This site has long followed the Foreign Corrupt Practices Act enforcement action against former Cognizant Technology Solutions executives Gordon Coburn and Steven Schwartz.

The DOJ criminally charged the individuals in 2019 and the trial is scheduled to begin next week in New Jersey.

This post sets forth the many reasons why the enforcement action is unusual and questions why the enforcement action is going forward despite President Trump’s Executive Order on February 10th titled “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security.”

As stated in the DOJ’s February 15, 2019 press release announcing the criminal charges:

“According to the indictment, in or about April 2014, Coburn and Schwartz allegedly authorized an unlawful payment of approximately $2 million to one or more foreign government officials in India to secure and obtain a necessary permit to open a new office campus.  To conceal Cognizant’s involvement in the scheme, Coburn, Schwartz and others allegedly agreed that a third-party construction company would obtain the permit by making the illegal bribe payment and that Cognizant would reimburse the construction company through phony construction invoices at the end of the project.  The indictment further alleges that in or about late June 2014, after the co-conspirators had agreed that the construction company would make the bribe payment on behalf of Cognizant, the construction company secured the necessary government order for Cognizant to obtain the permit, allowing Cognizant to complete the development of the office campus and avoid millions of dollars in costs.  Months later, the co-conspirators are alleged to have knowingly caused Cognizant to funnel over $2 million to the construction company disguised as payment for cost overruns on the office campus when they knew that the actual purpose of the payment was to reimburse the construction company for the bribe payment.  According to the indictment, as Coburn, Schwartz and others had previously agreed, they hid the bribe reimbursement payment within a series of line items in a construction change order request to be paid to the construction company, thereby concealing the true nature and purpose of the reimbursement, falsifying Cognizant’s books and records, and circumventing and failing to implement its internal controls.”

The DOJ’s action against Coburn and Schwartz was announced on the same day that Cognizant resolved an SEC enforcement action based on the same alleged core conduct. Without admitting or denying the SEC’s findings, Cognizant agreed to pay approximately $25 million in disgorgement and pre-judgement interest. (See here). The DOJ also released a so-called declination letter which stated in pertinent part:

“Consistent with the FCPA Corporate Enforcement Policy, the [DOJ] has declined prosecution of … Cognizant Technology Solutions Corporation for violations of the FCPA.

The Department’s investigation found that Cognizant, through its employees, authorized its agents to pay an approximately $2 million bribe to one or more government officials in India in exchange for securing and obtaining a statutorily required planning permit in connection with the development of an office park in Tamil Nadu, India known as the CKC/KITS facility in Chennai, as well as other improper payments in connection with other projects in India. Specifically, from in or about 2014 through in or about 2015, certain high-level employees of Cognizant, along with agents of the Company, took part in a scheme through which they authorized a third-party construction company to pay an approximately $2 million bribe to one or more government officials in India in exchange for assistance in securing and obtaining a planning permit relating to construction of the CKC/KITS facility. 

[…]

Despite the fact that certain members of senior management participated in and directed the criminal conduct at issue, the Department has decided to decline prosecution of this matter …”

As highlighted on these pages in February 2019 (see here and here), it was an open question whether Cognizant, Coburn or Schwartz even violated the FCPA based on the allegations in the resolution documents. This prior post noted: “If the defendants choose to put the DOJ/SEC to its burden of proof, disputed issues will likely focus on corrupt intent, obtain or retain business and the facilitating payments exception.”

Let’s start with the basics.

There are generally two types of enforcement actions in which the DOJ has alleged violations of the FCPA’s anti-bribery provisions.

  • (1) Those in which the DOJ alleges that improper conduct was to obtain or retain a contract (a Procurement Case for lack of a better term); and 
  • (2) Those in which the DOJ alleges that improper conduct occurred outside the context of procurement (a Non-Procurement Case for lack of a better term) such as in connection with a foreign license or permit.

The Coburn / Schwartz prosecution is a Non-Procurement Case in that the DOJ alleged that the individuals authorized a third party to make payment to an Indian official to obtain a permit in connection with an office campus project in India.  

