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Walmart’s $160 Million Ripple

Ripple

The article “Foreign Corrupt Practices Act Ripples” highlights how settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement.

Among other ripples are private shareholder suits.

In the aftermath of the New York Times April 2012 article (an article which did not lead to Wal-Mart’s FCPA scrutiny, but certainly magnified it to a whole new level) numerous shareholder suits rained down on the company.

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L-3 Exec Testifies That Representative Agreement With Qatar Company “Was Cover For Any Kind Of Allegation That [L-3] Has Violated The FCPA”

Judicial Decision

This post concerns a judicial opinion recently released by the Southern District of New York in a bench trial concerning the claims of Capital Security Systems (a company located in Qatar) against L-3 Communications Security and Detection Systems.

The underlying claims were garden variety breach of contract and related causes of actions with Foreign Corrupt Practices Act issues sprinkled in.

In terms of relevant background information, the decision states in pertinent part:

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A Few FCPA Related Securities Fraud Claims Are Allowed To Proceed

greenlight

This recent post highlighted how securities fraud class actions in the aftermath of Foreign Corrupt Practices Act enforcement actions or mere instances of FCPA scrutiny are frequently dismissed.

This remains a true statement, but as highlighted in this post, sometimes a claim or two does advance past the motion to dismiss stage as was recently the case in matters involving Cognizant Technology Solutions and Obebrecht.

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Several FCPA Related Securities Fraud Actions Dismissed

Denied

Sure as dogs bark and the sun rises in the east, in the aftermath of a Foreign Corrupt Practices Act enforcement action or merely an instance of FCPA scrutiny, plaintiffs’ counsel (no doubt representing shareholders on a contingent fee basis) file securities fraud class actions and hope to get some claims past the motion to dismiss stage.

Rarely does this happen and this post highlights three instances, in just the past few weeks, in which federal trial court judges have dismissed FCPA related securities fraud class actions.

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Judge Finds The Term Instrumentality “Unclear” And Narrowly Construes “Foreign Official” Element Contrary To The DOJ’s Position

Judicial Decision

There is little substantive Foreign Corrupt Practices Act case law, even fewer judicial decisions of precedent. Nevertheless, in the aftermath of FCPA enforcement actions or merely FCPA scrutiny, plaintiffs counsel (no doubt representing shareholders on a contingent fee basis) frequently file securities fraud class actions hoping some get past the motion to dismiss stage.

In deciding motions to dismiss, federal trial court judges occasionally directly comment upon FCPA issues and this post highlights a recent example in a matter involving Rio Tinto. As discussed below, a federal court judge found the term “instrumentality” in the FCPA’s “foreign official” definition “unclear” and otherwise narrowly construed the term in a way contrary to the DOJ’s current position.

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