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Friday Roundup

Roundup

Scrutiny alert, coincidence or FCPA-related, ripple dismissed, and more shallow commentary, and ISO 37001 laughable.  It’s all here in the Friday roundup.

Scrutiny Alert

As highlighted in this previous post, in late 2013/early 2014 United Technologies Corp. (UTC) disclosed FCPA scrutiny concerning a non-employee sales representative retained in China. Recently, the company disclosed: “On March 7, 2018, the DOJ notified UTC that it had decided to close its investigation of this matter. Based on our ongoing discussions with the SEC staff to resolve this matter, UTC recorded a charge of approximately $11 million in the second quarter of 2018.”

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Friday Roundup

Roundup

Funny, scrutiny alerts and updates, and for the reading stack. It’s all here in the Friday roundup.

Funny

According to the FCPA Blog, there is “nothing too complicated or expensive” about FCPA compliance.

That’s funny because on a daily basis FCPA Blog content is flanked by approximately 20 blinking and flashing ads from FCPA Inc. participants.

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Friday Roundup

Roundup2

Exasperated, skittish, checking in, scrutiny alerts and updates, and for the reading stack.  It’s all here in the Friday roundup.

Exasperated

This recent post highlighted Assistant Attorney General Leslie Caldwell’s recent speech in which she stated – in reference to FCPA internal investigations – “we do not except companies to aimlessly boil the oil.”

This recent Law360 article notes that some attorneys are exasperated by Caldwell’s remarks.  The article states:

“[D]efense attorneys have balked at the idea that they’re spending too much time or money on investigations they’re conducting in large part for the government’s sake, saying they’re not willfully adding unnecessary work to an FCPA probe.

Many companies still feel like they’re being forced to walk the fine line between investigating problems thoroughly enough to satisfy the government without making it seem like they’re holding something back or impeding an investigation, according to Day Pitney LLP partner Bob Appleton.

“On the one hand they’re saying, ‘Be fast and don’t do an over-thorough job,’ but on the other hand, they’re saying, ‘If you only partially disclose you’ll get in trouble,’” said Appleton, a former assistant U.S. attorney.

And the costs of an investigation aren’t just limited to what a company self-reports, since the government will often then ask how the company can be sure the problem isn’t popping up anywhere else, according to Colleen P. Mahoney, partner at Skadden Arps Slate Meagher & Flom LLP.

“One of the biggest challenges is the expense after it starts,” Mahoney said about FCPA investigations at a Practicing Law Institute event Friday.

At the PLI event, SEC enforcement chief Andrew Ceresney said it was up to a company to decide what law firm to retain and how deep to investigate a potential bribery matter.

“We’re not micromanaging your internal investigation,” he said.”

Numerous posts on FCPA Professor have highlighted the staggering amount of pre-enforcement action professional fees and expenses (see also “FCPA Ripples“).

Speaking of which, Key Energy Services disclosed yesterday $18 million in expenses – for the first quarter of 2015 -“related to the previously disclosed Foreign Corrupt Practices Act (“FCPA”) investigations.”

I’ve had several conversations with FCPA practitioners about this issue.  For what it is worth, the common response is something along the following lines: FCPA practitioner agrees that pre-enforcement action professional fees and expenses have spun out of control in many instances, but FCPA practitioner insists that his/her firm is not part of the problem.

Other practitioners are also pushing back as to other aspects of Caldwell’s recent speech – namely “what cooperation looks like”.  In this recent post on the FCPA Blog an anonymous contributor states:

 “When client companies and I have opted to cooperate early on and open up all information and records to the DOJ investigative units, I have seen the FCPA investigative team to be less interested in whether facts or evidence show violations or point to evidence raising red flags, as to how the client (and lawyer also) is bowing and mewling in anguish and sorrow before the government.

Provided the client is willing to genuflect and cry out mea culpa and beg for mercy (all three are required) there can be a happy and acceptable outcome in correcting corporate deficiencies and reaching an early valid resolution.

Executives who have somewhat less capacity to grovel underfoot are punished with the promise of crippling expansions of the process including raids and countless subpoenas to uninvolved officers, employees, consultants and accountants.

My experience is that this is not based on early findings of probable cause, but rather a haughty outrage that there was insufficient willingness to self-immolate.”

Skittish

Much has been written about whether the FCPA and its enforcement deters foreign investment.  (See here for instance).