In enacting the FCPA, Congress learned of a wide range of foreign corporate payments to a variety of recipients for a variety of reasons. Congress could have – and still could today – legislate as to this wide range of foreign corporate payments.

However, Congress accepted in passing the FCPA to capture only a narrow category of such payments. As stated by a key Senator during passage of the FCPA:

“[W]e define [a bribe] as a payment to an official of a foreign government for the purpose of inducing him to use his influence to secure business for the issuer or influence legislation or regulations of his government.”

Senate and House Reports evidence the limited nature of the FCPA and that it would not capture all foreign corporate payments Congress learned of during its multi-year investigation.

A Senate Report stated:

“In drafting the bill . . . the Committee deliberately cast the language narrowly, in order to differentiate between such payments [to a foreign official corruptly intended to induce the recipient to use his influence to secure business, influence legislation or regulations] and low-level facilitating payments sometimes called ‘grease payments.’ Thus, [the bill] would not reach a small gratuity paid to expedite shipment through Customs or the placement of a trans-Atlantic telephone call, to secure required permits, or to ensure that a corporation’s warehouses were not put to the torch. In other words, payments made to expedite the proper performance of duties may be reprehensible, but it does not appear feasible for the United States to attempt unilaterally to eradicate all such payments. However, where the payment is made to influence the placement of government contracts or to influence the formulation of legislation or regulations, such payment is prohibited. …. The Committee fully recognizes that the proposed law will not reach all corrupt payments overseas.”

A House Report likewise stated:

“The scope . . . is limited by the requirement that the offer, promise, authorization, payment, or gift must have as a purpose inducing the recipient to use influence with the foreign government or instrumentality, or to refrain from performing any official responsibilities, so as to direct business to any person, maintain an established business opportunity with any person, divert any business opportunity from any person or influence the enactment or promulgation of legislation or regulations of that government or instrumentality. . . . The bill’s coverage does not extend to so-called grease or facilitating payments. . . . The language of the bill is deliberately cast in terms which differentiate between such payments and facilitating payments, sometimes called ‘grease payments’. In using the word ‘corruptly’, the committee intends to distinguish between payments which cause an official to exercise other than his free will in acting or deciding or influencing an act or decision and those payments which merely move a particular matter toward an eventual act or decision or which do not involve any discretionary action. […] Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity by performed in any event.  While payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are not necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments. As a result, the committee has not attempted to reach such payments. However, where the payment is made to influence the passage of law, regulations, the placement of government contracts, the formulation of policy or other discretionary governmental functions, such payments would be prohibited. The committee fully recognizes that the proposed law will not reach all corrupt payments overseas.”

Consistent with this clearly articulated Congressional intent, the FCPA’s anti-bribery provisions have various elements including “obtain or retain business” and corrupt intent as well as an express facilitating payment exception which specifically mentions licenses and permits. 

Generally speaking, the “obtain or retain business” element captures: 

an offer, payment, promise to pay, or authorization of the payment of any money; directly or indirectly; to a foreign official; for purposes of:

“influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or

inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,

in order to assist … in obtaining or retaining business for or with, or directing business to, any person.”

However, as previously noted, the Coburn / Schwartz enforcement action is a Non-Procurement Case in which the DOJ is seemingly ignoring the “obtain or retain business” element and advancing a theory of liability explicitly rejected by Congress in enacting the FCPA.

As stated in the Conference Report prior to the passage of the FCPA:

“The scope of the prohibition [in the Senate bill] was limited by the requirement that the offer, promise, authorization, payment, or gift must have as a purpose inducing the recipient to use his influence with the foreign government or instrumentality, influencing the enactment or promulgation of legislation or regulations of that government or instrumentality or refraining from performing any official responsibilities, so as to direct business to any person, maintain an established business opportunity with any person or divert a business opportunity from any person.

The House amendment was similar to the Senate bill; however, the scope of the House amendment was not limited by the “business purpose” test […] The conferees clarified the scope of the prohibition by requiring that the purpose of the payment must be to influence any act or decision of a foreign official (including a decision not to act) or to induce such official to use his influence to affect a government act or decision so as to assist an issuer in obtaining, retaining or directing business to any person.””

