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What You Need To Know From Q2

This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related events from the second quarter of 2014. (See here for a similar post from Q1).

DOJ Enforcement (Corporate)

The DOJ brought one corporate enforcement action in the second quarter.  DOJ recovery is this enforcement action was approximately $77 million.  The enforcement action has not resulted, at least yet, in any individual charges against company employees.

Year-to-date, the DOJ has brought three corporate enforcement actions.  DOJ recovery in these enforcement actions has been approximately $388 million.  At present, none of these enforcement actions have resulted in any individual charges against company employees.

HP Related Entities (April 9th)

See here for the prior post

Charges:  As to HP Russia – (i) conspiracy to violate the FCPA’s anti-bribery provisions and books and records and internal controls provisions; (ii) one count of violating the FCPA’s anti-bribery provisions; (iii) one count of violating the FCPA’s internal controls provisions; and (iv) one count of violating the FCPA’s books and records provisions; As to HP Poland – violation of the FCPA’s books and records and internal controls provisions; As to HP Mexico – not applicable.

Resolution Vehicle:  As to HP Russia, a plea agreement; as to HP Poland a DPA; as to HP Mexico an NPA.

Guidelines Range:  As to HP Russia $87 million to $174 million; as to HP Poland $19.3 million to $38.6 million; as to HP Mexico not specified in the NPA.

Penalty:  As to HP Russia $58.8 million; as to HP Poland $15.5 million; as to HP Mexico $2.5 million.

Disclosure:  The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).

Monitor:  No

Individuals Charged:  No

DOJ Enforcement (Individual)

In the second quarter, the DOJ brought an FCPA and related enforcement action against various individuals in connection with securing Indian mining licenses.  As noted in this post, the following individuals were charged:

  • Dmitry Firtash (a Ukrainian businessman)
  • Andras Knopp (a Hungarian businessman)
  • Suren Gevorgyan (of Ukraine)
  • Gajendra Lal (an Indian national and permanent resident of the U.S.)
  • Periyasamy Sunderalingam (of Sri Lanka)
  • K.V.P. Ramachandra Rao (a Member of the Parliament in India who was an official of the state government of Andra Pradesh and a close advisor to the now-deceased chief minister of the State of Andhra Pradesh, Y.S. Rajasekhara Reddy).

All of the defendants except Rao (the alleged Indian “foreign official”) were charged with, among other charges, conspiracy to violate the FCPA’s anti-bribery provisions.

Also in the second quarter, the DOJ brought additional criminal charges against individuals associated with broker-dealer Direct Access Partners.  As noted in this post, Benito Chinea and Joseph DeMeneses (the Chief Executive Officer and a managing partner, respectively of Direct Access Partners) were criminally charged in connection with alleged improper payments to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes, an alleged Venezuelan state-owned banking entity that acted as the financial agent of the state to finance economic development projects).

Year-to-date, in addition to the above individual enforcement actions, the DOJ also brought criminal charges against three former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.” (See here for the prior post). The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold and former general counsel Gregory Weisman.

SEC Enforcement (Corporate)

The SEC resolved one corporate FCPA enforcement action via an administrative order  in the second quarter.  SEC recovery in this enforcement action was approximately $32 million. The enforcement action has not resulted, at least yet, in any individual charges against company employees.

Year-to-date, the SEC has resolved two corporate enforcement actions, both via administrative orders.  SEC recovery in these enforcement actions has been approximately $193 million.  At present, none of the enforcement actions have resulted in any individual charges against company employees.

HP (April 9th)

See here for the prior post.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.

Settlement:  $34 million in disgorgement and prejudgment interest (approximately $2.5 million of the disgorgement amount was satisfied by payment of $2.5 million in connection with the HP Mexico DOJ action).

Disclosure:   The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here for the prior post).

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

SEC Enforcement (Individual)

The SEC did not bring any FCPA charges against individuals in the second quarter.

Year-to-date there have not been any SEC FCPA enforcement actions against individuals.

Other Developments or Items of Interest

As highlighted here, the 11th Circuit issued its long-awaited “foreign official” decision – the first time in FCPA history in which an appellate court addressed the prominent enforcement theory that employees of alleged state-owned or state-controlled entities can be “foreign officials” under the FCPA.  This post highlights the key language, this post captures the current landscape regarding “foreign official” issues, this post aggregates approximately 25 law firm publications regarding the 11th Circuit’s decision, this post offers a perspective on the court’s flawed reasoning, and this post explores the 193 meanings of “foreign official.”

As highlighted here, the 2nd Circuit issued its long-awaited decision regarding Judge Jed Rakoff’s (S.D.N.Y.) refusal to approve the settlement in SEC v. Citigroup.  In pertinent part, the Second Circuit concluded that “there is no basis in the law for the district court to require an admission of liability as a condition for approving a settlement between the parties. The decision to require an admission of liability before entering into a consent decree rests squarely with the S.E.C.”  According to the Second Circuit, the SEC does not need to establish “the truth” of the allegations against a settling party as a condition for approving consent decrees because, in the words of the Court, “trials are primarily about truth” whereas “consent decrees are primarily about pragmatism.”