Companies obviously make foreign investment decisions based on a host of legal and non-legal risks and thus empirically separating and measuring the impact of FCPA enforcement on foreign investment decisions is difficult.  Moreover, despite the general rise in FCPA enforcement concerning conduct in certain high risk jurisdictions such as China, India, and Brazil, there continues to be vast amounts of foreign direct investment in those countries by companies subject to the FCPA prohibitions.

Any “evidence” that the FCPA and its enforcement deters foreign investment thus tends to be anecdotal.

Following up on this prior post regarding Cambodia, the Phnom Penh Post reports:

“Despite high-profile US companies like Coca-Cola announcing plans to expand their footprint in the Kingdom, foreign investment from the US remains low compared to regional heavyweights. Large US businesses appear reluctant in setting up in the Kingdom due to corruption concerns, an unpredictable regulatory environment, and a lack of economic attractiveness that allows US interests to thrive.

[…]

Corruption remains one of the major factors keeping US companies away. According to an American Chamber of Commerce survey for 2015, 82 per cent of American businesses in Cambodia were dissatisfied with corruption – the second highest in the region after Laos.”

Checking In

Way back in 2010, Steven Jacobs, the former President of Macau Operations for Las Vegas Sands Corp., filed a civil lawsuit against Las Vegas Sands (LVS) in which Jacobs alleged various improprieties at LVS including in the FCPA context.

As noted in this Bloomberg article, Sheldon Adelson, the billionaire founder and chairman of LVS, recently testified in open court about the case and stated, among other things, that “after four years of investigating, they [the DOJ and SEC]  haven’t found a shred of evidence yet.”

Scrutiny Alerts and Updates

CSC / ServiceMesh

CSC is a Virginia-based IT company and in October 2013 it acquired acquire ServiceMesh, a cloud management company.  Various reports note that Eric Pulier, the former CEO of ServiceMesh, and head of the ServiceMesh division within CSC since ServiceMesh was acquired by that company, has left the company.

CSC sent the following statement to media about Pulier’s departure:

“On March 26, 2015 Eric Pulier was notified that his actions involving payments from the ACE Foundation—an organization founded by Mr. Pulier and not related to CSC—to former IT executives of Commonwealth Bank of Australia, a CSC client, violated CSC’s code of conduct related to conflicts of interests and appearance of improprieties. Mr. Pulier was further notified that these violations were grounds for termination of his employment.”

PTC

In this release, PTC stated:

“We have, since making a voluntary disclosure to the U.S. Securities and Exchange Commission and the Department of Justice, been cooperating to provide information to those agencies concerning expenditures by certain of our business partners in China and by our China business, including for travel and entertainment, that apparently benefitted employees of customers regarded as state owned enterprises in China. This matter involves issues regarding compliance with laws, including the U.S. Foreign Corrupt Practices Act. Negotiations with the SEC to reach a resolution of its investigation have begun but have not been concluded. We expect to begin negotiations with the Department of Justice to resolve its investigation in the near future. Resolution of this matter is likely to include fines and penalties. Given the uncertainty regarding whether settlements can be reached and, if reached, on what terms, we are not able to estimate a range of reasonably possible loss with regard to any such settlements and have not recorded any liability in connection with this matter. If settlements are reached, we believe that the associated financial liability could be material to our results of operations for the fiscal period in which the liability is recorded. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.”

Braskem SA

Brazil-based Braskem recently disclosed in an SEC filing:

“In the context of anti-corruption allegations against certain individuals and entities in Brazil, including Petrobras, we were mentioned in allegations of improper payments made in order to receive favorable treatment in connection with certain contracts that we are party to with Petrobras. We have not received notice of any proceeding or investigation involving us that has been commenced in Brazil or the United States in connection with these allegations.

Although we have certain procedures in place, we have implemented additional procedures and controls to monitor our compliance with applicable anti-corruption laws and as a result of the recent allegations against us, have engaged Brazilian and U.S. legal counsel to conduct a voluntary internal investigation of this matter.  If any of these allegations prove to be true, or if we or any of our subsidiaries, or joint venture partners fails to comply with any of these laws, we could be subject to applicable civil or criminal penalties, which could adversely affect our overall performance.”

[…]

In early March 2015, declarations made by defendants in lawsuits filed against third parties were made public, in which Braskem and two of its former executive officers were cited in allegations of supposed improper payments between 2006 and 2012 to benefit the Company in raw-material supply agreements entered into with Petrobras. As of April 24, 2015, to the knowledge of the management, Braskem has not received any notification of the filing of any proceeding or investigation by Brazilian or U.S. authorities.

