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Potpourri

A Friday roundup of recent FCPA events.

An FCPA Sentencing Trend?

As noted in yesterday’s DOJ release (here), two former executives of Willbros International Inc. (a subsidiary of Houston-based Willbros Group Inc.) were sentenced for their roles in a conspiracy to make improper payments to “foreign officials” in Nigeria and Ecuador.

Jason Edward Steph was sentenced to 15 months in prison and Jim Bob Brown was sentenced to 366 days in prison.

For more on the Willbros matter, see here and here.

The DOJ’s sentencing recommendations appear to be sealed, but one can assume, given the “light” sentences, that perhaps the DOJ likely sought sentences greater than those issued by District Court Judge Simeon Lake.

If so, this would appear to continue a trend of judges sentencing FCPA defendants to prison sentences less than those recommended by DOJ.

For instance, in Frederic Bourke case, a case which involved a “massive bribery scheme” according to DOJ, Judge Shira Scheindin rejected the 10-year prison sentence proposed by DOJ and sentenced Bourke to 366 days in prison. (see here). In sentencing Bourke, Judge Scheindin is reported to have said “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crok or a little bit of both.”

With several FCPA sentencing dates on the horizon, this apparent trend will be an issue to watch.

See here for local media coverage regarding the sentences.

Kozeny’s Tan Not in Jeopardy

While Bourke (see here) prepares his appeal, Viktor Kozeny, the alleged master-mind of the scheme to bribe officials in Azerbaijan in connection with privatization of the state-owned oil company, will be staying put in The Bahamas as an appellate court again rejected DOJ’s extradition attempts.

As noted in the recent Bahamian Court of Appeals decision (here), Kozeny, a Czech national, has been living in The Bahamas since 1995 and has not departed the country since 1999.

The opinion notes that there is no dispute “that there was a conspiracy to corrupt the Azeri officials and that such officials were paid money, given gifts and provided shares in certain companies under the control of [Kozeny] without payment; and had certain medical procedures paid for them by [Kozeny].

Even so, the court concluded that while The Bahamas did indeed have a bribery/corruption statute, it applied only to bribes within The Bahamas or given to a Bahamian public officer. Thus, because Kozeny’s conduct would not violate Bahamian law, the appellate court upheld the lower court’s denial of the extradition request.

For additional coverage (see here and here and here).

According to these reports, the decision may be appealed to London’s Privy Council pursuant to Bahamian legal procedure. Kozeny’s U.S. lawyer is quoted as saying “enough is enough” and U.S. prosecutors should finally accept the fact that Kozney, a non-U.S. citizen, could not violate the FCPA as it existed in 1998 – the year in which the bribe scheme perhaps ended – although, as noted in the opinion, the U.S. alleges that the bribe scheme continued into 1999.

Why is this relevant?

Because the FCPA was amended in 1998 to include, among other provisions, 78dd-3 which applies the antibribery provisions to “any person” (i.e. foreigners) “while in the territory of the U.S.” from making use of the mails or any other means or instrumentality of interstate commerce in furtherance of an improper payment.

The SFO Continues to “Step-It-Up”

Today, the U.K. Serious Fraud Office (the functional equivalent of the DOJ) issued a release (here) indicating that a former BAE agent has been charged with “conspiracy to corrupt” for “conspiring with others to give or agree to give corrupt payments […] to unknown officials and other agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria as inducements to secure, or as rewards for having secured, contracts from those governments for the supply of goods to them, namely SAAB/Gripen fighter jets, by BAE Systems Plc.”

For local media coverage of the charges (see here).

With a new Bribery Bill expected in the U.K. by years end, the SFO continues to “step-it-up” (see here for more on the SFO).

Disclosing FCPA Compliance

Public companies dislose FCPA issues all the time. Rarely though do the disclosures concern issues other than internal investigations and potential enforcement actions.

Accordingly, two recent SEC filings caught my eye.

China MediaExpress Holdings, Inc. (a Delaware company) recently disclosed (here) that it:

“[e]ntered into a securities purchase agreement with Starr Investments Cayman II, Inc. Under this agreement, Starr will, subject to various terms and conditions, purchase from the Company 1,000,000 shares of Series A Convertible Preferred Stock and warrants to purchase 1,545,455 shares of the Common Stock of the Company for an aggregate purchase price of US$30,000,000.”

One of the conditions was that the company “shall have adopted a program with respect to compliance with the US Foreign Corrupt Practices Act” and a post-closing covenant obligates the company to “implement a program regarding compliance with the US Foreign Corrupt Practices Act not later than April 30, 2010.”

Cardtronics Inc. (an operator of ATM networks around the world) (here) recently disclosed (here) that:

“On January 25, 2010, the Board of Directors by unanimous vote approved three management proposed modifications to the Company’s Code of Business Conduct and Ethics. The modifications as approved by the Board include: (i) adding a section that addressed compliance with the Foreign Corrupt Practices Act and International Anti-Bribery and Fair Competition Act of 1998.”

Costa Rica Joins the Club

Last, but certainly not least, Costa Rica recently announced a first … the first time a foreign corporation has paid the government damages for corruption.

As noted here, telecom company Alcatel-Lucent recently disclosed a $10 million payment to settle a corruption case in Costa Rica in which it was accused of paying kicbacks to former Costa Rican President Miguel Angel Rodriguez (and others government officials) in return for a 2001 contract worth $149 million.

