If I had to say in two words what I think my responsibility is as a member of the FCPA Commentariat—and yes, I think that when you have a large bullhorn, you have a duty to use it correctly—those two words are “informed commentary.” I might disagree with Mike Koehler more often than not, but I respect Mike—and his opinions, especially the ones I disagree with—because say what you will about his commentary, it’s informed commentary. And say what you will about me—and many have—I’m man enough to admit when I’m wrong.
Usually, I think, I get it right. I certainly try hard to. But no one is right 100% of the time. Me included.
Some time back, the SEC brought the case against Watts Water. The SEC took some criticism for bringing the case because Watts Water did everything we expect from corporations when an investigation begins. They really showed that they reformed themselves. I was one of the people who thought the SEC overreacted, and I said so (made worse by the forum in which I expressed myself, as described below).
And so I find myself owing an apology to the SEC, via Rob Khuzami, head of Enforcement and Kara Brockmeyer, head of the SEC’s FCPA Unit.
I was privileged to attend both recent FCPA Business Roundtables. The Roundtables are forums where 20-25 senior business compliance leaders come in and talk to the government about FCPA enforcement. The meetings are jointly hosted by Lanny Breuer (Assistant Attorney General of the DOJ’s Criminal Division), Rob Khuzami (Director of the SEC’s Division of Enforcement), and Cam Kerry (General Counsel at the Dept. of Commerce). A slew of other SEC, DOJ, and DOC people attend as well. The Roundtables are conducted under Chatham House Rules. In other words, everything is pretty much off the record.
I think it’s fantastic that the DOJ and the SEC seek the business community’s input, and I was proud to be asked to join.
During the last Roundtable, I was asked in the course of conversation what cases I thought the DOJ and SEC brought that they shouldn’t have. It was a strange question to put to me (as another participant at the meeting pointed out) because I’m usually the guy defending the DOJ and SEC’s enforcement record. But I took the question seriously, and tried to answer it.
Watts Water was one of the cases I mentioned.
Putting aside that I was criticizing someone’s case—maybe someone who was in the room—in front of (and to) the Director of the Division of Enforcement, I felt, based on what I had read, that Watts Water did everything we expect from companies, and should have gotten a pass (maybe the SEC’s second DPA?)
I was wrong.
I knew I had to publicly retract my semi-private criticism once I read the English translation of the underlying policy that got Watts Water into trouble:
The amount of the kickback paid to a client shall be based on the contract price, inclusive of any sales agency fees, return of price difference, consulting fees to design institutes and sales person’s commissions, etc. ….
There’s no way—no way—that any regulator could read that policy and not bring a case. The fact that Watts Water did what it was supposed to do once it, belatedly, found out about that policy certainly serves to mitigate penalties. And it did. But to take a pass with a company policy—HELLO! A POLICY!—that says that? No way.
My apologies, Mr. Khuzami.
The Commission was absolutely right to authorize the action, and the staff absolutely right to request it.
As I said, I try to deliver informed commentary. And I think I have just as good a grasp on the overall enforcement record as anyone. But in this instance, boy, did I drop the ball.
I’m still sticking to my guns about Alcatel, though. Sorry, Chuck.
NB: I would have written this earlier—I read the policy a week ago—but I wanted to make sure that by publishing what I did, I wasn’t violating the press rules for the Roundtable. I am only publishing after receiving reassurance that I’ve stayed within the rules.