That Cognizant (and several other companies prior) agreed to resolve Non-Procurement Cases through resolution vehicles not subjected to judicial scrutiny does establish much of anything other than business organizations subject to FCPA scrutiny are risk averse.

Indeed, Cognizant’s counsel (Latham & Watkins) stated in an August 24, 2018 letter to the DOJ (a document included as an Exhibit to a filing in the Coburn / Schwartz matter) the following:

  • “The payments did not result in increased revenue …”
  • “Cognizant’s improper payments did not cause a revenue stream. Cognizant’s revenue, generated from moving human capital, would have accrued regardless of these payments;”
  • “Here there is no evidence that the payments at issue resulted in any additional business for Cognizant. To the contrary, the record is clear that Cognizant could have provided all the services to its clients absent the payments at issue”
  • “The alleged improper payments in the Cognizant matter were not made to secure a contract, build a customer relationship, or gain a competitive advantage with respect to potential contracts, customers, or sales. There is no evidence that the payments at issue resulted in any additional revenue to the Company.”
  • “Cognizant was already actively operating across the Indian market at the time the payments were made, and the payments at issue were not made to enter the country or to operate in a specialized market.”
  • “The payments did not result in the Company getting any business or receiving additional revenue. We are aware of no record evidence indicating that any new contracts, sales, work, business relationships, or customer-advantages came to Cognizant as a result of these payments.”

The Government’s expansive theory of liability that the FCPA’s anti-bribery provisions are violated by payments to foreign officials outside the context of foreign government procurement (such as to secure a license or permit) has been subjected to judicial scrutiny four times in the FCPA’s nearly 50 year history.

Because of this limited judicial scrutiny, each case is discussed below.

In 1989, the DOJ criminally charged various individuals associated with AEA Aircraft Recovery (a company in the business of recovery of seized aircraft) including Alfredo Duran. According to the indictment, the defendants conspired to make payments to officials of the Dominican Republic in order to obtain the release of two aircraft seized by the government in violation of the FCPA’s anti-bribery provisions.  After the DOJ presented its evidence at trial, Duran filed a motion for judgment of acquittal and argued that “no reasonable jury could find that the purpose of any of the alleged intended payments was to assist […] in obtaining or retaining business” and that the government “has failed to adduce sufficient evidence to prove any intended payments were not facilitating or expediting payments for the purpose of expediting or securing routine governmental action (i.e. grease payments).”  The court granted a judgment of acquittal.

In 2002, the DOJ criminally charged David Kay and Douglas Murphy (the president and vice president of American Rice Inc. (ARI), with FCPA anti-bribery violations based on allegations that the defendants made improper payments to Haitian foreign officials for the purpose of reducing customs duties and sales taxes owed by ARI to the Haitian government. The indictment, while specific as to other items, merely tracked the FCPA’s ‘‘obtain or retain business’’ language and did not specifically allege how the alleged payments assisted ARI in obtaining or retaining business in Haiti or what business was obtained or retained.  The court granted the defendants’ motion to dismiss the indictment and held, as a matter of law, that the alleged payments were not payments made to ‘‘obtain or retain business’’ and thus did not fall within the scope of the FCPA’s anti-bribery provisions.

The third judicial decision to consider whether payments to foreign officials outside the context of foreign government procurement violate the FCPA’s anti-bribery provisions was SEC v. Mattson in which the Government alleged that Baker Hughes Inc. employees Eric Mattson and James Harris violated the FCPA in making goodwill payments to an Indonesian tax official for a reduction in a tax assessment. However, in granting the defendants’ motion to dismiss the court held that the payments to the Indonesian tax official did not violate the FCPA because they did not help Mattson’s and Harris’s employer ‘‘obtain or retain business.’’

