No comment, scrutiny alert, when the obvious is not so obvious, quotable, undercover, follow-up, and for the reading stack. It’s all here in the Friday roundup.
The recent FCPA enforcement action against Chile-based LAN Airlines (in which the company paid $22 million to resolve DOJ and SEC enforcement actions concerning an alleged payment to resolve an Argentina labor dispute) suggested that both Argentine and Chilean law enforcement officials had commenced investigations of the conduct approximately five years ago.
I’ve tried to find information in the public domain regarding these apparent law enforcement investigations but have generally struck out.
For instance, I contacted LAN’s investor relations office and posed the following question:
“In the recent FCPA enforcement action, there is mention of related Argentine and Chilean law enforcement investigations regarding the conduct at issue. Is there anything in the public domain regarding those related investigations? If those investigations are finished, can you please provide the end result? Was there a fine or penalty?”
After waiting two weeks, I received the below answer from an individual in LAN’s investor relations office.
“I spoke with our legal counsel and we are not able to share any additional information at this time outside of the information contained in the agreements signed with the SEC and DOJ, which are publicly available on the SEC´s website.”
Gee, that was helpful as there is no information in the SEC and DOJ resolution documents regarding the Argentine and Chilean law enforcement investigations other than a brief mention of their apparent existence.
As highlighted in this prior post, in a discreet December 2013 blog post, Cisco disclosed that it was under FCPA scrutiny. Yesterday, the company disclosed:
“At the request of the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice, we have conducted an investigation into allegations which we and those agencies received regarding possible violations of the U.S. Foreign Corrupt Practices Act involving business activities of our operations in Russia and certain of the Commonwealth of Independent States, and by certain resellers of our products in those countries. We take any such allegations very seriously and we have fully cooperated with and shared the results of our investigation with the SEC and the Department of Justice. Based on the investigation results, both the SEC and the Department of Justice have recently informed us that they have decided not to bring enforcement actions.”
When The Obvious Is Not So Obvious
This Wall Street Journal Risk & Compliance Journal entry states “AstraZeneca Avoids Bribery Charges” and notes that “the lack of criminal [anti-bribery] charges puzzled some legal experts.”
How about this obvious explanation for the lack of FCPA anti-bribery violations (civil or criminal) in the AstraZeneca enforcement action.
AstraZeneca (AZN) is a foreign issuer The FCPA’s anti-bribery provisions only apply to a foreign issuer such as AZN to the extent there is “use of the mails or any means or instrumentality of interstate commerce” in connection with a bribery scheme.
There is nothing in the SEC’s AZN order that finds, suggests, or infers such “use of the mails or any means or instrumentality of interstate commerce” in connection with a bribery scheme in the SEC’s administrative order.
So what bribery charges did AZN actually “avoid”?
Once again, a non-lawyer journalist looking to fill their pages with off-target articles.
In this recent speech, David Green (Director of the U.K. Serious Fraud Office) discusses, among other topics, the two DPAs his office has thus far executed. Green stated:
“[T]he traditional tactics of the litigator have no place in DPA negotiations. It is not about point-scoring or wearing down an opponent, it is about reaching a transparent agreement that a court will accept, reflecting the interests of justice.”
The justice system that I learned about was that justice was the intended end result of an adversarial system in which competing views of the facts and law are subjected to burdens of proof.
Speaking of DPAs and related topics, from Australia:
“The [Australian] federal government will hire a new team of specialist anti-corruption investigators in Perth after a series of revelations … about high-level foreign bribery … Justice Minister Michael Keenan announced on Monday that a new fraud and anti-corruption team, including investigators, forensic accountants and lawyers, will tackle corporate corruption and would “prioritise foreign bribery investigations”.
Mr Keenan said the government was considering whether to allow for deferred prosecution arrangements, which encourage companies to report their own bad behaviour and pay for it, in return for an agreement not to prosecute them.”
