Corporate criminal defense is increasingly becoming an international practice.
Ask Seth Farber.
Winston & Strawn
Farber is a partner at Winston & Strawn and heads the firm’s New York litigation department.
A former federal prosecutor, Farber spent years defending multinational corporations against a slew of Justice Department criminal antitrust prosecutions.
Now, much of his practice is still international.
We asked Farber if he’s finding that corporate criminal enforcement is down in recent years.
“There are certainly areas that have shifted,” Farber told Corporate Crime Reporter in an interview last month. “For example, a number of years ago, much of my work was international criminal antitrust cartel cases. I represented principally Japanese multinational companies that had, along with other companies, found themselves the subject of criminal price fixing or market allocation agreements.”
“The Justice Department over probably a ten or fifteen year period did a whole series of those investigations. But those have largely wound down. But I think that’s kind of a function, essentially, of the Antitrust Division being a victim of its own success.”
“They’ve gotten the message out at least in some areas of the world that hadn’t really appreciated the criminal significance and the consequences that would flow from market allocation agreements, or agreements on price that in other parts of the world historically were not criminal, but are in the United States. And the United States has a very aggressive, extraterritorial application of its criminal laws.”
“So that’s an example of an area that was very, very active a few years ago, but now much less so. It’s not so much which administration is in office. It’s more just sort of the ebb and flow of enforcement activity.”
There’s a great public database that tracks corporate criminal wrongdoing. It’s called – Violation Tracker. It’s run by Phillip Mattera. We interviewed him a number of times. And he said this – if we look at the largest fines and settlements, say those above $200 million announced since Biden took office, most of those involve foreign companies.
Are you finding that still to be true in other areas?
“Yes. When I was discussing my practice, I should have mentioned that over the past ten or fifteen years, my practice became more internationally focused.”
“During the period of the antitrust cases, I was representing Japanese companies. For the past five years, I have been representing companies in Latin America in connection with United States enforcement matters of various kinds – some Foreign Corrupt Practices Act (FCPA) cases, some others.”
“But the reason why I think the international area is so significant is that U.S. standards are often different from what they are in some of the home countries of some of these multinational corporations. Compliance expectations are different.”
“And the Justice Department is quite aggressive in making use of what extra territorial tools it has – and it has a number of them.”
“So you put those things together – the lack of similar governance structures, similar compliance cultures in some other regions compared to what you would have in the United States and it leads to areas that are sort of more fertile for the Department to look at.”
What we have noticed over the years is that the corporate criminal defense practice has fundamentally changed from one that’s more confrontational – go to trial, get a judgment, get a plea – to settling these major corporate crime cases with deferred and non prosecution agreements.
What’s your take on that shift?
“I’m not sure I agree with the perception that the defense approach in corporate representations has evolved toward being more accommodating or focused on cooperation. There was a period of time when that was true.”
“These kinds of deferred prosecution agreements for corporate cases were started by the U.S. Attorney’s office in New York. The U.S. Attorney here pushed aggressively to create incentives for cooperation and disincentives for challenging the government. There were a number of examples of entities that had not cooperated that resulted in not great outcomes. That created concern in corporate America about the potentially catastrophic consequences of not cooperating with the government.”
“In more recent years, there have been companies that have had guilty pleas, including some financial institutions who used to think the guilty pleas would be a death sentence. There were consequences for the guilty pleas, but they didn’t go out of business.”
“And there have been some companies in the criminal antitrust area that have taken the government to trial and won. That used to be viewed as almost impossible given the low threshold that the government needs to overcome to prove corporate criminal responsibility.”
“As a result, I think the pendulum has swung back again in the past five or ten years to the point where certainly lawyers representing companies are very attuned to the benefits of cooperation and the consequences of not cooperating. Most defense lawyers these days don’t simply reflexively cooperate.”
What about from the Justice Department’s perspective? Hasn’t the Justice Department changed over the years to be more willing to enter these non prosecution and deferred prosecution agreements?
“They have become more institutionalized. If you go back to when Mary Jo White was U.S. Attorney in the Southern District, she had the first one. She created this idea of entering into a resolution with Prudential. It has exploded now so that it is a tool across the Justice Department and even in state enforcement agencies.”
“It has certainly become a much more routine practice. But at the federal level, the Justice Department has tried to set out more strict criteria for qualifying for one.”
Are you finding that there is a better chance now to get a declination in major corporate crime cases, or is that still an outlier once the Justice Department opens an investigation?
“The declination is the best of all worlds. Then there is a non prosecution agreement. Almost all of the time that is going to require self-reporting before the government has learned of the wrongdoing. And then there has to be full cooperation going forward. Either that, or you have to show them that the conduct that they thought was criminal is not criminal.”
“But getting that kind of result where the government has already opened an investigation is very difficult to come by.”
You are a former federal prosecutor. For years now, you have been on the defense side. I’m wondering your thoughts on how the practice differs from being a prosecutor to being a defense attorney in these major corporate crime cases? It seems as if there are similarities. You are doing fact based investigations. You are making discretionary judgements on when to proceed and when not to proceed.
“As you mention, the skill set you need for both is similar. The legal issues are the same. It’s the same body of law. The underlying skills you need are the same in terms of analyzing factual material, working with witnesses, evaluating documents, synthesizing documentary evidence and witness testimony, evaluating the strength of cases, putting together legal arguments, evaluating how judges are going to react to certain arguments.”
“The primary difference between being on the defense side and being on the prosecution side is that on the defense side you deal on a more regular basis with a wider set of problems. When you are a federal prosecutor, you are dealing with the federal criminal justice system.”
“If you are representing a company that, for example, has discovered some accounting fraud, it could be a federal criminal problem, but it also could be an issue with the SEC. What civil litigation consequences can there be? What employment consequences do we have internally?”
“Increasingly, these cases are becoming international as well. In the criminal antitrust cases I did, those cases involved antitrust authorities not only in the U.S., but in Europe, Australia, Brazil, Japan. In some matters, I’m dealing with all of them. And in some cases, you are dealing with them simultaneously. It requires you to develop relationships with lawyers around the world and understand the different standards and customs in those parts of the world.”
Are companies more or less likely to self-report over the last couple of years?
“There might be a slight pause in eagerness to self-report. The Justice Department has continued to push companies to self-report and to do so more and more promptly by creating incentives for doing so and disincentives for not doing so.”
“But there is always a tension between wanting to self-report quickly and wanting to make sure you have a situation where you understand that that’s the right course of action to take and that you have your arms around the facts. The quicker you do something, the more difficult it is to ensure you do have your arms around the facts. And sometimes if you are moving too quickly it may be harder to make a reasoned assessment that that’s the best option.”
“Companies are slightly less intimidated with the prospect of a confrontational approach with the Justice Department now than they were five or ten years ago. There are now some examples of companies that have taken cases to trial and prevail – particularly in the antitrust area. There is a recognition that it might not be the right response in every situation.”
“Also, the burdens of cooperation seem to only increase over time. And you can’t partially cooperate. If you are going in, you have to be all in. You are taking on a very large burden of providing information from internal investigations, turning over documents. Companies want to be comfortable that that is the right decision for them under the circumstances.”
[For the complete q/a format Interview with Seth Farber, see 37 Corporate Crime Reporter 38(13), September 25, 2023, print edition only.]
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