Selective SEC release, scrutiny alert, from the docket, for the reading stack, for your viewing pleasure, and a survey. It’s all here in the Friday roundup.
Selective SEC Release
Since it was filed in December 2011, this site has closely followed the SEC’s long-standing Foreign Corrupt Practices Act enforcement action against former Magyar Telekom executives Elek Straub (former Chairman and CEO); Andras Balogh (former Director of Central Strategic Organization); and Tamas Morvai (former Director of Business Development and Acquisitions) with various FCPA and related offenses. (See here for the prior post).
The complaint alleged, in connection with a bribery scheme in Macedonia and Montenegro, that the individuals violated or aided and abetted violations of the FCPA’s anti-bribery, books and records, and internal controls provisions; knowingly circumvented internal controls and falsified books and records; and made false statements to the company’s auditor.
Unlike most FCPA individual defendants (criminal or civil), the individuals mounted a defense (see here) and the SEC was put in the rare position of having to prove an FCPA case. A motion to dismiss was filed (largely on jurisdictional and statue of limitations issues) and in February 2013 the court denied the motion to dismiss. (See here for the prior post).
Put in a position to prove its case, the SEC ultimately dropped its claims that the individuals bribed Montenegro officials. (See here).
The case proceeded through discovery and competing motions for summary judgment were filed. In late August 2016 oral argument on the motions were heard as to the following issues:
- statute of limitations issues;
- the jurisdictional element of the FCPA’s anti-bribery provisions including whether a key document in the SEC’s complaint was indeed in furtherance of a bribery scheme or merely a legitimate business document;
- general personal jurisdiction issues; and
- two of the SEC’s claims that do not necessarily involve bribery, but rather falsification of books and records and false statements to auditors.
As highlighted in posts here and here, in September 2016 the court denied the motions for summary judgment and in doing so rejected the SEC’s position that it may pursue FCPA violations that occurred out of the limitations period on the basis that those violations were similar in character to and part of the same alleged “scheme” as violations that occurred within the limitations.
Very little of the above information is mentioned in this SEC release from earlier this week. What is mentioned is the following:
“Straub has agreed to pay a $250,000 penalty and Balogh has agreed to pay a $150,000 penalty. Both executives agreed to a five-year bar from serving as an officer or director of any SEC-registered public company.
Morvai, agreed to a settlement that was approved by the court in February requiring him to pay a $60,000 penalty for falsifying the company’s books and records in connection with the bribery scheme.”
In the release, Stephanie Avakian (Acting Director of the SEC’s Division of Enforcement) stated:
“The executives in this case were charged with spearheading secret agreements with a prime minister and others to block out telecom competitors. We persevered in order to hold these overseas executives culpable for corrupting a company that traded in the U.S. market.”
William Sullivan (Pillsbury and counsel for Balogh) provided FCPA Professor the following statement:
“The settlement reached by my client, Mr. András Balogh – a Hungarian resident who has never lived or worked in the United States – provides closure to him related to claims stemming from conduct that was alleged to have occurred in Macedonia more than a decade ago. Despite defending against these allegations from the initiation of the case almost six years ago, for personal and family reasons (most specifically, the seriously declining health of his elderly father, which has recently required expert medical intervention), Mr. Balogh finally concluded that under these circumstances he could not travel to New York in May to personally appear at trial in his own defense against the SEC’s allegations, but instead should resolve the case consistent with the negotiated settlement terms and without either any admission of liability or further denials of misconduct. Accordingly, the allegations in the SEC’s civil complaint have not been, and will now never be heard, evaluated, or decided by a jury in a court of law.”
The Brazil-based company with shares traded on the NYSE, through its subsidiary Rumo Logística Operadora Multimodal S.A. or “Rumo Logística,” acquired 100% of the common shares of ALL – América Latina Logística S.A., or “ALL in April 2015.
Cosan recently disclosed:
“During the course of 2016, Rumo became aware of certain press reports alleging that improper payments to government officials were made by former employees of ALL (prior to being acquired by Rumo) in connection with an investment by Fundo de Investimento do Fundo de Garantia do Tempo de Serviço, or FI-FGTS, in Rumo’s indirect subsidiary Brado Logística and in ALL. As a result of these allegations, Rumo has engaged external legal counsel and consultants to conduct an internal investigation. In connection with the investigation, Rumo voluntarily sought out and provided information to local authorities. At this time, we can neither predict the outcome of the internal investigation, the consequences of any findings or any measures that may be taken by local authorities, any of which may have a material adverse effect on Rumo.”