Regarding the rise in DPAs (Canada, among other countries, is keen to have them too), this is precisely what I predicted in my 2010 article “The Facade of FCPA Enforcement.”
“The final reason … for why the facade of FCPA enforcement matters relates to the increasing frequency by which other nations are modeling enforcement of their own bribery laws on U.S. enforcement methods and theories. These methods and theories, unless addressed and corrected here in this country, will continue to be replicated elsewhere, perhaps leading to a global facade of enforcement.”
To learn more about how DPAs (and NPAs) have impacted FCPA enforcement, see this recent article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement.”
This Omaha World-Herald article highlights comments made in a recent interview by Mike Yanney (chairman emeritus of the Burlington Capital Group who also serves on the boards of several Omaha businesses).
“Yanney’s investment banking ventures include more than 40 business projects in the Soviet Union. At one point his company had investments in businesses there that employed 9,300 people, including the country’s largest producers of chickens and glass bottles, both run by Russian nationals. “You’ve got to hire the right people and motivate them and give them responsibility and trust them,” he said. Not all Russians he met were trustworthy. One official demanded an under-the-table Chevrolet Monte Carlo in return for completing a business deal. Yanney rejected the demand and discovered later that the Russian was working undercover for the FBI to catch violators of the Foreign Corrupt Practices Act. If he had agreed to the bribe, he said, “I’d still be in prison for a lousy car.”
This previous post highlighted Louis Berger’s civil suit against Richard Hirsch (a former executive at the company located in the Philippines) for exposing the company to FCPA liability resulting in the company resolving a $17.1 million FCPA enforcement action. As noted in the post, Louis Berger’s civil complaint asserted a variety of breach of fiduciary duty claims.
This report states:
“The Louis Berger Group Inc. has reached a settlement in one of the two lawsuits the company filed in New Jersey state court against former executives over their bribery of foreign officials, criminal activity that ultimately led the business to pay a $17.1 million penalty. Counsel for the New Jersey-based construction management company and its parent company, Berger Group Holdings Inc., and counsel for Richard J. Hirsch said in a stipulation of dismissal filed on Aug. 19 that “the parties have resolved all claims between them” and that the companies dismissed the lawsuit. The terms of the settlement were not disclosed in the court filing, and attorneys for the parties did not immediately respond to requests for comment Wednesday. The companies’ lawsuit against the second former executive, James McClung, is still pending, court records show.”
An interesting read here from the Wall Street Journal titled “The Sinister Side of Cash.”
“[P]aper currency lies at the heart of some of today’s most intractable public-finance and monetary problems. Getting rid of most of it—that is, moving to a society where cash is used less frequently and mainly for small transactions—could be a big help. There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism. There are substitutes for cash—cryptocurrencies, uncut diamonds, gold coins, prepaid cards—but for many kinds of criminal transactions, cash is still king. It delivers absolute anonymity, portability, liquidity and near-universal acceptance. It is no accident that whenever there is a big-time drug bust, the authorities typically find wads of cash.”
“All things come in cycles, and we are now far enough into the current cycle of corporate prosecutions and related regulatory enforcement actions to be able to reflect meaningfully on the amplification of major resolutions in the multi-billion dollar range. Perhaps we are even able to discern some principles. As lawyers handling government investigations, we are accustomed to having to derive principles in an important area of the law with undeveloped case law. On some of the most important issues that lawyers both for defendant companies and for the government confront, there is very little neutral guidance as to appropriate outcomes. Historically, the surest and most relevant guide has been to look to the major negotiated resolutions to determine the contours of the law on issues from sales of mortgages, to cartel conduct, to foreign corruption, to the extent of economic sanctions. But those guides are becoming less and less helpful.”
For prior posts that touch upon similar topics, see “FCPA Settlement Amounts Have Come a Long Way in a Short Time,” and “Have FCPA Settlement Amounts Increased … Just Because?”
A good weekend to all.