Top Menu

Archive | FCPA Reform

The Significant Differences Among OECD Convention Countries On Legal Person Criminal Liability

Apples to Oranges

Fact # 8 in “Ten Seldom Discussed FCPA Facts That You Need to Know” concerns how it is an apples to oranges comparison to compare Foreign Corrupt Practices Act enforcement to enforcement of similar foreign laws in the 41 other countries that are party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention).

There are a couple reasons for this.

First, the U.S. is rare among OECD Convention countries in resolving alleged FCPA violations via non-prosecution agreements, deferred prosecution agreements, or administrative actions. The common thread in all three resolution vehicles is the absence or practical absence of any judicial scrutiny of FCPA enforcement theories. In contrast, in nearly every other OECD Convention country, law enforcement agencies must do something that may be considered old-fashioned by current U.S. standards and that is prove actual legal violations to someone other than itself. In doing so, these foreign law enforcement agencies have two choices (charge or do not charge) vs. the three choices in the U.S. (charge, do not charge, or use an alternative resolution vehicle).

Another reason, and the topic of this post, is the wide differences among OECD Convention countries when it comes to legal person liability for alleged bribery offenses. As demonstrated in this post, the U.S. appears to be unique among all other 41 OECD Convention countries when it comes to legal person criminal liability for alleged bribery offenses.

Continue Reading

Rep. Perlmutter, Once Again, Introduces FCPA Reform Bill

perlmutter

If nothing else, U.S. Representative Ed Perlmutter (D-CO) is persistent.

In 2009 he introduced the “Foreign Business Bribery Prohibition Act” in the House to no avail. (See here and here for prior posts).

In 2011, he introduced the “Foreign Business Bribery Prohibition Act” in the House to no avail. (See here for the prior post).

Last week, he again introduced the “Foreign Business Bribery Prohibition Act” in the House (H.R. 5438).

What is the “Foreign Business Bribery Prohibition Act?”

Continue Reading

FCPA Flash – A Conversation With Billy Jacobson

Podcast Logo

The FCPA Flash podcast provides in an audio format the same fresh, candid, and informed commentary about the Foreign Corrupt Practices Act and related topics as readers have come to expect from the written posts on FCPA Professor.

This FCPA Flash episode is a conversation with Billy Jacobson. Jacobson has experience with the FCPA from a number of vantage points few can claim.  He has been an Assistant Chief for FCPA enforcement in the DOJ fraud section.  He has been a Senior Vice President, Co-General Counsel and Chief Compliance Officer for Weatherford International Ltd., a large oil and natural gas services company that does business around the world.  Currently, he is a lawyer in private practice at Orrick and was previously a lawyer in private practice at other firms.

In the episode, Jacobson discusses the DOJ’s FCPA “pilot program” announced in April 2016, his policy suggestions for more effective FCPA enforcement, an FCPA compliance defense and what the FCPA might look like if it was passed today (instead of 1977), and whether a business organization should put the DOJ to its burden of proof.

Continue Reading

FIFA – A Beautiful Cesspit Of Corruption?

FIFA

Today’s post is from Professor Bruce Bean (Michigan State University College of Law). Professor Bean, who had a diverse practice career including at various law firms and in-house counsel positions, will be leading a panel discussion about the FIFA bribery scandal at International Law Weekend at Fordham University in New York City on November 7th.  (See here for more information).

*****

FIFA, the organization controlling the world’s most popular sport, “football,” (“soccer” to those in North America), is formally known as Fédération Internationale de Football Association. FIFA is very big business. 209 national and other football associations from Andorra to Russia and the Faroe Islands to Australia make up FIFA membership. See here.  In the past three decades television and other broadcast rights, plus corporate sponsorships by international brands like Nike, Coca Cola and Visa have vastly increased the resources now involved in global football and, in particular, its quadrennial world championship, the FIFA World Cup. Between 2007 to 2014 FIFA had $10 billion in revenues and, as a Swiss registered NGO, it paid no taxes on its $969 million in profits.

Perhaps the greatest player of all time, Brazil’s legendary Pelé, published My Life and the Beautiful Game in 1977. The phrase the “beautiful game” is still synonymous with football.  In 2014, however, a whistleblower leaked “hundreds of millions” of FIFA documents to journalists at the London Sunday Times. Early in 2015 Heidi Blake and Jonathan Calvert published The Ugly Game: The Corruption of FIFA and the Qatari Plot to Buy the World Cup, describing a decidedly not very beautiful game.

