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Supreme Court Questions Whether Dollar-Denominated Transactions Or Other Financial Transactions In The U.S. Are Sufficient To Assert Jurisdiction Over Foreign Corporations

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Largely because of how the DOJ and SEC have chosen to enforce the Foreign Corrupt Practices Act (that is resolution vehicles not subjected to any meaningful judicial scrutiny), the Supreme Court has never been presented with an opportunity to interpret the FCPA (and likely never will be so long as the current state of affairs continues). Heck, you can count on one hand (and have a few fingers left over) the number of substantive FCPA decisions issued by appellate courts.

Nevertheless, in recent years the Supreme Court has issued several decisions that are FCPA relevant and in every one the court has questioned certain aspects common in FCPA enforcement. The most recent example occurred in an Alien Tort Claims Act case (Jesner v. Arab Bank) in which the majority opinion questioned in dicta whether dollar-denominated transactions or other financial transactions in the U.S. are sufficient to assert jurisdiction over foreign corporations.

Prior to discussing the recent Jesner decision, this post highlights how such allegations are common in FCPA enforcement actions against foreign corporations.

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Yet Again, The Supreme Court Rejects The DOJ’s Overly Expansive Interpretation Of A Criminal Law

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Today’s post is very similar to this post from last month. In other words, yet another post (see here and here for prior posts) generally regarding the topic “if only the Supreme Court accepted the “foreign official” challenge” in 2014.

In a statutory interpretation case released yesterday that was very similar to the statutory interpretation issues in the “foreign official” challenge, the Supreme Court in a 7-2 opinion authored by Justice Breyer once again rejected the DOJ’s overly expansive interpretation of a criminal law.

As stated by the opinion, the issue presented in Marinello v. U.S. was: “A clause in §7212(a) of the Internal Revenue Code makes it a felony “corruptly or by force” to “endeavo[r] to obstruct or imped[e] the due administration of this title.” 26 U. S. C. §7212(a). The question here concerns the breadth of that statutory phrase. Does it cover virtually all governmental efforts to collect taxes? Or does it have a narrower scope?”

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Kokesh – Yet Another Reason Why Issuers Should Not Roll Over And Play Dead When Under FCPA Scrutiny

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The Supreme Court’s recent unanimous decision in Kokesh rejecting the SEC’s position and holding that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues” should impact SEC FCPA enforcement against issuers.

However, statute of limitations issues are meaningless when issuers (as often happens in the FCPA context) waive statute of limitations defenses or agree to toll the statute of limitations.

Thus, whether Kokesh will impact SEC FCPA enforcement against issuers depends on whether issuers will continue to roll over and play dead when under FCPA scrutiny or actually mount a defense.

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Kokesh Footnote Seems To Be Inviting A Future Disgorgement Case

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The Supreme Court’s decision earlier this week in Kokesh v. SEC was yet another Supreme Court benchslap of the SEC. As highlighted in this prior post, the Supreme Court unanimously rejected the SEC’s position and held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.”

As previously highlighted in numerous prior posts regarding Kokesh, the non-FCPA case is FCPA relevant in that since the SEC first sought a disgorgement remedy in an FCPA enforcement action in 2004, disgorgement has become the dominant remedy sought by the SEC in corporate FCPA enforcement actions.

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Supreme Court Benchslaps SEC Yet Again – Rules That Disgorgement Is A Penalty Subject To A Five Year Limitations Period

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FCPA Professor has been closely following Kokesh v SEC, a non-FCPA case that is FCPA relevant because the issue before the Supreme Court is whether SEC disgorgement is subject to a five-year statute of limitations. (See prior posts here and here regarding the case, here for a summary of the oral argument in the case, and here for an FCPA Flash podcast episode devoted to the case and issue).

What makes Kokesh FCPA relevant is that since the SEC first sought a disgorgement remedy in an FCPA enforcement action in 2004, disgorgement has become the dominant remedy sought by the SEC in corporate FCPA enforcement actions.

Yesterday in this unanimous decision authored by Justice Sotomayor, the Supreme Court rejected the SEC’s position and held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.”

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