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Judicial Decision

Judicial opinions construing the Foreign Corrupt Practices Act are rare. Thus, when they occur (even if only a trial court opinion on a pre-trial motion to dismiss) FCPA judicial opinions are worthy of note.

As highlighted in this prior post, in January 2015 the DOJ criminally charged Dmitrij Harder, the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co., for allegedly bribing an official with the European Bank for Reconstruction and Development (“EBRD”).

The enforcement action was notable in that it invoked the rarely used “public international organization” prong of the FCPA’s “foreign official” element.

As highlighted here, in October 2015, Harder filed this motion to dismiss:  In summary fashion it stated:

“The Indictment fails to accurately allege the elements of a violation under the Foreign Corrupt Practices Act (“FCPA”) – it is devoid of any allegations that Mr. Harder paid an allegedly corrupt payment to a “foreign official,” fails to state required allegations when an allegedly corrupt payment is made to a third party, and impermissibly substitutes “public international organization” in the charging language against Mr. Harder. The FCPA counts should also be dismissed because the provision permitting the President to expand the term “foreign official” by identifying “public international organizations” as authorized by 15 U.S.C. § 78dd-2(h)(2)(B) is unconstitutional.”

In an unsurprising development given the procedural posture of the motion, last week Judge Paul Diamond (E.D. Pa.) denied the motion. It is believed to be the first judicial decision in FCPA history construing the rarely implicated “public international organization” prong of the FCPA’s “foreign official” definition.

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The FCPA Need Not Be The Grinch That Steals The Holiday Spirit

Grinch

In running FCPA Professor, I have conducted daily searches six years running for Foreign Corrupt Practices Act content. The flow of FCPA and related information is often predictable at certain times of year.

This time of year, FCPA Inc. and others look for fresh angles regarding FCPA topics.

So as the holidays approach, it was not surprising to find articles discussing the FCPA risks of holiday gift giving. (see here “Don’t Let a Season of Giving Turn Corrupt;”  here “Tis the Season to Revisit Gift Giving Policies and Procedures;” here “Monitoring Gifting Policies During the Holiday Season;” here “Giving Corporate Holiday Gifts Without the Bribery Risk;” here “Giving the Perfect Gift: 4 Tips for Avoiding Compliance Risks This Season;” here “Corporate Holiday Gift Giving and Anti-Corruption Compliance.”).

Yes, certain FCPA enforcement actions have involved gift giving, including in connection with holidays and festivals – such as Chinese New Year and India’s Diwali Festival.

However, as previously highlighted in this post (a review of the book “Suspicious Gifts“), throughout human history gifts have been a respected and legitimate form of gratitude and generosity, serving as a social glue important to any cohesive society. Yet, and invoking a concept from the book, in this current era of anti-corruption enforcement, everything it seems is viewed through a “bribery gaze.”

  • When you want to be generous – it could be bribery!
  • When you want to be friendly – it could be bribery!
  • When you allow yourself to be invited – it could be a bribe!
  • When you accept a present or prize – it could be a bribe!

This “bribery gaze” has social and public policy consequences. As the author of the book argued:

“Campaigns to eliminate these gift exchanges are at the same time campaigns to restrict the gamut of courtesy or ritual exchanges. The manifestations of courtesy, gratitude, and social bonds, which are so important as social glue in any cohesive society, are not just called into question, but criminalized.”

This holiday season ought not be gift-less because of the FCPA or any other similar law.

Indeed, as the DOJ/SEC issued FCPA Guidance states:

“A small gift or token of esteem or gratitude is often an appropriate way for business people to display respect for each other. Some hallmarks of appropriate gift-giving are when the gift is given openly and transparently, properly recorded in the giver’s books and records, provided only to reflect esteem or gratitude, and permitted under local law.  […] The FCPA does not prohibit gift-giving. Rather, just like its domestic bribery counterparts, the FCPA prohibits the payments of bribes, including those disguised as gifts.”

My own two cents on the FCPA risks of gift giving around the holidays is as follows.

During this season of giving, I think it would be wise for companies not to view everything through a bribery gaze, but with a sense of practicality. The corporate community – which is frequently bombarded with doomsday scenario after scenario by FCPA Inc. – sometimes needs to take a step back to realize that in order to violate the FCPA’s anti-bribery provisions there has to be corrupt intent. While it may seem a bit counterintuitive, gift giving during the holidays can actually be less risky because it is the holiday season and gestures of good will are common.  Companies should be more concerned with a gift that occurs outside the normal periods of gift giving.

