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Africa Sting – Update

Yesterday was a busy day in Judge Leon’s packed courtroom in Washington D.C.

For a colorful description of what transpired see here for Christopher Matthew’s piece at Main Justice. See here for a Reuters piece.

Here are the highlights.

Judge Leon remains skeptical of the government’s assertion that all 22 defendants were in one grand conspiracy. According to the reports, Judge Leon read all of the indictments and has “zero sense that there was an omnibus grand conspiracy.” Judge Leon reportedly told the DOJ that “what you think is so transparent is not” and he urged the DOJ to “take a step back” given that the DOJ may be so “close to trees that it can’t see the forest.”

Defense lawyers are troubled by the lack of evidence turned over by the government concerning Richard Bistrong (Individual 1 in the indictments)(see here). One defense lawyer is quoted as saying, “this is an entrapment case […] we need to know more about Bistrong.”

Future dates to keep in mind are: March 10 (when the government must turn over all of its evidence concerning Bistrong) and March 22 (when the government must decide whether to consolidate the cases into one conspiracy). On that issue, Judge Leon again unexpressed an unwillingness to conduct a 22 defendant trial and the DOJ is reportedly in “disposition” talks with some of the defendants.

As previously noted, whether guilty or innocent, there is tremendous pressure on individual criminal defendants in multi-party cases to plead and cooperate in the government’s prosecution of others given the “juicy carrots” that are offered by the sentencing guidelines for such “flipping.”

Africa Sting – The Lawyers

Christopher Matthews over at Main Justice has a thorough piece (here) about the lawyers representing the Africa Sting defendants.

The lawyers in this high-profile case include an eclectic mix of solo practitioners, small criminal defense firms, and large firms which substantial FCPA expertise. The lawyers include a former U.S. attorney, several former prosecutors, and firm with a public website www.entrapped.com. (See here for prior posts regarding potential entrapment issues in this case).

Lawyers for the Africa Sting defendants are due back in court tomorrow.

While respectful of the obvious human dimension of this case, the Africa Sting case could not have come at a better time for FCPA practitioners, which tend to be employed by large law firms – although not exclusively.

The upside from this case is perhaps more indirect than being directly involved in the actual case. The Africa Sting case has received mounds of media attention and notoriety in sectors of the economy that tend not to have FCPA compliance and risk assessment on the to-do list. If nothing more, the Africa Sting case has raised public consciousness of the FCPA and has nudged certain businesses to pick up the phone and talk to an FCPA practitioner.

In the News

Despite Statoil and Siemens (among other enforcement actions), many continue to describe the FCPA as the law that applies only to U.S. companies. Of course that is a wrong statement, as the FCPA applies to all issuers (foreign or domestic) and any foreign company or national that engages in acts in furtherance of a bribery scheme while in U.S. territory. In any event, it is sometimes hard to change perceptions.

Next time you hear this misperception, think February 12, 2010.

On February 12, 2010, it was reported that Daimler AG (a German carmaker) and Technip (a French oil and gas company) were close to resolving FCPA related enforcement actions.

Daimler

As reported here, Daimler is poised to “pay about $200 million and two subsidiaries will plead guilty to resolve a U.S. investigation into whether it paid bribes to secure business overseas.” According to the company’s prior filings, an internal investigation found that “improper payments were made in a number of jurisdictions, primarily in Africa, Asia, and Eastern Europe.” In addition, the report notes that Daimler has also faced scrutiny in connection with its role in the U.N. Oil-For-Food program in Iraq. The report quotes a Daimler spokesperson as saying, “we are in discussions with the DOJ and SEC regarding consensually resolving the agencies’ investigations.”

The report also notes that “government lawyers submitted the deal in Washington to U.S. District Judge Richard Leon.” Judge Leon is also overseeing the Africa Sting case. If true, the normally transparent DOJ (at least when it comes to alerting the public to FCPA enforcement actions) has yet to publicly announce any Daimler filing on its website. Nor does the DOJ website contain any information about the recent BAE matter. Perhaps it is because of the recent weather in D.C. which resulted in DOJ offices being closed for several days.

Technip

According to the company’s release (here), “Technip and the SEC and DOJ have discussed a resolution of all potential claims against the company” arising from an investigation involving TSKJ, a joint venture company in which Technip has a 25% share. The company disclosed that it will record a €245 million charge to reflect the “estimated costs” of the resolution. According to the release, “the potential resolution does not contemplate a criminal conviction for Technips’s role in the TSKJ joint venture.”

The TSKJ joint venture in Nigeria has been the focus of several previous FCPA enforcement actions. See here, here, and here.

In the News

Despite Statoil and Siemens (among other enforcement actions), many continue to describe the FCPA as the law that applies only to U.S. companies. Of course that is a wrong statement, as the FCPA applies to all issuers (foreign or domestic) and any foreign company or national that engages in acts in furtherance of a bribery scheme while in U.S. territory. In any event, it is sometimes hard to change perceptions.

Next time you hear this misperception, think February 12, 2010.

On February 12, 2010, it was reported that Daimler AG (a German carmaker) and Technip (a French oil and gas company) were close to resolving FCPA related enforcement actions.

