US Federal Regulatory Compliance – Know Your Agency!

This is an area that is critical to today’s complex Regulatory scheme. Even though the new Administration has vowed to drastically reduce these regulation burdens it really does not affect a corporation’s perspective and a need to develop a CRP (Corporate Regulatory Philosophy) in the approach, management and strategy in maintaining satisfactory compliance.

It doesn’t matter whether you are dealing with the USDOJ, The Department of Commerce (DOC) which controls Import and Export (BIS), The FDA (which also includes “Stem cell” research and practice), FTC, FCC or any other Agency you must “Know your Agency” because they each have their own distinct internal procedural policies and differing aspects of Enforcement and it varies and encompasses the spectrum from highly conciliatory to what many might view as ‘Draconian” and penal in nature.

If you are involved in significant Washington, DC Agencies it is helpful to have local DC Counsel but my experience has proven that this is simply not enough. The Company’s corporate Counsel must him/herself be familiar enough with not only the inner workings of the particular DC agency but must also be able to self- Represent their corporate interest before these agencies in any Jurisdiction.

To this end it is advisable to be a familiar name and face with these Agencies and my approach is to make frequent visits and learn the personalities behind the Titles, develop the relationships and reputation with these individuals and this is the difference between getting a phone call from them in advance as opposed to a Subpoena.

Why Travel to DC – Because as a practical matter these agencies hierarchies do not return phone calls very often and even when they do it doesn’t result in much progress but they WILL entertain a visit to their offices where they feel at ease and comfortable (even though the corporate Counsel may not –at first).

For that reason I make it a routine part of my practice to visit, conduct meetings and gain a first- hand knowledge of the individuals and what their Agency considers their priorities on any given issue and time.

Enforcement – Depending on the Agency the regulatory authority will be different and it is critical to know this information. Some agencies rely exclusively on the Department of Justice which is an enormous and politically motivated entity and so having DOJ experience will without a doubt produce great results.

DOJ -The DOJ can be painstakingly slow, non-responsive and bureaucratic but having a relationship with the Assistant Attorneys General can drastically reduce this onerous impediment. They can also be heavily influenced by penalty enforcement and some have argued that this indigenous Agency element is controlling and unfair. It is easy to reach this conclusion (like the $8 Billion penalty that was assessed to a foreign EU bank ) but it is also true that knowing the Agency, the Personalities behind the Titles and *especially having both a rapport’ & reputation of sincere “corporate citizenry” responsibility will nonetheless be invaluable for while there are serious civil and criminal availabilities that are at the Prosecutor’s disposal there is also a wide margin of discretion & power allocated to these individuals and at the end of the day I have found them to be understanding and fair minded individuals that live and have the same daily activities as we all do.

It would come as a surprise to most Corporations to learn that within the past three years I have been told by the USDOJ, FDA & the Securities Exchange Commission that I was the first ‘In House” Counsel that had ever visited their office and that they almost exclusively dealt with the Same local DC Counsel.

Internal Enforcement - At the other end of the spectrum we have Federal Agencies that have their own internal Regulators and Enforcement Attorneys. For example:

The Federal Communications Commission or the “FCC” – Ever since the 2015 reclassification of Broadband communications (the internet) has fallen into this Agencies Title II & Title III jurisdiction it has grown in immense authority and jurisdiction and this involves even “remote” or “short range” devices such as Bluetooth, cordless control of appliances and the like and there is a plethora of regulatory activity regarding such “FCC Terminology” as “unlicensed spectrum” or falling what is known as the “white spaces” which (remarkably) both Google & Microsoft is seeking to achieve.

Within this Internal Enforcement group also includes the CPSC or Consumer Products Safety Commission together with the Federal Trade Commission or FTC which derives with their original 1914 Clayton Act jurisdiction of “Unfair Trade Practices”. Now, this Agency is located in Bethesda Maryland and is comprised of only 500 employees and has two internal Enforcement Agencies – the OIG (Office of Inspector General) and the CLU (Criminal Liaison Unit).

Now, this is critical to know how these internal agencies operate as opposed to the DOJ and it can make the difference between an enormous fine + penalty and a relatively painless Consent Decree whereby the company agrees to engage in corrective behavior within specified guidelines and I can attest that this Agency can be incredibly wonderful to work with and to establish regulatory official relationships because believe me when I say “They Call The Shots” in their territory.

Department of Energy –DOE – I would be remiss in discussing these limited agencies without touching upon the DOE. Within this enormous agency is the FERC or Federal Energy Regulatory Commission and this jurisdictional base is massive – Coal, Wind, Solar, Nationwide Power grids, Geomagnetically-induced currents (GICs), GMD or Geomagnetic Disturbances, maintenance of the Nuclear power plants, hydroelectric power ……”whew ! I could go on forever but the important thing to note here is that this area of power regulatory schematics can be complex to the point of seeming almost Algorithmic and it is true that they can be complex and controversial (See 1., below) But I can state with experience that this agency has a very “compassionate personality” when it comes to enforcement. They simply want the job done.

They do not have the time nor desire to perceive themselves as a “tax alternative” Agency for their responsibility is quite frankly far too important and critical to both our domestic welfare as well as our National Security and they well recognize this responsibility 2. In recent times they have found themselves at the crossroads of the Public Welfare, Homeland Security, GEOINT (Satellite Surveillance) and as a cross functional agency with numerous others.

Strategy When Things “Go South” - All said here in this brief synopsis are the highlights and points of interest in knowing the Agencies, their particular enforcement policies & procedures, whether it be internal or external (DOJ) and perhaps most importantly building the relationships.

But what does a Corporation do when they have become the “target” of an Agency and diplomacy and remedial action has proven to be no avail and it appears that the Agency is unduly aggressive and seems intent on strict and unreasonable and/ or severe fines or penalties. This is rare but it does happen.

This is when the corporate counsel needs a “pre-advance” action strategy in place to deal with these to adequately protect the legal and financial interests of the company. One Option is to make sure that you maintain your “Home Playing Field” and that means filing an action in the Federal District Court in YOUR particular jurisdiction and seek remedial, injunctive or declaratory Relief vs. the impending Agency action and it is just as important to note that having a reputation that your company can and will take such steps is a great deterrence against such action.

The Agency knows that if they are to compel you to appear before the “Ever So Friendly” Court within Washington, DC that your chances are slim. It’s like playing against the house in Vegas. Some corporations have argued that the deal is stacked.

But what would you perceive to be your chances if you were to hail, that agency into a Federal Court in, say, San Antonio or El Paso Texas? I’ll let you decide that but take my word that your chances of conciliation are far greater in the Independent Republic of Texas and the DC Enforcement Attorneys know full well that the Federal Courts in Texas have no fear of the Washington power base and have and will consider its Corporate citizens.

Now, be it not said here that the DC Courts are not fair and I mean to infer noting disparaging against that venue but the reality is this: There is a Political, practical (less expensive) and undeniable advantage of a jurisdictional home Court advantage and it should be common knowledge that if the Corporate entity feels that it is appropriate that it will indeed take full advantage of their home State venue- This is simply and ethically appropriate legal strategy- so use it !

1. For example there is a provision in the Federal Power Act Section 215(e)(3): which states: The FERC may order compliance with a Reliability Standard and impose a penalty if a BPS user, owner, or operator “has engaged in or is about to engage in any acts or practices that constitute or will constitute a violation of a reliability standard”

2. Electric Power Grid Disasters- March 1989 blackout in Quebec Damage to Salem (NJ) generator step-up transformers (1989) October 2003 “Halloween Storm” 1859 “Carrington” event