Like A Kid In A Candy Store

Kid in Candy Store

Like every year around this time, I feel like a kid in a candy store given the number of FCPA year in reviews hitting my inbox.  This post highlights various FCPA or related publications that caught my eye.

Reading the below publications is recommended and should find their way to your reading stack.  However, be warned.  The divergent enforcement statistics contained in them (a result of various creative counting methods) are likely to make you dizzy at times and as to certain issues.

Given the increase in FCPA Inc. statistical information and the growing interest in empirical FCPA-related research, I again highlight the need for an FCPA lingua franca (see here for the prior post), including adoption of the “core” approach to FCPA enforcement statistics (see here for the prior post), an approach endorsed by even the DOJ (see here), as well as commonly used by others outside the FCPA context (see here)

Debevoise & Plimpton

The firm’s monthly FCPA Update is consistently a quality read.  The most recent issue is a year in review and the following caught my eye.

“The government’s pressure on companies to assist in investigating and prosecuting individuals raises significant challenges for in-house legal and compliance personnel as they work to navigate the potentially conflicting interests in anti-bribery compliance and internal investigations.  This pressure has produced legitimate concerns that a failure to self-report could, in and of itself, be met with, or be the cause for imposing, monetary penalties.  Although the U.S. Sentencing Guidelines provide for a reduction in fines for a heightened level of cooperation, outside of a narrow range of arenas (such as where duties to self-report are imposed on U.S. government contractors), the government generally lacks any statutory basis for imposing financial penalties against companies for the failure to self-report potential misconduct.  Since there is no legal obligation to self-report, it is our view that the government should exercise caution when discussing bases for monetary penalties and should rely solely on laws passed by Congress and the Sentencing Guidelines provisions that properly draw their authority from a duly-passed statute.  It would be a disturbing trend indeed were the government to begin to impose monetary penalties for failing to self-report where there is no legal obligation to do so.  The actions by U.S. regulators in the coming year will continue to warrant close scrutiny …”.

Gibson Dunn

The firm’s Year-End FCPA Update is a quality read year after year.  It begins as follows.

“Within the last decade, Foreign Corrupt Practices Act (“FCPA”) enforcement has become a juggernaut of U.S. enforcement agencies.  Ten years ago, we published our first report on the state-of-play in FCPA enforcement.  Although prosecutions were at the time quite modest–our first update noted only five enforcement actions in 2004–we observed an upward trend in disclosed investigations and advised our readership that enhanced government attention to the then-underutilized statute was likely.  From the elevated plateau of 2015, we stand by our prediction. In addition to the traditional calendar-year observations of our year-end updates, this tenth-anniversary edition looks back and analyzes five trends in FCPA enforcement we have observed over the last decade.”

The update flushes out the following interesting tidbit from the Bio-Rad enforcement action.

“[A noteworthy aspect] of the Bio-Rad settlement is that it is the first DOJ FCPA corporate settlement agreement to require executives to certify, prior to the end of the [post-enforcement action] reporting period, that the company has met its disclosure obligations.  As noted above in the Ten-Year Trend section, post-resolution reporting obligations, including an affirmative obligation to disclose new misconduct, have long been a common feature of FCPA resolutions.  But Bio-Rad’s is the first agreement to insert a provision requiring that prior to the conclusion of the supervisory period, the company CEO and CFO “certify to [DOJ] that the Company has met its disclosure obligations,” subject to penalties under 18 U.S.C. § 1001.”

Gibson Dunn also released (here) its always informative “Year-End Update on Corporate Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs).”  The update:  “(1) summarizes highlights from the DPAs and NPAs of 2014; (2) discusses several post settlement considerations, including protections for independent monitor work product and post settlementterm revisions; (3) analyzes a potential trend in the judicial oversight of DPAs; and(4) addresses recent developments in the United Kingdom, where the Deferred ProsecutionAgreements Code of Practice recently took effect.

According to the Update, there were 30 NPAs or DPAs entered into by the DOJ (29) or SEC (1) in 2014. (However, this figure includes two in the Alstom action and two in the HP action.  Thus, there were 27 unique instances of the DOJ using an NPA or DPA in 2014.  Of the 27 unique instances, 5 (19%) were in FCPA enforcement actions and the FCPA was the single largest source of NPAs and DPAs in 2014 in terms of specific statutory allegation.

