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Additional Lighthouses and Buoys Sentence

Last Friday, the DOJ announced (see here) that John Warwick was sentenced to approximately three years in federal prison “for his role in a conspiracy to pay bribes to former Panamanian government officials to secure maritime contracts.” U.S. District Court Judge Henry Hudson also sentenced Warwick to two years of supervised release following his prison term and ordered Warwick to forfeit approximately $330,000 in proceeds from his crime.

In February, Warwick pleaded guilty to a one-count indictment charging him with conspiring to make corrupt payments to Panamanian officials for the purpose of securing business for Ports Engineering Consultants Corporation in violation of the Foreign Corrupt Practices Act. The business involved contracts to maintain lighthouses and buoys along Panama’s waterways.

This is the same conduct at issue in the prior plea and sentencing of Charles Edward Jumet. (See here for additional posts on this matter). In April, Jumet was sentenced to approximately 7.25 years in federal prison after pleading guilty to two charges – conspiracy to violate the FCPA and making false statements to federal agents. (See here). Even though Jumet’s charges were equal part FCPA and equal part making false statements to federal agents, his sentence was described as the “longest prison term imposed against an individual for violating the FCPA.”

Given that Warwick was charged and pleaded guilty to the same conspiracy as Jumet, it suggests that the FCPA component of Jumet’s sentence was between 3-4 years.

Innospec Agent Pleads Guilty

Approximately one year ago, a criminal indictment against Ousama Naaman was unsealed (see here). The indictment charged Naaman, a dual Canadian and Lebanese national, with violating the FCPA and conspiring to violate the FCPA and commit wire fraud, while acting on behalf of a U.S. public chemical company and its subsidiary in connection with kickback payments to the Iraqi government under the United Nations Oil for Food Program. The indictment also charged Naaman with making payments on behalf of the company to Iraqi Ministry of Oil officials.

Since then, Naaman was extradited to the U.S. and the chemical company was identified as Innospec – which resolved its own FCPA enforcement action in March (see here).

As noted in this DOJ release, last Friday Naaman “pleaded guilty … to a two-count superseding information filed June 24, 2010, charging him with one count of conspiracy to commit wire fraud, violate the Foreign Corrupt Practices Act (FCPA), and falsify the books and records of a U.S. issuer; and one count of violating the FCPA.”

According to the release:

“From 2001 to 2003, acting on behalf of Innospec, Naaman offered and paid 10 percent kickbacks to the then Iraqi government in exchange for five contracts under the OFFP. Naaman negotiated the contracts, including a 10 percent increase in the price to cover the kickback, and routed the funds to Iraqi government accounts in the Middle East. Innospec inflated its prices in contracts approved by the OFFP to cover the cost of the kickbacks. Naaman also admitted that from 2004 to 2008, he paid and promised to pay more than $3 million in bribes, in the form of cash, as well as travel, gifts and entertainment, to officials of the Iraqi Ministry of Oil and the Trade Bank of Iraq to secure sales of tetraethyl lead in Iraq, as well as to secure more favorable exchange rates on the contracts. Naaman provided Innospec with false invoices to support the payments, and those invoices were incorporated into the books and records of Innospec.”

For additional coverage of the Naaman plea, see here from Christopher Matthews at Main Justice.

In 1998, the FCPA’s antibribery provisions were amended to, among other things, broaden the jurisdictional reach of the statute to prohibit “any person” “while in the territory of the U.S.” from making improper payments through “use of the mails or any means or instrumentality of interstate commerce” or from doing “any other act in furtherance” of an improper payment. (see 15 USC 78dd-3(a)). “Any person” is generally defined to include any person other than a U.S. national or any business organization organized under the laws of a foreign nation. (see 15 USC 78dd-3(f)).

In other words … the FCPA … it isn’t just for Americans.

Ousama Naaman found out the hard way.

Other foreign nationals that have been the focus of FCPA enforcement actions include Jeffrey Tesler and Wojciech Chodan (both U.K. citizens criminally indicted for their roles in the KBR / Halliburton bribery scheme)(see here) and Chrisitan Sapsizian (a French citizen who pleaded guilty to violating the FCPA for his role in a scheme to bribe Costa Rican foreign officials) (see here).

World Bribery & Corruption Compliance Forum

I am pleased to serve as Chair of the World Bribery & Corruption Compliance Forum in London, September 14-15th.

As indicated on the conference brochure (here) speakers will include the U.K. Attorney General, and representatives from the U.K. Serious Fraud Office, the U.S. Department of Justice, the Securities and Exchange Commission, the OECD, the World Bank, Transparency International, Trace International as well as global business compliance professionals and legal practitioners.

Readers of the FCPA Professor Blog are entitled to 20% off the conference fee by using the above brochure and additional savings will be earned by booking by July 2nd.

“Foreign Official” Brain Teasers

Two “foreign official” brain teasers are highlighted below.

One touches upon sovereign wealth funds, the other a Chinese state-owned enterprise (as well as sovereign wealth funds). Both are based on recent events.

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A prior post discussed sovereign wealth funds and the FCPA (see here).

I noted that while no FCPA enforcement action has yet involved a sovereign wealth fund, such funds and the investments these funds make in private companies, are clearly on the radar screen of the enforcement agencies as both DOJ and SEC officials have in the past publicly stated that sovereign wealth funds pose FCPA risks because the funds are government owned (see here and here).

The next frontier of the enforcement agencies often times aggressive and dubious “foreign official” interpretation may thus be application to the investments made by sovereign wealth funds.

According to a recent Wall Street Journal article, Chesapeake Energy Corp. (here) recently sold $900 million in preferred stock to a group of investors. Among others, Chesapeake sold shares to China Investment Corp. (a Chinese government sovereign wealth fund – here), Korea Investment Corp. (a South Korea government sovereign wealth fund – here) and Temasek Holdings (Singapore’s sovereign wealth fund – here). For good measure, Abu Dhabi Investment Council (Abu Dhabi’s sovereign wealth fund – here) also invested in Chesapeake.

