The recent Louis Berger International FCPA settlement highlighted once again the serious consequences from systemic bribery violations, the ease with which bribery schemes can be carried out, and the risks facing all global companies, especially those involved in high-risk industries like construction projects.
Berger agreed to pay $17 million to settle the case and agreed to a three-year corporate monitor. Interestingly, at the same time the company’s case was settled, DOJ announced the guilty pleas of two former Berger executives who are scheduled to be sentenced in November 2015.
The Berger settlement raises several interesting issues.
Same-Time Individual Prosecutions: After reviewing the facts, there is no question that these two actors deserved prosecution. DOJ had substantial evidence from a large number of witnesses who were willing to testify against the executives, along with extensive email evidence corroborating the evidence and demonstrating their attempts to cover up the bribery scheme.
Individual FCPA Prosecutions: The contemporaneous prosecution of two former Berger former executives raises a real question about DOJ handling of other FCPA criminal prosecutions against individuals. The guilty pleas of these two individuals shows that DOJ is more committed to contemporaneous guilty pleas of individuals at the same time as resolution of corporate case.
This new trend stands in stark contrast to DOJ settlement of corporate cases and subsequent prosecution of individuals. For example, DOJ settled the Avon case without resolving the individual criminal cases. If DOJ declined to prosecute the Avon individuals whose conduct was equal to or worse than the two Berger executives, DOJ’s disparate treatment of these individuals raises a question as to its prosecutorial discretion.
DOJ has been criticized for failing to prosecute individuals and the Berger case shows DOJ operating efficiently to bring related criminal prosecutions against individuals simultaneously with the resolution of the corporate case. If this approach is new, DOJ will have trouble explaining why it did not commit itself to such a strategy earlier.
Fine of $17 Million: Under the settlement calculation, Berger’s fine range was $17 to $34 million. Based on its cooperation, DOJ signed off on $17 million settlement, but did not give Berger any discount for cooperation.
DOJ’s reason for not giving a discount reflects several considerations:
First, the circumstances surrounding Berger’s “voluntary” disclosure were somewhat ambiguous. DOJ first notified Berger of potential False Claims Act violations. Berger launched an internal investigation, during which Berger discovered FCPA violations. Berger then disclosed these FCPA violations to DOJ;
Second, Berger’s conduct involved approximately $3.9 million in bribes, involved several high-ranking executives who actively sought to cover-up the bribery scheme.
The nature and amount of such evidence may have pushed DOJ to take a more aggressive stance on the resolution, the discount and the terms of settlement.
Balancing these considerations, DOJ came out at $17 million. If Berger had discovered the FCPA violations itself and voluntarily disclosed the matter to DOJ independent of the False Claims Act issue, Berger might have earned around a 25 percent discount from $17 million.
Return of the Corporate Monitor: DOJ has not imposed a three-year corporate monitor since 2013 in the Weatherford case. Looking at the Berger settlement, it is hard to understand why a three-year corporate monitor was imposed, especially in comparison to other settlements where DOJ settled for a hybrid monitor: 18-month monitor and 18-month self-reporting. Again, given the facts and the cover-up, DOJ may have felt that Berger had been given enough positive benefits for its remediation and cooperation.