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Friday Roundup

Roundup

Clayton responds, from the dockets, Bitkower to FCPA Inc., and a student writing competition. It’s all here in the Friday roundup.

Clayton Responds

This previous post highlighted the FCPA portion of the recent confirmation hearing of SEC Chair nominee Jay Clayton. In follow-up written questions, Senator Sherrod Brown (D-OH) asked: “The Foreign Corrupt Practices Act (FCPA) forbids U.S. companies and their subsidiaries from paying foreign government officials to obtain or retain business. What is your specific plan for enforcement of the FCPA.”

Clayton responded:

“Bribery and corruption have no place in society. Moreover, they often go hand-in-hand with many other societal ills, including inequality and poverty, and have anti-competitive effects, including disadvantaging honest businesses. Accordingly, combating corruption is an important government mission.

U.S. authorities, including the SEC, other financial regulators, and law enforcement agencies, both at home and abroad, play an important role in combating government corruption. I believe the FCPA can be a powerful and effective means to effect this objective. I also believe that international anti-corruption efforts are much more effective at combating corruption if non-U.S. authorities are similarly committed and seek to coordinate. Fortunately, international enforcement efforts appear to be more prevalent than they were a decade ago. If confirmed, I look forward to working with my fellow Commissioners, Enforcement Division staff, and other authorities in the U.S. and abroad to coordinate enforcement of the FCPA and other anti-corruption laws. In particular, I believe that coordination with the Department of Justice is integral to effective enforcement of the FCPA.”

From the Dockets

Siemens Monitor Report Litigation

Previous posts here and here highlighted the DOJ’s efforts (along with Siemens and its monitor) to block public release of the Monitor reports provided to the DOJ in connection with resolution of the still record-setting 2008 FCPA enforcement action.

A recent opinion by Judge Rudolph Contreras (D.D.C.) largely sided with the DOJ (and Siemens) by finding that the DOJ has justified the withholding of certain information pursuant to various Freedom of Information Act exemptions.

The relevant exemptions concern information relating to “trade secrets and commercial or financial information obtained from a person that may be privileged or confidential” and information relating to “inter-agency or intra-agency memorandums or letters that would not be available by law to a party other than an agency in litigation with the agency.”

As to the former, the judge found that annual monitor reports and associated documents, monitor work plans and associated documents, and Siemens training, compliance policies and associated documents all contained information commercial in nature and that because the information was provided involuntarily to the DOJ the information was confidential for purposes of FOIA. The judge also found that disclosure of this information can constitute a form of competitive harm.

Odebrecht / Braskem Securities Fraud Matter

Recently a federal court judge in the S.D. of N.Y. largely dismissed shareholder securities fraud class action claims against Braskem, its major shareholder Odebrecht, and various former officers.

In pertinent part, the shareholders alleged that “Braskem participated in, but did not publicly disclose, a bribery scheme that long enabled it to buy naphtha, a raw material central to its manufacturing operations, at materially below-market prices.”

The court sorted the alleged false or misleading statements into three categories: (1) Braskem’s standards of conduct and code of ethics, as articulated in [a] Odebrecht press release, Braskem’s sustainability reports, and Braskem’s code of conduct; (2) Braskem’s statements relating to its internal controls, as articulated in Braskem’s SOX certifications attached to the company’s [SEC] filings; and (3) Braskem’s statements relating to the basis for prices it paid for naphtha, as articulated in the company [SEC filings].”

As to category (1), the court concluded that these statements “are non-actionable as immaterial puffery.”

As to category (2), the court likewise concluded that these statements were not actionable. According to the court, the complaint “lacks any concrete factual allegations that Braskem had deficient internal controls governing its financial reporting. Indeed, the [plaintiff] does not concretely allege that any of Braskem’s financial reports were in any way inaccurate.”

As to category (3), the court concluded that these statements do allege an actionable material misrepresentation or omission. As stated by the court, “each filing was misleading, because each, while commenting on naphtha pricing, omitted to reveal the – or least an – elephant in the room: that the favorable purchase price that Braskem secured was substantially due to its bribery of Petrobras and public officials.”

The court granted Odebrecht’s motion to dismiss finding that the it did not have personal jurisdiction. As stated by the court, “[the plaintiffs’ complaint] does not allege, concretely, that Odebrecht played any role in making, proposing, editing or approving Braskem’s public filings in the United States, including the two categories of filings regarding naphtha pricing that the Court has held, on the pleadings, to be only the potential bases for defendants’ liability to the plaintiffs.”

Bitkower to FCPA Inc.

Following the typical career path of FCPA enforcement attorneys, David Bitkower (former DOJ Principal Deputy Assistant Attorney General for the Criminal Division) is joining FCPA Inc.

As stated in this Jenner & Block press release:

“Together with other senior DOJ leaders, Mr. Bitkower oversaw the department’s most significant investigations and prosecutions of corporate wrongdoing, including financial institution fraud, sanctions evasion, FCPA violations and corporate health care fraud. Prominent cases brought by the Criminal Division during Mr. Bitkower’s tenure include the first-ever prosecution of a hedge fund for FCPA violations …”.

[…]

Along with his colleagues, [Bitkower] was also responsible for developing, implementing and articulating departmental enforcement policies, such as the FCPA Enforcement Plan and Guidance (“FCPA Pilot Program”) …”.

The above-statement about the”first-ever prosecution of a hedge fund for FCPA violations” is a reference to the September 2016 FCPA enforcement action against Och-Ziff in which Bitkower stated: “This case marks the first time a hedge fund has been held to account for violating the Foreign Corrupt Practices Act.”

This was a curious statement when made and remains curious in the Jenner & Block press release. (See here for information on the DOJ’s FCPA website about the 2007 FCPA enforcement action against Omega Advisors including this DOJ press release titled “U.S. Announces Settlement with Hedge Fund Omega Advisors Inc. in Connection with Omega’s Investment in Privatization Program in Azerbaijan.”

This previous post analyzed Bitkower’s statements (on behalf of the DOJ) regarding the FCPA Pilot Program.

Regarding the general issue of DOJ or SEC FCPA enforcement attorneys leaving for lucrative positions with FCPA Inc. to provide defense and compliance services to business organizations subject to the enforcement climate they helped create, I have long proposed a prohibition on DOJ (or SEC) FCPA enforcement attorneys with supervisory and discretionary authority from providing FCPA defense or compliance services for five years upon leaving government service.

Indeed, the legitimacy and credibility of the DOJ and SEC’s entire FCPA enforcement programs hinge on this policy proposal being adopted. For additional reading on this topic, see here and here.

Student Writing Competition

The Coalition for Integrity, an anti-corruption and good government non-profit, non-partisan organization, announced an essay contest for students on: “Attacking Corruption and Promoting Integrity in the United States and around the Globe.” (To learn more click here).

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