In light of such facts, the Company’s Management and Board of Directors approved in April the internal plan for investigation into the allegations (“Investigation”) to be carried out by law firms experienced in similar cases in the United States and in Brazil.  The law firms will work under the coordination of an ad hoc committee formed by members of its Board of Directors, specially created for this purpose.

In addition, the following measures have already been taken:

i)    Voluntary announcement about the Investigation and periodical updates sent to regulatory agencies of capital markets in Brazil (Securities and Exchange Commission of Brazil – CVM) and the United States (Securities and Exchange Commission – SEC, and the Department of Justice – DOJ);

ii)    Publication of two Material Fact notices and one Notice to the Market to clarify the news reports and to keep shareholders and the market informed of actions taken by the Company;

iii)   Updating the Audit Board and external auditors about the progress of the Investigation and of the actions already taken.

Braskem and its subsidiaries are subject to a series of anticorruption and anti-bribery laws in the countries where they operate. To reduce the likelihood of infringement of such laws, a series of procedures and controls were implemented and are continuously being improved.

On the other hand, if any of the allegations proves to be true, the Company may be subject to material penalties envisaged in law. At this moment, the Company Management believes that it is not possible to estimate the duration or outcome of the Investigation and, consequently, whether it will have any impact on future financial statements.

The Management is committed to taking all the necessary measures to clarify the facts and will keep the market informed of any progress on this matter.”

United Technologies

Recently, the company disclosed:

“As previously disclosed, in December 2013 and January 2014, UTC made voluntary disclosures to the United States Department of Justice (DOJ), the Securities and Exchange Commission (SEC) Division of Enforcement and the United Kingdom’s Serious Fraud Office to report the status of its internal investigation regarding a non-employee sales representative retained by United Technologies International Operations, Inc. (UTIO) and IAE for the sale of Pratt & Whitney and IAE engines and aftermarket services, respectively, in China.  On April 7, 2014, the SEC notified UTC that it was conducting a formal investigation and issued a subpoena to UTC.  UTC continues to cooperate fully with the investigations and has responded to requests for documents and information.  The DOJ and SEC also continue to request information, and the SEC issued a second subpoena on March 9, 2015 seeking documents related to internal allegations of alleged violations of anti-bribery laws from UTC’s aerospace and commercial businesses, including but not limited to Otis businesses in China.  Because the investigations are ongoing, we cannot predict the outcome or the consequences thereof at this time.”

For the Reading Stack

The NY Times goes in depth regarding the U.S’s attempt to extradite Dmitry Firtash, a Ukrainian national criminally indicted in April 2014 along with others (see here for the prior post).  According to the article:

“An Austrian judge will issue a crucial ruling in the case on Thursday at an extradition hearing here, where Mr. Firtash’s lawyers will argue that his arrest — on charges of bribing officials in India to secure a titanium mining deal that never materialized — was really an effort by the United States to remove him from public life in Ukraine, where he controls major business interests and still holds considerable clout. The Justice Department has repeatedly declined to discuss the case because it is an active prosecution, but the United States attorney’s office in Chicago, which led the investigation, has flatly denied any political motivations.

[…]

Andras Knopp, a Hungarian businessman and longtime associate of Mr. Firtash’s who is also charged in the case, said that the United States authorities had made no effort to extradite him, or even to talk to him about the case, even though he was at the center of the Indian titanium deal …”.

*****

The most recent edition of the always informative Debevoise & Plimpton FCPA Update is here.  Among the topics discussed are developments in India including potential amendments to the Prevention of Corruption Act providing for liability for a commercial organizations whose employees bribe but also creating a defense for a commercial organization commercial organization if it can prove it had “adequate procedures” in place to prevent bribery.

*****

This Bloomberg article (“The Dinner Proposal That Led United Into Corruption Probe”) begins:

“United Airlines Inc. was seeking hundreds of millions of dollars in public investment for the airport in Newark when its chief executive dined with New Jersey Governor Chris Christie’s top Port Authority official in September 2011.

Jeffery Smisek, United’s chief executive officer, wanted funding for several projects, including an estimated $600 million extension of the PATH train from downtown Newark to the airport, as the airline worked through its merger with Continental Airlines.

