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On National Drink Beer Day, AB InBev Agrees To Pay $6 Million To Resolve FCPA (And Related) Enforcement Action

ABInBev

Yesterday was National Drink Beer Day.

Fitting then that yesterday the SEC announced this administrative cease and desist order against Anheuser-Busch InBev, a Belgium brewer with American Depository Receipts traded on the New York Stock Exchange. The conduct at issue involved improper payments by an Indian joint venture “to Indian government officials to obtain beer orders and to increase brewery hours.” AB InBev held a minority interest in the joint venture which marketed and distributed the beer of AB InBev’s wholly-owned Indian subsidiary.

The SEC found that AB InBev violated the FCPA’s books and records and internal controls provisions. Without admitting or denying the SEC’s findings, AB InBev agreed to pay approximately $6 million to resolve the matter. As highlighted below, the SEC also found that AB InBev entered into a separation agreement with a former employee that violated an SEC Rule implementing Dodd-Frank’s whistleblower provisions.

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Indirect Mexico Subsidiary Exposes Key Energy Services To $5 Million FCPA Enforcement Action

Key Energy

Last Friday, the SEC announced this administrative order finding that Key Energy Services violated the books and records and internal control provisions of the Foreign Corrupt Practices Act.

In pertinent part, the SEC found that certain employees of an indirect Mexico subsidiary “abused their privileges, approving suspect arrangements with and payments to consultants and gifts to Mexican government officials at Pemex, and concealing these arrangements and payments from Key Energy.”

Without admitting or denying the SEC’s findings, Key Energy agreed to pay $5 million in disgorgement.

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Two For Tuesday In FCPA Enforcement Land – Akamai Technologies

akami

Just when you think you’ve seen all possible combinations of Foreign Corrupt Practices Act enforcement, along comes yesterday’s “two for Tuesday” in which the SEC announced in the same press release two non-prosecution agreements against two separate companies and the DOJ simultaneously released two so-called “declination” letters against the same two companies.

This post highlights the enforcement action against Akamai Technologies and today’s first post highlights the enforcement action against Nortek Inc.. From there future posts will highlight issues to consider from the enforcement actions (and there are many including the question of just what charges – based on the SEC’s statement of facts – did the DOJ actually decline?”).

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Olympus Latin America Pays $22.8 Million In Latest FCPA Enforcement Action To Allege That Health Care Professionals Are “Foreign Officials”

olympus

Earlier this week, the DOJ announced (as part of a much larger enforcement action) a Foreign Corrupt Practices Act action against Olympus Latin American Inc. (OLA), a Miami-headquartered company that distributes medical imaging equipment in the Caribbean, Central America, and South America for Olympus Corporation (a Japanese company).

This post highlights the OLA enforcement action (the latest FCPA enforcement based on the theory that certain health care professionals are “foreign officials” under the FCPA) in which the DOJ charged the company in this criminal complaint with conspiring to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions. The charges were resolved via this deferred prosecution agreement in which OLA agreed to pay $22.8 million.

According to the charging documents, from 2006 to 2011 OLA provided approximately $3 million in “hundreds of unlawful payments” to publicly employed healthcare professionals in Brazil, Bolivia, Colombia, Argentina, Mexico, and Costa Rica to “induce the purchase of Olympus products, influence public tenders, or prevent public institutions from purchasing or converting to the technology of competitors.” According to the charging documents, OLA recognized approximately $7.5 million in profits as a result of the alleged unlawful payments.

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Harder Files Motion To Dismiss

Harder

As highlighted in this previous post, in January 2015 the DOJ criminally charged Dmitrij Harder (pictured), the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co., for allegedly bribing an official with the European Bank for Reconstruction and Development (“EBRD”).

The enforcement action was notable in that it invoked the rarely used “public international organization” prong of the FCPA’s “foreign official” element.

Recently, Harder filed this motion to dismiss:  In summary fashion it states:

“The Indictment fails to accurately allege the elements of a violation under the Foreign Corrupt Practices Act (“FCPA”) – it is devoid of any allegations that Mr. Harder paid an allegedly corrupt payment to a “foreign official,” fails to state required allegations when an allegedly corrupt payment is made to a third party, and impermissibly substitutes “public international organization” in the charging language against Mr. Harder. The FCPA counts should also be dismissed because the provision permitting the President to expand the term “foreign official” by identifying “public international organizations” as authorized by 15 U.S.C. § 78dd-2(h)(2)(B) is unconstitutional. Finally, the Travel Act counts fail to state an offense under the Pennsylvania anti-bribery statute and because the Travel Act does not apply extraterritorially to the facts of this case.”

