Interview with FCPA Litigator David Simon

Ed. Note-this post continues my efforts to write about thought leaders in the area of anti-corruption compliance. Today, I post an interview with David Simon, a partner in the Milwaukee office of Foley and Larder. David not only practices in the area of FCPA defense but writes and consistently articulates innovative approaches to FCPA compliance.

Where did you grow up and what were your interests as a youngster?

I grew up in the suburbs of Milwaukee.  As a kid, I was pretty focused on sports and music — talented in neither, but an enthusiastic consumer of both.  I come from a long line of crazed Green Bay Packers fans.  One of my earliest memories involves Sunday dinner at my Grandmother’s house – squeezed in during halftime, dessert on our laps in front of the TV.  I’m pretty sure I have attended, watched, or listened to something approaching 90% of all Packers games played during my lifetime.

Where did you go to college and what experiences there led to your current profession?

I graduated from the University of Wisconsin (Madison).  It was a great fit for me – a big, diverse place where students are given tremendous freedom to chart their own educational course.  My liberal arts education provided a great foundation for a career as a lawyer.  I was taught the key skills for a litigator — how to think critically and how to express my thoughts in writing and orally.

During college, I was heavily involved in a student organization called AIESEC (a French acronym that stands for the International Association of Students in Economics and Commerce).  AIESEC is a fantastic organization that runs a global internship exchange program.  Our chapter was charged with raising internships with Wisconsin companies for foreign students.  In turn, we got to send our members abroad to work in similar internships.  AIESEC gave me the international bug – my first opportunity for international travel (a global conference in Norway), a Polish roommate, and an internship in Germany.  The path to my FCPA practice started with AIESEC.

Before joining Foley Lardner, you clerked for a federal judge. How did that experience help you as a lawyer and what did you learn from it?

I was lucky to have the opportunity to clerk for U.S. District Judge Robert Warren (now deceased).  He was a great man who exemplified fairness, decency, respect, and duty.  I can’t imagine a better place to start a legal career.  Besides learning how cases are litigated and tried (and what works and –  perhaps more importantly –  what doesn’t work), I learned so much about the human aspect of the law and the right way to treat people.

Could you describe your current practice?

My practice is focused principally on two core services:  First, I  represent companies (and, from time to time, individuals) that find themselves under scrutiny by the government or are in a situation that could lead to scrutiny by the government.  This includes internal investigations, the defense of enforcement proceedings, and, sometimes, litigation.  Second, I help companies stay out of the government’s cross-hairs by counseling on specific issues and by helping them build and implement effective compliance programs.

From a subject-matter perspective, I focus heavily on the FCPA and other anti-corruption laws. That is a little unusual for a Wisconsin resident who practices principally out of Foley & Lardner’s Milwaukee office.  It was an interesting path to this practice:  As a relatively junior lawyer, I had the good fortune of working with Martin Weinstein, one of the deans of the FCPA bar, during his first years out of the government and while he was starting his practice at Foley.  So as an associate learning how to be a government enforcement lawyer, I had the opportunity to work on a number of FCPA matters with one of the leading experts in the field.  This was well before the explosion in FCPA enforcement.  I always say we were FCPA before FCPA was cool.   We’ve been able to continue that tradition at Foley, which has been really great.

My practice is not 100% FCPA, though.  I also do enforcement, investigation, counseling and compliance work in the fields of antitrust, health care, and the False Claims Act.

You were one of the defense counsel you presented oral arguments in the Esquazi case in the 11^th Circuit last fall. Can you describe how you prepared and what was your experience in handling a federal court of appeals oral argument.

It was a great privilege to represent Carlos Rodriguez in the appeal of his criminal conviction. I hope we will achieve a positive result for him on appeal.

I am very grateful to Foley for investing really significant resources in this pro bono appeal.  Our representation of Carlos was a major team effort, with more than ten different lawyers contributing in various ways.  My colleagues Pam Johnston, Ken Winer, Lauren Valiente and Jamie Circincione made really significant contributions to the development of our FCPA “foreign official” arguments.  (We argued that an “instrumentality” of a foreign government must be limited to entities that are actually part of the government.)

It was a great experience having the opportunity to participate in the development of this important aspect of the law.  That is an unfortunately rare opportunity, since there has been so little actual litigation in the FCPA context.  It is a really good thing that there have been more litigated issues in the last couple of years, and we were glad to be able to join in the debate.

The oral argument itself was a terrific experience.  One never feels more like a lawyer than when arguing a case in a federal appellate court.  We had a great panel that was fully engaged and was clearly aware of the importance of the issues presented.  And I had the opportunity to follow Markus Funk, who did a great job representing co-defendant Joel Esquinazi, making similar, though slightly different, arguments on the “foreign official” issue.  What more could you ask for?  (Other than a reversal and remand!)

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, 2014

Just Say Yes to the Compliance Defense

Ed. Note – this week, I am pleased to join my colleagues David Simon, partner at Foley & Lardner LLP, and William ‘Bill’ C. Athanas, partner at Waller Lansden Dortch & Davis, LLP, in a tripartite debate on the efficacy of the affirmative defense of a compliance program to the Foreign Corrupt Practices Act (FCPA). Yesterday, I presented my views, from the perspective of a former in-house counsel, on why a compliance defense would not help to create greater compliance with the FCPA. Today, Simon will discuss his views, from the perspective a white collar defense practitioner, on why a compliance defense under the FCPA would foster greater compliance with the Act. Tomorrow, Athanas will present his views as a former Department of Justice (DOJ) prosecutor. I hope that you will enjoy our debate.

