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Regarding “Competitive Disadvantage”

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Pursuant to various securities laws rules and regulations, issuers are required to disclose risks in various required filings.

With increasing frequency, such risk disclosures take up several pages and often serve as little more than defensive disclosures to guard against opportunistic plaintiffs’ counsel who may allege securities fraud if the issuer did not disclose to investors obvious risks that may impact the company.

For instance, this recent 10-K filing of Nova Lifestyle Inc. (a California-based furniture company) contains approximately 35 risk factors including the following obvious risks:

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FCPA Flash Podcast – A Conversation With James Noe Regarding FCPA Issues In The Oil And Gas Industry

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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 written posts on FCPA Professor.

This FCPA Flash episode is a conversation with James Noe (special counsel with Jones Walker LLP who previously served in various in-house counsel and executive roles with several oil and gas companies). During the podcast, Noe discusses: the easiest and most difficult aspects of FCPA compliance in the oil and gas industry; the extent of facilitating payments in the industry; whether oil and gas companies are too risk averse when it comes to FCPA issues; and civil actions by industry participants when business is lost because of a refusal to make bribe payments.

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The FCPA “Limits The Universe” Of Business Opportunities

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It is always interesting when the Foreign Corrupt Practice Act is mentioned during investor conference calls. The comments tend to be off-the-cuff (not scripted as much FCPA content is) which make them great.

For instance, during a recent investor call an executive from CF Industries Holdings (an Illinois based manufacturer and distributor of agricultural fertilizers with a largely North American footprint) was asked by an investor:

“What are the next stages of capital deployment, especially as the market is now relatively more stable? Do you still feel industry consolidation is necessary? And just generally, what do you see as your own potential role in the process? And should we limit our thinking to North America?”

The company’s President, CEO and Director responded:

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The Charitable Donation That Did Not Occur

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After the introductory comments in italics, the remainder of this post is from Corporate Counsel at a well-known U.S. based publicly traded company.

Do Foreign Corrupt Practices Act enforcement actions based on foreign charitable donations (such as Schering-Plough, Nu Skin Enterprises and several others that include such allegations) represent a net positive or net negative?

The FCPA Guidance contains the unobjectionable statement that companies “cannot use the pretense of charitable contributions as a way to funnel bribes to government officials.” However, seldom are the circumstances as black and white as the government portrays and query whether business organizations, because of this guidance and because of the above enforcement actions involving charitable donations, have become excessively risk averse and have stopped contributing to humanitarian causes or otherwise pulled back from supporting communities or institutions in need. According to the below guest post, the answer is yes and query whether the world is a better place because of this.

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Is This An FCPA Success Or Failure?

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In a recent investor conference call, Darren Jamison (President, CEO & Director of California-based Capstone Turbine Corporation) was asked about the status of an Ecuador deal – described as a “large megawatt opportunity” for the company.

Jamison stated:

“That deal has been put on hold for now. There’s another wave of corruption that unfortunately hit the Ecuadorian government. We’re hopeful that once things settle down, new folks will be put in place that, that opportunity will come back. But right now, I’d say that, that opportunity is on hold. And I will say that Capstone takes Foreign Corrupt Practices Act, or FCPA, very seriously. And we do have a zero-tolerance policy. So we do get into areas where there is potential corruption or graft, we have to separate ourselves from those opportunities.”

The question is posed: does this represent an FCPA success or failure? Who wins from Capstone Turbine’s decision? Who loses?

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