As relevant to the FCPA’s third-party payment provisions, the motion states:

“Under the FCPA, when an allegedly corrupt payment is made to a person who is not a “foreign official” (like “EBRD Official’s Sister”), it is a crime only if the payment is made by the defendant “while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official.” 15 U.S.C. § 78dd-2(a)(3). The statutory language of the FCPA does not mention the phrase “for the benefit of.” The Indictment therefore fails in two ways: (1) it purports to expand the statute’s reach and criminalize payments made “for the benefit” of a foreign official; and (2) it fails to set forth any factual allegations that the allegedly corrupt payments were made by Mr. Harder “while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official.” The Indictment also fails to state an offense because it charges Mr. Harder with inducing a foreign official to use his influence with a public international organization under 15 U.S.C. § 78dd-2(a)(3)(B), but that prong of the FCPA only addresses acts intended to influence a “foreign government” and not a “public international organization.”

As relevant to the FCPA’s “foreign official” element and specifically the “public international organization” component of the “foreign official” definition, the motion states:

“The FCPA counts in the Indictment (Counts One through Six) should be dismissed because the FCPA statute is unconstitutional to the extent criminal liability is premised upon allegedly corrupt payments in connection with “public international organizations.” In this regard, the FCPA states, without any explanation or limitation, that the President of the United States is empowered to designate entities as “public international organizations,” whose employees are then considered to be “foreign officials” covered by the FCPA. But Congress cannot delegate its legislative powers to the President in criminal matters without providing some direction (such as policy, scope, or limitations), and Congress failed to do this in the FCPA. Further, because the FCPA is vague as to what conduct is criminal – because the term “public international organization” is not clearly defined nor are the designated entities so easily identified – this portion of the FCPA is void for vagueness, particularly because an individual can be convicted without proof that the defendant knew that the entity in question was a “public international organization” and therefore covered by the FCPA. Mr. Harder believes this to be the first case where the government has charged anyone under the “public international organization” prong of the FCPA, and the constitutional defects arising from that portion of the statute are readily apparent.

Mr. Harder has not found any case that has reviewed the constitutionality of the definition of “public international organization” for purposes of the FCPA – the key element to the government’s case against Mr. Harder. The term “public international organization” was not in the FCPA when it was originally enacted in 1977. Only when the FCPA was amended as of November 10, 1998, was the term “public international organization” inserted into the FCPA. See PL 105-366 (Nov. 10, 1998). This term, as utilized in the FCPA, violates two important constitutional doctrines: the non-delegation doctrine and the void for vagueness doctrine.

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Congress cannot delegate its legislative powers to the President in criminal matters without providing some direction (such as policy, scope, or limitations), and Congress failed to do this in the FCPA. Further, because the FCPA is vague as to what conduct is criminal – because the term “public international organization” is not clearly defined nor are the designated entities so easily identified – this portion of the FCPA is void for vagueness, particularly because an individual can be convicted without proof that the defendant knew that the entity in question was a “public international organization” and therefore covered by the FCPA. Mr. Harder believes this to be the first case where the government has charged anyone under the “public international organization” prong of the FCPA, and the constitutional defects arising from that portion of the statute are readily apparent.4 Mr. Harder has not found any case that has reviewed the constitutionality of the definition of “public international organization” for purposes of the FCPA – the key element to the government’s case against Mr. Harder. The term “public international organization” was not in the FCPA when it was originally enacted in 1977. Only when the FCPA was amended as of November 10, 1998, was the term “public international organization” inserted into the FCPA. See PL 105-366 (Nov. 10, 1998). This term, as utilized in the FCPA, violates two important constitutional doctrines: the non-delegation doctrine and the void for vagueness doctrine.”

Harder is represented by Ian Comisky (Blank Rome) and Stephen LaCheen (LaCheen, Wittels & Greenberg).

U.S. District Court judge Paul Diamond (E.D. Pa.) is presiding over the case.

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