Halfway through dinner at Novita, an Italian restaurant in Manhattan, Port Authority Chairman David Samson surprised the group with a request of his own. He complained that he and his wife had grown weary of the trip to their weekend home in Aiken, South Carolina, because the best flight out of Newark was to Charlotte, North Carolina, 150 miles away. Until 2009, Continental had run direct service from Newark to Columbia, South Carolina, 100 miles closer.

In a tone described by one observer as “playful, but not joking,” Samson asked: Could United revive that route? An awkward silence fell over the table.

Though the United CEO didn’t agree to the request at the dinner, according to the accounts of some who attended, the airline ultimately added the money-losing route that became known as “the chairman’s flight.” Now federal prosecutors are looking into whether its genesis crossed the line from legitimate bargaining into illegal activity.”

*****

A good weekend to all.

Friday Roundup

FCPA scrutiny equals a raise, Qualcomm declines to cave, scrutiny alerts, industry specific risks, survey says, gaps in the narrative, a pulse on FCPA Inc., quotable and not quotable, and for the reading stack.  It’s all here in the Friday Roundup

FCPA Scrutiny Equals A Raise

There are some things that happen in the FCPA space that cause one to scratch their head.

Such as a company being under FCPA scrutiny paying audit committee members more money because of the time devoted to the FCPA scrutiny.  In its recent proxy statement, Wal-Mart disclosed as follows.

“Since November 2011, the Audit Committee has been conducting an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) and other alleged crimes or misconduct in connection with foreign subsidiaries, and whether prior allegations of such violations and/or misconduct were appropriately handled by Walmart. The Audit Committee and Walmart have engaged outside counsel from a number of law firms and other advisors who are assisting in the ongoing investigation of these matters. This investigation has resulted in a significant increase in the workload of the Audit Committee members since the commencement of this investigation, and during fiscal 2014, the Audit Committee conducted 13 additional meetings related to the investigation and compliance matters, and Audit Committee members received frequent updates via conference calls and other means of communication with outside counsel and other advisors related to the investigation. As it had done in November 2012 in recognition of the significantly increased commitment of time required of the Audit Committee to conduct this investigation, in November 2013, the CNGC (Compensation, Nomination, and Governance Committee) and the Board approved an additional annual fee in the amount of $75,000 payable to each Audit Committee member other than the Audit Committee Chair for fiscal 2014, and an additional annual fee in the amount of $100,000 payable to the Audit Committee Chair for fiscal 2014. These amounts were prorated for directors who served on the Audit Committee during a portion of fiscal 2014. The CNGC determined the amounts of these additional fees based on (1) the CNGC’s and the Board’s review of the significant additional time and effort that had been required of the Audit Committee members during the previous Board term in connection with these matters, which were in addition to the time spent by the Audit Committee with respect to the Audit Committee’s other duties and its regularly scheduled meetings, and (2) the expectation that the Audit Committee members would continue to expend approximately the same amount of time and effort in discharging their responsibilities as Audit Committee members at least through the remainder of fiscal 2014.”

Qualcomm Declines to Cave

Rare are so-called Wells Notices in the FCPA context for the simple reason that few issuers actually publicly push back against the SEC.  Thus, the below disclosure by Qualcomm earlier this week stands out:

“Securities and Exchange Commission (SEC) Formal Order of Private Investigation and Department of Justice Investigation : On September 8, 2010, the Company was notified by the SEC’s Los Angeles Regional office of a formal order of private investigation. The Company understands that the investigation arose from a “whistleblower’s” allegations made in December 2009 to the audit committee of the Company’s Board of Directors and to the SEC. In 2010, the audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. This internal review into the whistleblower’s allegations and related accounting practices did not identify any errors in the Company’s financial statements. On January 27, 2012, the Company learned that the U.S. Attorney’s Office for the Southern District of California/Department of Justice (collectively, DOJ) had begun an investigation regarding the Company’s compliance with the Foreign Corrupt Practices Act (FCPA). As previously disclosed, the audit committee conducted an internal review of the Company’s compliance with the FCPA and its related policies and procedures with the assistance of independent counsel and independent forensic accountants. The audit committee has completed this comprehensive review, made findings consistent with the Company’s findings described below and suggested enhancements to the Company’s overall FCPA compliance program. In part as a result of the audit committee’s review, the Company has made and continues to make enhancements to its FCPA compliance program, including implementation of the audit committee’s recommendations.

