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The Results Are In …

A couple of survey/poll results that may be of interest to FCPA followers.

The first survey is courtesy of Deloitte which obtained over 1,000 on-line survey responses from business professionals in various industries in connection with a recent webcast titled “Global Anticorruption: Risks and Strategies for Today’s Global Enterprise.”

Results of interest:

Only 31% of respondents indicated that their company had in place a “comprehensive FCPA compliance program.” When asked why some companies might not have a comprehensive FCPA compliance program, 23% of respondents cited an “unawareness of the severity and consequences of FCPA violations.” Clearly more people need to read this blog (and others) and follow FCPA news!

Only 32% of respondents indicated that their company addresses FCPA risks “proactively.”

Respondents are most nervous about FCPA issues arising from: foreign subsidiaries (35%), agent/consultant relationships (28%) and joint venture/strategic alliances (18%).

And finally, 40% of respondents either said “no” or “don’t know” to the question of whether the increased FCPA enforcement activity will deter future FCPA violations. You have to wonder what goes through the minds of Mark Mendelsohn and others at DOJ when they read a response like that?

The second survey (see here to download) was sponsored by Integrity Interactive Corporation and Compliance Week. The survey (which covers a wide range of compliance and ethics topics – not just the FCPA) collected approximately 230 responses from executives at global public companies and large private entities. Pgs. 38-39 of the survey contain FCPA data and indicate that executives are most concerned about payments to third parties, followed by inappropriate gifts and entertainment, direct bribes, company-financed “business trips” and unlawful political or charitable contributions.

Verdict In … Greens Found Guilty

The third FCPA trial of the summer has concluded and Gerald and Patricia Green (two Los Angeles area film executives) have been found guilty by a federal jury of conspiracy to violate the FCPA, substantive FCPA violations, and other charges (see here for the DOJ New Release).

According to the DOJ release, evidence introduced at trial showed that “beginning in 2002 and continuing into 2007, the Greens conspired with others to bribe the former governor of the [Tourism Authority of Thailand] in order to get lucrative film festival contracts as well as other TAT contracts.” According to the release, the evidence also established that the Green’s attempted to disguise the bribe payments by labeling them “sale commissions” and by making the payments “for the benefit of the former governor through the foreign bank accounts of intermediaries, including bank accounts in the name of the former governor’s daughter and friend.”

Reacting to the verdict, Assistant Attorney General Breuer stated that the DOJ “will not waiver in its fight against corruption, whether perpetrated within our borders or abroad” and that the FCPA “is a powerful tool that the [DOJ] will continue to use in an effort to stop individuals like the Greens who seek to further their own business interests through bribes paid to foreign officials.”

The Greens are to be sentenced in December and the conspiracy and FCPA charges each carry a maximum penalty of five years in prison.

As mentioned, the Green trial was the third FCPA trial of the summer.

The other two were the Bourke matter (see here) and the Jefferson matter (see here).

Leading up to these trials, the FCPA bar and the enforcement officials themselves, predicted that one result of these trials would be greater clarity of some of the FCPA’s murky elements.

While the verdicts were, on balance, pro-DOJ verdicts, the verdicts reached in these trials were not exactly uniform.

Bourke was convicted of conspiracy to violate the FCPA (the case did not proceed to trial on a substantive FCPA violation).

Jefferson was also convicted of conspiracy (although it is not entirely clear if the jury found him guilty of conspiracy to violate the FCPA). However, Jefferson was found not guilty on the substantive FCPA charge (the charge predicated on the “cash in the freezer” allegations).

Have these trials provided any greater clarity as to various FCPA elements as widely predicted?

I think it is far to say that as a result of the Bourke verdict (even though it was not a substantive FCPA trial), the FCPA’s knowledge standard has never been broader, and can be satisfied even when an investor, like Bourke, does not actually pay a bribe, but is merely aware that others may be making bribe payments in a widely viewed corrupt country for the potential benefit of an entity in which he is an investor (see here and here).

Beyond this, I’m not sure that any further clarity as to substantive FCPA elements has resulted from these trials, but I would be interested to hear what others have to say.

Will these trials and the largely pro-DOJ verdicts send a “proceed with caution” message to any individual or corporation faced with an FCPA enforcement action and stiffle legitimate defense theories based on the FCPA’s elements?

I expect so, yet that is indeed unfortunate as a significant portion of FCPA enforcements are based largely on DOJ/SEC’s untested and unchallenged interpretations of the law.

“Foreign Officials” in Puerto Rico?

While reading the DOJ release today regarding the guilty plea of Dr. Candido Negron Mella (see here), I was reminded of a conversation I had a few years back with a former law firm colleague during which we scratched our heads wondering if a Puerto Rico government official could be a “foreign official” under the FCPA. Because the statute defines “foreign official” as being an “officer or employee of a foreign government …” we surmised that the answer was no, but agreed that the question was nevertheless an interesting issue to ponder.

The Mella enforcement action would seem to bear all the hallmarks of an FCPA enforcement action. As set forth in the release, Mella pleaded guilty to conspiracy to violate the Federal Election Campaign Act for “his participation in a corruption scheme involving the 2000 Resident Commissioner campaign of a former governor of Puerto Rico.” The release notes that “Mella was a partner in a company that had a professional relationship with a large Medicaid dental provider in the United States that was interested in obtaining a direct dental agreement with the Commonwealth of Puerto Rico.” According to the release, “[i]n order to assist that provider in obtaining a contract in Puerto Rico” Mella agreed to raise contributions for the campaign and he admitted that he hoped that contributing to the campaign “would enable him to obtain access to the government of Puerto Rico to promote his business interests.”

All the hallmarks of an FCPA enforcement action that is … except a foreign official. At least that is my conclusion from reading the Mella enforcement action and the lack of FCPA charges.

I ponder no more.

War of Words in Ecuador

Chevron has been involved in a long, mammoth legal battle in Ecuador involving allegations of environmental contamination at oil fields in the Amazon. Much has been written about the case, which began over 15 years ago and mega money is at issue.

Both sides and their supporters have been pro-active in making their respective positions known (see here and here).

This long, messy battle now includes an FCPA component.

Last week, Chevron went on the offensive offering up what it said is videotaped evidence of a bribery scheme connected to the $27 billion case, including evidence implicating the presiding judge in the matter. (See here, here and here). A few days later, Ecuador’s Attorney General (Washington Pesantez) requested that the judge step aside, which he did (see here).

Yesterday, AG Pesantez went on the offensive calling on U.S. authorities to investigate Chevron for potential FCPA violations (see here and here)

Chevron is no stranger to FCPA scrutiny. In 2007, it agreed to pay $30 million in combined fines and penalties to settle enforcement actions relating to its procurement of Iraqi oil under the United Nations Oil for Food Program (see here and here).

This long, messy legal battle is getting more murky by the day.

Corruption in China

Consider the feature story in today’s NY Times Business Section titled “The Corruptibles” (in the print edition) (see here) for your long-weekend reading pile.

Among other interesting points, writer David Barboza notes that the “Chinese government has more than 1,200 laws, rules and directives against corruption” and that even with selective enforcement of these laws about “150,000 officials [are] being punished every year for bribery, corruption and other offenses.”

The cost of such conduct? According to a cited report, approximately 3% of China’s gross domestic product.

Query whether employees of state-owned or state controlled companies are considered government / public officials under any of these various laws, rules or directives applicable to such office holders (as opposed to say commercial bribery laws). If anyone has insight into this issue, please do share.

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