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I believe the FCPA should be amended to include an affirmative defense to corporate FCPA criminal liability based on an effective corporate compliance program.  Here’s why:

1.         A compliance defense would be fair.  It would recognize the challenges faced by global companies operating in far-flung places.  Sometimes our enforcers assume a lot more control than actually exists or can exist in the real world.  Even very good, very ethical companies operating in good faith have trouble preventing, for example, a mid-level manager in Kuala Lumpur from violating company anti-bribery policies, even where those policies had been clearly and directly communicated to him.  This dynamic is perhaps best illustrated by the fact that a significant number of companies recognized as “Most Ethical” have had publicized FCPA problems.  See the FCPA Professor’s blog post entitled, “Oracle – Another World’s Most Ethical FCPA Violator?“.  By including a compliance defense to FCPA liability, we would recognize the reality that the world is a complicated and not easily navigated place and that strong compliance efforts undertaken in good faith sometimes fail.

Moreover, U.S. companies currently operate under what is effectively a strict liability regime:  they have to assume that any violation of the FCPA by any employee of any subsidiary anywhere in the world will create corporate liability.  This distinguishes the FCPA from other corporate criminal offenses that are not extra-territorial, and answers the question of why we should enact a compliance defense in just this one area of U.S. criminal law.

An effective compliance defense would represent a fair and reasonable counterbalance to those realities.  Note that the UK made a similar trade-off in its Bribery Act – both the strict liability aspect and the affirmative defense are made explicit.  Further, other OECD countries also maintain some kind of defense based upon corporate compliance.  The idea that corporate compliance should be rewarded in this way is hardly a novel one within the context of anticorruption law – for good reason.

2.         An effective corporate compliance defense would not undermine anti-corruption enforcement.  Those opposed to a compliance defense sometimes claim that it would seriously undermine the enforcement regime.  They contend that such a defense would result in a race to the bottom, where companies would do the least they could get away with to preserve the defense.

But an affirmative defense to corporate FCPA liability would not give a free pass to any company that has an anti-corruption policy.  Or to one that simply checked a training box by sending around an off-the-shelf web-based training module to employees around the world.  Instead, by explicitly making clear that only a tailored and effective compliance program qualifies, such an affirmative defense would encourage companies to work hard to implement appropriate compliance measures, thereby aiding the cause of ensuring that less bribery occurs.  Since a company invoking the defense would bear the burden of showing that it had an effective program and that any violation occurred in spite of that otherwise effective program, only companies that implemented carefully thought out and well functioning programs would qualify.

The contours of this would obviously need to be sorted out, but I would expect the standards of “effectiveness” would be similar to those articulated in the DOJ/SEC Guidance.  A company would likely bear the burden of showing adequate training and communication, incentives and discipline resulting from compliance failures, third-party due diligence, a confidential reporting system and a process for investigating red flags that arise, periodic testing and auditing, and due diligence and integration of acquisitions.  That burden would not be light; the showing required would be significant.

Some would argue that DOJ already gives credit for an effective compliance program, in that its corporate charging guidelines instruct that prosecutors should take into account the existence and adequacy of the corporation’s compliance program when deciding whether to bring charges.  But the reality is that it is only in the rarest circumstances, if at all, that the existence of even a top-of-the-line compliance program leads to a declination.  Further, once the decision is made to proceed with an investigation, or in the context of settlement discussions, it is unclear that any credit is given for compliance at all.  Putting in place an explicit affirmative defense would be consistent with the recognition in the DOJ guidelines that corporate compliance is an important factor in determining culpability and would further that goal by encouraging compliance.

It is very hard to see merit to the argument that the objectives of the FCPA will be undermined by a policy that promotes better and more effective compliance. Don’t we want to incentivize exactly that behavior?  I simply don’t see how this results in a race to the bottom.

3.         Finally, perhaps the most significant benefit to enacting a compliance defense would be to provide much clearer guidance to companies on what actually constitutes an effective compliance program. Enacting an effective compliance affirmative defense will help develop a body of law on what constitutes an effective compliance program.  As we have learned from the individual FCPA prosecutions of the past couple of years, there is no better way to develop the law than through actual litigation.  Formalizing an effective compliance program affirmative defense would create an incentive for companies to fight FCPA charges.  And by doing so, we might actually get cases assessing the effectiveness of actual corporate compliance programs.  This would be an unqualifiedly good thing:  it would help clarify what is required of companies and would give compliance practitioners specific guidance for formulating good programs.

This is how law usually develops in our system.  In my view, it is the best way to address a nuanced, fact-specific world like anti-corruption compliance.  Rather than forcing companies to try to divine the intentions of the FCPA regulator mandarins, they can compare their facts and circumstances to litigated cases, determine where they fit, and make a better judgment of what they need to do to make their compliance program one likely to be deemed effective.

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David Simon, a partner at Foley & Lardner, defends corporations in government enforcement actions, conducts internal investigations, and provides compliance advice and counseling.  He specializes in the FCPA and other anti-corruption laws. He can be reached at DSimon@foley.com

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Episode 5 of the FCPA Compliance and Ethics Report is up and available to review. In this Episode I, discuss the evolution of transaction monitoring in FCPA compliance programs. You can check it out by clicking here.

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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.