is going to limit the bad acts which determine the size of what 
that recovery would be? It is something that I would humbly 
suggest is well worth Congress' attention.
    Mr. Quayle. And going back to the creation of jobs--that is 
the final question? My time is----
    Mr. Sensenbrenner. Sure.
    Mr. Quayle. Thank you, Mr. Chairman. Without getting into 
any confidences, how--can you give us an example? Do you have 
any knowledge of companies that have been ceding markets to 
foreign companies because they are afraid of what happens under 
    Mr. Terwilliger. I would not--I think ceding markets would 
go too far, at least between, beyond data that is available to 
me. I would say that American companies have become much more 
circumspect in dealing with opportunities, particularly smaller 
opportunities that may grow into something larger in some of 
the developing markets of the world, including China, which was 
mentioned earlier, simply because the cost/benefit analysis of 
worrying about FCPA compliance issues in this world of 
uncertain parameters, which is no criticism of the Justice 
Department. I think they do undertake an effort to be fair in 
enforcement. But that is the end of the line. We are worried 
about the beginning of that line.
    Mr. Quayle. Thank you. Thank you, Mr. Chairman.
    Mr. Sensenbrenner. Thank you very much, Mr. Quayle.
    I have changed the order of questioning deliberately today 
rather than asking my questions first, but I am going to do it 
last because I wanted to hear both the testimony as well as the 
answers to questions of Members of the Committee.
    There is no question in my mind that we have to bring this 
law up to date. Nobody here is in favor of bribery, but there 
has to be more uncertainty. And I must say I was a bit 
befuddled at the statement that the former Chairman of the 
Committee, Mr. Conyers, made, saying that corporations should 
know what is illegal. I think while a corporation is not a 
human being, but everybody has a right to know what is illegal, 
and there has to be much more certainty in the law.
    So I think that we are going to have to have a defined 
parameter which may be a little bit less than it has been, 
recognizing that there have been some changes with the result 
of China's economy exploding and the collapse of the Soviet 
Union, so that people have a better idea of what is in bounds 
and what is out of bounds.
    I have several points that I have heard, and I am going to 
ask you, Mr. Andres, and you, Ms. Regon, what your idea of an 
appropriate response would be.
    First is a better clarification of the definition of a 
foreign official, particularly when you are dealing with a 
quasi-state-owned enterprise like are very common in China and 
the Middle East.
    The second is how we delineate between a legitimate 
business activity and bribery, because I think that there has 
to be a clarification on that.
    The third is talking about affirmative defenses such as the 
affirmative defense that has been provided in Title 7 of the 
Civil Rights Act, where if there is a remediation in the 
workplace, that can be pleaded as an affirmative defense; a 
clarification of the type of mens rea that the prosecution must 
prove in order to successfully convict someone who is indicted.
    And then I am really concerned about a de minimis defense 
and having at least some clarification that when an opinion is 
issued, the Justice Department would have to accept that as 
precedential value rather than saying, well, it was okay if X 
did it, but it is criminal if Y does exactly the same thing.
    And we talked quite a bit about the taxi ride. And if you 
are working until 3 o'clock in the morning and everything is 
shut down, I don't know what good it does to wait for an 
advisory opinion that can take as long as 30 days from the 
Justice Department for the U.S. corporation official or 
somebody else to decide to get back to the hotel and snare some 
Z's, rather than sitting and waiting until somebody from 
Washington tells them what is good and what is not and whether 
this is bribery or whether it is a legitimate business 
    So if you can kind of sum this up, both Ms. Regon and Mr. 
Andres, on how we deal with this issue, I think it would be 
very helpful to the Committee in drafting legislation. And I 
would like to ask you to go first, Ms. Regon, because I would 
like to hear the answer to your observation from Mr. Andres.
    Ms. Regon. Thank you, Chairman, and I will attempt to 
answer succinctly the many questions that you have put to me. I 
would first like to say that NACDL has not taken an official 
policy position on the types of reforms my colleagues have 
mentioned today, but I would like to suggest that we are 
certainly supportive of anything that the Congress does to 
clarify, bring uniformity, and bring fairness to the 
enforcement of this statute. We are particularly supportive of 
ensuring that mens rea requirements in the statute, on behalf 
of both individuals and corporations, is as high and as 
protective as possible so that only persons who are purposely 
engaging in corrupt, explicit commercial bribery are punished 
by the act.
    I think that defining more narrowly who a foreign official 
is so that companies and individuals can look prospectively and 
say I am dealing with a foreign official in this business deal, 
therefore my compliance measures have to be up, my focus on 
what I am doing and what my employees are doing needs to be 
more sharp, sharply focused, I think that would help and go a 
long way in ensuring both compliance with the statute and 
preventing misconduct.
    Where you get misconduct is where you get these fuzzy lines 
where no one, companies or the individuals working for them, 
really understands what is prohibited or not, and I fail to see 
a rational explanation for not providing that kind of clarity 
to people so that they can conform their behavior to it.
    I think that we have many bribery statutes on the books 
that address other types of bribery in other contexts. Some of 
those are written very tightly and very well, and no one seems 
to have any difficulty figuring out what is bribery and what is 
not. So I suggest that we use those as models.
