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In Rejecting The Government’s Position, Court Finds Former Shareholders Of Africo Resources Ltd. Are “Victims” Of Och-Ziff’s Bribery

victim

As highlighted in this 2018 post, in the aftermath of the 2016 Och-Ziff Foreign Corrupt Practices Act enforcement action (see here and here for prior posts) former shareholders of Canadian mining company Africo Resources Ltd. (“Claimants”) sough restitution pursuant to the Mandatory Victims Restitution Act for losses allegedly incurred as a result of Och-Ziff’s bribery of corrupt officials in the Democratic Republic of the Congo.

The DOJ opposed the request arguing, among other things, that Claimants had not show direct or proximate causation of quantifable harm from Och-Ziff’s conduct and that damages were too speculative.

However in this recent ruling, Judge Nicholas Garaufis (E.D.N.Y.) found that Claimants are victims of Och-Ziff’s crime under the MVRA and “directed the parties to submit supplemental briefing regarding how to calculate the appropriate restitution amount.”

While each case is factually unique, the ruling is important as it may open a door to other business entities who lose out on opportunities because of the conduct of business organizations resolving an FCPA enforcement action.

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Issues To Consider From The Petrobras Enforcement Action

Issues

This previous post went in-depth into the DOJ and SEC’s recent Foreign Corrupt Practices Act enforcement action against Petrobras which resulted in a net approximate $170 million enforcement action. This post continues the analysis by highlighting additional issues to consider.

First

The Petrobras enforcement action is believed to be the first ever FCPA enforcement action against a foreign government. As stated by the DOJ, Petrobras is a “state-owned and controlled oil and gas company.” As stated by the SEC, Petrobras is a “Brazilian government-controlled oil and gas company.” Reflective of this unusual aspect of the Petrobras enforcement action, the DOJ’s NPA states:

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The Supreme Court’s Recent Unanimous Decision In A Restitution Case Provides Yet Another Reason Not To Voluntarily Disclose

supremecourt

The scenario is relatively common. Whether in the Foreign Corrupt Practices Act context or otherwise, an individual acts contrary to the law and when his or her conduct is discovered various business organizations impacted by the illegal activity conduct an internal investigation.

The question arises: if the individual engaged in the illegal activity is convicted, may the impacted business organizations recover from the individual internal investigation expenses under the Mandatory Victims Restitution Act (MVRA) and, if so, under what circumstances? In recent years, circuit courts have split on the relevant issues.

Last week though the Supreme Court provided clarity in Lagos v. U.S. In the unanimous decision authored by Justice Breyer, the court concluded that the words “investigation” and “proceedings” in the MVRA are limited to government investigations and criminal proceedings. After excerpting the case, this post highlights how business organizations can best position themselves for MVRA restitution in certain FCPA matters by not voluntarily disclosing.

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Former Equity Holders Of Africo Resources Seek Designation As “Victims” Of Och-Ziff’s Bribery Schemes And Raise Concerns About The Underlying Settlement

victim

“Bribery is not a victimless crime.”

It is a common sentence in DOJ FCPA talking points (see here for instance).

If bribery is not a victimless crime, then why do FCPA fines and penalties simply go directly into the U.S. Treasury? Why are there generally no efforts to identify the victims of FCPA violations and to allow those victims to pursue legal remedies? As highlighted in this post, the U.S. government actually identified certain victims of Och-Ziff’s bribery schemes, but later backed off this determination perhaps because it complicated the DOJ’s efforts to resolve the matter.

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