The fourth judicial decision to consider whether payments to foreign officials outside the context of foreign government procurement violate the FCPA’s anti-bribery provisions was the DOJ’s appeal of the trial court dismissal of the criminal indictment in Kay. One issue on appeal to the Fifth Circuit was whether payments to foreign officials to obtain favorable tax and customs treatment can come within the scope of the FCPA’s anti-bribery provisions. The appellate court found the FCPA’s “obtain or retain business” ambiguous and stated:

“Perhaps our most significant statutory construction problem results from the failure of the language of the FCPA to give a clear indication of the exact scope of the business nexus element; that is, the proximity of the required nexus between, on the one hand, the anticipated results of the foreign official’s bargained-for action or inaction, and, on the other hand, the assistance provided by or expected from those results in helping the briber to obtain or retain business. Stated differently, how attenuated can the linkage be between the effects of that which is sought from the foreign official in consideration of a bribe (here, tax minimization) and the briber’s goal of finding assistance or obtaining or retaining foreign business with or for some person, and still satisfy the business nexus element of the FCPA?”

The appellate court concluded “that bribes paid to foreign officials in consideration for unlawful evasion of customs duties and sales taxes could fall within the purview of the FCPA’s proscription.” However, the court cautioned:

“We hasten to add, however, that this conduct does not automatically constitute a violation of the FCPA: It still must be shown that the bribery was intended to produce an effect—here, through tax savings—that would ‘assist in obtaining or retaining business.’”

Indeed, the appellate court emphatically stated that not all such payments to a foreign official outside the context of foreign government procurement violate the FCPA; it merely held that such payments ‘‘could’’ violate the FCPA.  According to the court, the key question of whether the defendants’ alleged payments constituted an FCPA violation depended on whether the payments were intended to lower ARI’s costs of doing business in Haiti enough to assist ARI in obtaining or retaining business in Haiti and the court stated:

“There are bound to be circumstances in which such a cost reduction does nothing other than increase the profitability of an already-profitable venture or ensure profitability of some start-up venture. Indeed, if the government is correct that anytime operating costs are reduced the beneficiary of such advantage is assisted in getting or keeping business, the FCPA’s language that expresses the necessary element of assisting is obtaining or retaining business would be unnecessary, and thus surplusage—a conclusion that we are forbidden to reach.”

For a long time, the Government has argued that FCPA’s 1998 amendments expanded the FCPA’s anti-bribery provisions to include payments made to independently “secure any improper advantage” regardless of whether a payment also satisfies the “obtain or retain business” element.

However, this position is clearly contradicted by placement of the term “secure any improper advantage” in the FCPA’s statutory text.

Moreover, this precise issue was litigated in the Kay case and the Government’s position was rejected by both the trial court and appellate court. The trial court stated:

“The OECD Convention had asked Congress to criminalize payments made to foreign officials ‘‘ ‘in order to obtain or retain business or other improper advantage in the conduct of international business.’’ . . . Congress again declined to amend the ‘‘obtain or retain business’’ language in the FCPA . . . . Congress did not insert the ‘‘improper advantage’’ language into the ‘‘obtain or retain business’’ provision of the FCPA.”

The appellate likewise court stated:

“When Congress amended the language of the FCPA, however, rather than inserting ‘any improper advantage’ immediately following ‘obtaining or retaining business’ within the business nexus requirement (as does the Convention), it chose to add the ‘improper advantage’ provision to the original list of abuses of discretion in consideration for bribes that the statute proscribes.’’

Even if the FCPA’s required “obtain or retain business” element is satisfied in a Non-Procurement Case involving a foreign license or permit, the FCPA still has an express facilitating payment exception.

In enacting the FCPA, Congress stated that the anti-bribery provisions would not reach “payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature …”.

Consistent with this legislative intent, the FCPA specifically states that the anti-bribery provisions “shall not apply to any facilitating or expediting payment to a foreign official … the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official” and defined “routine governmental action” to include “obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country.”

The FCPA’s express exception for facilitating or expediting payments in connection with obtaining permits in a foreign country is consistent with Congressional intent in excluding such payments from the reach of the FCPA’s anti-bribery provisions.

As stated by a key Senator during passage of the FCPA, the anti-bribery provisions are not intended to capture payments “to speed needed documents on their way through the bureaucratic labyrinth.”

Other Congressional leaders likewise stated during hearings that the anti-bribery provisions are “not concerned with so-called grease or facilitating payments … to speed documents through a bureaucracy.”

