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Friday Roundup

Roundup

Interesting, from the DOJ’s perspective, pay them more, sanctioned, scrutiny update, exit, and for the reading stack. It’s all here in the Friday roundup.

Interesting

As highlighted here, in December 2016 Odebrecht S.A. (a Brazilian holding company) and Braskem S.A. (a Brazil-based petrochemical company in which Odebrecht owns a majority of voting shares) resolved a large FCPA and related enforcement action largely concerning conduct in Brazil including the companies relationships with Petrobras as well as allegations of improper payments in Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela.

As highlighted here, in late December 2018 Brazil-based Eletrobras resolved an FCPA enforcement action centered on allegations that “several Brazilian government officials, the former Eletronuclear president, and other Eletronuclear officers received bribes from Brazilian construction company executives engaged in a bid-rigging and bribery scheme involving” a specific project.

Recently Eletrobras announced that Odebrecht “will pay it and three affiliates a combined sum of nearly 161.9 million Brazilian reals ($42.7 million) as part of a corruption-related leniency agreement between the Brazilian engineering conglomerate and the nation’s government.” As noted here: “Eletrobras said that adhering to the agreement “is an opportunity for Eletrobras to recover part of the funds to which it is entitled, as a result of the losses caused by Odebrecht, as part of the corruption scheme unveiled by [Operation Car Wash].”

From the DOJ’s Perspective

The Fraud Section of the Department of Justice recently released this annual report. It contains several references to the FCPA including what the DOJ views as its most notable FCPA cases in 2018.

Pay Them More

There are two parties in a bribery scheme. The giver and the recipient. Often times, the recipient “foreign official” with discretion has a low government salary and is looking to supplement their income by making a request for something of value.

Does this mean that if the “foreign official’s” salary is increased that the “foreign official” will stop demanding things of value?

I doubt it, but as highlighted in this article

“[Guyana] Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams, has said that he will petition the Government for more funds in an effort to boost the paltry pay of his officers. His reason for doing so is premised on concerns from local and international transparency advocates that the poor salaries of EPA officers make them more susceptible to the influence of corrupt oil companies. Dr. Adams noted, yesterday, that this is a serious concern of his. He said, too, that he notes the importance of the issue especially since the EPA will be one of the key regulators of the oil and gas sector.”

Sanctioned

As highlighted here, in November 2018 the DOJ criminally charged Venezuelan billionaire Raul Gorrin with FCPA and related offenses. According to the DOJ, Gorrin “offered and agreed to pay bribes to Foreign Official 1 [described as a high-level official with decision-making authority and influence within the Oficina Nacional del Tesoro (ONT), the Venezuelan National Treasury] for purposes of obtaining and retaining business; specifically, influencing and inducing Foreign Official 1 to permit Gorrin to conduct foreign currency exchanges for the Venezuelan government and securing an improper advantage in acquiring the right to conduct such exchange transactions.”

Recently, the Treasury Department announced:

“[T]he U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Venezuelan individuals and companies involved in a significant corruption scheme designed to take advantage of the Government of Venezuela’s currency exchange practices, generating more than $2.4 billion in corrupt proceeds.  This designation, pursuant to Executive Order (E.O.) 13850, targets seven individuals, including former Venezuelan National Treasurer Claudia Patricia Diaz Guillen (Diaz) and Raul Antonio Gorrin Belisario (Gorrin), who bribed the Venezuelan Office of the National Treasury (ONT, or Oficina Nacional del Tesoro) in order to conduct illicit foreign exchange operations in Venezuela.”

Scrutiny Update

As highlighted in this previous post in late December 2017, Ciena Corp., Maryland-based technology company, disclosed:

“During fiscal 2017, one of Ciena’s third-party vendors raised allegations about certain questionable payments to one or more individuals employed by a customer in a country in the ASEAN region. Ciena promptly initiated an internal investigation into the matter, with the assistance of outside counsel, which investigation corroborated direct and indirect payments to one such individual and sought to determine whether the payments may have violated applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act (“FCPA”). In September 2017, Ciena voluntarily contacted the Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) to advise them of the relevant events and the findings of Ciena’s internal investigation. With the direct oversight of the Board, Ciena continues to cooperate fully with the SEC and DOJ in their review of the investigation.

Ciena’s operations in the relevant country have constituted less than 1.5% of consolidated revenues as reported by Ciena in each fiscal year since 2012. Ciena does not currently anticipate that this matter will have a material adverse effect on its business, financial condition or results of operations. However, as discussions with the SEC and DOJ are ongoing, the ultimate outcome of this matter cannot be predicted at this time.

Recently the company disclosed:

“On December 10, 2018, the DOJ advised that it has declined to prosecute this matter and that its investigation into the matter is now closed. Ciena continues to cooperate fully with the SEC in its investigation into this matter.”

Exit

As highlighted here, Sandra Moser (Acting Chief of the DOJ’s Fraud Section) is leaving the government to join Quinn Emanuel Urquhart & Sullivan. See here for an example of one of Moser’s FCPA speeches.

Reading Stack

The New York Times goes in-depth to explore possible links between Dmitry Firtash (criminally charged for FCPA and related offenses in 2014 see here) and McKinsey and Boeing. The article also explores circumstances surrounding the U.S.’s extradition efforts against Firtash (see here for a prior post).

An informative and comprehensive read here from Gibson Dunn attorneys titled “FCPA Liability for Third Party Conduct.” Also from Gibson Dunn, its annual FCPA Update. The following caught my eye.

“In 2018, the SEC resolved 10 corporate FCPA enforcement actions that did not have a corresponding DOJ resolution.  In several of these SEC-only resolutions, the SEC leveraged the accounting provisions to bring cases predicated upon aggressive theories of FCPA liability that, at least on the face of the charging documents, bore a tenuous (or non-existent) connection to foreign bribery.  In another case, the SEC seemed to stretch (if not break) the boundaries of the anti-bribery provision.  Thus continues a trend we have observed periodically over the years, including most recently in our 2017 Year-End FCPA Update. Although settlements are clearly non-binding in the legal sense, any FCPA practitioner knows that they are frequently bandied about as precedent in settlement discussions and thus become a very real part of the body of FCPA enforcement that must be contended with.”

I agree with the general observations and have been writing about the facade of FCPA enforcement for nearly a decade. (See here for my 2010 article “The Facade of FCPA Enforcement”).

But what is ever going to be done about this?

As long as issuer risk aversion is the name of the game, the SEC is going to push the envelope. Will any issuer ever push back? It has never happened in FCPA history, but it should and if it would I am confident that the FCPA landscape would look different.

However, so long as the roll-over-and-play dead mentality exists, issuers (and other business organizations subject to the FCPA) are part of the problem.

Gibson Dunn also released its annual “Year-End Update on Corporate Non-Prosecution Agreements and Deferred Prosecution Agreements.”

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