Re-Examining "Carbon Copy" Prosecutions: A Look Back and Spring Forward.

• Author: Boutros, Andrew S.

Re-Examining "Carbon Copy" Prosecutions: A Look Back and Spring Forward (1)

One emerging transnational trend we have tracked for some time--and first wrote about in 2012--is the phenomenon of carbon copy prosecutions." (2) Stripped to its core, when we first developed the term "Carbon Copy Prosecution" back in 2011, we described the following: "[w]hen foreign or domestic Jurisdiction A files charges based on a guilty plea or charging document from Jurisdiction B." (3) We recognize that since that time, the term has gained considerable currency; countless of law firm client updates now regularly report on instances of carbon copy prosecutions, and most recently Deputy Attorney General Rod Rosenstein spoke about it in virtually identical terms: "[o]ne concern is about multiple law enforcement and regulatory agencies pursuing a single entity for the same or substantially similar conduct." (4)

The old (indeed, by contemporary legal standards perhaps "ancient") days of one-dimensional government investigations appear to be over. We will explain why duplicative, serial enforcement actions are now part and parcel of the enforcement landscape, despite a healthy ongoing debate over the need for, and fairness of, serial enforcements. Carbon copy prosecutions have already left their seemingly permanent mark and have joined the international vernacular dealing with cross-border corruption matters. Our prediction is that, as globalization continues to shrink the world, carbon copy prosecutions will continue to increase in frequency, size, scope, and force. Simply stated, carbon copy prosecutions are here to stay.

1. Carbon Copy Basics

   On occasion, a company will reach a negotiated resolution with U.S. authorities on international bribery-related charges--whether through a non-prosecution agreement, a deferred prosecution agreement, or a guilty plea. Although in those cases the U.S. authorities may be perfectly satisfied with the resolution, the authorities in other countries where the bribery (and harm) actually occurred may for good reason not feel vindicated. In those situations, there exists a bona fide risk that the other countries will initiate prosecutions based on the same operative facts as, and admissions arising out of, the U.S. investigation and resolution.

   Relatedly, if an individual company officer is even tangentially involved or implicated in a U.S.-negotiated resolution, that officer--even if not named at all in the resolution--now faces the specter of potential criminal charges overseas. The officer has a strong incentive to ensure that the resolution does not name him or her and describes the officer's conduct in the most positive light (or at least neutrally).

   The net effect of the U.S. government's (specifically, that of the Department of Justice and Securities Exchange Commission) Foreign Corrupt Practices Act (FCPA) settlement policies is that when a company enters into a negotiated resolution with U.S. enforcers, it is essentially powerless to defend against--much less deny--the factual basis on which the resolution is based. This all but ensures that a company that settles with the DOJ--or both the DOJ and SEC in parallel proceedings--will have little or no choice but to settle with foreign authorities, should such authorities choose to exercise jurisdiction and enforce their corollary anticorruption laws.

   A country's incentive to vindicate its own laws is not insubstantial, especially when a company or individual has already admitted, in another proceeding (say, in the United States), to violating local law. Accordingly, both named parties and non-parties implicated in a resolution in one country ought to give due consideration to the potential impact of that resolution in another territory, especially in light of recent trends pointing to coordinated multinational cooperation and successive enforcement proceedings.

   1. The Halliburton Example

   In February 2009, oilfield services giant Halliburton Company settled with U.S. authorities for a then-recordbreaking $579 million to put an end to charges that one of its former units bribed Nigerian officials to obtain multibillion dollar contracts to build liquefied natural gas facilities on Bonny Island, Nigeria. (5) The resolution no doubt brought a sigh of relief to those Halliburton executives who had been under investigation but who, at the conclusion of the U.S. probe, had not been criminally or civilly charged. For many of them, however, that relative calm ended on December 7, 2010, when Nigerian anticorruption authorities released a sixteen-count criminal complaint against Halliburton, several related companies, and many of their C-suite executives for conduct that mirrored--and that the companies to a great extent had already publicly admitted to being part of in--the resolved U.S. criminal and administrative cases. (6)