The Gibson Dunn updates provides a thorough review of two pending cases in which federal court judges are wrestling with the issue of whether to approve of a DPA agreed to be the DOJ and a company.

Shearman & Sterling

The firm’s “Recent Trends and Patterns in Enforcement of the FCPA” is also another quality read year-after-year.

Of note from the publication:

“[W]hat may be the most interesting facet of the SEC’s current enforcement approach is the Commission’s shift in the latter half of 2014 in Timms to settle charges against individuals through administrative proceedings. This may come as no surprise, as the SEC has had difficulty successfully prosecuting individuals for violating the FCPA in previous years. Most recently, in early 2014, the SEC suffered a pair of setbacks in its enforcement actions against executives from Nobel Corp. and Magyar Telekom […] before the U.S. courts. Other cases, such as SEC v. Sharef (the SEC’s case against the Siemens executives) and SEC v. Clarke (which is currently the subject of a pending stay), have lingered in the S.D.N.Y. for significant periods of time without resolution.”

[…]

Obtain or Retain Business

Following the announcement of the SEC’s settlement with Layne Christensen over improper payments made to foreign officials in various African countries, we noted that the SEC’s approach to the “obtaining or retaining business” test in the FCPA appeared at odds with the Fifth Circuit’s 2007 opinion in United States v. Kay. Specifically, in Kay, the DOJ charged two executives of American Rice, Inc. for engaging in a scheme to pay Haitian customs officials bribes in exchange for accepting false shipping documents that under-reported the amount of rice onboard ocean-going barges. The result of the false shipping documents was to reduce the amount of customs duties and sales taxes that American Rice would have otherwise been forced to pay. While the court in Kay dismissed the defendants’ argument that the FCPA was only intended to cover bribes intended for “the award or renewal of contracts,” holding instead that the payment of bribes in exchange for reduced customs duties and sales taxes, the court added that in order to violate the FCPA, the prosecution must show that the reduced customs duties and sales taxes were in turned used “to assist in obtaining or retaining business” per the language of the FCPA. In short, the court in Kay held that while bribes paid exchange for the reduction of duties or taxes could violate the FCPA, they were not per se violations of the statue, and that the Department would have to show how the benefit derived from the reduced duties and taxes were used to obtain or retain business.

Fast forwarding to 2014 in Layne Christensen, the Houston-based global water management, construction, and drilling company, was forced to pay over $5 million in sanctions despite the fact that the SEC’s cease-and-desist order pleaded facts inconsistent with the Fifth Circuit’s opinion in Kay. In its discussion of Layne Christensen’s alleged violation of the FCPA’s anti-bribery provisions, the SEC only alleged that the company paid bribes to foreign officials in multiple African countries “in order to, among other things, obtain favorable tax treatment, customs clearance for its equipment, and a reduction of customs duties.” The SEC’s cease-and-desist made no reference to how these reduced costs were used to obtain or retain business, rendering the SEC’s charges facially deficient.

Layne Christensen is not, however, the first time the DOJ and SEC have brought similar FCPA charges against companies without alleging how reduced taxes and customs duties were used to obtain or retain business. In the Panalpina cases from 2010, a series of enforcement actions against various international oil and gas companies, the DOJ and SEC treated the exchange of bribes for reduced taxes and customs duties as per se violations of the FCPA. Even in the 2012 FCPA Guide the enforcement agencies make clear that “bribe payments made to secure favorable tax treatment, or to reduce or eliminate customs duties . . . satisfy the business purpose test.” Whether the DOJ’s and SEC’s approach to the “obtaining or retaining business” element of the FCPA stems from a misinterpretation of Kay or is an attempt to challenge the Fifth Circuit’s opinion, remains to be seen. Nevertheless, we are troubled by the lack of clarity in the DOJ’s and SEC’s approach as it ultimately disadvantages defendants who may otherwise be pressured to settle charges over conduct which does not necessarily constitute a crime.”

