- FCPA Professor - http://fcpaprofessor.com -

“Foreign Official” Limbo – The Bar Has Been Lowered

It’s Friday, so let’s get this started with some music [1].

The previous “limbo low” for an otherwise commercial enterprise to be deemed an “instrumentality” of a foreign government, and thus employees of the enterprise to be deemed “foreign officials” by the DOJ and SEC was 43%. See this [2] prior post regarding the Alcatel-Lucent enforcement action and Telekom Malaysia Berhad – a commercial enterprise with a shareholder base of approximately 35,000 institutional and private/retail shareholders.

The limbo bar apparently has been lowered.

The recent Comverse enforcement (here [3]) focused on “individuals connected to” “Hellenic Telecommunications Organization S.A. [“OTE”] – a telecommunications provider controlled and partially owned by the Greek Government” including “employees of OTE’s subsidiaries Cosmote, Cosmofon, and Cosmorom, in order to obtain purchase orders from those companies.”

According to the NPA, “the Greek Government was OTE’s largest single shareholder and maintained an interest in over one-third of OTE’s issued share capital.”

Although the NPA only referenced knowing violations of the FCPA’s books and records provisions (i.e. a “charge” that does not have a “foreign official” element) you can be sure that this enforcement action, notwithstanding the manner of resolution, was still very much about the “foreign officials” allegedly at issue. See, e.g., Miller & Chevalier FCPA Review Spring 2011 (here [4]) (“Neither the SEC nor the DOJ identifies OTE as a government instrumentality, although the language used (identifying the Greek government as the largest single shareholder but not majority owner) suggests that they would have brought anti-bribery charges if there was evidence that CTI had knowledge of the payments or that Comverse Limited engaged in improper activity in the United States.”).

The conduct at issue in the Comverse enforcement took place between 2003-2006.

Just what type of entity was OTE during this time period?

OTE’s 2003 Annual Report (here [5]) notes that the “Greek State” stake of total share capital was approximately 33.7%. The report notes that OTE’s shares have traded on the New York Stock Exchange since 1998. The report states as follows. “The Greek State may no longer control OTE in a way different from that of any other Societe Anonyme company or telecom services provider. The Greek State may – only as a shareholder – monitor the operation and administration of the corporate affairs. The Greek State is represented by the Minister of Finance who is entitled to intervene according to the Articles of Association and the legal procedures as any other shareholder can do.

OTE’s 2004 Annual Report (here [6]) contains information similar to that noted above and states as follows. “The Greek State may no longer control OTE in a way different from that of any other Societe Anonyme and telecom services provider company. The Greek State may – only as a shareholder – monitor the operation and administration of the corporate affairs. The Greek State is represented by the Minister of Finance who is exercising its control through the established bodies as any other shareholder can do.”

OTE’s 2005 Annual Report (here [7]) describes a shareholder structure as follows. International institutional shareholders 40%; Hellenic Republic 38.7%; Greek institutional shareholders 12.1%; Rest shareholders 9.2%.

OTE’s 2006 Annual Report (here [8])describes a shareholder structure as follows. International institutional shareholders 45%; Hellenic Republic 38.7%; Greek institutional shareholders 9.5%; Rest shareholders 6.8%.

According to OTE’s current website (here [9]), it shares trade on the Athens Stock Exchange, the London Stock Exchange and OTE’s ADRs trade on the OTC (over the counter) market in the U.S. and OTE continues to report to the SEC.

According to OTE’s current website (here [10]), its current shareholder base is as follows. Hellenic Republic: 20.0%; Deutsche Telekom: 30.0%; Greek Institutional Shareholders: 30.2%; International Institutional Shareholders: 9.7%; and Rest Shareholders: 10.1%.

Step aside 43%, the new limbo low is between 33% – 38%.

How long can it go?

*****

A good weekend to all.