As previously disclosed, the Company discovered, and as a part of its cooperation with these investigations informed the SEC and the DOJ of, instances in which special hiring consideration, gifts or other benefits (collectively, benefits) were provided to several individuals associated with Chinese state-owned companies or agencies. Based on the facts currently known, the Company believes the aggregate monetary value of the benefits in question to be less than $250,000, excluding employment compensation.

On March 13, 2014, the Company received a Wells Notice from the SEC’s Los Angeles Regional Office indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company for violations of the anti-bribery, books and records and internal control provisions of the FCPA. The bribery allegations relate to benefits offered or provided to individuals associated with Chinese state-owned companies or agencies. The Wells Notice indicated that the recommendation could involve a civil injunctive action and could seek remedies that include disgorgement of profits, the retention of an independent compliance monitor to review the Company’s FCPA policies and procedures, an injunction, civil monetary penalties and prejudgment interest.

A Wells Notice is not a formal allegation or finding by the SEC of wrongdoing or violation of law. Rather, the purpose of a Wells Notice is to give the recipient an opportunity to make a “Wells submission” setting forth reasons why the proposed enforcement action should not be filed and/or bringing additional facts to the SEC’s attention before any decision is made by the SEC as to whether to commence a proceeding. On April 4, 2014, the Company made a Wells submission to the staff of the Los Angeles Regional Office explaining why the Company believes it has not violated the FCPA and therefore enforcement action is not warranted.

The Company is continuing to cooperate with the SEC and the DOJ, but is unable to predict the outcome of their investigations or any action that the SEC may decide to file.”

Needless to say, this instance of FCPA scrutiny will be interesting to follow.

Scrutiny Alerts

Hiring Probes Expand

Reuters reports here:

“U.S. government agencies that have been probing banks’ hiring of children of powerful Chinese officials are expanding existing investigations in other industries across Asia to include hiring practices …The U.S. Justice Department and the Securities and Exchange Commission have been asking global companies in a range of industries including oil and gas, telecommunications and consumer products for information about their hiring practices to determine if they could amount to bribery …”.

For more on JPMorgan’s FCPA scrutiny which got this started, see here.  For more on so-called industry sweeps, see here.

Delphi Automotive

Delphi Automotive disclosed in it most recent SEC quarterly filing as follows:

“During the first quarter of 2014, Delphi identified certain potentially improper payments, made by certain manufacturing facility employees in China, that may violate certain provisions of the U.S. Foreign Corrupt Practices Act (the “FCPA”). Under the oversight of Delphi’s Audit Committee of the Board of Directors, Delphi has engaged outside counsel to assist in the review of these matters, and to evaluate existing controls and compliance policies and procedures. This review remains ongoing. Violations of the FCPA could result in criminal and/or civil liabilities and other forms of penalties or sanctions. Delphi has voluntarily disclosed these matters to the U.S. Department of Justice and the SEC, and is cooperating fully with these agencies. Although Delphi does not expect the outcome of this review to have a material adverse impact on the Company, there can be no assurance as to the ultimate outcome of these matters at this time.”

United Technologies

United Technologies disclosed in its most recent SEC quarterly filing as follows:

“Non-Employee Sales Representative Investigation

In December 2013 and January 2014, UTC made voluntary disclosures to the United States Department of Justice, the Securities and Exchange Commission Division of Enforcement and the United Kingdom’s Serious Fraud Office to report the status of its internal investigation regarding a non-employee sales representative retained by United Technologies International Operations, Inc. (UTIO) and International Aero Engines (IAE) for the sale of Pratt & Whitney and IAE engines and aftermarket services, respectively, in China. On April 7, 2014, the SEC notified UTC that it is conducting a formal investigation and issued a subpoena to UTC seeking production of documents related to the disclosures. UTC is cooperating fully with the investigation. Because the investigation is at an early stage, we cannot predict its outcome or the consequences thereof at this time. At the outset of the internal investigation, UTIO and IAE suspended all commission payments to the sales representative, and UTIO and IAE have not resumed making any payments. This led to two claims by the sales representative for unpaid commissions: a civil lawsuit filed
against UTIO and UTC and an arbitration claim against IAE. We are contesting the lawsuit and the arbitration claim. We do not believe that the resolution of the lawsuit or the arbitration will have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.”

Industry Specific Risk

The reasons why companies become the subject of FCPA scrutiny are often unique to the industry the company is in.  This is why FCPA compliance is best tailored to a company’s unique risk profile as informed by a risk assessment.

