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Friday Roundup

Roundup

Funny, also funny, corruption in the anti-corruption industry, the head of the DOJ’s FCPA Unit writes, reasons for the general increase in FCPA enforcement, scrutiny alert, asset recovery, and for the reading stack. It’s all here in the Friday roundup.

Funny

This recent FCPA Blog post asked “what’s the most important FCPA case ever” and stated: “The Africa Sting showed how far the feds would go to make a splashy FCPA case. But the final lesson was that using a big sting to concoct a supposed industry-wide conspiracy was a bad idea. The judge didn’t buy it, and neither did a couple of juries.”

Funny that the post doesn’t mention that the the person at the center of this failed, manufactured case was its current Contributing Editor and training partner Richard Bistrong.

To read more about how the jury “didn’t buy it,” see this guest post from the Africa Sting jury foreman. As stated by the jury foreman:

“[M]ore than one juror voiced concern that it would be unjust for the defendants in this case to be convicted when the government relied so heavily on Mr. Bistrong who freely admitted on the stand more illegal acts than the entire group of defendants was accused of, yet was able to plead to only one count of conspiracy to violate the FCPA.”

Regarding the FCPA Blog’s training partner relationship with Bistrong, there is little transparency of this in FCPA Blog posts such as this one.

However, it doesn’t take much to connect the dots.

  • Bistrong is the CEO of Front Line Bribery LLC.
  • The FCPA Blog is owned by Recathlon LLC.
  • On Recathlon LLC’s website is the following. “Through our training partner Front-Line Anti-Bribery LLC, Recathlon delivers FCPA education and training videos to organizations worldwide covering tens of thousands of employees.”

Also Funny

As highlighted in several prior posts including here, Transparency International’s Corruption Perceptions Index (“CPI”) has many flaws and the corporate community should thus take the CPI with a grain of salt.

It was funny to see that TI (after encouraging the business community for many years to look to the CPI) recently stated (see here “Transparency International Questions Use of Corruption Index):

“Poor performance in the CPI is like a red flag, but the response to a red flag should not be cutoffs, but greater attention to, and investment in, how to prevent corruption and maintain integrity in business practice.”

Corruption in the Anti-Corruption Industry?

I don’t agree with everything Hui Chen (former DOJ compliance counsel) says or writes about, but I certainly agree with the following and have been writing about this aspect of FCPA Inc. for years. Chen writes in this article:

“[O]ne of the worst results of the fear-mongering approach to FCPA compliance is an ironically corrupting trend in the anti-corruption industry. There are FCPA conferences always, every day of the week, many of them “pay-to-play”: speaking slots for sale as sponsorships. Nonprofit organizations purporting to advocate against corruption supporting their causes by courting corporate donors and awarding stamps of approval, purchased, again, through corporate sponsorships.”

For numerous FCPA Professor posts on these topics, see herehere, here, here.

The Head of the DOJ’s FCPA Unit Writes

Daniel Kahn, the current head of the DOJ’s FCPA Unit, recently penned this article in Law360. In it, Kahn writes:

“Unlike most other laws, however, the FCPA necessarily implicates international and diplomatic issues in every case. Gathering evidence and securing witnesses from overseas — particularly from countries with which the United States does not have established mechanisms for cooperation — makes it extremely difficult to prove cases beyond a reasonable doubt.” (emphasis added).

From a public policy standpoint, am I supposed to be concerned that it is extremely difficult for the DOJ to prove criminal cases beyond a reasonable doubt? Absolutely not, this is what the “founder fathers” desired and it should be difficult, not easy, to marshal the full resources of the government against a person (whether a natural person or legal person), change lives through criminal charges, and perhaps deprive them of their liberty.

In any event, the statement is a bit ironic in the FCPA context because, in any given year, approximately 50% of corporate FCPA enforcement actions originate from voluntary disclosures and even if not, nearly all business organizations under FCPA scrutiny cooperate with the DOJ.

Kahn also writes about DOJ prosecutors:

“Many of these individuals left or turned down significantly higher-paying jobs to work equally long (if not longer) hours for the government, and consistently work late into the night and on weekends.”

While I am grateful for all forms of public service, it should be noted that nearly all FCPA enforcement attorneys with supervisory and discretionary responsibilities leave government service with guaranteed multi-million offers from FCPA Inc. participants.