There has been FCPA/corruption issues on both sides “of the hyphen” as noted here in this recent Main Justice article.

And with that, have a nice weekend.

FCPA … the “Law Version” of Baseball

October is a month for baseball – the playoffs are under way and the World Series is right around the corner. Baseball aficionados are found of their statistics, and with good reason, there are a ton of baseball statistics to digest.

Well, the FCPA is quickly becoming the “law version” of baseball when it comes to statistics. Every few weeks it seems (see here for a prior post) FCPA aficionados have new statistics to digest.

The latest FCPA statistics come courtesy of Fulbright & Jaworski’s 6th Annual Litigation Trends Survey (see here for download).

According to a survey of over 400 corporate counsel in the U.S. and the U.K.:

(1) “the percentage of companies that has engaged outside counsel in the past 12 months to assist with a corruption or bribery investigation (i.e., FCPA and U.K. equivalent) has nearly doubled …” (see p. 37) and;

(2) “the incidence of due diligence for bribery or corruption relating to mergers, acquisitions or other transactions in foreign countries has more than doubled …” (p. 38).

These statistics should come as no surprise to followers of this blog who well know that FCPA compliance is a hot topic given the current aggressive enforcement climate.

Yet, the Fulbright survey (much like the prior Deloitte survey – see here) also shows that very few companies address FCPA risks on a pro-active basis. For instance, even though Fulbright’s survey found that the incidence of FCPA/bribery due diligence in M&A transactions has doubled, the number of companies engaging in such due diligence remains below 20%.

As to the “big picture” issue of whether perceived levels of corruption in a foreign country result in a company doing less business in that country, the survey shows that “only about half as many respondents as last year say their companies, at some point in the past, have decided against doing business in a country due to the perceived degree of local corruption.” (see p. 38). The one exception appears to be in the manufacturing sector “where 39% have made that decision v. 27% last year.”

FCPA Training – “The First Few Minutes”

The A&E Network has a show, “The First 48,” that I watch on occasion (see here). The show follows real-life homicide detectives from around the country during the “first 48 hours” of an investigation as they race against time to find the suspect.

Why is the “first 48 hours” so important? Because the chance of solving the case is apparently reduced by approximately 50% if the detectives do not get a lead in the “first 48 hours.”

So what in the world does this have to do with FCPA training?

Just as the “first 48 hours” are critical to the success of a homicide investigation, the “first few minutes” are critical to the success of FCPA training.

During those critical “first few minutes” one needs to properly set the tone and engage participants on their level.

If one starts off an FCPA training session like this … “today I will be talking about a U.S. law that makes it a crime to bribe foreign government officials to get business” – you just lost a good portion of your audience and, regardless of what you say during the rest of the training sesssion, your training session will not be as successful as it could have been.

Crime? Steve in the second row of the audience has a clean record and wouldn’t hurt a fly. He coaches his son’s soccer team and worships on the weekend. Joe is thinking to himself, “I have never committed a crime and I don’t intend to – what does this FCPA training session have to do with me?”

Government? Melissa is in the first row of the audience. Her job function is internal audit and finance. She has absolutely no contact or communication with government officials and is thinking to herself “does this company even do business with foreign governments – what does this FCPA training session have to do with me?”

Business? Francisco, the logistics manager from outside the U.S., has been flown in for the FCPA training session. He is thinking “business – I’m not a sales and marketing guy, I just make sure our product gets into and out of the country and I occasionally help secure various licenses and permits for the company – what does this FCPA training session have to do with me?”

For reasons described in other postings on this blog, FCPA training is indeed relevant to the Steve, Melissa and Francisco’s in a company.

To avoid having participants’ minds wander during the “first few minutes” of FCPA training, it may be more effective to start off the training session along these lines.

“Today, I will be talking about a U.S. law that applies to all of you – regardless of whether you are in the sales and marketing department, the executive office suite, the finance and audit department, or the logistics department. This law can cover a wide range of payments the company makes, or could make, either directly or indirectly, in doing business or seeking business in foreign markets. Your understanding of this law and how it may relate to your specific job function will best ensure that the company remains compliant with this law and is able to achieve its business objectives.”

HP To Channel Partners – You MUST Complete FCPA Training

Engaging a foreign agent, representative, distributor or channel partner (collectively “channel partners”) can greatly assist a company in increasing foreign sales. After all, these individuals or entities “know the landscape.”

As readers of this blog well know, engaging a foreign channel partner can also be risky business under the FCPA.

In a previous post, I talked about certain minimum elements of an effective FCPA compliance program as typically set forth in DOJ non-prosecution or deferred prosecution agreements (see here).

One of those elements is the “promulgation of a compliance code, standards and procedures designed to reduce the prospect of violations of the FCPA” which “should apply to all directors, officers, and employees and, where necessary and approopriate, outside parties acting on behalf [of a company] in a foreign jurisdiction, including agents, consultants, representatives, distributors, teaming partners, and joint venture partners.”

HP has apparently determined that it is necessary and appropriate for its global network of approximately 155,000 channel partners to complete HP’s regulatory compliance training program or risk losing their partner status (see here).

A HP spokesperson confirmed that “HP is, in fact, working to have all of its global channel partners undergo training regarding government legal and regulatory compliance [including the FCPA] as part of establishing or renewing their Business Development Agreement” with HP.

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