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London Judge Rejects Link Between Goldman Sachs Internship And “Foreign Official” Decision-Making

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The SEC has brought two Foreign Corrupt Practices Act enforcement actions based on internship and other hiring practices involving family members of alleged “foreign officials.”

As highlighted here and here, in August 2015 BNY Mellon agreed, without admitting or denying the SEC’s findings in an administrative order, to pay $14.8 million to resolve findings that the company provided “valuable student internships to family members of foreign government officials affiliated with a Middle Eastern sovereign wealth fund.”

As highlighted here and here, in March 2016 Qualcomm agreed, without admitting or denying the SEC’s findings in an administrative order, to pay $7.5 million to resolve findings that the company “provided or offered full-time employment and paid internships to family members and other referrals” of alleged “foreign officials” at state-owned or state-controlled enterprises.

The narrative in both enforcement actions was that providing an internship or job to a family member of an alleged “foreign official” represented an attempt to improperly influence the “foreign official” who then exercised discretion – presumably because of the internship or job provided to a family member – to benefit the company.

It is this narrative that has resulted in several other companies, including Goldman Sachs, being under FCPA scrutiny. Yet last week this narrative was rejected by a London judge in a closely watched civil action between the Libyan Investment Authority (LIA) and Goldman Sachs.

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Friday Roundup

Roundup

Positive feedback, guilty plea, scrutiny alerts and updates, an instrumentality with mouse ears?, rant alert, quotable, and for the reading stack. It’s all here in the Friday roundup.

Positive Feedback

In running FCPA Professor for nearly seven years, I often feel like the captain of a ship in a wide, vast ocean. My metrics tell me people are reading, but feedback tends to be sparse. I take this as a good sign given that negative feedback is more likely to occur than positive feedback.

Thus, I appreciated much positive feedback in connection with the recent post “Denied by the DOJ.”

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Friday Roundup

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From the dockets, you gotta be kidding me, it’s a numbers game, former DOJ FCPA Unit Chief Duross on …, scrutiny updates, a foreign official teaser, a bracket of a different kind, and an event notice. It’s all here in the Friday Roundup.

From The Dockets

Two developments in DOJ FCPA individual actions.

One the DOJ apparently wants you to do know about because it issued a press release, the other apparently not because there was no press release.

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Friday Roundup

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Not something you see everyday, Yates Memo related, quotable, scrutiny alerts and updates, and for the reading stack. It’s all here in the Friday roundup.

Not Something You See Everyday

It’s not everyday that you see a director of a publicly-traded company publicly resign because the director thinks the company is engaged in improper conduct including FCPA violations.

But that is just what Michael Moss, until recently a director of Malvern Bancorp, did.

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Friday Roundup

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Scrutiny alerts and updates, civil litigation updates, SEC enforcement statistics, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

Millicom

The telecom and media company headquartered in Luxembourg with shares traded over the counter (OTC) in the U.S. recently disclosed:

“Millicom … announced that it has reported to law enforcement authorities in the United States and Sweden potential improper payments made on behalf of the company’s joint venture in Guatemala. A Special Committee of the Board of Directors made the decision in connection with an independent investigation being overseen by the Special Committee and conducted by international law firm Covington & Burling LLP, with the support of Millicom’s management team. Millicom is committed to fully cooperating with the authorities. It is not possible at this time to predict the matter’s likely duration or outcome. Millicom is committed to the highest ethical business standards and to full compliance with all applicable laws and regulations in every market in which the company operates.”

AEI

Speaking of FCPA scrutiny in Guatemala, according to this article in the Nation, Jaguar Energy Guatemala, a subsidiary of Houston-based AEI, “participated in an influence-trafficking scheme to obtain privileged information and favors from high-level Guatemalan officials. Among other things, the subsidiary is accused of paying to obtain meetings with the country’s former president Otto Pérez Molina.”

