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Facade Of Enforcement Across The Pond


A facade of Foreign Corrupt Practices Act enforcement is when a business organization – often for reasons of risk aversion and efficiency – agrees to resolve an enforcement action in the absence of any judicial scrutiny even though no employee or agent of the company (business organizations obviously can only act through real human beings) was charged. (See here for the article “The Facade of FCPA Enforcement” and here for the article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement.”)

Even more troubling is when employees are charged, put the government to its burden of proof, are acquitted yet the business organization still resolves an enforcement action based on the same underlying conduct.

This 2014 post, published after the United Kingdom formally adopted deferred prosecution agreements, was titled “The U.K. Enters the Facade Era.” As discussed below, recently there was a major facade moment in the U.K.

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United Technologies Corp. Resolves $13.9 Million Enforcement Action


Yesterday, the SEC announced that United Technologies Corporation resolved a $13.9 million Foreign Corrupt Practices Act enforcement action.

The conduct at issue concerned Otis Elevator Co. (a wholly-owned subsidiary of UTC), Pratt & Whitney (an operating division of UTC), and International Aero Engines (a joint venture of five aerospace companies including Pratt & Whitney) regarding a Russian and Azerbaijani improper payment scheme, a China aviation scheme, improper payments for Otis Elevator sales in China, and leisure travel for foreign officials from several countries including China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia.

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With Chi Guilty Verdict, Focus Shifts To Kinemetrics And Guralp Systems


The DOJ recently announced that Heon-Cheol Chi (Chi) of South Korea, “the Director of South Korea’s Earthquake Research Center at the Korea Institute of Geoscience and Mineral Resources (KIGAM) was convicted … following a four-day jury trial of laundering bribes that he received from two seismological companies based in California and England through the U.S. banking system.”

As noted here, according to court documents the companies are Kinemetrics (a California company that designs technologies, products, and solutions for monitoring earthquakes and their effects on people and structures) and Guralp Systems Ltd. (a U.K. company that designs, manufactures and delivers products, services, systems and solutions for a wide range of applications for the seismological research community as well as the the oil & gas, civil engineering and energy sectors.)

With the Chi guilty verdict, focus shifts to Kinemetrics and Guralp Systems and when asked if there would be an FCPA enforcement action against these companies a DOJ spokesperson informed me via e-mail that “the investigation is ongoing.”

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Friday Roundup

Scrutiny alert, potential fallout, act like a cop be treated like a cop, and for the reading stack.  It’s all here in the Friday Roundup.

Scrutiny Alert

Leighton Holdings Limited (an Australia-based holding company with ADRs registered in the U.S.) has been the focus of much recent media attention concerning business conduct in Iraq, Indonesia, Malaysia, as well as other Asian and Middle Eastern countries (see here and here for instance).  In response, the company issued statements here and here.

Potential Fallout?

As noted here, earlier this week South Korea criminally charged “100 people, including senior executives at state-run energy companies, on corruption charges.”  According to the article, “parts suppliers are suspected of bribing officials to accept their products with faked certification.”  Among the companies mentioned is Korea Hydro and Nuclear Power Co.  This company, along with other alleged state-owned or state-controlled energy companies, was mentioned in the 2009 Foreign Corrupt Practices Act enforcement action against Control Components Inc.

Time will tell if the South Korea charges might implicate various part suppliers subject to the FCPA.


In this recent speech, SEC Chair Mary Jo White stated:

“The SEC is, in very important part, a law enforcement agency, and should be seen by investors to be ‘their cop.’  And, the SEC must continue to be the tough cop because in many cases, particularly when there is no criminal violation, it is the only agency that can play that role.”

White’s comment reminded me of this excellent guest post by Russell Ryan (King & Spalding and previously an Assistant Director of the SEC Enforcement Division) in which he notes, among other things, that “if the SEC’s enforcement role is more like that of a criminal prosecutor than a private plaintiff, why shouldn’t the SEC be held to some of the same procedural and evidentiary burdens of a prosecutor rather than benefitting from the more relaxed standards accorded to private plaintiffs?”

Reading Stack

An interesting Q&A with Andreas Pohlmann (Chief Compliance Officer at SNC-Lavalin Group Inc) including the following spot-on statement.