In fact, FIFA has a decades-long, undistinguished, undisturbed history of involvement in scandals, bribery and corruption. In 2009, the Financial Action Task Force, the international anti-money laundering organization, released a report describing FIFA’s role in money-laundering, game-fixing, illegal gambling, and more. See here. Despite the great popularity of football in Europe and the rest of the world, and unending reports of FIFA corruption, no significant action had ever been taken against FIFA and its allegedly corrupt officials by a nation where football reigns supreme.  In the United States, international football is a minor sport, although there is a growing number who participate.  Nevertheless, on May 20, 2015 the United States Department of Justice an indictment in the U.S. District Court for the Eastern District of New York.  See here.  A Brooklyn Grand Jury returned the Indictment against nine current and former FIFA officials and five businessmen involved with FIFA. The release of the Indictment was coordinated with simultaneous raids and arrests by U.S. and Swiss officials at FIFA facilities in Miami and FIFA headquarters in Zurich. In addition to 14 defendants specifically charged, the Indictment refers to 25 unnamed co-conspirators.

The Indictment details $150 million in bribes paid on behalf of privately-held sports marketing companies to secure broadcast and marketing rights from FIFA for its various regional competitions and for the FIFA World Cup.  The charges filed include racketeering, conspiracy, wire fraud, money laundering, obstruction of justice, tax evasion, and, in one case, the unlawful procurement of naturalization.

Shortly after the US Department of Justice intruded into the world’s most popular sport by announcing the Indictment, Russia’s President Putin declared “This is another blatant attempt to extend [U.S.] jurisdiction to other states.” See here.  Offering a decidedly differing view, the Economist commented on the fact that it was the United States, where football is not that popular, that had finally taken steps regarding FIFA.  “America has a long history of being tougher on white collar crime and corruption than other countries….   Most of Europe is happy [with the U.S. bringing this action], believing that FIFA has long been a cesspit of corruption in desperate need of fresh faces and reform.”   See here.

Strangely, notwithstanding the fact that the U.S. has both the FCPA and the best record of prosecuting international bribery, there are no FCPA allegations in the entire 161 pages of the Indictment.  Why does this year’s highest profile bribery and corruption case not include a single allegation of an FCPA violation?  See this prior FCPA Professor post. FCPA charges were not eliminated because the Department of Justice suddenly decided to abandon its (over)broad view of the jurisdictional nexus required to apply U.S. law to foreigners.  See here.

Rather, there are no FCPA allegations because the FIFA officials allegedly involved with the bribes the Indictment describes are not “foreign officials” as described in the FCPA.  The FCPA defines the “term “foreign official” [as] any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization….”  The FCPA further provides that “’public international organization’ means any … international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register.”   See here.

The current list of public international organizations includes 80 entities, ranging from the United Nations to the International Fertilizer Development Institute and the Pacific Salmon Commission.  Adding FIFA by Executive Order seems logical and straight-forward.  While FIFA is a private organization, it is responsible to no one and exercises extraordinary power over sovereign nations.  For instance, in October 2015 FIFA banned the Kuwaiti national football team from international play because of a dispute over a Kuwaiti law. See here.  In connection with the FIFA World Cup held in Brazil in 2014, FIFA insisted that Brazil exempt all twelve Brazilian World Cup venues from a 2003 national law prohibiting the sale of alcohol at football matches.  As the FIFA General Secretary announced on a trip to Brazil prior to the commencement of World Cup activities,  “Alcoholic drinks are part of the FIFA World Cup, so we’re going to have them. Excuse me if I sound a bit arrogant but that’s something we won’t negotiate.” See here .

Given the supreme importance of the sport of football in most countries, the long history of scandalous allegations about FIFA and the fact that FIFA is entirely self-governing, responsible to absolutely no one outside itself, there is a strong argument that FIFA should be added to our list of international public organization.

This is not necessarily an easy task, however.

When concerns about corruption possibly related to the Salt Lake City Olympics arose in the late 1990s, three bills were introduced in Congress seeking to bring the International Olympic Committee within the FCPA.  As the FCPA Professor has previously noted, “None of these bills made it out of committee.”  See here.

Given that Congress has been unable to accomplish anything recently, let’s hope the President will act.  He (or perhaps she in the near future) has the authority under 22 USC 288 to designate “public international organizations.”  Adding FIFA to this list will finally bring the ultimate power over international football within the scope of the FCPA.  

Friday Roundup

Roundup2

More on the Yates Memo, scrutiny alerts, survey says, and FCPA reform.  It’s all here in the Friday roundup.

More on the Yates Memo

Once again a private company has marketed a public official to drive attendance to its paid event.

Earlier this week, Assistant Attorney General Leslie Caldwell delivered this speech reiterating various aspects of the “Yates Memo.” Caldwell stated:

“[O]ur focus on individuals stems from the reality that corporations act through human beings, and that justice usually requires identifying those responsible for criminal conduct and holding them personally accountable.  Prosecuting the corporate entity, and imposing a fine and other impersonal conditions, simply is not enough – in most instances – to fully punish and, more importantly, deter corporate misconduct.”

