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Plaintiffs Allege Harm At The Hands Of Terrorist Group Funded In Part By Corrupt Sales Practices Of Various Multinational Companies

Mahdi Army

Various courts have held that the Foreign Corrupt Practices Act does not confer a private right of action. However, as highlighted in “FCPA Ripples” and several other posts on this website, private plaintiffs with increasing frequency are using allegations of corruption to allege other substantive causes of action in what amounts to “offensive use” of the FCPA and related topics.

Recently, American service members and civilians and their families who were killed or wounded while serving in Iraq filed this 203 page civil complaint against AstraZeneca, General Electric, Johnson & Johnson, Pfizer and Roche claiming that the companies’ alleged acts of corruption in Iraq present viable civil claims under the federal Anti-Terrorism Act and for intentional infliction of emotional distress. Specifically, the plaintiffs allege that they or their family members were attacked by a terrorist group (Jaysh al-Mahdi) funded in part by the defendants’ corrupt sales practices.

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Bio-Rad Appeals Approximate $11 Million FCPA-Related Civil Verdict In Favor Of Its Former General Counsel

Bio-Rad

As highlighted in this previous post, in November 2014 Bio-Rad agreed to pay $55 million to resolve a parallel DOJ and SEC FCPA enforcement action based on alleged conduct in Russia, Thailand and Vietnam.

As highlighted in this previous post, in May 2015 Sanford Wadler, the former General Counsel and Secretary of Bio-Lab Laboratories, filed a civil complaint against the company and certain executive officers and board members alleging various unfair employment practices including that Wadler was terminated for blowing the whistle on certain potential FCPA issues.

As highlighted in this previous post, Wadler’s claims were fully litigated and in February 2017 a jury awarded Wadler $2.9 million in back pay and stock compensation and $5 million for punitive damages. The district court doubled the compensatory award pursuant to Dodd-Frank for a total award of approximately $11 million.

Recently Bio-Rad filed this appeal in the Ninth Circuit challenging various aspects of the trial court decision.

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From The Dockets

Judicial Decision

As highlighted in this previous post, Misonix has been under FCPA scrutiny since September 2016 and in March 2017 Cicel (Beijing) Science & Technology Co. Ltd. brought a variety of civil claims against Misonix concerning its business relationship with the company.

Among the claims brought by Cicel was a breach of contract claim. Misonix acknowledged that it terminated the contract, but argued that it “was justified in doing so because of Misonix’s FCPA investigation” regarding Cicel. In response, Cicel claimed that the investigation “was a ruse for breaching the contract.” Recently, U.S. District Court Judge Arthur Spatt (E.D.N.Y.) allowed Cicel’s claim to proceed beyond the motion to dismiss stage. (See 2017 WL 4535933).

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VimpelCom Securities Fraud Case Largely Gets Past The Motion To Dismiss Stage

Judicial Decision

It’s as predictable as the sun rising in the east. In the aftermath of a Foreign Corrupt Practices Act enforcement action (and in some instances after mere FCPA scrutiny is disclosed) a plaintiffs’ lawyer representing a shareholder and working on a contingent fee basis files a securities fraud class action against the company and/or its executives.

Given the legal framework relevant to such actions (that is heightened pleading requirements as well as the Private Securities Litigation Reform Act) few of these actions actually get past the motion to dismiss stage.

Yet, recently a securities class action against VimpelCom (which recently changed its name to VEON Ltd.) did largely get past the motion to dismiss stage. Yet, even in this egregious instance of corporate bribery (see here and here for the prior posts), several of the plaintiffs’ allegations were deemed not viable.

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Development From The “Other Universe” – In Dismissing FCPA-Related Civil Claims, Judge Rejects The Notion That The FCPA “Establishes A Statutory Floor For Adequate Internal Controls”

parallel universe

Foreign Corrupt Practices Act issues often co-exist in two parallel universes.

One universe is ruled by perceived all-powerful gods with big and sharp sticks in which subjects dare challenge the gods. Another universe consists of checks and balances in which independent actors call the balls and strikes.

The first universe refers to FCPA enforcement by the DOJ and SEC. The second universe refers to litigation of FCPA-related claims in which judges make decisions in the context of an adversarial legal system. This second universe is often referred to as the rule of law universe.

There are several examples of theories used in the first universe that do not work in the second universe.

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