“[W]e need one global compliance program.  That means that what we are doing at the time being is not establishing a Canadian compliance program, or a North American compliance program, but we are establishing a global compliance program for all of our associates all over the world, and that’s the challenge. To get out a compliance program in Montreal at the headquarters of SNC-Lavalin is still easy. It becomes challenging when we go to the more difficult regions of this world, like Latin and South America, Africa, Eastern Europe and Southeast Asia. We have to get to the hearts and minds of our people and have them live up to our worldwide standards; otherwise, the compliance program would not be credible.”


A good weekend to all.

First Case Under Korea’s Version Of The FCPA Tests The Limits Of Defining “Foreign Official”

This previous guest post discussed “Korea’s FCPA” and a recent case in which a trial court held that the prosecution failed to meet its burden of proof that China Eastern Airlines was a state owned enterprise, and, therefore, that the president of China Eastern’s Korean subsidiary was a foreign public official sufficient to state a claim under the law.

The prosecution appealed the ruling and in this guest post Alston & Bird attorneys Edward Kang and Christopher Lucas discuss the appellate court ruling.


An appeals court in Korea affirmed a lower court decision to reject a prosecution’s theory of what it means to be a “foreign official” under Korea’s version of the Foreign Corrupt Practices Act, called the Act on Preventing Bribery of Foreign Public Officials (“FBPA”). This was the first case brought by prosecutors under the FBPA with allegations that an executive of a state-controlled company was a “foreign official.” Prosecutors have appealed to the Korean Supreme Court, and the high court’s decision could be an important signal as to how aggressively prosecutors can pursue future cases under the FBPA.

In 2011, Korean prosecutors brought FBPA charges against two individuals – executives at a shipping company and a travel agency – for allegedly bribing the president of the Korean subsidiary of China Eastern Airlines to secure improper business advantages. Prosecutors argued that the Korean president of China Eastern Airlines was a “foreign official” and pointed to documents that allegedly linked the company to the Chinese government.

The lower court acknowledged the evidence suggesting a connection with the Chinese government, but found that prosecutors had not met their burden in proving that the China Eastern executive was a “foreign official” under the FBPA. The Korean prosecutors appealed and directed the appellate court to additional pieces of evidence to support its theory, including the facts that the Chinese government: (1) through a wholly-owned subsidiary, owned more than 50% of China Eastern’s capital; (2) had appointment and dismissal power over China Eastern’s CEO; (3) was in charge of certain business decisions of China Eastern, including mergers and spin-off decisions; and (4) provides China Eastern with large amounts of government subsidies.

Despite that evidence, the appellate court affirmed the lower court’s decision without further elaboration. The case has been appealed to the Korean Supreme Court. We will continue to monitor developments and provide an update once this decision has been announced.

The Korean FBPA defines “foreign official” to include employees of certain state-owned or state-controlled companies. Under Article 2(2)(c) of the FBPA, the term “foreign official” includes:

“[A]n executive or employee of a company in which a foreign government contributed more than 50% of the paid-in-capital or with respect to which a foreign government exercises de facto control over its overall management including major business decisions and the appointment or dismissal of its executives.”

Interestingly, at the same time the Korean Supreme Court wrestles with the limits of defining “foreign official” when it comes to state-owned or controlled companies, the U.S. Court of Appeals for the Eleventh Circuit is currently considering a similar issue in U.S. v. Esquenazi, a case that is slated for oral arguments in October.


Similar to the issue raised in this recent post concerning Canada’s FCPA-like law, Korea’s FBPA defines the targeted recipient category to include state-owned enterprise (“SOE”) definitions and concepts.  As noted in my “foreign official” declaration (which has been cited by the defense in the pending 11th Circuit “foreign official” appeal), despite being aware of state-owned enterprises (SOEs) during the FCPA’s legislative process, despite exhibiting a capability for drafting a foreign official definition that expressly included SOEs in other bills, and despite being provided a more precise way to describe SOEs during the legislative process, Congress chose not to include such definitions or concepts in FCPA.

As noted in this prior post regarding the DOJ’s response brief in the 11th Circuit challenge, among other arguments the DOJ is making is the alarmist argument that “Defendants’ construction of the statute to exclude employees of SOEs … means that the United States is out of compliance with its treaty obligations under the [OECD] Convention.”

Like the U.S., Korea is also a member of the OECD Convention.

[Disclosure – I am providing pro bono expert services to defendants’ counsel relevant to the “foreign official” issue].

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