Parent/Subsidiary Liability

As noted in previous Trends & Patterns, over the past several years the SEC has engaged in the disconcerting practice of charging parent companies with anti-bribery violations based on the corrupt payments of their subsidiaries. In short, the SEC has adopted the position that corporate parents are subject to strict criminal liability not only for books & records violations (since it is the parent’s books ultimately at issue) but also for bribery violations by their subsidiaries regardless of whether the parent had any involvement or even knowledge of the subsidiaries’ illegal conduct. The SEC has subsequently continued this approach in Alcoa and Bio-Rad.

According to the charging documents, officials at two Alcoa subsidiaries arranged for various bribe payments to be made to Bahraini officials through the use of a consultant. The SEC acknowledged that there were “no findings that an officer, director or employee of Alcoa knowingly engaged in the bribe scheme” but it still charged the parent company with anti-bribery violations on the grounds that the subsidiary responsible for the bribery scheme was an agent of Alcoa at the time. The Commission’s tact is curious considering that it charged Alcoa with books and records and internal controls violations as well, making anti-bribery charges seemingly unnecessary. Moreover, it is noteworthy that in the parallel criminal action, the DOJ elected to directly charge Alcoa’s subsidiary with violations of the FCPA’s anti-bribery provisions instead of Alcoa’s corporate parent.

In Bio-Rad, the SEC’s cease-and-desist order alleged that the corporate parent was liable for violations of the FCPA’s anti-bribery provisions committed by the company’s corporate subsidiary in Russia, Vietnam, and Thailand. In order to impute the alleged wrongful conduct upon the corporate parent, the SEC relied heavily upon corporate officials’ willful blindness to a number of red flags arising from the alleged schemes in Russia, Vietnam, and Thailand. Nevertheless, even if certain officials from Bio-Rad’s corporate parent were aware of the bribery scheme, the SEC’s charges ignore the black-letter rule that in order to find a corporate parent liable for the acts of a subsidiary, it must first “pierce the corporate veil,” showing that the parent operated the subsidiary as an alter ego and paid no attention to the corporate form.

It is also interesting that much like the case of Alcoa, the DOJ’s criminal charges against Bio-Rad are notably distinct from the SEC’s. Specifically, while the DOJ charged Bio-Rad’s corporate parent with violating the FCPA, the Department elected to only charge the company with violations of the FCPA’s book-and-records and internal controls provisions, not the anti-bribery provisions like the SEC.

The SEC’s charging decisions in Alcoa and Bio-Rad are even more peculiar given the fact that the SEC took an entirely different approach in HP, Bruker, and Avon, where despite alleging largely analogous fact patterns, the SEC charged the parent companies in HP, Bruker, and Avon with violations of the FCPA’s books-and-records and internal controls provisions only. Much like Alcoa and Bio-Rad, all of the relevant acts of bribery in HP, Bruker, and Avon were committed by the company’s subsidiaries in Mexico, Poland, Russia (HP), and China (Bruker and Avon). The SEC’s decisions in Alcoa, Bio-Rad, HP, Bruker, and Avon to charge parent companies involved in largely analogous fact patterns with different FCPA violations raise ongoing questions as to consistency and predictability of the SEC’s approach to parent-subsidiary liability.”

WilmerHale

The firm’s FCPA alert states regarding the travel and entertainment enforcement actions from 2014.

“While most cases involving travel and entertainment historically have involved other allegedly corrupt conduct, it was notable this year that travel and entertainment was the focus of the conduct in some cases. … [T]his suggests that travel and entertainment should continue to be a focus of corporate compliance programs. Unfortunately, the settled cases give little guidance as to some of the gray areas that challenge compliance officers, such as the appropriate dollar amounts for business meals, or how much ancillary leisure activity is acceptable in the context of a business event. Perhaps most interesting about the recent cases is that the government’s charging papers in some cases seem to lack any direct evidence that the benefits provided were provided as a quid pro quo to obtain a specific favorable decision from the official. The cases seem to simply conclude that if there were benefits provided to a government decision maker, the benefits must have been improper. Whether such allegations would be sufficient to satisfy the FCPA’s “corruptly” standard in litigation remains to be seen.”

