Lawyers Are Targets in FCPA Investigations Too

“I should have refused to draft the contract that we used for paying bribes.” – Former Keppel Offshore & Marine Ltd., In-House Counsel Jeffery Chow.

Lawyers, particularly in-house lawyers, are supposed to be the first line of defense in preventing FCPA violations.  But lawyers are often under considerable pressure to get the “deal done”, and that pressure can not only lead lawyers to look the other way, but actively participate in criminal activities and cover-ups.  That pressure is particularly acute in this part of the world, which is seeing phenomenal economic growth but also suffers from a weak compliance culture.

And this can lead to disastrous results.  Jeffery Chow, the former in-house counsel at Singapore based Keppel Offshore & Marine Ltd., pled guilty to conspiracy to violate the FCPA last year.  He admitted to drafting contracts to over-pay Keppel’s agent in Brazil.  On 29 August 2017 Mr. Chow pled guilty to violating the FCPA. On December 22 2017, Keppel Offshore and its U.S. subsidiary agreed to pay a total penalty of more than $422 million to resolve corruption charges with authorities in the United States, Brazil, and Singapore.

Mr. Chow’s sentencing is set for 2 May 2018.  And he is not the only lawyer to be prosecuted for violating the FCPA.  Former General Counsel Gregory Weisman of PetgroGroup, Ltd., also pled guilty to FCPA conspiracy charges.  In both cases, the lawyers described considerable pressure from senior management to do whatever it takes to get the deal done.

This should sound familiar to any lawyer, but particularly lawyers in this region where, to put it bluntly, compliance is often considered as nothing more than an annoying hindrance.  So what are the key takeaways for lawyers, both in-house and external, about FCPA’s prosecutions of lawyers?

First, lawyers cannot expect to escape discipline and even prosecution by citing the pressure the commercial management employed to get the deal done.  Jeffery Chow now says he should have quit instead of relenting to pressure to draft bogus contracts, and he is right.  It does not matter what commercial managers demand.  Participation in a criminal act, particularly a corruption related criminal act, is a crime even when senior management presses for it.

Second, lawyers can expect to be held to a higher standard.  Their job includes compliance, and that means, among other things, identifying and documenting red flags of suspected compliance violations.  Relenting to management pressure to look the other way and take a “commercial approach” will cut much harder against lawyers.

Third, if lawyers become part of the compliance problem they cannot expect much sympathy from law enforcement.  When it comes to compliance, they must be truly independent.  Assume every act taken and every document will ultimately be subject to scrutiny. There are limits to the attorney-privilege, and don’t expect it to act as a shield to prevent scrutiny of a compliance investigation. Lawyers need to take compliance investigations seriously.  It is not simply a matter of going through the motions of conducting an investigation.  If things go wrong, expect a 20/20 hindsight review of every step that was taken.

Finally, in-house lawyers need adequately resourced compliance teams and systems.  In culturally heterogeneous Southeast Asia, this is particularly challenging. In-house lawyers here are often responsible for covering a region consisting to separate countries with diverse legal requirements and cultural norms.  Those cultural norms can complicate a compliance investigation in ways that counsel and compliance teams back in the U.S. often simply do not understand.  Competent compliance staff is hard to find. Nonetheless, red flags must be seriously investigated.  A failure to do so will often ultimately cost a company more and could destroy careers – or worse.