Reasons for the General Increase in FCPA Enforcement

This recent article in Law360 by former DOJ FCPA Unit Chief Patrick Stokes states:”At 40, the FCPA packs a punch that even lawmakers likely did not envision decades ago.”

Well, I certainly agree with that, but not necessarily for the primary reason stated in the article:

“There are numerous factors that have led to the expanded reach and impact of the FCPA over the past four decades. Perhaps none has been, or will prove to be, more consequential than the increasing collaboration between U.S. and foreign anti-corruption authorities.”

Consider the following reasons for the general increase in FCPA enforcement.

  • For most of the FCPA’s 40 years, the government either charged or didn’t charge, now there is a buffet of enforcement options (NPAs, DPAs, declinations with disgorgement, administration actions, etc.) that have as a common thread lack of any meaningful judicial scrutiny. Obviously the more resolution vehicles law enforcement has created, the more FCPA enforcement there is going to be.
  • Enforcement theories (again not subjected to any meaningful judicial scrutiny) have changed. Consider just one example. Since first being “invented” in 2002, there have been approximately 25 corporate enforcement actions based on the theory that physicians, lab personnel, etc. are “foreign officials” under the FCPA and thus on par with President and Prime Ministers.
  • In the FCPA’s new era, FCPA Inc. has become a multi-billion niche industry that largely controls and benefits from more enforcement.

Scrutiny Alert

It is not the typical way FCPA scrutiny arises, but as highlighted here and here Muddy Waters Research, an investment firm that conducts investigative research on public companies, recently accused OSI Systems (a California based company that develops and markets security and inspection systems such as airport security X-ray machines and metal detectors) of corruption.

The allegation has already spanned this class action lawsuit.

Asset Recovery

Attorney General Jeff Sessions recently spoke about asset recovery. He stated:

“Bribes paid to an official in West Africa can be spent on a yacht in Miami.

[…]

[W]e have seized or restrained $3.5 billion worth of corruption proceeds involved in money laundering offenses.
Since 2004, the United States has returned millions in corruption proceeds to compensate victims. That includes approximately $119 million to the people of Italy, $115 million to the people of Kazakhstan, more than $20 million to the people of Peru, and millions more to the people of Nicaragua, South Korea, and Taiwan. That recovery has only been possible because of cooperation with our foreign law enforcement partners.”

In terms of mutual legal assistance treaties (MLATs), Sessions stated:

“As a prosecutor for 14 years, I know firsthand that the best evidence is often simple things like bank records, airplane records, and telephone records. If they’re not properly shared between nations, then, in many cases, justice cannot be done.  It is essential that we continue to improve that kind of sharing. That’s why we must all do more to expedite mutual legal assistance requests.  These requests ensure that prosecutors have the evidence that they need to bring criminals to justice. In response to the increasing volume and complexity of legal assistance requests, the Department of Justice has taken two actions that are critically important. First, we have increased staffing levels at the Department’s Office of International Affairs, or OIA.  Second, OIA has created two new units dedicated to reviewing and executing foreign requests.  As a result, OIA has significantly reduced its backlog by thousands of cases, despite receiving 16 percent more requests in fiscal 2016 than in fiscal 2015. These are important steps.  But we can and must do more to help one another. I challenge all of you to devote more resources to quickly and effectively reducing your backlog too.  You know how serious these cases can be.  There is no time to waste.  We will do our part for you, but we need to work together. The Department is also working towards the implementation of a framework with some of our closest allies that would supplement the MLAT process and reduce potential conflicts of law regarding the disclosure of electronic evidence.  That kind of framework would enhance public safety efforts in the U.S. and around the world. In order for this type of framework to function, however, we need to ensure that our warrants continue to be effective even when an American company chooses to store customer data outside of the United States. When we have access to the right evidence, we get results.”

For the Reading Stack

A dandy article here from Michael Levy (Paul Hastings) titled “The SEC’s Unlawful and Dangerous Expansion of the Exchange Act” concerning the FCPA’s books and records and internal controls provisions.

For more on “off-the-rails” FCPA enforcement by the SEC, see here.

See here for Levy’s prior dandy guest post on FCPA Professor titled “Prosecutorial Common Law.”

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