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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.

Friday Roundup

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More on the Yates Memo, scrutiny alerts, survey says, and FCPA reform.  It’s all here in the Friday roundup.

More on the Yates Memo

Once again a private company has marketed a public official to drive attendance to its paid event.

Earlier this week, Assistant Attorney General Leslie Caldwell delivered this speech reiterating various aspects of the “Yates Memo.” Caldwell stated:

“[O]ur focus on individuals stems from the reality that corporations act through human beings, and that justice usually requires identifying those responsible for criminal conduct and holding them personally accountable.  Prosecuting the corporate entity, and imposing a fine and other impersonal conditions, simply is not enough – in most instances – to fully punish and, more importantly, deter corporate misconduct.”

Regarding the cooperation credit aspects of the “Yates Memo,” Caldwell stated:

“We recognize, however, that a company cannot provide what it does not have.  And we understand that some investigations – despite their thoroughness – will not bear fruit.  Where a company truly is unable to identify the culpable individuals following an appropriately tailored and thorough investigation, but provides the government with the relevant facts and otherwise assists us in obtaining evidence, the company will be eligible for cooperation credit.  We will make efforts to credit, not penalize, diligent investigations.  On the flip side, we will carefully scrutinize and test a company’s claims that it could not identify or uncover evidence regarding the culpable individuals, particularly if we are able to do so ourselves.

As I have said before, it is not our intent to outsource our investigation of corporate wrongdoing to companies and their outside advisors.  As in the past, we will not sit idle, waiting for a company to conduct or complete its investigation.  Regardless of a company’s cooperation, federal agents and prosecutors will conduct thorough investigations.  If, through this process, we are able to identify the culpable individuals when the company itself did not do so, as well as evidence that would support the charging and prosecution of those individuals, we will assess whether that evidence truly was unavailable to the company.

We, of course, recognize that we sometimes can obtain evidence that a company cannot.  We often can obtain from third parties evidence that is not available to the company.  Also, we know that a company may not be able to interview former employees who refuse to cooperate in a company investigation.  Those same employees may provide information to us, whether voluntarily or through compulsory process.  Likewise, there are times when, for strategic reasons, we may ask that the company stand down from pursing a particular line of inquiry.  If so, the company will not be penalized for failing to identify facts subsequently discovered by government investigators.”

Caldwell also answered questions after the speech.  It appears that this Q&A was recorded and the same private company put the Q&A behind its paywall.

It’s just plain wrong that a private company is selling the words of public officials. It ought to stop.

Scrutiny Alerts

Transocean

As highlighted here, in 2010 as part of the CustomsGate enforcement actions, Transocean resolved a $20.7 million FCPA enforcement action (involving a DOJ and SEC component) concerning alleged conduct in Nigeria.

Bloomberg reports:

“Transocean Ltd., the world’s largest offshore rig contractor, is being linked for the first time to the corruption probe of Petroleo Brasileiro SA, the state-owned energy giant at the center of Brazil’s biggest corporate scandal. A former executive at Brazil’s state-run oil company has testified to receiving what he says were payments made by someone claiming to be a Transocean agent in exchange for a rig-operation contract from Petrobras.”

SNC-Lavalin

This CBCNews report goes in-depth regarding new allegations in a civil suit concerning SNC-Lavalin. According to the article:

“Top executives for years endorsed bribes and lavish gifts — including a yacht and even prostitutes — to win contracts from Libya’s Gadhafi regime.”

To cement ties, [the complaint] alleges specific SNC executives signed off on or approved numerous favours to help Gadhafi, including:

  • providing SNC staff and hiring university professor as tutors;
  • helping to obtain a Canadian visa;
  • considering appointing Saadi Gadhafi an SNC vice-president;
  • officially sponsoring his Italian Serie A professional soccer team.

One of the largest expenses included the purchase of a Palmer Johnson yacht worth $38 million for Saadi Gadhafi “organized and validated by CFO Laramée and approved by the then CEO Lamarre.” Saadi Gadhafi visited Canada in 2008, and SNC Lavalin picked up the bill — more than $2 million.”

Survey Says

KPMG recently conducted a worldwide online survey of corporate risk leaders to find out the strengths and weaknesses of their companies’ programs to combat bribery and corruption.  According to the survey responses:

“There is a sharp increase in the proportion of respondents who say they are highly challenged by the issue of Anti-Bribery Compliance (ABC) compared with a survey KPMG conducted four years earlier.

As companies continue to globalize, management of third parties poses the greatest challenge in executing ABC programs.

Despite the difficulty of monitoring their business dealings with third parties, more than one third of the respondents do not formally identify high-risk third parties. More than half of those respondents with right to-audit clauses over third parties have not exercised the right.

ABC considerations are accorded too low a priority by companies preparing to acquire, or merge with, other corporations across borders.

Respondents complain they lack the resources to manage ABC risk.

A top-down risk assessment would help companies set priorities, but executives admit that an ABC risk assessment is one of their companies’ top challenges.

Data analytics is an increasingly important and cost-effective tool to assess ABC controls. Yet only a quarter of respondents use data analysis to identify violations and, of those that do so, less than half continuously monitor data to spot potential violations.”

FCPA Reform

The U.S. Chamber of Commerce recently released this document outlining its policy priorities. Included in the lengthy document was the following:  “work to reform the Foreign Corrupt Practices Act by supporting changes to enforcement practices.”

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A good weekend to all.

 

FCPA “Summer School” – A Free Two-Part Webinar Series

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Don’t let the dog days of summer make you lazy.

Elevate your Foreign Corrupt Practices Act knowledge and practical skills.

Recently, I conducted a two-part FCPA “summer school” series sponsored by Hiperos (a leading third-party management company).

Hundreds participated in the live webinars in July and August, but if you missed out, the webinars can be accessed at the below links.

The first webinar titled “Understanding FCPA Scrutiny and the Enforcement Landscape” provide participants with an understanding of:

  • current FCPA enforcement theories;
  • the long term and short term costs associated with an FCPA enforcement action or merely FCPA scrutiny; and
  • how the FCPA is enforced by the Department of Justice and the Securities and Exchange Commission.

The second webinar titled “FCPA Third Party Compliance Best Practices” provides participants with an understanding of:

  • the FCPA risks of utilizing third parties
  • FCPA compliance best practices relevant to third parties (including pre-engagement, engagement, and post-engagement practices) and learning from third-party compliance failures in past enforcement actions; and
  • how best to effectively communicate compliance expectations to third parties

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