Goldman Sachs

The Wall Street Journal recently went in-depth regarding a Malaysian government investment fund,  1Malaysia Development Bhd., or 1MDB, and the role of Prime Minister Najib Razak. As noted in this article:

“[T]he fund has become the center of a political scandal that has engulfed Malaysia’s government. The fund is mired in debts of over $11 billion. It is a subject of a raft of local and international investigations, including, in Malaysia, by the central bank, auditor general, anticorruption agency and a parliament committee. It has faced accusations that billions of dollars are missing and that money was misused for political purposes or siphoned off in corruption by individuals.”

According to this article:

“Goldman Sachs Group Inc.’s role as adviser to a politically connected Malaysia development fund resulted in years of lucrative business. It also brought exposure to an expanding scandal. As part of a broad probe into allegations of money laundering and corruption investigators at the Federal Bureau of Investigation and the Justice Department have begun examining Goldman Sachs’s role in a series of transactions at 1Malaysia Development Bhd., people familiar with the matter said. The inquiries are at the information-gathering stage, and there is no suggestion of wrongdoing by the bank, the people said. Investigators “have yet to determine if the matter will become a focus of any investigations into the 1MDB scandal,” a spokeswoman for the FBI said.”

Bristol-Myers

It was fairly obvious to knowledgeable observers that when the SEC brought an FCPA enforcement action against Bristol-Myers earlier this month (see here for the prior post), but the DOJ did not, that this signaled that there would not be a DOJ enforcement action as such parallel actions are almost always brought on the same day. Should there be any doubt, the company recently disclosed: “The Company has also been advised by the Department of Justice that it has closed its inquiry into this matter.”

Civil Litigation Updates

As highlighted in Foreign Corrupt Practices Act Ripples, settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall consequences that can result from FCPA scrutiny or enforcement. Among other things, FCPA scrutiny or enforcement often leads to private shareholder litigation as well as other civil claims such as wrongful termination by employees who allegedly “blew the whistle.”

Two developments from the FCPA-related civil dockets.

This recent post highlighted the civil lawsuit filed by Sanford Wadler, the former General Counsel and Secretary of Bio-Lab Laboratories, against the company and certain executive officers and board members in the aftermath of the company’s FCPA scrutiny and enforcement action. In his complaint, Wadler alleged various unfair employment practices. In this recent decision from the Northern District of California, the court largely denied the defendants’ motion to dismiss and allowed the bulk of Wadler’s claims to proceed.

It did not take long for the Ninth Circuit to affirm a lower court order dismissing derivative claims against H-P directors for, among other things, alleged breach of fiduciary duty in connection with the company’s FCPA scrutiny.  The court’s 4 page order is here.

SEC Enforcement Statistics

Although the SEC has a specialized FCPA Unit (one of only five specialized units at the SEC) and declared the FCPA to be a “vital part” of its overall enforcement program, the fact remains that FCPA enforcement is a relatively minor part of the SEC’s overall enforcement program.

Indeed, as noted in this recent SEC release:

“In the fiscal year that ended in September, the SEC filed 807 enforcement actions covering a wide range of misconduct, and obtained orders totaling approximately $4.2 billion in disgorgement and penalties.  Of the 807 enforcement actions filed in fiscal year 2015, a record 507 were independent actions for violations of the federal securities laws and 300 were either actions against issuers who were delinquent in making required filings with the SEC or administrative proceedings seeking bars against individuals based on criminal convictions, civil injunctions, or other orders.”

In the SEC’s FY 2015, there were 13 FCPA enforcement actions.

Nevertheless, the SEC’s release does mention:

Combating Foreign Corrupt Practices

Reading Stack

The most recent FCPA Update by Debevoise & Plimpton is here.

Miller & Chevalier’s Autumn FCPA Review is here.

An informative read here from Professor Peter Henning at his White Collar Crime Watch column in the New York Times titled “Reforming the SEC’s Administrative Process.”

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A good weekend to all.

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