   Even more, the announcement garnered worldwide headlines due to its inclusion of former U.S. Vice President Richard Cheney, the one-time Halliburton CEO. (7) Nigerian authorities also sought extradition of the defendants (including Vice President Cheney), invoking its longstanding extradition treaty with the U.S. (8) Within two weeks, Halliburton settled the Nigeria case. (9) But the message sent by the actions of the Nigerian authorities was loud and clear. First, if a corporation reaches a negotiated resolution with U.S. authorities on international bribery-related charges--whether through a non-prosecution agreement, a deferred prosecution agreement, or a guilty plea--there is a bona fide risk that other countries will initiate prosecutions based on the same facts as, and admissions arising out of, the U.S. investigation and resolution. Second, if an individual corporate officer is even tangentially involved or implicated in a U.S.-negotiated resolution, that corporate officer --even if not named at all in the resolution--faces potential criminal charges overseas. The officer, therefore, has a strong incentive to ensure that the resolution either does not name him or her or describes the officer's conduct in the most positive light (or at least neutrally).

2. Carbon Copy Prosecutions

   1. Carbon Copy Prosecutions: A New Fixture in the International Enforcement Arena

   1. A definition and an explanation of carbon copy prosecutions

      As noted at the outset, we use the term "carbon copy prosecutions" to refer to successive, duplicative prosecutions by multiple sovereigns for conduct transgressing the laws of several nations but arising out of the same common nucleus of operative facts. Although they may have been an "emerging" trend in six years ago, today we view carbon copy prosecutions as a seemingly permanent fixture in the equation used to conduct and resolve international anticorruption investigations.

      For years--especially during the early gestation period of cross-border corruption enforcement actions--corporate targets concerned themselves primarily with whether they would face liability from both the DOJ and SEC for overseas conduct violating the FCPA. However, exposure to liability from a single sovereign is no longer the singular concern. Now, companies and their executives and agents cannot afford to focus exclusively on the enforcement arms of the DOJ and SEC, both acting on behalf of the unitary, monolithic sovereignty of the United States. Today's international enforcement picture is much more complex. (10)

      First, an increasing number of nations are enacting--or at least contemplating--enhanced anticorruption laws. For example, Brazil, China, Russia, Thailand, and the United Kingdom have passed new (or at least "newer") and enhanced anticorruption legislation, while India continues to make headway. (11) Australia, France, Mexico, Indonesia, Jordan, Morocco, Taiwan, and the Ukraine are among those countries also to have recently proposed or adopted anticorruption measures. (12) More importantly for purposes of this article, and as more recent foreign enforcement actions demonstrate, more and more nations are actively enforcing their own local anticorruption laws. Serious consideration must be given to the increasing possibility of successive prosecutions by multiple sovereigns for the same core conduct that gives rise to U.S. liability.

      Of course, an important distinction must be made between the theoretical risk of prosecution and a foreign nation's actual, demonstrated willingness to prosecute. (13) For years companies and others have known and understood--at least on a theoretical level--that from an international jurisdictional standpoint, an illegal act committed in one nation could give rise to liability in another nation that prohibits the same or a similar act (or conduct facilitating the commission of the illegal act). (14) For example, a bribe paid overseas by a U.S. agent to a foreign official not only offends the FCPA and the United States Travel Act, (15) but it almost certainly violates the local laws where the bribe was paid and accepted. Even more, with the proliferation of extraterritorial provisions in the criminal laws of nations that prohibit international bribery, a single improper payment can trigger liability not only in the U.S. under the FCPA and in the country where the bribe took place, but in every jurisdiction that claims a codified interest in putting an end to foreign bribery by those that carry on a business, or part of a business, within its territories. (16)

      But carbon copy prosecutions do not refer to questions of overlapping jurisdiction among nations, nor does the term implicate hypothetical enforcement opportunities arising out of the quilt-like pattern of overlapping foreign laws that prohibit international bribery. Instead, it describes the real-world, burgeoning--and now here-to-stay--phenomenon of consecutive prosecutions (or at least investigations) in multiple jurisdictions for the same (or similar) underlying conduct. (17) Indeed, two key features of these...