The Mercury 7, Chuck Duross and Continuous Improvement to Your Compliance Program

Next Monday, February 20, 2012 is the 50^th anniversary of the first American manned orbital space flight. It made John Glenn a national hero and heralded America’s move into direct competition with the (then) Soviet Union for the race to put the first man on the moon. In an article in the New York Times, entitled, “At 90, John Glenn Looks Back” reporter John Noble Wilford wrote about this flight, the Mercury program and Glenn based upon two interviews with the ex-astronaut and former Senator from Ohio. This coming Saturday, Glenn will be honored at Cape Canaveral at a celebration of the remaining members of the Mercury space team.

These original seven astronauts, known as the “Mercury 7” were true American heroes. Anyone interested in science in the slightest bit in the 60s knew who these men were. They were featured in Life Magazine with their families and each of their space flights were covered on live television by all three networks. Glenn is one of two of the original Mercury astronauts still alive, the other being Scott Carpenter, who will also be honored on Saturday. The remaining astronauts of the Mercury 7 were Deke Slayton, Gus Grissom, Alan Sheppard, Gordon Cooper and Wally Schirra. They were immortalized for a later generation by Tom Wolfe, in his book, “The Right Stuff”.

So what is the compliance angle here? It is that NASA created an entire system, consisting of processes and procedures to put a man on the moon. Were there setbacks? Yes, the Apollo 1 tragedy still resonates at NASA today. However NASA moved forward and fulfilled President Kennedy’s vow to put a man on the moon by the end of the decade. NASA did this largely by continuous improvement of its system.

I thought about this article while reading the tweets coming from my “This Week in FCPA” co-host Howard Sklar last night. Howard is in Hong Kong, chairing the Anti-Corruption Asia Congress this week. Yesterday, Chuck Duross, Deputy Chief, Foreign Corrupt Practices Act (FCPA) Unit, United States Department of Justice (DOJ) spoke to the event and Howard tweeted some of the highlights of Chuck’s remarks. They included:

• To combat anti-corruption, there needs to be political will, as it requires prosecution of bribe takers as well as bribe payers.
• Do not assume that your company is immune from FCPA liability just because you are not a US company. Here you should note that 9 out of the 10 FCPA settlements of all-time are with non-US based companies.
• Charging individuals leading to more trials. Last year the DOJ tried 3,000 cases last year and there were 4 FCPA trials. In Chuck’s words, (as tweeted by Howard) “Let’s all take a breath”.
• There was a FCPA trial first: a Foreign official, charged with money laundering, testified against the business bribe-payer. Here it is important to note that the DOJ can and will be charge foreign government offices.
• Turning to some specifics of compliance programs, Duross remarked that companies using half-measures to prevent bribery are at risk.
• Companies will receive a significant benefit for having robust compliance programs: lower fines, DPA/NPA, even not having a monitor. He gave some examples; Noble got an NPA, paid $2.6 MM, no monitor. Pride which sustained substantial cooperation with the DOJ, received below-the-guideline range penalty of 55%.
• Turning to the facilitation payment exception, Duross said that it is a narrow one: it’s usually illegal locally where it is paid, discouraged in US, illegal internationally.
• He emphasized that third party agents need to be properly vetted.
• He noted that other violations of US law often accompany FCPA violations, such as anti-competitive behavior, trade violations, embezzlement, and money laundering.
• He emphasized that your company should do what it can do regarding your compliance program. If necessary, at first, change the tone at the top. Make it clear that illegal acts will not be tolerated. But you must mean it. Vocal support is necessary, but management’s commitment cannot end there. Compliance is a cost center: management must back up vocal support of compliance with budget and resources.
• Next Duross suggested that companies reevaluate internal controls. They should take the time to review and test, think critically about risk.
• The DOJ looks at proactive compliance efforts when deciding how and whether to prosecute. He also suggested that your company might consider joining an integrity pact.
• Howard’s tweets ended with this suggestion; that it is important to TEST your compliance program. You can run a fake invoice through your system which has information which should raise has red flags. You can run information through the hotline and see what happens. That impresses the DOJ.

The last few points raised by Duross emphasized to me the process of compliance. But as important as putting the program in place is testing the program and using the lessons learned to upgrade and update your compliance program. While we celebrate John Glenn, the Mercury 7 and NASA for what they achieved, we should remember that NASA used continuous improvement in its space program. These same techniques can be brought to bear in your compliance program. Based upon the remarks of Chuck Duross, such monitoring, improvement and upgrades will be counted in a positive light by the DOJ if you are involved in a FCPA enforcement action.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012