This recent Wall Street Journal Risk & Compliance post from the Dow Jones Global Compliance Symposium is informative in collecting industry insight.

“Technology. Melissa Lea, Chief Global Compliance Officer, SAP AG. Profit margins for distributors are flexible in tech as so much of the cost is related to labor. And that flexibility offers room for partners to try to pad expenses to pay bribes. “Any time you hear about flexibility it opens the door for corruption,” said Ms. Lea, who noted that authorities have recently cracked down on bribery in the technology sector, once thought to be amongst the cleanest industries.

Pharmaceuticals. Rady A. Johnson, Chief Compliance & Risk Officer, Pfizer Inc. Drug companies pay doctors for a variety of consulting services and often invite them to attend events to promote their products. But since it’s these same doctors that prescribe drugs, pharmaceutical companies need to ensure that fancy conferences and payments for services are not cover for bribes. “We can’t do our job without interacting with health care professionals,” Mr. Johnson said. But companies need to ensure those interactions are appropriate and well defined, he said. In 2012, Pfizer agreed to pay more than $60 million to settle investigations into improper payments made to doctors and foreign officials.

Banks. W.C. Turner Herbert, Director of Anti-Corruption, Bank of America Corp.  Lately in the banking sector, corruption concerns have centered on hiring the relatives of foreign officials in exchange for business. In the past few years, U.S. authorities have investigated a number of banks over allegations of the practice, including Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. “Its a new area of enforcement without much precedence,” Mr. Herbert said. While hiring well-connected people shouldn’t, by itself, be a red flag, compliance officers need to ensure the selection is done on “merit and the business objectives” of the job, he said. “What draws red flags is if he’s not qualified,” Mr. Herbert said.

Survey Says

In connection with the above-mentioned Dow Jones Global Compliance Symposium, Dow Jones released this “Anti-Corruption Survey Results 2014.”  The survey was conducted on-line “among compliance professionals worldwide” and 383 responses “were completed among companies with anti-corruption programs.”  It is difficult to assess survey results without knowing the precise questions asked, but the Dow Jones survey does contain some interesting nuggets.

Such as “approximately 30% of companies spend $1 million or more on anti-corruption staff and policies.”

In “Revisiting a Foreign Corrupt Practices Act Compliance Defense,” I suggest that the current FCPA enforcement environment does not adequately recognize a company’s good faith commitment to FCPA compliance and does not provide good corporate citizens a sufficient return on their compliance investments.

Compliance defense opponents (such as the DOJ) like to point out that such a defense will result in “paper compliance” and “check-a-box” exercises.  Such clichés, however, ignore the reality of the situation – this many companies are making substantial investments of time and money in pro-active compliance policies and procedures.

One irony of course is that several former DOJ FCPA enforcement attorneys who have criticized a compliance defense as resulting in “paper compliance” and “check-a-box” exercises now devote a substantial portion of their private practice advising companies on FCPA compliance.

Gaps in the Narrative

You know the narrative.

In 2002, an accounting partnership (Arthur Anderson) was convicted of obstruction of justice for shredding documents related to its audit of Enron.  Even though the Supreme Court ultimately tossed the conviction, Arthur Anderson essentially went out of business.  Because of this, in the minds of some, the DOJ can’t criminally charge business organizations with crimes and thus the DOJ has crafted alternative resolution vehicles such as non-prosecution and deferred prosecution agreements to avoid the perceived collateral consequences of a criminal indictment or conviction.

Never mind that the narrative is based on a false premise.  (See here for the guest post and article by Gabriel Markoff titled “Arthur Anderson and the Myth of the Corporate Death Penalty).

Nevertheless, the narrative persists and is accepted by some as gospel truth.

However, perhaps you have heard that in early April Pacific Gas & Electric Corporation (PG&E – a public company) was criminally charged with multiple violations of the Natural Gas Pipeline Safety Act.

The company’s stock is still trading (in fact it is up since the criminal charges were announced), it is still employing people, and it is still operating its business.

Recognizing the fallacy of the narrative is important for corporate leaders of businesses subject to DOJ scrutiny in the FCPA context or otherwise.  Defenses can be mounted and the DOJ can and should be put to its burden of proof more often.

A Pulse on FCPA Inc.