As highlighted here, in a campaign finance case a majority of the Supreme Court adopted a narrow view of corruption and stated that “ingratiation and access are not corruption.”

What You Need To Know From Q1

This post provides a summary of Foreign Corrupt Practices Act activity and related events from the first quarter of 2014.

DOJ Enforcement (Corporate)

The DOJ brought two corporate enforcement actions in the first quarter.  DOJ recovery in these enforcement action was approximately $311 million.   Both enforcement actions were resolved via plea agreements. At present, none of the enforcement actions have resulted in any individual charges against company employees.

Marubeni (March 19th)

See here for the prior post

Charges:  Conspiracy to violate the FCPA’s anti-bribery provisions and 7 substantive FCPA anti-bribery violations

Resolution Vehicle:  Criminal information resolved via a plea agreement

Guidelines Range:  $63.7 million to $127.4 million

Penalty:  $88 million

Disclosure:  Related to the April 2013 FCPA enforcement action against various current and former employees of Alstom

Monitor:  No

Individuals Charged:  No

Alcoa (January 9th)

See here for the prior post

Charges:  One count of violating the FCPA’s anti-bribery provisions.

Resolution Vehicle:  Criminal information against Alcoa World Alumina LLC resolved via a plea agreement.

Guidelines Range:  $446 million – $892 million.

Penalty:  $209 million (plus administrative forfeiture of $14 million)

Disclosure:  A 2008 civil lawsuit between Alba and Alcoa.

Monitor:  No

Individuals Charged:  No

DOJ Enforcement (Individual)

As noted in this post, on January 6th the DOJ announced criminal charges against three former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.” The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold and former general counsel Gregory Weisman.  As noted here, Hammarskjold and Weisman have pleaded guilty and the charges against Sigelman remain pending.

SEC Enforcement (Corporate)

The SEC resolved 1 corporate FCPA enforcement action in the first quarter.  SEC recovery in this enforcement action was approximately $161 million.  At present, none of the enforcement actions have resulted in any individual charges against company employees.

Alcoa (January 9th)

See here for the prior post.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s anti-bribery provisions and books and records and internal control provisions.

Settlement:  $175 million in disgorgement (of which $14 million will be satisfied by the payment of the forfeiture in the criminal action).

Disclosure:   A 2008 civil lawsuit between Alba and Alcoa.

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

SEC Enforcement (Individual)

The SEC did not bring any FCPA charges against individuals in the first quarter.

Other Developments

As noted in this post, the DOJ released FCPA Opinion Procedure Release 14-01 in which the DOJ gave a company the green light to purchase a foreign businessman’s (turned “foreign official”) minority interest in a company for fair market value.

As noted in this post, a judicial decision in a civil case between Chevron and a plaintiffs’ lawyer representing Ecuadorian villagers alleging environmental contamination at oil fields in the Amazon touched upon FCPA issues.  Specifically, a federal court judge found that the lawyer  “violated the Travel Act through the use of facilities of interstate or foreign commerce with the intent to facilitate violations of the anti-bribery provisions of the Foreign Corrupt Practices Act” and the decision most squarely addressed the FCPA’s “obtain or retain business” element.

As highlighted in this post, Congress remains interested in FCPA issues as Senator Charles Grassley (R-IA), Ranking Member of the Senate Judiciary Committee, asked several FCPA-related questions for the record in connection with the confirmation hearing of a nominee for Assistant Attorney General of the Criminal Division.

As discussed in this post, the U.K. formally entered the facade era as DPAs officially became available to U.K. prosecutors.  Why did the U.K. adopt DPAs?  In short, the U.K. agencies tell us that doing things the old-fashioned way (i.e. proving a criminal violation in an adversarial system) is too difficult and takes too long.  The SFO Director’s language on this issue is blunt as he states that “one of the principal purposes of DPAs is to bring resolution to cases of corporate criminality more quickly.” The U.K.’s justification for DPAs is really quite sad as ease and efficiency are not concepts normally associated with the rule of law and justice.  Yet, when politicians and civil society groups are clamoring for more prosecutions this is the end result.

During the first quarter, the DOJ’s FCPA Unit Chief became the latest in a long line of DOJ and SEC FCPA enforcement attorneys to leave government service for FCPA Inc. to provide defense and compliance services to business organizations subject to the enforcement climate they helped create.  For more information see posts here, here and here.

As highlighted here, FCPA lawyers would be wise to review a recent Third Circuit decision in which the court upholds an order from the district court enforcing a grand jury subpoena issued to a corporation’s FCPA lawyer concerning oral advice the lawyer gave to the client regarding the application of the Foreign Corrupt Practices Act.

Finally, as noted in this post, sometimes it takes the Supreme Court to remind us … well … what the law is! Dig into certain corporate FCPA enforcement actions and it would appear that legal liability seems to hop, skip, and jump around a multinational company.  This of course would be inconceivable in other areas, such as contract liability, tort liability, etc. absent an “alter ego” / “piercing the veil” analysis for the simple reason that is what the black letter law commands.  In Daimler v. Bauman, the Supreme Court, in a non-FCPA case, slammed the “agency” theory seemingly serving as the basis for several recent corporate FCPA enforcement actions.

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