“The SFO confirms that it has opened an investigation into the activities of KBR, Inc’s United Kingdom subsidiaries, their officers, employees and agents for suspected offences of bribery and corruption. KBR, Inc. is an engineering, procurement and construction company incorporated in the USA and listed on the New York Stock Exchange. This investigation is related to the SFO’s ongoing investigation into the activities of Unaoil.”
In its quarterly report today, KBR stated:
“The DOJ, SEC, and the SFO are conducting investigations of Unaoil, a Monaco based company, in relation to international projects involving several global companies, including KBR, whose interactions with Unaoil are a subject of those investigations. KBR is cooperating with the DOJ, SEC, and the SFO in their investigations, which includes the voluntary submission of information and compliance with formal document requests, including a subpoena from the SEC and a Section 2 notice from the SFO.”
The company recently disclosed:
“We occasionally identify or are apprised of information or allegations that certain employees, affiliates, agents or associated persons may have engaged in unlawful conduct for which we might be held responsible. We are conducting an investigation, with the assistance of outside counsel, relating to certain business activities of the Company and its affiliates and contractors in countries outside the U.S. The investigation includes a review of compliance with the requirements of the U.S. Foreign Corrupt Practices Act and other applicable laws and regulations. The Company has been working with the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice with respect to the investigation. In March 2016, the Company entered into a one-year agreement with the U.S. SEC tolling the statute of limitations relating to the investigation, and in April 2016, entered into a similar agreement with the U.S. Department of Justice. Both of the initial tolling agreements were effective through October 29, 2016. In September 2016, the Company agreed to extend its tolling agreement with the Department of Justice through April 2017, and agreed to a similar extension with the SEC in October 2016.
In late February 2017, the Company received a declination letter from the SEC relating to this investigation indicating that they do not intend to recommend an enforcement action. As of the filing of these financial statements, we cannot predict the ultimate outcome of these matters.
Accordingly, no provision with respect to these matters has been made in our consolidated financial statements.”
As highlighted in this prior post, in March 2016 Novartis coughed up $25 million to resolve an FCPA enforcement action focused on conduct in China.
As noted here by Reuters: South Korea said [earlier this week] it has fined Swiss drugmaker Novartis 55.1 billion won ($48.80 million) for offering doctors kickbacks to recommend the company’s drugs, and also suspended insurance coverage for some of its drugs.
From the Docket
As highlighted in this post, in late 2016 the DOJ filed a superseding indictment adding Foreign Corrupt Practices Act charges to its existing 2015 enforcement action against Ng Lap Seng and Jeff Yin alleging various payments to United Nations official John Ashe in connection with a U.N. sponsored conference center in Macau, China and to influence business interactions with Antiguan government officials.
Ng filed the following pretrial motions: (1) motion to compel the production of the internal documents from all agencies of the Government related to the establishment of a permanent conference center in Macau, China; (2) motion to suppress post-arrest statements; (3) motion to dismiss Indictment or in the alternative for a bill of particulars; and (4) motion to strike the Indictment or, in the alternative, to strike references to “Boss Wu” from the Indictment.
Earlier this week, in this decision federal trial court judge Vernon Broderick (S.D.N.Y.) stated as follows regarding the FCPA issues:
“Ng further argues that, with respect to the FCPA charges, there was no “official act” and that the FCPA is unconstitutionally vague as applied to him.
Because I find that the [Indictments] are legally sufficient and that neither violates the Constitution as applied to Ng, Defendant Ng’s motion to dismiss is denied. I will issue a decision detailing the basis for denying Defendant Ng’s motion to dismiss prior to the beginning of trial.”
For the Reading Stack
An informative, in-depth read from the American Lawyer regarding the Sanford Wadler v. Bio-Rad civil lawsuit that touched upon FCPA issues. As stated in the article: “Wadler’s trial aired Bio-Rad’s corporate dirty laundry and provided a rare behind-the-scenes look at two internal FCPA investigations.”
For Your Viewing Pleasure
A post earlier this week highlighted a recent speech by Attorney General Jeff Sessions during which he delivered the DOJ’s FCPA script.
From Luciana Silveira, a Fulbright Ph.D. Visiting Researcher at American University, Washington College of Law and avid FCPA Professor reader.
“I am asking for your kind help in sharing a survey with your contacts. The focus of my research is the interaction of anticorruption laws and international trade. With this in mind, I drafted a 15-question-survey, almost all multiple choice, destined to measure opinions based on personal experience and knowledge of corporate employees. It is an anonymous survey and respondents must not identify themselves or the company anywhere on their responses. No companies or individuals will be cited in the research.”
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