What would it take for Chesapeake employees to become Chinese “foreign officials”? A majority investment by China Investment Corp.? What if the investment was not a majority investment, but China Investment Corp. exercised veto rights over certain business decisions?

If not Chinese “foreign officials,” what would it take for Chesapeake employees to become Korean “foreign officials.” What if Korea Investment Corp. had the opportunity to appoint Chesapeake board members?

If not Korean “foreign officials,” what fact or factors would it take for Chesapeake employees to become Singapore or Abu Dhabi “foreign officials”?

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Numerous prior posts have discussed Chinese state-owned enterprises (“SOEs”) and the enforcement agencies interpretation (one that has never been accepted by a court) that employees of alleged Chinese SOEs are Chinese “foreign officials” because the SOE is an alleged “instrumentality” of the Chinese government – notwithstanding the fact that it has publicly traded shares and other attributes of private ownership.

One of the largest ever IPO’s is expected to soon price.

It involves Agricultural Bank of China Ltd. (a Chinese government owned bank – here) and its attempts to raise US$20 billion – $30 billion by listing shares on the Hong Kong and Shanghai stock exchanges.

According to a recent article in the Wall Street Journal, Qatar Investment Authority (Qatar’s sovereign wealth fund – here) is expected to invest US$2.8 billion in the offering. Kuwait Investment Authority (Kuwait’s sovereign wealth fund – here) is expected to invest $800 million. Other investors expected to participate in the deal include Temasek Holdings (Singapore’s sovereign wealth fund).

Can an entity such as Agricultural Bank of China Ltd. truly be considered a Chinese government instrumentality when it has publicly traded shares and multi-billion and million dollar investments from other nation’s sovereign wealth funds? At what point could Agricultural Bank of China employees cease being Chinese “foreign officials” and become Qatar or Kuwait “foreign officials”?

It is not just sovereign wealth funds that are planning to make massive investments in Agricultural Bank of China. According to a recent Wall Street Journal article, Archer Daniels Midland Co. (here) is also expected to invest $100 million to $200 million in the IPO.

Can Agricultural Bank of China Ltd. truly be considered a Chinese government instrumentality while at the same time securing a multi-million dollar investment from a US food giant?

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A recent article by Samuel Rubenfeld (Dow Jones News Service) titled “To Comply with Bribery Laws, Companies Must Decide Who’s ‘Official'” explores the meaning of the FCPA’s “foreign official” element. In the article, a DOJ spokeswoman merely referred to the statutory definition of “foreign official” in the FCPA as her agency’s comment for the article.

The FCPA defines “foreign official” as follows:

“Foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”

So these aren’t brain teasers after all, the DOJ apparently feels that the answer is found in the statute itself.

The Second Africa Regional Anti-Corruption Seminar

Last week in Cameroon, the U.S. Department of Justice and Cameroonian Ministry of Justice co-sponsored the Second Africa Regional Anti-Corruption Seminar (see here for the U.S. Embassy’s press release). As noted in the release, the annual seminar series “was started by the U.S. government because of the growing transnational nature of corruption and the importance many African nations attached to the recovery of stolen assets abroad” and because “the United Nations Convention Against Corruption and several other multilateral initiatives call for increased international cooperation to combat corruption.” According to the release, working sessions included: “international standards to fight against corruption and recover stolen assets; investigating corruption in state-owned corporations and enterprises; international funds transfers; and investigating corruption in customs and revenue services.”

U.S. Ambassador Janet Garvey (see here) opened the seminar and here comments can be found here.

Among other things, Ambassador Garvey stated that “corruption is a global problem and I don’t have to tell you that much work needs to be done at every level to combat it.”

She then stated:

“In the United States, companies listed on U.S. stock exchanges are subject to stiff punishment under the Foreign Corrupt Practices Act (FCPA) if they are caught engaging in corruption. We take this very seriously and such major corporations as Siemens, Daimler, BHP Billiton, Kellog, Brown and Root, and Britain’s BAE Systems have recently been forced to pay huge fines under the FCPA.”

Stiff punishment under the FCPA?

Does Ambassador Garvey know that Siemens, Daimler, and BAE System were not even charged with FCPA anti-bribery violations?

[Note – BHP Billiton has not recently been forced to pay huge fines under the FCPA. Rather, the company disclosed in April 2010 (see here) as follows: “Following requests for information from the U.S. Securities and Exchange Commission as a part of an investigation relating primarily to certain terminated minerals exploration projects, the Company has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials. Accordingly, the Company is cooperating with the relevant authorities including conducting an internal investigation, which is continuing. It is not possible at this time to predict the scope or duration of the investigation or its likely outcome.”]

Ambassador Garvey also stated as follows:

“In the U.S., we have taken other important steps to contribute to the global anti-corruption regime. Presidential Proclamation 7750 requires the U.S. Department of State to deny visas to citizens and government officials who have engaged in serious corruption.”

For more on Presidential Proclamation 7750, including what happens when the Forest and Agriculture Minister of Equatorial Guinea and the son of Equatorial Guinea’s president shows up at the U.S. “doorstep” on his way to his $35 million Malibu estate (see here). Short answer, he is let in. Despite the fact that federal law enforcement officials believe that “most if not all” of his wealth came from corruption related to oil and gas reserves in his home country. Despite the fact that the DOJ believes that he “may be receiving bribes or extortion payments” from oil companies operating in the country.

Thumbs up to the U.S. for sponsoring global anti-corruption seminars.

Thumbs down for yet another instance of “official rhetoric” not matching reality.

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