On May 24, 2010, Representative Peter Welch (D. VT) introduced the Overseas Contractor Reform Act, or HR 5366, to ban individuals and companies convicted of bribing foreign officials from contracting with the federal government. Representative Welch is the sole sponsor of this bill, which would require a proposal for debarment for any person found to be in violation of the FCPA within 30 days after a final judgment. A judgment becomes final when all appeals of the judgment have been finally determined, or all time for filing such appeals has expired. The head of a Federal agency may waive the proposed debarment.
The bill was approved by the House on September 15, 2010, by a vote of 409 to 0, with 23 not voting. Currently, contractors in the U.S. are already at risk of debarment if convicted or found liable of a commission of fraud or bribery, among many other wrongful acts.12 Some have criticized the bill because the very element it seeks to address – mandatory proposed debarment – is hardly mandatory for two reasons. First, the bill focuses on judgments, and many companies settle FCPA matters without an official “judgment.” Moreover, the agency waiver provision in the bill permits an escape to the “mandatory” nature of the proposed debarment.
Should a mandatory debarment bill become law in the U.S., it may have the unintended effect of encouraging more settlements without conviction for corporate FCPA violators. According to the DOJ’s sentencing memorandum in the recent Daimler AG action, the Department took note of the mandatory debarment provision in Europe, as well as noted its concern that there would be disproportionate harm to the shareholders and employees should Daimler be convicted of a corruption offense. Ultimately, the DOJ recommended a deferred prosecution agreement and a fine 20 percent lower than the Sentencing Guidelines range in Daimler’s case, citing these potential collateral consequences as well as Daimler’s excellent cooperation.