Very few pieces of legislation have gained as much traction in recent years as the US Foreign Corrupt Practices Act (FCPA).
The startling statistics are as follows: In 2007 the total amount of FCPA-related fines was $155m £98.1m). In the first quarter of 2010 it was $1.45bn.
Although the FCPA is just a part of most firms’ litigation offerings, the figures suggest it must form an increasingly large portion. What is certain is that, with an ever-tougher line being taken by the world’s leading regulators and growing cooperation between bodies such as the Securities and Exchange Commission (SEC) and the UK’s Financial Services Authority, the number of matters and size of fines look set only to increase.
No wonder there is a scramble in the US and further afield to hire the top litigation talent. And with the increasingly tough stance being taken by regulators – as reflected in the FCPA fines boom – this scramble for lawyers with an inside track is unlikely to subside.
Firms as diverse in their strategic approach to the market as Davis Polk & Wardwell, where the FCPA is currently the core of the white-collar practice, and Freshfields Bruckhaus Deringer at least have one thing in common – they are staffing up on disputes specialists.
The most recent high-profile move is that of Scott Peeler, the former Arent Fox partner and FCPA specialist, who starts work in Chadbourne & Parke’s New York office today (4 October).
But the man widely seen as having been the catalyst for the explosion of FCPA-related work, as well as for fostering relations between regulators around the world, is Mark Mendelsohn, who became a partner at New York firm Paul Weiss on 1 June.
While at the US Department of Justice (DoJ) as the deputy chief of the criminal division’s fraud section, Mendelsohn was the catalyst for a concerted push to revitalise the FCPA legislation. It was this decision that resulted in the phenomenal growth of matters and work for defence lawyers.
Last week The Lawyer went to see the man who hired Mendelsohn, Paul Weiss firmwide chairman Brad Karp, in New York to find out why the firm took him on and what difference it is making having Mendelsohn on board.
“Our rationale for bringing Mark in was that we believed there would continue to be substantial FCPA enforcement activity worldwide,” says Karp.
Among the reasons the Paul Weiss chair points to for thinking this way are the general regulatory climate and the fact that the SEC established its own FCPA group less than a year ago under its new director of enforcement Robert Khuzami.
There is also the fact that the SEC has indicated it is going to staff this new group to the hilt and be particularly active in looking for FCPA violations.
“So every indicator suggests that FCPA enforcement is going to continue to be a big deal and a very active area,” adds Karp. “Then the natural thought has to be, ’who’s the world’s leading FCPA practitioner?’.”
As Karp outlines, the choices at that point included lawyers who were already at other firms along with in-house specialists.
“But we thought, ’why not get the person who basically created the wave of FCPA enforcement over the past six years?’,” he adds. “And that was Mark.”
In Karp’s opinion, along with many others’, it was Mendelsohn who reinvigorated the FCPA legislation, which has existed for decades.
“There are lots of statutes that are dormant and people don’t focus on them,” says Karp. “What Mark did was focus on the existing statute, be more strategic and innovative in looking for situations where it might apply to commercial bribery, and then enforce it.
“And he built a terrific team of thoughtful investigators who went out and did what I think Congress intended, which was to enforce it.”
Not everyone is convinced that bringing in such a high-profile lawyer will be beneficial to Paul Weiss’s litigation franchise. As one rival puts it: “Some people aren’t fans of Mendelsohn. They see him as an aggressive prosecutor, and companies may not want to hire the guy who turned the FCPA into the most ferocious enforcement tool in the world.”
Nevertheless, few in New York are of the opinion that 42-year-old Mendelsohn is anything other than a hugely effective operator.
Karp puts the time lag in terms of major fines that is evident in figures reported by The Lawyer down to a ďstart-up period during which Mendelsohn’s team got itself organised and brought the biggest cases to fruition.
“For example, if you take the Siemens investigation, which is still the world’s biggest, this was brought relatively early in Mendelsohn’s tenure, but it wasn’t resolved for more than two years, so there’s a long lead time,” explains Karp.
As for Paul Weiss, the firm, which is among the US’s leading litigation powerhouses, naturally had an existing FCPA capability. It has handled a number of investigations over the years.
“If you didn’t read about them, it means we did our job,” jokes Karp.
That said, Paul Weiss did not want to miss out on Mendelsohn who it is understood was being widely courted by other firms. Now his mandate, according to the firm’s chairman, is “to develop the world’s leading FCPA enforcement practice”.
So far Mendelsohn has mainly spent his time speaking to clients and regulators and sitting on panels around the globe.
“He’s conflicted from working on projects he was involved in while at the DoJ, but if you’re a global corporation and the subject of an FCPA investigation, Mark would be at the top of your list,” adds Karp. “He’s directed and shaped the DoJ’s policies and hired all the enforcement staff. Quite simply, when it comes to FCPA enforcement, Mark’s the man.”