NEW YORK, Sept 16 (Reuters Breakingviews) - From Google last month to tire-maker Bridgestone this week, companies have
paid big money to avoid nasty fights with the government in
U.S. courts. Bridgestone's bribery settlement on Thursday came
despite prosecutors stretching the technicalities, and Google's
$500 million payment last month over drug advertisements cost
more than the money involved. Trouble is, these deals encourage
prosecutors to pursue what they can punish, not what the law
prohibits.
Former New York Attorney General Eliot Spitzer helped set
the template a decade ago. Among other things, he extracted big
settlements for conflicts of interest in investment banks'
research. His legal theories were rarely tested in court,
because firms cut deals to minimize costs. As a result, the
alleged but unproven offenses became benchmarks for other
settlements.
Prosecutors used similarly aggressive tactics in the Enron
and Arthur Andersen cases. They persuaded several executives to
plead guilty to financial shenanigans that, years later, the
U.S. Supreme Court ruled weren't even illegal. More recently,
Goldman Sachs could have plausibly challenged government
charges that led to its $550 million settlement last year over
dealings in collateralized debt obligations.
The Google settlement rested on the idea that the firm's
Internet search pages violated drug laws by helping Canadian
pharmacies sell "misbranded" prescriptions in the United
States. Google didn't deliver the drugs, but prosecutors say it
was an accomplice. Legally, that seems a stretch, but because
of the settlement, that won't be tested. And prosecutors won
another expansive, if unofficial, precedent.
Many bribery cases under the Foreign Corrupt Practices Act
follow a similar path. Bridgestone agreed to pay $28 million
for bid-rigging and bribing Latin American officials. But it's
hard to see how the Japanese company's sending of emails into
the United States tripped the law's requirement that illegal
conduct occur there. Again, this settlement allows prosecutors
to go after other companies armed with a newly broad
interpretation of the law.
Of course, many prosecutions that settle are justified. And
some defendants fight back. In at least three cases this year,
companies asked courts to narrow how the government defines a
foreign official under the FCPA. But there's a risk that
companies are left with yet another unpredictable cost of doing
business.
CONTEXT NEWS
-- The U.S. Justice Department said on Sept. 15 that tire
and rubber company Bridgestone had agreed to pay a $28 million
fine for violating the Foreign Corrupt Practices act by bribing
Latin American officials and fixing prices in the marine hose
business. The FCPA only covers conduct "in the territory of the
U.S.," and the DOJ said Bridgestone's bribery scheme qualified
because the company sent mails or faxes from Japan to the
United States.
-- On Aug. 24, the DOJ announced that Google had agreed to
pay $500 million for accepting drug advertisements from online
Canadian pharmacies aiming at the U.S. market. Prosecutors
claimed the ads made the company complicit in illegally
importing prescription drugs.
-- Google entered into a non-prosecution agreement, meaning
it will not face formal charges if it pays the money and
complies with the agreement's other terms. The payment equals
the amount Google earned from the ads plus the revenue the
Canadian pharmacies received from drug sales in the United
States.
-- Google said in February 2010 it would no longer allow
Canadian pharmacies to advertise to U.S. customers.
(Reporting by Reynolds Holding)
(Reynolds Holding, Reuters Breakingviews columnists. The
opinions expressed are their own.)
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