Regarding the cooperation credit aspects of the “Yates Memo,” Caldwell stated:

“We recognize, however, that a company cannot provide what it does not have.  And we understand that some investigations – despite their thoroughness – will not bear fruit.  Where a company truly is unable to identify the culpable individuals following an appropriately tailored and thorough investigation, but provides the government with the relevant facts and otherwise assists us in obtaining evidence, the company will be eligible for cooperation credit.  We will make efforts to credit, not penalize, diligent investigations.  On the flip side, we will carefully scrutinize and test a company’s claims that it could not identify or uncover evidence regarding the culpable individuals, particularly if we are able to do so ourselves.

As I have said before, it is not our intent to outsource our investigation of corporate wrongdoing to companies and their outside advisors.  As in the past, we will not sit idle, waiting for a company to conduct or complete its investigation.  Regardless of a company’s cooperation, federal agents and prosecutors will conduct thorough investigations.  If, through this process, we are able to identify the culpable individuals when the company itself did not do so, as well as evidence that would support the charging and prosecution of those individuals, we will assess whether that evidence truly was unavailable to the company.

We, of course, recognize that we sometimes can obtain evidence that a company cannot.  We often can obtain from third parties evidence that is not available to the company.  Also, we know that a company may not be able to interview former employees who refuse to cooperate in a company investigation.  Those same employees may provide information to us, whether voluntarily or through compulsory process.  Likewise, there are times when, for strategic reasons, we may ask that the company stand down from pursing a particular line of inquiry.  If so, the company will not be penalized for failing to identify facts subsequently discovered by government investigators.”

Caldwell also answered questions after the speech.  It appears that this Q&A was recorded and the same private company put the Q&A behind its paywall.

It’s just plain wrong that a private company is selling the words of public officials. It ought to stop.

Scrutiny Alerts

Transocean

As highlighted here, in 2010 as part of the CustomsGate enforcement actions, Transocean resolved a $20.7 million FCPA enforcement action (involving a DOJ and SEC component) concerning alleged conduct in Nigeria.

Bloomberg reports:

“Transocean Ltd., the world’s largest offshore rig contractor, is being linked for the first time to the corruption probe of Petroleo Brasileiro SA, the state-owned energy giant at the center of Brazil’s biggest corporate scandal. A former executive at Brazil’s state-run oil company has testified to receiving what he says were payments made by someone claiming to be a Transocean agent in exchange for a rig-operation contract from Petrobras.”

SNC-Lavalin

This CBCNews report goes in-depth regarding new allegations in a civil suit concerning SNC-Lavalin. According to the article:

“Top executives for years endorsed bribes and lavish gifts — including a yacht and even prostitutes — to win contracts from Libya’s Gadhafi regime.”

To cement ties, [the complaint] alleges specific SNC executives signed off on or approved numerous favours to help Gadhafi, including:

  • providing SNC staff and hiring university professor as tutors;
  • helping to obtain a Canadian visa;
  • considering appointing Saadi Gadhafi an SNC vice-president;
  • officially sponsoring his Italian Serie A professional soccer team.

One of the largest expenses included the purchase of a Palmer Johnson yacht worth $38 million for Saadi Gadhafi “organized and validated by CFO Laramée and approved by the then CEO Lamarre.” Saadi Gadhafi visited Canada in 2008, and SNC Lavalin picked up the bill — more than $2 million.”

Survey Says

KPMG recently conducted a worldwide online survey of corporate risk leaders to find out the strengths and weaknesses of their companies’ programs to combat bribery and corruption.  According to the survey responses:

“There is a sharp increase in the proportion of respondents who say they are highly challenged by the issue of Anti-Bribery Compliance (ABC) compared with a survey KPMG conducted four years earlier.

As companies continue to globalize, management of third parties poses the greatest challenge in executing ABC programs.

Despite the difficulty of monitoring their business dealings with third parties, more than one third of the respondents do not formally identify high-risk third parties. More than half of those respondents with right to-audit clauses over third parties have not exercised the right.

ABC considerations are accorded too low a priority by companies preparing to acquire, or merge with, other corporations across borders.

Respondents complain they lack the resources to manage ABC risk.

A top-down risk assessment would help companies set priorities, but executives admit that an ABC risk assessment is one of their companies’ top challenges.

Data analytics is an increasingly important and cost-effective tool to assess ABC controls. Yet only a quarter of respondents use data analysis to identify violations and, of those that do so, less than half continuously monitor data to spot potential violations.”

FCPA Reform

The U.S. Chamber of Commerce recently released this document outlining its policy priorities. Included in the lengthy document was the following:  “work to reform the Foreign Corrupt Practices Act by supporting changes to enforcement practices.”

*****

A good weekend to all.

 

Powered by WordPress. Designed by WooThemes