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Checking In

This post checks in on recent developments in two enforcement actions:  (i) the FCPA enforcement action against various individuals associated with Alstom; and (ii) the FCPA-related enforcement action against alleged Haitian “foreign official” Jean Duperval currently on appeal to the 11th Circuit.

Alstom-Related Action

Earlier this week, the DOJ announced that Lawrence Hoskins, “a former senior vice president for the Asia region for [Alstom], was charged in the District of Connecticut with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive FCPA and money laundering violations.”

The conduct at issue in the Second Superceding Indictment is the same core conduct alleged in original criminal charges filed against Frederic Pierucci and David Rothschild, as well as the conduct alleged in the Superceding Indictment which added William Pomponi to the action.  (See here and here for previous posts).    That is –  alleged payments in connection with the Tarahan coal-fired steam power plant project in Indonesia.  In the prior charging documents, Hoskins was generically referred to as Executive A.

As noted in previous posts, Rothschild pleaded guilty to conspiracy to violate the FCPA.

The DOJ further announced in its release earlier this week that Pierucci pleaded guilty to one count of conspiring to violate the FCPA and one count of violating the FCPA.  (See here for the plea agreement).

Duperval Action

This previous post detailed the 11th Circuit appeal of Jean Duperval.  Duperval was one of the alleged “foreign officials” charged in connection with the Haiti Teleco enforcement actions (see here for a summary and roundup of the entire Haiti Teleco enforcement actions) with non-FCPA offenses and he was found guilty by a jury of various money laundering charges.

As noted in the previous post, in his appeal Duperval argues, among other things, as follows.  “The evidence was insufficient to prove beyond a reasonable doubt that Haiti Teleco was a government instrumentality and that Jean Rene Duperval was a foreign official as required to prove that a violation of the Foreign Corrupt Practices Act generated proceeds of a specified unlawful activity – a necessary predicate for the convictions on the money laundering conspiracy and substantive money laundering charges.”

As noted in the previous post, Duperval’s substantive arguments as to “foreign official” largerly mirror the arguments of Joel Esquenazi and Carlos Rodriguez (also criminally charged and convicted in the Haiti Teleco matter) in their historical “foreign official” appeal to the 11th Circuit (see here for links to the briefing).

Among other things, Duperval’s argument includes discussion and several citations to my “foreign official” declaration  (see here).

Briefing is now complete in the Duperval appeal.

Not surprisingly, the DOJ’s arguments in connection with “foreign official” largely mirror the arguments it makes in the Esquenazi and Rodriguez appeal.  The DOJ is again seeking to exclude my foreign official declaration from the record and its brief states:

“Duperval relies on a 144-page declaration by a proposed defense expert that was filed on behalf of the defendants in Carson.  Although Duperval suggests that this Court may take judicial notice of the declaration because it relates to legislative history, the declaration selectively reviews the legislative history and draws inferences in support of a defense motion to dismiss the indictment. As such, it is not necessarily the statement of a disinterested expert, it was not reviewed as a scholarly article, and it was never subject to impeachment in the case below.”

Last week Duperval filed a reply brief, and not surprisingly, the arguments in connection with “foreign official” largely mirror the arguments made by Esquenazi and Rodriguez in their reply brief.  As to my “foreign official” declaration, the brief states:

“The government also condemns Duperval’s reference to Professor Michael J. Koehler’s declaration addressing the legislative history of the FCPA, which was filed in United States v. Carson. Aside from the analysis contained in the Koehler declaration, the substance of the declaration is the legislative history of the FCPA. The Court can surely take notice of legislative history, and evaluate the utility and accuracy of Professor Koehler’s declaration for itself. But the Government’s claim that the declaration of a professor filed in another criminal proceeding and under penalty of perjury is somehow of lower status than a law-review article reviewed by law students strains credulity.”

It will be an interesting “foreign official” Fall in the 11th Circuit.

Friday Roundup

Additional individual defendant added to Alstom-related enforcement action, a mere $110,000 per working day, a focus on international philanthropy, scrutiny alerts, and for the reading stack.  It’s all here in the Friday roundup.

Additional Alstom-Related Charges

This prior post highlighted the recently unsealed criminal charges against Frederic Pierucci (a current Alstom employee) and David Rothschild (a former Alstom employee) concerning alleged conduct in connection with the Tarahan coal-fired steam power plant project in Indonesia.  The post highlighted several other individuals generically referred to in the charging documents.

