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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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PDVSA “Victim” Petition Denied

Denied

This December post highlighted how Bariven S.A. (a subsidiary of Petroleos de Venezuela, S.A. (“PDVSA”) – the state-owned oil company of the Venezuela) made a filing in an ongoing DOJ Foreign Corrupt Practices Act prosecution seeking victim status and requesting that the court enter an order of restitution of $600 million.

The prior post called Bariven’s filing an uphill climb and noted that a similar request failed in connection with the Alcatel-Lucent FCPA enforcement action.

Nevertheless, the prior post noted that the DOJ would respond to the filing and in doing so was likely to reveal some interesting information.

As highlighted in this post, the DOJ did respond, revealed some interesting information, and the court denied the motion.

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PDVSA Petition Seeking “Victim” Status Is An Uphill Climb

uphill

Last week, Bariven S.A. (a subsidiary of Petroleos de Venezuela, S.A. (“PDVSA”) – the state-owned oil company of the Venezuela) made this filing in the DOJ’s Foreign Corrupt Practices Act prosecution against Enrique Rincon Fernandez, Abraham Jose Shiera Bastidas, Moises Abraham Millan Escobar and related prosecution against others moving “the Court to recognize Bariven’s rights as a victim and enter an order of restitution requiring [the defendants] jointly and severally, to make restitution [to the tune of $600 million] to Bariven as a victim of the offenses to which these Defendants have plead guilty.”

If this general issue sounds familiar, congratulations you have a good memory.

As highlighted in prior posts here, here, and here, Instituto Constarricense de Electricidad (“ICE”) of Costa Rica tried the same thing in connection with the Alcatel-Lucent FCPA enforcement action and its petition received a chilly reception by both the trial court the 11th Circuit.

PDVSA’s petition likewise faces an uphill climb.

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