    I think an affirmative defense could be helpful to a 
company. The Department has testified that they do take into 
consideration compliance defenses when they are thinking about 
whether to charge a company or what an appropriate sentence 
should be. I guess I would suggest that from NACDL's point of 
view, we would like to foster fairness in the criminal justice 
system, and having a prosecutor also sort of be judge and jury 
and being the sole person in that calculation making the 
determination of how valuable the compliance defense is isn't 
quite fair.
    And so I believe the people that are supporting an 
affirmative defense in this way are probably coming from that 
point of view and hoping that it is taken into consideration 
slightly more than just the same person that is deciding 
whether a violation of the statute has actually occurred.
    Mr. Sensenbrenner. Mr. Andres, which of Ms. Regon's 
suggestions don't you agree with?
    Mr. Andres. I am not sure I agree with any of them, sir.
    Mr. Sensenbrenner. Okay.
    Mr. Andres. Just stepping back for a minute, with respect 
to the definition of a foreign official, Mr. Chairman, you talk 
about the different structures in China. I think one of the 
things that you have to take into consideration in defining 
what a foreign official is is that the statute covers the whole 
world. And so what constitutes a foreign official in China 
because of different structures within the government and how 
they run their state-run industries may be very different from 
those joint ventures or structures that are government-
controlled in Brazil, or in France. So----
    Mr. Sensenbrenner. But how do you know that when you are 
trying to negotiate a contract to sell American-made products?
    Mr. Andres. Well, two things. If there is a concern about 
who constitutes a foreign official, you ask the government for 
an opinion and you provide the relevant facts.
    Mr. Sensenbrenner. Oh, come on now. China is a communist 
country. They are not going to tell you what the governmental 
involvement is or who gets paid which way.
    Mr. Andres. Well, we are going to----
    Mr. Sensenbrenner. They don't have the type of disclosure 
that Western countries, including the United States, has on who 
owns what, with disclosures that the SEC requires of public 
    Mr. Andres. I understand that, sir, but there is no 
prohibition with doing--the statute doesn't make it illegal 
doing business with China. It makes illegal providing a bribe. 
And so with respect to whether or not a company could bribe a 
commercial entity versus bribing a foreign official, the 
Department's position would be that if companies aren't paying 
bribes, they have nothing to fear with respect to enforcement--
    Mr. Sensenbrenner. Okay. Then would the Department approve 
an amendment to the Foreign Corrupt Practices Act to use the 
statute on bribing somebody in a commercial contract to apply 
to any type of bribery and forget about this debate on who a 
foreign official is, because bribery is bribery? That is a lot 
clearer than what is in the Foreign Corrupt Practices Act.
    The thing is that we have heard from every one of the 
witnesses today that this statute is vague, it does not tell 
people what is criminal activity and what isn't, and it is 
subjective, and what the Justice Department determines, which 
you don't know until you find out there is an investigation or 
get hit with an indictment, and there is no precedential value 
to advisory opinions that have been issued in the past.
    Now, I have been pretty pro-prosecution, as my friend from 
Virginia can say, probably too much so. But I really think that 
it would behoove the Department to realize that this statute 
needs updating because China was a lot different in 1977 than 
it is today, and I think most of the Middle East is going to be 
changing pretty rapidly if the newspaper reports are correct.
    Mr. Andres. Mr. Chairman, obviously the Department is more 
than willing to work with Congress on any possible changes.
    Mr. Sensenbrenner. Okay.
    Mr. Andres. Although I----
    Mr. Sensenbrenner. Okay. Well, the invitation is there, and 
we are going to be drafting a bill. So, see you later. 
    Mr. Andres. Understood, with the exception, Mr. Chairman, 
    Mr. Sensenbrenner. Okay.
    Mr. Andres. I will say that while there have been 
criticisms by the other members of the panel, no one has raised 
a single example of a prosecution or enforcement action which 
was remotely close to the line. The cases that we are 
    Mr. Sensenbrenner. But that is not the point, Mr. Andres. 
You know, the thing is is that if you were the general counsel 
of a corporation that was involved in the globalized economy 
and you had to go advise your CEO and everybody else who is 
involved in this, you are going to be advising in the most 
narrow way and exercising the greatest amount of caution 
because of what is going on. And as a result, legitimate 
business activity which is not bribery in nature is going to be 
quashed, and we end up being put at a significant disadvantage 
to our foreign competitors. Get the message, sir, and tell that 
to the AG.
    Well, I made my point. I think all of the Members of the 
Committee, as well as the witnesses, have made their point. I 
would like to thank all of you for coming, even those of you 
who have had a tough time.
    Does the gentleman from Virginia want to put something into 
the record?
    Mr. Scott. Yes. Mr. Chairman. Letters from--statements from 
the Global Financial Integrity and Citizens for Responsibility 
and Ethics in Washington.
    Mr. Sensenbrenner. Without objection, the material will be 
put in the record.
    The purpose of this Committee or this hearing having been 
concluded, without objection, the Committee stands adjourned.
    [Whereupon, at 12 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X


               Material Submitted for the Hearing Record