Earlier this week, the DOJ announced (here) that William Pomponi (a former executive of Alstom Power Inc., a Connecticut-based subsidiary of Alstom) was charged for his alleged participation in the same scheme.   Pomponi, previously identified as “Employee A,” is now described as “a Vice President of Regional Sales” at Alstom Power Inc. and “was one of the people responsible for approving the actions of, and authorizing payments to, Consultants A and B, knowing that a portion of the payments [to the consultants] was intended for Indonesian officials in exchange for their influence and assistance in awarding the Tarahan Project …”.

Like the original Pierucci indictment, all of the alleged overt acts in the superseding indictment against Pomponi allegedly occured between 2002 and 2004, although the information does allege wire transfers from Alstom Power Inc.’s bank account to the bank account of Consultant A until 2009.

Like Pierucci, Pomponi is also charged with one count of conspiracy to violate the FCPA, four substantive counts of FCPA anti-bribery violations, money laundering conspiracy and four substantive counts of money laundering.

Kudos to the DOJ for including a link to the charging document in the release.  This used to be DOJ’s practice, but when its new site launched a few years ago, it stopped doing this.  Let’s hope this is a new practice!

Avon’s FCPA Expenses

Nearly five years ago – in June 2008 – Avon launched an internal investigation concerning FCPA compliance in China and other countries.  In many respects, the most notable aspect of Avon’s FCPA scrutiny has been its pre-enforcement action professional and expenses – approaching $350 million (see here for instance).

In its most recent quarterly filing, Avon stated as follows.  “Professional and related fees associated with the FCPA investigations and compliance reviews … amounted to approximately $7 during the three months ended March 31, 2013.”

Headlines read “Avon FCPA Costs Down to $7 Million for Q1” and “Avon Slows Spending on Bribery Probe.”

Both accurate headlines, but it is amazing to note nevertheless that – five years into Avon’s FCPA scrutiny – the company is still spending approximately $110,000 per working day on its FCPA issues.  (See this prior post concerning Wal-Mart’s pre-enforcement action professional fees and expenses and asking “does it really need to cost this much?”).

International Philanthropy

FCPA material pops up in a variety of places.  Such as this article in www.wealthmanagement.com concerning the perils of global giving.  With two FCPA enforcement actions (Schering-Plough and Eli Lilly) based, in whole or in part, on donations made to a Polish castle foundation and with Wynn Resorts under FCPA scrutiny for a donation to the University of Macau (see here), FCPA scrutiny based on international charitable giving is no mere hypothetical.

Scrutiny Alerts

Scrutiny alerts concerning IBM, ADM, Total, and ENRC.

IBM

This recent post highlighted a ProPublica report regarding the relationship between various tech companies including H-P, IBM and Oracle with a ”senior technology officer for Poland’s national police and, later, the nation’s Interior Ministry, [who] set the terms for hundreds of millions of dollars in technology contracts and decided which ones should be awarded without competitive bidding.”

In a recent quarterly filing, IBM disclosed as follows.

“In early 2012, IBM notified the SEC of an investigation by the Polish Central Anti-Corruption Bureau involving allegations of illegal activity by a former IBM Poland employee in connection with sales to the Polish government. IBM is cooperating with the SEC and Polish authorities in this matter. In April 2013, IBM learned that the U.S. Department of Justice (DOJ) is also investigating allegations related to the Poland matter, as well as allegations relating to transactions in Argentina, Bangladesh and Ukraine. The DOJ is also seeking information regarding the company’s global FCPA compliance program and its public sector business. The company is cooperating with the DOJ in this matter.”

In 2011, IBM resolved an FCPA enforcement action concerning alleged conduct in South Korea and China.  (See here).  The settlement is still pending the approval of Judge Richard Leon (D.D.C.).  In 2000, IBM resolved an FCPA enforcement action concerning alleged conduct in Argentina. (See here).

ADM

Archer Daniels Midland Company recently stated as follows in this release.

“ADM is in discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission regarding a previously disclosed FCPA matter dating back to 2008 and earlier, and expects a resolution sometime this year. Based upon recent discussions, ADM believes it is appropriate to establish a provision of $25 million ($0.04 per share) to cover the potential assessments that may be imposed by these government agencies.”