Regarding the lack of transparency in FCPA enforcement, the alert states:

“[T]here still remains legitimate debate about whether the amount of credit that companies receive for voluntary disclosures is sufficient, especially when compared to companies that cooperate but do not self-report. One important factor that is often left out of the debate on this topic is the “credit” that is not visible in the public settlement documents but is nonetheless often informally received by companies that voluntarily disclose and/or cooperate. While the discussion above focuses on Sentencing Guidelines calculations and percentages of credit off the Sentencing Guidelines ranges, the discussion does not take into account decisions made by the government in settlement discussions that affect the ranges that are not seen in the settlement documents. For example, in settlement negotiations, the government might determine not to include certain transactions when calculating the gains obtained by the corporate defendant—perhaps because the evidence might have been weaker, or because jurisdiction might have been questionable, or because the settlement may have focused on transactions from a certain time period, or because of other factors. Thus, while the settlement documents might suggest a 20% discount from the bottom of the Sentencing Guidelines range, that range could have been higher had other transactions been included. These determinations are not transparent, but, anecdotally, there is some basis to believe that companies that voluntarily disclose and/or cooperate are more likely to get the benefit of the doubt as the sausage is being made. Given the lack of transparency in this area, the debates on this topic are likely to continue for a long time.”

Covington & Burling

The firm’s “Trends and Developments in Anti-Corruption Enforcement” is here.  Among other things, it states:

“As we have noted in the past, U.S. enforcement authorities have a taken creative and aggressive legal positions in pursuing FCPA cases. This past year saw a continuation of that trend, most notably with the SEC staking out an expansive position on the FCPA’s reach via agency theory.

Aggressive Use of Agency Theory. 2014 saw the SEC make use of a potentially far reaching agency theory to hold a parent company liable for the conduct of subsidiaries. In the Alcoa settlement, the SEC made clear that it had made “no findings that an officer, director or employee of [corporate parent Alcoa Inc.] knowingly engaged in the bribe scheme” at issue. Instead, its theory of liability was that the parent company “violated Section 30A of the Exchange Act by reason of its agents, including subsidiaries [Alcoa World Aluminum and Alcoa of Australia], indirectly paying bribes to foreign officials in Bahrain in order to obtain or retain business.” This agency theory was premised on the parent company’s alleged control over the business segment and subsidiaries where the conduct at issue allegedly occurred. Notably, the SEC did not rely on any evidence that parent-company personnel had direct involvement in or control over the alleged bribery scheme. Instead, the SEC pointed only to general indicia of corporate control that are the normal incidents of majority stock ownership (e.g., that Alcoa appointed the majority of seats on the business unit’s “Strategic Council,” transferred employees between itself and one of the relevant subsidiaries, and “set the business and financial goals” for the business segment). This is notable, in our view, because it is arguably at odds with DOJ and the SEC’s statement in the FCPA Resource Guide that they “evaluate the parent’s control — including the parent’s knowledge and direction of the subsidiary’s actions, both generally and in the context of the specific transaction — when evaluating whether a subsidiary is an agent of the parent.” (Emphasis added.) In the Alcoa matter, the SEC seemed to focus solely on “general” control; it did not allege any facts to support parent-level “knowledge and direction . . . in the context of the specific transaction.” This potentially expansive use of agency theory underscores the need for parent companies who are subject to FCPA jurisdiction to be attentive to corruption issues and compliance in all their corporate subsidiaries, even entities over which they do not exercise day-to-day managerial control.”

Miller & Chevalier

The firm’s FCPA Winter Review 2015 is here.

Among other useful information is a chart comparing the top ten FCPA enforcement actions (in terms of settlement amounts) as of 2007 compared to 2014 and a chart comparing SEC administrative proceedings and court filed complaints since 2005.

Davis Polk

The firm recently hosted a webinar titled “FCPA: 2014 Year-End Review of Trends and Global Enforcement Actions.”  The webcast and presentation slides are available here.

Jones Day

The firm’s FCPA Year in Review 2014 is here.

Other Items for the Reading Stack

From the FCPAmericas Blog – “Top FCPA Enforcement Trends to Expect in 2015.”

From the Corruption, Crime & Compliance Blog – “FCPA Year in Review 2014,” and FCPA Predictions for 2015.”

The FCPA Need Not Be The Grinch That Steals The Holiday Spirit

Grinch

Media sources (as well as FCPA practitioners) are always looking for fresh angles regarding Foreign Corrupt Practices Act topics.  So as the holidays approach, it was not surprising to find articles (here “Making a List and Checking It Twice … Compliance Tips for Holiday Business Gifts” and here “7 Potential FCPA Pitfalls For the Holiday Season”) discussing the FCPA risks of holiday gift giving.