A Senate Report specifically stated that the anti-bribery provisions “would not reach” payments “to secure required permits.” A House Report likewise specifically stated:

“The bill’s coverage does not extend to so-called grease or facilitating payments. . . . The language of the bill is deliberately cast in terms which differentiate between such payments and facilitating payments, sometimes called ‘grease payments’. In using the word ‘corruptly’, the committee intends to distinguish between payments which cause an official to exercise other than his free will in acting or deciding or influencing an act or decision and those payments which merely move a particular matter toward an eventual act or decision …”

“[The anti-bribery provisions would not reach] payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity by performed in any event.  While payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are not necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments. As a result, the committee has not attempted to reach such payments.”

The only judicial decision to substantively construe the facilitating payments exception is SEC v. Jackson in which the Government alleged that Mark Jackson and James Ruehlen (individuals associated with Nobel Corporation) violated the FCPA by approving payments to Nigerian officials to influence or induce them to grant temporary import permits and extensions for oil and gas equipment.

In a motion to dismiss, the defendants argued that the SEC had the burden of pleading the inapplicability of the facilitating payments exception, whereas the SEC argued that the defendants had the burden of pleading the inapplicability of the exception. 

In an issue of first impression, the Court held that the SEC “must bear the burden of negating the facilitating payments exception” and that the “exception is best understood as a threshold requirement to pleading that a defendant acted ‘corruptly.’”

Later in the pre-trial proceedings, even the SEC acknowledged that the facilitating payments exception is “a difficult area to understand, largely because of the wording of the exception and the statute overall.” In denying competing motions for summary judgment, the judge stated: “I have such trouble understanding the facilitating payment exception. […] I mean, it almost swallows the rest of the statute.  And I know it’s in the legislative history that these, I think reference is made to grease payments, somehow to grease the skids.  How do I separate those payments, which do seem to be contemplated, from the payments that [the SEC] alleges were made in this case, which you think are squarely within the FCPA’s prohibition?  […] And I don’t understand it.  Whether we make the distinction based on size of payments, regularity of payments, purpose of payments, nature of the — of the favorable conduct elicited.  I just really struggle with it.”

On the eve of trial and facing the prospect of having to negate the facilitating payments exception and otherwise prove its case, the SEC agreed to settle the matter on very favorable terms for the defendants.

In addition to the above legal deficiencies in the DOJ’s prosecution of Coburn and Schwartz are various factual issues evident from documents in the public domain which further make the prosecution unusual. 

Again, the DOJ’s theory of prosecution is that Coburn / Schwartz authorized a third party to make a bribe payment to an Indian official to obtain a permit in connection with an office campus project in India.  

However, in the immediate aftermath of the February 2019 enforcement action, the third party (Larsen & Toubro (L&T) – one of the largest construction companies in India) released a statement to the National Stock Exchange of India stating that it was “not aware of any evidence that supported the Company’s involvement in making the alleged improper payments.”

Several months later, L&T released another statement to the National Stock Exchange of India after its Audit Committee appointed external experts to review the matter stating: “The Audit Committee has concluded that there was no sufficient evidence to support the allegations of the Company’s involvement in making alleged improper payments at the direction of Cognizant Technology Solutions.”

In addition, during pre-trial proceedings and the government has seemingly acknowledged that it:

  • does not know if the alleged bribe was even paid;
  • does not know who paid the alleged bribe;
  • does not know which Indian official received the alleged bribe; and
  • does not know which Indian government agency the alleged bribe recipient worked for.

Context is also important in understanding the the DOJ’s prosecution of Coburn and Schwartz brought in 2019.

In April 2016, the DOJ announced an FCPA Pilot Program. Among the goals of the FCPA Pilot Program, as stated by the DOJ: 

“[T]his pilot program is intended to encourage companies to disclose FCPA misconduct to permit the prosecution of individuals whose criminal wrongdoing might otherwise never be uncovered by or disclosed to law enforcement.”

Shortly after the Pilot Program was announced, in September 2016 Cognizant disclosed:

“The Company is conducting an internal investigation into whether certain payments relating to facilities in India were made improperly and in possible violation of the U.S. Foreign Corrupt Practices Act and other applicable laws. The investigation is being conducted under the oversight of the Audit Committee, with the assistance of outside counsel, and is currently focused on a small number of Company-owned facilities. The Company has voluntarily notified the United States Department of Justice (the “DOJ”) and United States Securities and Exchange Commission (the “SEC”) and is cooperating fully with both agencies.”