Total

France-based Total recently stated as follows (here) concerning its long-running FCPA scrutiny concerning business conduct in Iran.

“In 2003, the United States Securities and Exchange Commission (SEC) followed by the Department of Justice (DoJ) issued a formal order directing an investigation in connection with the pursuit of business in Iran by certain oil companies including, among others, TOTAL.  The inquiry concerns an agreement concluded by the Company with consultants concerning gas fields in Iran and aims to verify whether certain payments made under this agreement would have benefited Iranian officials in violation of the Foreign Corrupt Practices Act (FCPA) and the Company’s accounting obligations. The Company fully cooperates with these investigations.  Since 2010, the Company has been in discussions with U.S. authorities (DoJ and SEC) to consider, as it is often the case in these kinds of proceedings, an out-of-court settlement, which would terminate the investigation in exchange for TOTAL respecting a number of obligations, including the payment of a fine and civil compensation, without admission of guilt.  U.S. authorities have proposed draft agreements that could be accepted by TOTAL. Consequently, and although discussions have not yet been finalized, a provision of $398 million, unchanged since its booking as of June 30, 2012 and reflecting the best estimate of potential costs associated with the resolution of these proceedings, remains booked in the Group’s consolidated financial statements as of March 31, 2013.  In this same affair, TOTAL and its Chief Executive Officer, President of the Middle East at the time of the facts, have been placed under formal investigation, following a judicial inquiry initiated in France in 2006. At this point, the Company considers that the resolution of these cases is not expected to have a significant impact on the Group’s financial situation or consequences on its future planned operations.”

A $398 million FCPA enforcement action would be the third-highest of all-time.

ENRC

Last week the U.K. Serious Fraud Office announced here as follows.

“The Director of the SFO has accepted [Eurasian Natural Resources Corp.] ENRC Plc. for criminal investigation.  The focus of the investigation will be allegations of fraud, bribery and corruption relating to the activities of the company or its subsidiaries in Kazakhstan and Africa.”

In a statement, the U.K. company,  stated as follows.

“The Board of Directors (the ‘Board’) of Eurasian Natural Resources Corporation PLC (‘ENRC’ or, together with its subsidiaries, the ‘Group’) today notes that the SFO has moved to a formal investigation. ENRC confirms that it is assisting and cooperating fully with the SFO. ENRC is committed to a full and transparent investigation of its procedures and conduct.

ENRC has ADRs listed with the SEC and thus could also be subject to the FCPA.

This recent article in the Wall Street Journal states as follows.

“U.K.-listed Eurasian Natural Resources Corp. PLC said … allegations of wrongdoing over minerals sales conducted through a Russian network of agents were thoroughly investigated and dismissed” in 2007.

Reading Stack

Tom Fox (FCPA Compliance and Ethics Blog) has penned a new book – “Best Practices Under the FCPA and Bribery Act: How to Create a First Class Compliance Program.”  I was pleased to contribute the foreword to the book and noted that Tom’s “use of real events as learning devices to demonstrate compliance best practices make [the] book an engaging and informative read.”

Inside the NY Times Wal-Mart investigation (here) from the perspective of the Mexican journalist who assisted in the investigative reporting.

Current And Former Alstom Employees Charged In Connection With Payments In Indonesia

The final catch-up post from recent FCPA enforcement activity – this one concerning the recently unsealed enforcement actions against David Rothschild and Frederic Pierucci.

First, what to make of this month’s enforcement activity?  Quite frankly, not much as I told Samuel Rubenfeld (Wall Street Journal) last week in this article.  Much of this “new” enforcement activity is really not “new.”  For instance, the BizJet individual enforcement actions were filed in 2011 and in 2012, but recently unsealed.  Parker Drilling disclosed last year its settlement and the amount, it just took a while for resolution documents to be finalized.  It was publicly reported last year that former Siemens executive Uriel Sharef was going to settle the SEC enforcement action, it just took a while for the resolution documents to be finalized.  And finally, the charges against Rothschild and Pierucci discussed below were filed last year, but recently unsealed.

This post summarizes the Rothschild information (dated November 2, 2012) and plea agreement (dated November 2, 2012) and then the Pierucci indictment (dated November 27, 2012).