Yes, certain FCPA enforcement actions have involved gift giving, including in connection with holidays and festivals – such as Chinese New Year and India’s Diwali Festival.

However, as previously highlighted in this post (a review of the book “Suspicious Gifts“), throughout human history, gifts have been a respected and legitimate form of gratitude and generosity, serving as a social glue important to any cohesive society. However, and invoking a concept from the book, in this new era of anti-corruption enforcement, everything it seems is viewed through a “bribery gaze.”

  • When you want to be generous – it could be bribery!
  • When you want to be friendly – it could be bribery!
  • When you allow yourself to be invited – it could be a bribe!
  • When you accept a present or prize – it could be a bribe!

This “bribery gaze” has social and public policy consequences. As the author of the book argued:

“Campaigns to eliminate these gift exchanges are at the same time campaigns to restrict the gamut of courtesy or ritual exchanges. The manifestations of courtesy, gratitude, and social bonds, which are so important as social glue in any cohesive society, are not just called into question, but criminalized.”

The holiday season ought not be gift-less because of the FCPA or any other similar law.

Indeed, as the DOJ/SEC issued FCPA Guidance states:

“A small gift or token of esteem or gratitude is often an appropriate way for business people to display respect for each other. Some hallmarks of appropriate gift-giving are when the gift is given openly and transparently, properly recorded in the giver’s books and records, provided only to reflect esteem or gratitude, and permitted under local law.  […] The FCPA does not prohibit gift-giving. Rather, just like its domestic bribery counterparts, the FCPA prohibits the payments of bribes, including those disguised as gifts.”

My own two cents on the FCPA risks of gift giving around the holidays is as follows.

During this upcoming season of giving, I think it would be wise for companies not to view everything through a bribery gaze, but with a sense of practicality. The corporate community – which is frequently bombarded with doomsday scenario after scenario by FCPA Inc. – sometimes needs to take a step back to realize that in order to violate the FCPA’s anti-bribery provisions there has to be corrupt intent. While it may seem a bit counterintuitive, gift giving during the holidays can actually be less risky because it is the holiday season and gestures of good will are common.  Companies should be more concerned with a gift that occurs outside the normal periods of gift giving.

“I Have Such Trouble Understanding The Facilitating Payment Exception”

Southern District of Texas Judge Keith P. Ellison.  HANDOUT.

In the minds of some, the Foreign Corrupt Practices Act is a clear statute with no ambiguity whatsoever (see here for a prior post on the same subject).  To such commentators, it’s easy –  just don’t bribe.  (The irony of course is that if it was so easy, then why do many of these same commentators devote their practice to FCPA compliance?).

To suggest that the FCPA is an ambiguous statute has been met by claims that such statements are nothing more than pandering to a particular audience.

Well, federal court judges are apparently pandering to a particular audience because if there is one common thread in many FCPA judicial decisions, it is judges finding various FCPA provisions vague or ambiguous.  (See the above prior post for numerous examples).

The latest example occurred in SEC v. Jackson & Ruehlen (the individual enforcement action the SEC settled on the eve of trial this past summer in what could only credibly be called an SEC defeat – see here and here for prior posts).

As to relevant background, in a pre-trial ruling (see here for the prior post), Judge Keith Ellisson (S.D.Tex.) ruled that the SEC had the burden of negating application of the FCPA’s facilitating payment exception.  As noted in this prior post, the enforcement action focused on alleged payments in connection with temporary importation permits in Nigeria for oil rigs.

Deep within the pre-trial transcript (see here), one will find Judge Ellison engage in the following exchange with SEC counsel.

JUDGE:  I have such trouble understanding the facilitating payment exception.  […] I mean, it almost swallows the rest of the statute.  And I know it’s in the legislative history that these, I think reference is made to grease payments, somehow to grease the skids.  How do I separate those payments, which do seem to be contemplated, from the payments that [the SEC] alleges were made in this case, which you think are squarely within the FCPA’s prohibition?  […] And I don’t understand it.  Whether we make the distinction based on size of payments, regularity of payments, purpose of payments, nature of the — of the favorable conduct elicited.  I just really struggle with it.”

SEC:  […] For the — for the exception to apply, the SEC’s position is that two elements must be met.  There must be a purpose to expedite an act and the act must be a routine government action within the meaning of the statute.