In early 2017, these pages began asking the question – to borrow a phrase from the DOJ’s then Assistant Attorney General – is Cognizant “boiling the ocean” giving the many millions of dollars the company disclosed it was spending in connection with its internal investigation?  (See here for the prior post). I wrote:

“During my nearly decade-long FCPA private practice career, I conducted several FCPA internal investigations around the world. Such investigations are not a cost-free exercise. However, Cognizant’s disclosure that it “incurred $27 million in costs related to the FCPA investigation and related lawsuits” strikes me as unusual for an internal investigation that appears to have begun in the second half of 2016 and appears to be based on a single country (India). In short, if I were a Cognizant board member (not to mention a Cognizant shareholder), I would have some serious concerns.”

It all seemed like a highly unusual situation.

Indeed, through Q3 2018, Cognizant disclosed that it incurred $74 million “in costs related to the FCPA investigation and related lawsuits.”

In late 2017, the DOJ’s Deputy Attorney General announced:

“We analyzed the Pilot Program and concluded that it proved to be a step forward in fighting corporate crime.  We also determined that there were opportunities for improvement. So today, I am announcing a revised FCPA Corporate Enforcement Policy.”

[…]

We expect the new policy to reassure corporations that want to do the right thing.  It will increase the volume of voluntary disclosures, and enhance our ability to identify and punish culpable individuals.”

Fast forward to 2019 and the DOJ was seemingly looking for an example to market its FCPA enforcement policies (much like the DOJ used the so-called Morgan Stanley declination in 2012 to market its corporate enforcement policies – see here for the prior post).

Indeed, in the 2019 DOJ press release announcing the Coburn / Schwartz indictment, the Assistant Attorney General stated:

“The allegations in the indictment … describe a sophisticated international bribery scheme authorized and concealed by C-suite executives of a publicly-traded multinational company. The indictment of Gordon Coburn and Steven Schwartz demonstrates the Department’s commitment to relentlessly pursuing corporate fraud and corruption wherever it is found.”

Just three weeks later and continuing for many months thereafter, the Cognizant DOJ “declination” and Coburn / Schwartz criminal charges became a frequent talking point in DOJ speeches.

The Assistant Attorney General stated:

“[Just last month we decided] not [to] prosecute Cognizant Technology Solutions Corporation, a publicly traded Fortune 200 company, for FCPA violations.  Certain high-level employees and agents of Cognizant allegedly participated in a scheme through which they authorized a third-party construction company to pay approximately $2 million in bribes to Indian officials for help in securing a planning permit relating to an office park project.  Notwithstanding the fact that the misconduct reached the highest levels of the company, we declined prosecution.  And we have made it clear why:  The company voluntarily self-disclosed the conduct within two weeks of when the company’s board learned of it.  As a result, the Department was able to identify the culpable individuals – and indeed, we have announced charges against the former president and the former chief legal officer of the company for their alleged involvement in the scheme.”

Shortly thereafter, the Attorney General stated:

“The Justice Department, of course, recently announced revisions to its FCPA Corporate Enforcement Policy. The new iteration of the Policy incentivizes good corporate behavior, expands transparency for companies seeking corporate resolutions, and increases the effectiveness of related individual prosecutions.

The Policy achieves these goals by encouraging companies to voluntarily bring misconduct to our attention at an earlier stage and to fully cooperate with investigations. This way, the Justice Department can take more investigative steps and gather more evidence without having to go through as many formal processes, including Mutual Legal Assistance Treaty requests.

Critically, this Policy also makes it clear that, if a company meets the benchmarks of good corporate behavior, the DOJ can use its discretion to act in deference to an SEC parallel resolution. For example, Cognizant, a technology-solutions company, authorized a third-party construction firm to pay approximately 2 million dollars in bribes to government officials in India. Yet in light of the company’s voluntary self-disclosure, internal reforms, full cooperation, active remediation, and a simultaneous SEC resolution – the DOJ declined prosecution.”