Pierucci, a French national, has been identified as a current executive of Alstom and he was arrested on April 14th at JFK airport in New York City.  Rothschild is a former vice president of sales for Alstom Power Inc., a Connecticut-based subsidiary of Alstom.

According to this report, Alstom said in a statement that it “has been working  constructively with the Justice Department for the last two years to address allegations of past misconduct.” It went on to say that Pierucci, its current executive, is entitled to the presumption of innocence.  “We urge everyone to respect the judicial process, which will provide a full  and fair opportunity for the facts to be adjudicated,” the statement read.

Rothschild Information

The conduct at issue concerned the Tarahan coal-fired steam power plant project in Indonesia.  According to the charging documents Perusahaan Listrik Negara (“PLN”) “the state-owned and state-controlled electricity company in Indonesia and an ‘agency’ and ‘instrumentality’ of a foreign government […] was responsible for sourcing the Tarahan Project.

The officials allegedly involved were.

“Official 1  … a member of Parliament in Indonesia [who] had influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 2 … a high-ranking official at PLN [who] had broad decision-making authority and influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 3 … an official at PLN [who] was a high-ranking member of the evaluation committee for the Tarahan Project.  Official 3 had broad decision-making authority and influence over the award of the Tarahan contract.”

The information charges one count of conspiracy and alleges that Rothschild and others, between 2002 through 2009, conspired to make “corrupt payments to a member of Parliament in Indonesia, officials at PLN, and others in order to obtain and retain business related to the Tarahan Project on behalf of the following entities and in violation of the FCPA’s anti-bribery provisions.

Alstom

Alstom Power Inc.

Power Company Switzerland – an indirect subsidiary of Alstom.

Power Company Indonesia – an indirect subsidiary of Alstom.

Consortium Partner – “a trading company … headquartered in Japan, incorporated in Japan, an in the business of providing power generation related services around the world.”  According to the information, this entity “acted as the partner” of the above Alstom entities “in the bidding and carrying out of the Tarahan Project in Indonesia.”  Consortium Partner would sure seem to be Marubeni Corp. of Japan.  (See here for its 2004 press release concerning the Tarahan Project).  This will be interesting to follow as Marubeni in 2012 resolved an FCPA enforcement action concerning conduct at Bonny Island, Nigeria (see here for the prior post) and is currently under a two year DPA.

Specifically the information alleges various telephone and e-mail communications between Rothschild and others concerning the alleged bribe payments and efforts to “conceal the payments to foreign officials by entering into consulting agreements with Consultant A (described as a “consultant who purportedly provided consulting related services [for the above companies] in connection with the Tarahan Project in Indonesia”) and Consultant B (same description) in order to disguise the bribe payment to the foreign officials.”

All of the alleged overt acts in the information allegedly occurred between 2002 and 2004, although the information does allege the following wire transfers:

In 2005 “200,064 from [Alstom Power Inc.’s] bank account to the bank account of Consultant A in Maryland”

In 2006 “200,064 from [Alstom Power Inc.’s] bank account to the bank account of Consultant A in Maryland”

In 2007 “200,064 from [Alstom Power Inc.’s] bank account to the bank account of Consultant A in Maryland”

In 2009, “66,688” from [Alstom Power Inc.’s] bank account to the bank account of Consultant A in Maryland”

Other individuals generically identifed in the information include the following.

“Executive A – Senior Vice President for the Asia Region at [Alstom].  Executive A’s responsibilities at [Alstom] included oversight of [Alstom’s] and [Alstom’s] subsidiaries’ efforts to obtain contracts with new customers and to retain contracts with existing customers in Asia, including the Tarahan Project in Indonesia.”

“Executive B – who held executive level positions at [Alstom Power Inc.] and [Alstom], including Vice President of Global Sales [this is Pierucci].  Executive B’s responsibilities at [Alstom Power Inc.] included oversight of [Alstom Power Inc.] efforts to obtain contracts with new customers and to retain contracts with existing customers around the world, including the Tarahan Project in Indonesia.”

“Employee A – Vice President of Regional Sale at [Alstom Power Inc.]  Employee’s A’s responsibilities at [Alstom Power Inc.] included obtaining contracts with new customers retaining contracts with existing customers in various countries, including the Tarahan Project in Indonesia.”