JUDGE:  Both those could apply to the temporary — to the temporary import, though, couldn’t it?

SEC:  Well, in what way, Your Honor?

JUDGE: Well, because it purpose was to expedite an act and it was a routine government action.  These import permits were granted all the time.

Elsewhere in the transcript, one will find Judge Ellison expressing concern about the SEC’s position that the defendants violated the FCPA’s books and records provisions because Noble Corp. booked the alleged bribe payments in a special facilitating payments account based on the good faith belief that they were indeed facilitating payments.  The following exchange occurred.

JUDGE:  You also argue that recording the payments as facilitating payments in the company’s book is essentially duplicative or duplicitous.  Would payments to government officials, just say to that, like so, would that be accessible?

SEC:  Your honor, these payments were recorded as a particular kind of payment, a lawful payment.  A payment that meets a legal exception to liability under the FCPA.  As this Court recognized in the motion to dismiss opinion, calling a payment something that it is not is false.

JUDGE: What would they have needed to call it?  That’s what I am asking?

SEC:  Payments to government official — I can’t speculate all the things that it possibly could have been called, but payments to government officials may have been – may have been adequate.  However, they weren’t designated payments to government officials in this case …

Elsewhere in the transcript, the SEC acknowledged that the facilitating payments exception is “a difficult area to understand, largely because of the wording of the exception and the statute overall.”  The following exchange occurred.

SEC: This is how we conceptualize it.  And I think it’s — and it’s clearly evidenced and its manifest in the words of the statute and the exception.  Now, the facilitating payment exception is exactly that. It’s an exception for government actions that are routinely or ordinarily carried out. And you’ll see in the — in the exception itself, a number of examples that Congress set out as — as possible facilitating payment — facilitating payments and government — routine government actions. […]

JUDGE: In your mind, does “routine” mean frequent or does “routine” mean automatic or does “routine” mean both?

SEC: I think that’s a fact issue, Your Honor. I think there could be situations where a routine governmental action can be something automatic. I think there can be situations where a — a routine governmental action is something that is issued or granted by a government entity or official routinely, so frequently, or without exception.

JUDGE: Well, I’m trying to identify which of the those things.  I mean, what if it were routine but not consistent; or automatic but not routine, it only happened once every five years?

SEC:  […] Now, what’s important here is that the SEC posits whether a particular action is a routine governmental action is an objective inquiry.  You just take a look at the Nigerian law that governs this particular action.  If the Nigerian law says that it’s nondiscretionary, that’s the end of the inquiry.

JUDGE: Well, that’s what I trying to identify.  The fact that it’s nondiscretionary.  Do you think — do you agree with that?

SEC: No, Your Honor.

JUDGE:  Tell me what the lynchpin is?

SEC: The lynchpin is, again, it’s a fact-intensive inquiry.  What did the defendants – all right – what did the defendants believe was the action here?  And the action here was in — again, tying to the specific — specific facts of this case, the action was applying for temporary import authorizations that had, prior to the relevant period in this case, had been routinely granted.

JUDGE: Meaning — meaning consistently?

SEC: Consistently, to our — to our knowledge, without exception.

JUDGE:  Consistently and frequently?

SEC:  Yes

JUDGE:  Okay.

SEC:  Every — every time an application was put in, they received the authorization.

JUDGE: And those — to the best of your knowledge were those applications put in without — without any further monetary inducement or were they accompanied by monetary inducement?

SEC:  Accompanied by monetary inducement; hence, the payment itself, the facilitating payment, for a government action that was routinely rendered.

JUDGE: So the government would grant these routinely if it was paid?

SEC:  Well, Your Honor, we don’t know whether — we don’t necessarily know whether they were — whether they would have been granted if — if a payment had — payment had not been made, but what — what matters here is the payments were made —

JUDGE:  Isn’t that a big difference, though?  If it would have been granted anyway, without a payment being made, isn’t that signficant?

SEC:  I don’t think so, Your Honor.

In short, while many FCPA commentators continue to believe that the FCPA is a simple, straight-forward statute (and that claims of vagueness and ambiguity are the stuff of sugar plums and tinkerbells), the above example is just the latest of many (and please do visit this prior post for the numerous other examples) where federal court judges remain confused about various aspects of the FCPA.

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