Law360 highlights “Four Practices Areas Generating Big Billable Hours.”  As to the FCPA the article notes:

“The Foreign Corrupt Practices Act, which mandates certain accounting transparency requirements and gives the U.S. government the power to pursue businesses that bribe foreign officials, is creating long workdays for attorneys throughout the world.  “If Foreign Corrupt Practices Act were a stock, I wish I would have held it,” said William Devaney, co-chair of  Venable LLP’s FCPA and anti-corruption practice group. “We’ve seen huge growth in the practice area since 2004, and with the government’s current focus on FCPA, it’s safe to say anti-corruption enforcement will be around for a long time.”  After the FCPA was amended in 1998 to include additional anti-bribery provisions, the U.S. government began actively applying the FCPA to not only large companies but also their smaller counterparts.  As a result, Devaney says, a lot of midmarket and smaller companies are now coming into the FCPA compliance fold after acknowledging their obligations under the law, resulting in a surge in demand.
And according to Aaron G. Murphy, a partner with Akin Gump Strauss Hauer & Feld LLP, foreign countries passing legislation similar to the FCPA will create an explosion of fraud investigations that begin abroad but later will involve the U.S. Department of Justice.  Murphy said the FCPA stood as one of the lone anti-corruption laws in the world for 20 years, then in the mid-1990s, numerous foreign governments adopted similar rules to punish local and international corruption. “No politician has ever been elected on a ‘get softer on corruption’ ticket,” Murphy said. “If anti-corruption laws get modified, they will probably get stronger, not weaker. So we likely won’t see, 20 years from now, attorneys reminiscing about when companies had to deal with corruption laws. This practice area is here to stay.”

That the FCPA practice is here to stay is all the more reason to elevate your FCPA knowledge and practical skills at the FCPA Institute.

The three other practice areas highlighted in the article were:  export controls and trade sanctions; civil false claims act; and patent litigation and patent trolls.

Quotable

The White House recently announced that President Obama named Kirkland & Ellis partner W. Neil Eggleston to be White House Counsel (see here).  FCPA Professor has highlighted in the past (see here and here) certain of Eggleston’s spot-on comments regarding the FCPA or related issues.

In this interview Eggleston stated: “I worry that [NPAs and DPAs] will become a substitute for a prosecutor deciding – this is not an appropriate case to bring – there is no reason to subject this corporation to corporate criminal liability. In the old days, they would have dropped the case. Now, they have the back up of seeking a deferred or non prosecution agreement, when in fact the case should not have been pursued at all. That’s what I’m worried about – an easy out.”

In another interview, Eggleston was asked “what is an important issue or case relevant to your practice area and why” and stated: “We are beginning to see the development of case law in the FCPA area, which I believe is good for the process. Most of these cases have been settled. When that occurs, defendants have little incentive to refuse to agree to novel Department of Justice theories of prosecution or jurisdiction, so long as the penalty is acceptable. The department then cites its prior settlement as precedent when settling later ones. But no court approved the earlier settlement, and the prior settlement should have no precedential value in favor of the DOJ in later settlements. As the DOJ increases its prosecution of individuals, we will see many more trials, which will give rise to courts, not the DOJ, interpreting the statute.”

Not Quotable

DOJ Deputy Attorney General James Cole was a keynote speaker earlier this week at the Dow Jones Global Compliance Symposium.   According to the event agenda, the title was “What the Justice Department Has in Its Sights” and described as follows.

“From foreign bribery to insider trading, the U.S. Department of Justice has been at the forefront of rigorous enforcement that has forced companies to treat compliance seriously. We interview James Cole, deputy attorney general, about where the department is focusing its efforts now.”

I reached out to the DOJ Press Office for a transcript of Mr. Cole’s remarks and was told “we don’t have one.”

It is unfortunate that public officials speak about matters of public interest at private conferences that charge thousands of dollars to attend.

Reading Stack

The FCPA Guidance was sort of interesting to read, but as noted in my article “Grading the FCPA Guidance” it lacks any legal authority or effect.  A hat tip to the Tax Law Prof Blog for highlighting a recent U.S. Tax Court decision finding that IRS Guidance is “not binding precedent” nor “substantial authority” for a tax position.

The New York Times here goes in-depth on Dmitry Firtash, the Ukrainian businessman recently criminally charged in connection with an alleged bribery scheme involving Indian licenses (see here for the prior post).

An informative three-part series (here, here and here) by Tom Fox (FCPA Compliance & Ethics Blog) regarding gifts, travel and entertainment.

Miller & Chevalier’s FCPA Spring 2014 Review is here.

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