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Judge Blasts SEC’s Lack of Dilligence

Dig into the details of most FCPA enforcement actions and one quickly discovers that the conduct at issue is old – in some cases very old.

The February 2011 enforcement action against Tyson Foods for instance related to conduct between 2004 and 2006. See here for the SEC’s complaint.

The January 2011 enforcement action against Maxwell Technologies alleged conduct going back to 2002. See here for the SEC’s complaint.

The December 2010 enforcement action against Alcatel-Lucent alleged conduct going back to 2001. See here for the SEC’s complaint.

The June/July 2010 Bonny Island bribery enforcement actions alleged conduct going back to 1995. See here for the SEC’s complaint against Technip for instance.

The FCPA does not have a specific statute of limitations, rather the “catch-all” provisions in 18 USC 3282 (for criminal actions) and 28 USC 2462 (for civil actions) apply.

Cooperation is often the name of the game in FCPA enforcement inquiries and, because of that, tolling agreements are frequently agreed to. Thus, discussing a fundamental black-letter law concept like statute of limitations in the FCPA context seems foolish.

But imagine a world (a world that perhaps is slowly developing – see here for instance) in which individuals and companies in FCPA enforcement actions do mount legal defenses based on black-letter legal principles such as statute of limitations.

In that world, it is likely one would see judicial opinions like the recent opinion from U.S. District Court Judge Jane Boyle (N.D. Tex.) in SEC v. Microtune, Inc. et al (see here for the opinion).

The relevant facts are as follows.

In June 2008, the SEC filed an enforcement action against Microtune and two of its former executives alleging a fraudulent stock-option backdating scheme between 2000 and mid-2003. As noted in the opinion, the “crux” of the limitations defense “was that most of the acts forming the basis of the SEC’s case occured between 2001 and mid-2003.”

The precise issue before the court was “whether the doctrine of fraudulent concealment, relied on by the SEC, operate[d] to toll the running of the five-year limitations period under the facts of the case.” The SEC argued that it was entitled to judgment as a matter of law on the limitations defense “because the ‘discovery rule’ and certain equitable tolling principles including ‘fraudulent concealment’ and the ‘continuing violations doctrine’ applied and salvaged claims that would otherwise be barred by the five-year statute of limitations.” The court had previously rejected the SEC’s “discovery rule” and “continuing violations doctrine” claims, and focused on the SEC’s “fraudulent concealment” theory for tolling the statute of limitations.

The court noted that in order for the SEC to prevail on its “fraudulent concealment” claim, it had to show that it “acted diligently once [the SEC] had inquiry notice, i.e., once [the SEC] knew of or should have known of the facts giving rise to [its] claim.” The court held that there was “no genuine issue of material fact as to whether the SEC acted diligently nor as to whether the SEC discovered the alleged wrongdoing within the limitations period.”

As noted in the opinion, “when asked about the SEC’s diligence” counsel for the SEC explained as follows: “we, often for resource reasons, wait until the company does its own investigation before we complete ours.” [In July 2006, Microtune announced it was commencing an internal review as to the alleged practices].

Judge Boyle was not persuaded and stated as follows. “While perhaps an understandable method of allocating Commission resources, such justification does not excuse the SEC’s apparent inactivity from mid-2004 to mid-2006, when further investigation would have uncovered the full extent of Microtune’s backdating and would have allowed the SEC to bring a complaint against Microtune much earlier than 2008.”

Accordingly, the judge dismissed all claims against the defendants falling outside of the five year limitations period – except those saved as a result of tolling agreements reached in 2007 and 2008.

See here for an article about the ruling from Shannon Green at Corporate Counsel.

Ask any FCPA practitioner and, in a candid moment, they will tell you that SEC FCPA inquiries often unnecessarily drag on for many years, including long stretches of complete inactivity, unreturned phone calls, and other delays due to SEC resource issues – including turnover of SEC attorneys assigned to the case.

Again, because cooperation tends to be the name of the game in FCPA inquiries and because tolling agreements are frequently agreed to, the SEC’s lack of diligence in an FCPA matter is generally not a relevant issue.

However, every once in a while it is interesting to think of what would happen if FCPA enforcement largely took place in the context of an adversarial system.

The recent Microtune decision would seem to provide a glimpse.

Big, Bold, and Bizarre

Many words could be used to describe Foreign Corrupt Practices Act enforcement in 2010.

The words I selected in this Year in Review piece recently published by BNA’s White Collar Crime Report are big, bold, and bizarre.

The article provides an overview of the year that was and describes the big, bold, and bizarre year in FCPA enforcement; the increased scrutiny of the FCPA and FCPA enforcement; and events related to the FCPA as well as other anti-corruption laws and initiatives.

The FCPA in 2015 – What Will It Look Like?

The Dow Jones Global Compliance Symposium (see here for details) is set for March 31st and April 1st in Washington DC at the Park Hyatt Washington.

I am pleased to be participating in a panel discussion on March 31st titled “The FCPA in 2015 – What Will It Look Like?”

Moderated by Dionne Searcey (Legal Correspondent – Wall Street Journal), other panelists will include: Mark Mendelsohn (Paul Weiss); Peter Jaffe (Chief Ethics & Compliance Officer, AES); and Frederic Miller (PricewaterhouseCoopers).

Other panels or interviews at the Symposium will focus on the FCPA and related issues as well.