“Employee B – the General Manager of Power Company Indonesia.  Employee B’s responsibilities at Power Company Indonesia including obtaining contracts with new customers and retaining contracts with existing customers in Indonesia, including the Tarahan Project in Indonesia.”

“Employee C – Director of Sales at Power Company Indonesia. Employee C’s responsibilities at Power Company Indonesia including obtaining contracts with new customers and retaining contracts with existing customers in Indonesia, including the Tarahan Project in Indonesia.”

In the plea agreement, Rothschild pleaded guilty to the one count information charging him with conspiracy to violate the FCPA.  According to the plea agreement, the offense carries a maximum penalty of 5 years imprisonment and a $250,000 fine.  Other than setting forth the DOJ’s recommendation that the court reduce by two levels Rothschild’s offense level “based on the defendant’s prompt recognition and affirmative acceptance of person responsibility,” the plea agreement does not set forth any further specifics concerning sentencing.

Pierucci Indictment

The indictment is based on the same core set of facts alleged above in the Rothschild information.  Because it is an indictment, and not an information, the Pierucci indictment is more detailed and indeed contains additional charges beyond the one count of conspiracy to violate the FCPA.  In addition, Pierucci is charged with four substantive counts of FCPA anti-bribery violations, money laundering conspiracy and four substantive counts of money laundering.

In the indictment, the DOJ alleges that “Pierucci was one of the people responsible for approving the selection of, and authorizing payments to, Consultants A and B, knowing that a portion of the payments to Consultants A and B was intended for Indonesian officials in exchange for their influence and assistance in awarding the Tarahan Project contract to [Alstom] and its subsidiaries.”

The indictment further alleges that Pierucci and others “came to the conclusion that Consultant A was not effectively bribing key Indonesian officials” and accordingly in 2003 Pierucci and others concluded “that Consultant A would be responsible only for paying bribes to Official 1, a member of the Indonesian Parliament” and that Alstom and its subsidiaries would retain another consultant to pay bribes to PLN officials.”

In this release, Acting Assistant Attorney General Mythili Raman stated as follows.

“Frederic Pierucci and David Rothschild allegedly used outside consultants to bribe foreign officials in Indonesia in exchange for lucrative power contracts.  Stamping out foreign bribery is a Justice Department priority, and we are determined to continue our vigorous enforcement of the Foreign Corrupt Practices Act.”

SFO Providing Real Time Disclosure in ALSTOM Investigation

For a government agency that has stated in the past that it prefers not to investigate bribery and corruption cases (see here), and for a government agency that has received mounds of criticism in connection with its bungled BAE enforcement action, the U.K. Serious Fraud Office (“SFO”) would seem to be running a public relations campaign of late.

In this release from today, the SFO states, in connection with ALSTOM investigation (see here) that:

“The Serious Fraud Office search operation runs into its second day. Following yesterday’s multi-location search operation and arrests relating to ALSTOM in the UK, the SFO made operational decisions to extend searches today at ALSTOM properties in Rugby and Ashby de la Zouch. Today’s operation involved over 50 personnel including officers from the Warwickshire and Leicestershire Police forces.”

ALSTOM – Corruption Investigation Enters the Boardroom

The U.K. Serious Fraud Office (“SFO”) issued this release today which states that “[t]hree members of the Board of ALSTOM in the UK have been arrested on suspicion of bribery and corruption, conspiracy to pay bribes, money laundering and false accounting, and have been taken to police stations to be interviewed by the Serious Fraud Office.”

According to the release, search warrants were executed at five ALSTOM businesses premises and four residential addresses. The operation, involving “109 SFO staff and 44 police officers” is code-named “Operation Ruthenium” and centers on “suspected payment of bribes by companies within the ALSTOM group in the U.K.” According to the release, “[i]t is suspected that bribes have been paid in order to win contracts overseas.”

SFO Director Richard Alderman, in a very DOJ-like statement, noted that “[t]he SFO is committed to tackling corruption” (presumably so long as it does not involve BAE) and that the SFO is “working closely with other criminal justice organizations across the world” and is “taking steps to encourage companies to report any suspicions of corruption, either within their own business or by other companies or individuals.”

ALSTOM (see here) “is a global leader in power generation and rail infrastructure.” One of the company’s major competitors is Siemens. ALSTOM’s shares are listed on the Paris Stock Exchange.

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