Daimler

As reported here, Daimler is poised to “pay about $200 million and two subsidiaries will plead guilty to resolve a U.S. investigation into whether it paid bribes to secure business overseas.” According to the company’s prior filings, an internal investigation found that “improper payments were made in a number of jurisdictions, primarily in Africa, Asia, and Eastern Europe.” In addition, the report notes that Daimler has also faced scrutiny in connection with its role in the U.N. Oil-For-Food program in Iraq. The report quotes a Daimler spokesperson as saying, “we are in discussions with the DOJ and SEC regarding consensually resolving the agencies’ investigations.”

The report also notes that “government lawyers submitted the deal in Washington to U.S. District Judge Richard Leon.” Judge Leon is also overseeing the Africa Sting case. If true, the normally transparent DOJ (at least when it comes to alerting the public to FCPA enforcement actions) has yet to publicly announce any Daimler filing on its website. Nor does the DOJ website contain any information about the recent BAE matter. Perhaps it is because of the recent weather in D.C. which resulted in DOJ offices being closed for several days.

Technip

According to the company’s release (here), “Technip and the SEC and DOJ have discussed a resolution of all potential claims against the company” arising from an investigation involving TSKJ, a joint venture company in which Technip has a 25% share. The company disclosed that it will record a €245 million charge to reflect the “estimated costs” of the resolution. According to the release, “the potential resolution does not contemplate a criminal conviction for Technips’s role in the TSKJ joint venture.”

The TSKJ joint venture in Nigeria has been the focus of several previous FCPA enforcement actions. See here, here, and here.

The BAE “Soapbox”

Below is a compilation of what certain others in the FCPA community are saying about the BAE enforcement action.

Steven Tyrrell (here) notes (here) that the BAE “case again demonstrates the DOJ’s willingness to push its jurisdictional reach in cases involving foreign-based, non-issuers that make suspect payments outside the United States.” Tyrrell notes that “in spite of [a] seemingly slight jurisdictional nexus, DOJ aggressively pursued this FCPA matter and obtained an agreement from BAE to plead guilty to a felony and pay a $400 million penalty.” Even though the BAE criminal information contained bribery allegations (see here), the information did not change any FCPA offenses. Yet, Tyrrell and many others, continue to describe the BAE matter as an “FCPA matter.” Tyrrell’s aggressive comments are curious (and perhaps telling) in that he was the DOJ Chief of the Fraud Section responsible for prosecuting the FCPA from 2006 until his recent departure into private practice. (See here).

Miller Chevalier recently released (here) a thorough alert on the BAE matter. Among other things, the alert points out that the BAE matter “raises a host of significant legal and policy questions that are only partly explained in the public documents” associated with the matter. The alert points the “differences in the factual allegations in the two settlements” [SFO/DOJ] and notes that “the oblique nature of the violations charged, the negotiated terms of the settlements, and the allegations that are not made in the public settlement documents provide a glimpse of the political undercurrents, legal maneuvering, and policy objectives that underlie this settlement and raise potentially far-reaching precedential issues.”

Brian Whisler (here) had this to say:

“In a nutshell, the BAE resolution: (1) reconciles with DOJ’s publicly-stated commitment to deter corruption and bribery through the enforcement / prosecution of high impact, high profile cases — there are apparently other similar large scale matters in the DOJ pipeline (e.g., DaimlerChrysler); (2) reconciles with the UK’s effort to become a bigger player on the world enforcement scene, with the enhancement of penalties and other legislative efforts to give more teeth to the UK’s anti-corruption regime (keeping up with Germans in the aftermath of Siemens); and (3) suggests that defense contractor and procurement fraud in general will remain in the sights of the enforcement community for a considerable time, so long as we have one or more theaters of active military engagement.”

An FCPA lawyer who wished to remain anonymous had this to say:

“First, the SFO and the British justice system in general suffer in this settlement. From the British side, the deal has the feel of something that was quickly put together to put a lid on what else might develop. SFO investigators reportedly were still interviewing people on the morning the BAE resolution was announced. Larger than that issue, BAE clearly did wrong in Tanzania, but its actions in other markets were far equally disturbing and there will be no formal accounting for those acts. The unwritten message seems to be that industrialized nations continue to recognize that certain companies are “too big to fail,” and will take steps to protect even a company that does wrong, so long as the company is critical to some important national issue like defense or homeland security. Ultimately, these types of actions erode the moral authority of the industrialized world to demand the developing world to clean up its house. U.S. authorities have made a strong effort to have others step up and take the lead on anti-corruption issues, so that the world does not see anti-corruption as simply a U.S. issue. To some degree, the settlement in the U.S. diminishes that effort, as well. The developing world will see this deal as having been pushed by the U.S. They also will see the deal as not doing much to help the countries that BAE harmed through its corrupt business efforts. The small charity payment to Tanzania seems almost an afterthought inside of a $400 million deal, which is a drop in the bucket compared to BAE’s profits. The world likely will view the entire fine as a fairly minor slap for a company that has made a lot of money in the world market place because of its improper conduct.”

Finally, Ben Heineman, Jr. (here) noted that the BAE story is “depressingly familiar.” He notes that the BAE matter (and the Siemens matter) represent problems “in the developed world (!!), not in the developing world” and states that if “these iconic developed world companies had such widespread issues, it is reasonable to think that they are hardly alone.”

Willing to share you thoughts on the BAE matter? The comment box is open.

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