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

Friday Roundup

Scrutiny alert, on cue, across the pond, survey says, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alert

According to various Nigerian media reports (here [1] and here [2]):

“A group which goes by the name: Concerned Itsekiri Coastal Dwellers Association, CICDA, has petitioned the United States, US Department of Justice, Criminal Division over alleged fraudulent and corrupt practices by some Delta state government officials with Chevron Nigeria Limited, CNL.”

In 2007 ,Chevron agreed to pay $30 million to resolve an FCPA enforcement action in connection with the Iraq Oil for Food program (see here [3]).

On Cue

This prior post [4] analyzed the recent U.K. deferred prosecution agreement against Standard Bank (SB)  – specifically “what” the DPA resolved – and stated:
“Given the allegations and findings, it is curious why SB even voluntarily disclosed the conduct at issue to the SFO, particularly in light of Sec. 7′s adequate procedures defense.
But then again, counsel to SB (like counsel in other FCPA or related internal investigations [5]) no doubt secured substantially more in legal fees by making the disclosure (compared to the other reasonable alternative of not disclosing and remedying any internal control deficiencies) plus the deferred prosecution agreement comes with post-enforcement action compliance obligation. Moreover, counsel achieved name recognition by being the first law firm to represent a Sec. 7 corporate defendant and secure a DPA on behalf of its client. (One can only imagine the speaking opportunities in the future for “how they did it”).”

As if on cue, the law firm that represented SB is currently marketing a seminar about the enforcement action.  The teaser e-mail states:

“Join the legal team who acted on the UK’s first ever Deferred Prosecution Agreement for a breakfast seminar about the process. […] We hope you will join us to hear how this ground-breaking and highly anticipated agreement was arrived at, the pivotal legal points which were discussed, and the key lessons for senior in-house counsel from the process.”

Across the Pond

The U.K. Serious Fraud office recently announced [6]:

“UK printing company Smith and Ouzman Ltd, [previously] convicted of making corrupt payments, was … ordered to pay a total of £2.2 million in a sentencing hearing at Southwark Crown Court. The conviction and sentence follows a four-year investigation by the Serious Fraud Office.

The … company, which specialises in security documents such as ballot papers and exam certificates, was convicted in December 2014 under the Prevention of Corruption Act 1906. The corrupt payments totalling £395,074 were made to public officials for business contracts in Kenya and Mauritania.

The sum broken down included a fine of £1,316,799 as well as £881,158 to satisfy a confiscation order applied for by the SFO and £25,000 in costs. The fine is payable in instalments every six months until the full amount is paid, while the confiscation order must be satisfied within 28 days and the costs paid within six months.

In passing sentence, Recorder Andrew Mitchell QC said:

“Corruption of foreign officials is damaging to the country in which the corruption occurs, is damaging to the reputation of UK business and of course, in the market in which a business operates, it is anti-competitive.”

Director of the SFO, David Green CB QC commented:

“The bribery of foreign officials by UK companies damages this country’s reputation, commercially, politically and ethically. The SFO will pursue such criminal behaviour at both the corporate and individual level.”

Survey Says

According to this recent survey [7] of South Africans conducted by the Ethics Institute of South Africa and sponsored by Massmart, only 22% of respondents believe that it is possible to successfully navigate daily life in the country without paying a bribe.

For the Reading Stack

In a recent article “Four Ways to Improve SEC Enforcement [8],” Professor Andrew Vollmer (a former Deputy General Counsel of the SEC and former partner in the securities enforcement practice of Wilmer Cutler) touches on some basic rule of law principles that sometimes bear repeating

“The first way to improve SEC enforcement is for the Commission to assert violations of law based only on well established and widely accepted legal principles and not to base claims on new, untested, and extreme legal theories.

[…]

Regulating and enforcing by unelaborated and expanding legal rules raise serious issues for both the private party and the system as a whole. Once the government charges a private party, the person is labeled publicly as a law breaker, even if a small group of knowledgeable practitioners appreciates that the legal theory is new and untested, and faces severe and frequently career or business ending sanctions. The private party must incur the costs, distress, and adverse publicity associated with a defense or succumb and settle, and the pressure to settle is over-powering even when the SEC case lacks merit.

The threats to the overall system are equally grave, and here they come in two forms. First, a federal agency breaks fundamental bonds of trust and accountability in our system of democratic governance when it exceeds its governing law. An Executive Branch agency must take care to stay well within the legal boundaries set by Congress or it acts as lawlessly as those who really violated the securities laws.

Second, enforcement agencies must exercise their power within established rules and precedent so regulated persons know what is required of them and may act accordingly and “so that those enforcing the law do not act in an arbitrary or discriminatory way.” “A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required.” A charge based on a new agency legal interpretation is essentially a claim against an innocent person. “It is one thing to expect regulated parties to conform their conduct to an agency’s interpretations once the agency announces them; it is quite another to require regulated parties to divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference.” An SEC enforcement case based on an interpretation that has not been properly communicated to the public is not valid.

Thus, when the Chair said SEC enforcement should be “aggressive and creative,” she sent the wrong message to her staff. Expansive, untested theories of law to impose liability weaken the SEC’s enforcement efforts, short-change investigations of core misconduct, mistreat the private parties who must respond, and breach a trust between the agency and the country. One way to improve the SEC enforcement process therefore is to reward the staff for recommending cases based on established and accepted legal doctrines and to eschew over-reaching legal positions.

[…]

Another area worth attention is the time SEC investigations take. Potential wrongdoing must be investigated promptly and charges, when justified, must be brought promptly to serve a range of important interests. Avoiding delay during investigations helps deter, uses SEC resources efficiently, reduces uncertainty and costs for private parties, keeps evidence fresh, and promotes finality.

Unfortunately, investigations lasting for many years are the norm.

[…]

Extended investigations disserve the enforcement process and the persons being investigated. The delays increase the costs of defense and the burdens on private parties. Lengthy investigations create uncertainty for both companies and individuals, and uncertainty about the SEC’s plans can harm reputations, stall careers, and postpone financings and investments, research, and product development.

The delays also seriously harm the quality of justice and the SEC’s cases.”

*****

A good weekend to all.