Cognizant’s counsel also marketed its representation of the company.

Set forth below is an image from the website of Latham & Watkins in October 2019.

As stated in the Latham marketing piece, the firm “persuaded” the DOJ that the facts and circumstances relevant to the Cognizant declination “would send a powerful signal to the business community that DOJ was serious about rewarding cooperation.”

In the meantime, Coburn and Schwartz still faced criminal charges – their lives turned upside down, their personal liberty and reputation on the line.

In addition to the above, there are other dynamics of the Coburn / Schwartz enforcement action which make it highly unusual.

In short, I am not aware of any DOJ enforcement action in the past twenty years against an employee of a company also resolving an action in which an individual was criminally charged in the following circumstances: (1) merely authorizing or approving a payment; (2) in connection with a foreign license or permit matter which implicates the FCPA’s facilitation payment exception.

The Coburn / Schwartz matter appears to be “unicorn” enforcement action.

Fast forward to February 10th and President Trump’s Executive Order titled “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security.”

In pertinent part, the order states:

“Sec. 2.  Policy of Enforcement Discretion.  (a) For a period of 180 days following the date of this order, the Attorney General shall review guidelines and policies governing investigations and enforcement actions under the FCPA.  During the review period, the Attorney General shall:

(i) cease initiation of any new FCPA investigations or enforcement actions, unless the Attorney General  determines that an individual exception should be made;

(ii) review in detail all existing FCPA investigations or enforcement actions and take appropriate action      with respect to such matters to restore proper bounds on FCPA enforcement and preserve Presidential foreign policy prerogatives; and

(iii) issue updated guidelines or policies, as appropriate, to adequately promote the President’s Article         authority to conduct foreign affairs and prioritize American interests, American economic competitiveness with respect to other nations, and the efficient use of Federal law enforcement resources.”

Has the process set forth in the Executive Order been followed?

Has Attorney General Pam Bondi “review[ed] in detail [the Coburn / Schwartz action] to restore proper bounds on FCPA enforcement and preserve Presidential foreign policy prerogatives”?

On the morning of February 11th, Judge Michael Farbiarz issued a Text Order stating: “In light of the Executive Order issued yesterday by the President, the United States shall state its position as to the upcoming trial. It shall do so in a letter, to be filed on or before February 18 at 9:00AM.”

The DOJ responded on February 18th:

“The Government respectfully submits this letter pursuant to the Court’s February 11, 2025 order directing the “United States [to] state its position as to the upcoming trial” in light of the February 10, 2025 Executive Order (“Executive Order”).

This case has been indicted by a duly sworn grand jury, and the Government is preparing to proceed to trial on March 3, 2025. In addition, the Government is adhering to the Executive Order and is conducting a review of all FCPA investigations and enforcement actions; this case is currently undergoing that review. The Government is aware of the upcoming trial date and has prioritized review of this matter.”

On February 18th, Judge Farbiarz issued an additional Text Order stating: As to the letter by the United States of February 18, the United States shall file a further update letter on or before February 21 at 9:00am.”

The DOJ responded on February 21st:

The Government respectfully submits this letter pursuant to the Court’s February 18, 2025 order directing the Government to provide a further update concerning the Government’s review of this case pursuant to the President’s February 10, 2025 Executive Order (“Executive Order”).

The Government is urgently working to complete its review of this matter required by the Executive Order and expects a final determination in short order. The Government remains mindful of the March 3, 2025 trial date and will provide the Court and the Defendants with another update no later than 4:00 p.m. today.

Later that day, the DOJ responded:

“The Government respectfully submits this letter to provide a further update concerning the Government’s review of this case pursuant to the President’s February 10, 2025 Executive Order (“Executive Order”).

Following its review of this case pursuant to the Executive Order, the Government can report that the Government intends to proceed to trial on March 3, 2025. The Government therefore respectfully requests that the Court enter the attached proposed order confirming that trial will proceed on March 3, 2025.”

Interesting that none of the DOJ’s responses to the court mention the Attorney General as specifically contemplated by the Executive Order.

In the meantime, Coburn and Schwartz are still facing criminal charges – their lives turned upside down, their personal liberty and reputation on the line.