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DOJ Announces Criminal Charges And Plea Agreements In Connection With Mexican Aviation Bribery Scheme

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This recent post highlighted the many Foreign Corrupt Practices Act enforcement actions involving the aviation industry.

Add another to this long list as yesterday, the DOJ announced that criminal charges “were unsealed against six individuals, all of whom have pleaded guilty for their involvement in schemes to bribe Mexican officials in order to secure aircraft maintenance and repair contracts with government-owned and controlled entities, and two for conspiring to launder the proceeds of the schemes.”

The criminal FCPA conspiracy charges were against four individuals: Daniel Perez, Kamta Ramnarine, Victor Valdez, and Douglas Ray.

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The DOJ Uses Its Full Toolbox

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The Foreign Corrupt Practices Act Guidance rightly notes that “the FCPA does not cover every type of bribe paid around the world for every purpose.”

Among other limitations, the FCPA’s anti-bribery provisions require the existence of a “foreign official” and the FCPA’s books and records and internal control provisions apply only to issuers.

Moreover, the FCPA is a supply-side statute and does not capture the demand-side of bribery (i.e. the foreign officials who received the bribes, see U.S. v. Castle).

Two enforcement actions announced by the DOJ earlier this week demonstrate these points and how the U.S. government’s fight against bribery and corruption is broader than just the FCPA.

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PDVSA Petition Seeking “Victim” Status Is An Uphill Climb

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Last week, Bariven S.A. (a subsidiary of Petroleos de Venezuela, S.A. (“PDVSA”) – the state-owned oil company of the Venezuela) made this filing in the DOJ’s Foreign Corrupt Practices Act prosecution against Enrique Rincon Fernandez, Abraham Jose Shiera Bastidas, Moises Abraham Millan Escobar and related prosecution against others moving “the Court to recognize Bariven’s rights as a victim and enter an order of restitution requiring [the defendants] jointly and severally, to make restitution [to the tune of $600 million] to Bariven as a victim of the offenses to which these Defendants have plead guilty.”

If this general issue sounds familiar, congratulations you have a good memory.

As highlighted in prior posts here, here, and here, Instituto Constarricense de Electricidad (“ICE”) of Costa Rica tried the same thing in connection with the Alcatel-Lucent FCPA enforcement action and its petition received a chilly reception by both the trial court the 11th Circuit.

PDVSA’s petition likewise faces an uphill climb.

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Olympus Latin America Pays $22.8 Million In Latest FCPA Enforcement Action To Allege That Health Care Professionals Are “Foreign Officials”

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Earlier this week, the DOJ announced (as part of a much larger enforcement action) a Foreign Corrupt Practices Act action against Olympus Latin American Inc. (OLA), a Miami-headquartered company that distributes medical imaging equipment in the Caribbean, Central America, and South America for Olympus Corporation (a Japanese company).

This post highlights the OLA enforcement action (the latest FCPA enforcement based on the theory that certain health care professionals are “foreign officials” under the FCPA) in which the DOJ charged the company in this criminal complaint with conspiring to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions. The charges were resolved via this deferred prosecution agreement in which OLA agreed to pay $22.8 million.

According to the charging documents, from 2006 to 2011 OLA provided approximately $3 million in “hundreds of unlawful payments” to publicly employed healthcare professionals in Brazil, Bolivia, Colombia, Argentina, Mexico, and Costa Rica to “induce the purchase of Olympus products, influence public tenders, or prevent public institutions from purchasing or converting to the technology of competitors.” According to the charging documents, OLA recognized approximately $7.5 million in profits as a result of the alleged unlawful payments.

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Supreme Court To Address The Meaning Of “Official Action”

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The core of the FCPA’s anti-bribery provisions prohibit the direct or indirect payment or offering of money or anything of value to a “foreign official” for purposes of: (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality in order to assist the payor in obtaining or retaining business for or with, or directing business to, any person. (emphasis added).

While not a Foreign Corrupt Practices Act case, in a related development the U.S. Supreme Court recently agreed to hear former Virginia Governor Robert McDonnell’s criminal appeal.

The Supreme Court agreed to hear the following question presented as stated in the petition.

“The question presented is whether ‘official action’ is limited to exercising actual governmental power, threatening to exercise such power, or pressuring others to exercise such power, and whether the jury must be so instructed.”

As stated elsewhere in the petition:

“[McDonnell] was convicted on federal corruption charges based on the theory that he accepted otherwise-lawful gifts and loans in exchange for taking five supposedly “official acts.” Yet those five acts—as alleged in the indictment, argued to the jury, and relied on by the courts below—were limited to routine political courtesies: arranging meetings, asking questions, and attending events. There is no dispute that Gov. McDonnell never exercised any governmental power on behalf of his benefactor, promised to do so, or pressured others to do so.

[…]

The courts below nonetheless reasoned that arranging a meeting to discuss a policy issue, or inquiring about it, is itself “official” action “on” that issue—even if the official never directs any substantive decision.

[…]

This is the first time in our history that a public official has been convicted of corruption despite never agreeing to put a thumb on the scales of any government decision. Officials routinely arrange meetings for donors, take their calls, and politely listen to their ideas. By affirming the convictions and endorsing the instructions below, the Fourth Circuit construed “official action” so broadly that it made these commonplace actions federal felonies whenever a jury infers a link to the donor’s contributions.”

In recent years the Supreme Court has issued several opinions in non-FCPA cases, yet in those opinions addressed issues that touch upon FCPA enforcement. (See here for discussion of McCutcheon v. FEC and Daimler A.G. v. Bauman. See here for discussion of SEC v. Gabelli and Kiobel v. Royal Dutch Shell Petroleum).

Thus, the McDonnell case is one to keep an eye on.

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