Joe Palazzolo (Dow Jones and Wall Street Journal Corruption Currents) will speak with Stephen Reynolds (SVP & General Counsel, Alcatel-Lucent) in a keynote interview titled “Moving Forward: Alcatel-Lucent’s Anti-Corruption Program.” See here for prior posts on the December 2010 Alcatel-Lucent FCPA enforcement action.

Georg Kell (Executive Director, UN Global Compact) will be interviewed on “Stamping Out Corruption: The Role That Corporations Can Play.”

Dionne Searcey will speak with Commissioner Dabney Friedrich (U.S. Sentencing Commission) in a featured interview expected to cover how new and evolving corporate and anticorruption regulations are being enforced.

David Wessel (Economics Editor, Wall Street Journal) will speak to former U.S. Senator Arlen Specter in a keynote interview titled “FCPA Enforcement: How to Comply. If No Compliance, Then Jail Time, Not Just Fines.” As highlighted in this previous post, Senator Specter chaired the November 30, 2010 Senate Judiciary Subcommittee hearing on “Examining Enforcement of the Foreign Corrupt Practices Act.”

Jean Eaglesham (Senior Reporter, The Wall Street Journal) will speak with Lorin Reisner (Deputy Director, Enforcement Division, Securities & Exchange Commission) in a keynote interview expected to cover the SEC’s enforcement of the Foreign Corrupt Practices Act.

Cassell Bryan-Low (Reporter – Wall Street Journal) will speak with Vivian Robinson (General Counsel – U.K. Serious Fraud Office) in a featured interview titled “The U.K. Bribery Act: Dispelling the Myths.”

In addition, other events or interviews at the Symposium are sure to touch upon FCPA issues as well.

“Foreign Official” First

For the first time in FCPA history, a federal court judge, with the benefit of a detailed and complete overview of the FCPA’s extensive legislative history on the “foreign official” element, is being asked to rule on the DOJ’s interpretation that employees of alleged state-owned or state-controlled enterprises are “foreign officials” under the FCPA.

See here for the motion to dismiss in U.S. v. Stuart Carson, et al.

See here for my declaration.

President’s Day

Today is President’s Day.

This post highlights the role of Gerald Ford, Jimmy Carter, Ronald Reagan, and William Clinton in enactment and subsequent development of the FCPA.


After watching Congress investigate and hold hearings on the foreign payments problem for approximately nine months, in March 1976 President Ford issued a “Memorandum Establishing the Task Force on Questionable Corporate Payments Abroad” (see here).

The great debate at this time was whether the foreign payments problem should be addressed through a disclosure regime or through a criminalization regime. The Ford Administration favored the former and in June 1976, Ford released “Remarks Announcing New Initiatives for the Task Force on Questionable Corporate Payments Abroad.” (see here). As noted in the remarks, Ford directed the task force “to prepare legislation that would require corporate disclosure of all payments made with the intention of influencing foreign government officials.”

Certain bills were introduced in Congress consistent with Ford’s vision and in August 1976 Ford issued “Foreign Payments Disclosure – Message From the President of the United States Urging Enactment of Proposed Legislation to Require the Disclosure of Payments to Foreign Officials.” (see here).

Neither Ford’s proposal, or any other, was enacted by Congress prior to the 1976 elections in which Ford was defeated by Jimmy Carter.


Unlike the Ford Administration, the Carter administration favored the criminalization regime that was under consideration in the prior Congress and a movement that soon picked up speed when Congress reconvened in January 1977.

Certain members of the Carter administration testified at Congressional hearings throughout 1977 in favor of the criminalization regime and in December 1977, S. 305 (the Foreign Corrupt Practices Act of 1977 and the Domestic and Foreign Investment Improved Disclosure Act of 1977) was presented to President Carter.

On December 20, 1977, President Carter signed S. 305 into law – see here for his signing statement.


As noted in this previous post, President Reagan’s administration very soon sought decriminalization of foreign payments subject to the FCPA. During the Reagan administration (1981-1989), numerous efforts were made in Congress to amend the FCPA. Soon after the FCPA was enacted, it was widely recognized that the FCPA had addressed a serious problem, but that the statute created much uncertainty and was, in the minds of many, unworkable.

Among other things, the FCPA antibribery provisions enacted in 1977 contained a broad knowledge standard (“reason to know”) applicable to indirect payments to “foreign officials”; (ii) did not contain any affirmative defenses; and (iii) did not contain an express facilitating payments exception. Beginning in 1980, various bills were introduced – either as stand alone bills or specific titles to omnibus trade and export bills – that sought to amend the FCPA. This legislative process took eight years.

In August 1988, President Reagan signed H.R. 4848 the Omnibus Trade and Competitiveness Act of 1988. Title V, Subtitle A, Part I of the Act was titled “Foreign Corrupt Practices Act Amendments.” President Reagan’s signing statement does not refer to the FCPA amendments buried in the omnibus trade bill. Among the amendments were a revised knowledge standard applicable to indirect payments and the creation of affirmative defenses and an express facilitating payment exception.


In November 1998, President Clinton signed S. 2375, the “International Anti-Bribery and Fair Competition Act of 1998.” Among other things, the Act amended the FCPA by (i) creating a new class of persons subject to the FCPA – “any person” not an issuer or domestic concern to the extent such person’s bribery scheme has a U.S. nexus; and (ii) creating a new alternative nationality jurisdiction test for U.S. issuers and domestic concerns.

See here for President Clinton’s signing statement.

Will President Obama play a role in FCPA history?

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