From the dockets, you gotta be kidding me, it’s a numbers game, former DOJ FCPA Unit Chief Duross on …, scrutiny updates, a foreign official teaser, a bracket of a different kind, and an event notice. It’s all here in the Friday Roundup.
From The Dockets
Two developments in DOJ FCPA individual actions.
One the DOJ apparently wants you to do know about because it issued a press release, the other apparently not because there was no press release.
Starting with the later, as highlighted in this prior post, in August 2015 U.S. District Court Judge Janet Bond Arterton (D. Conn.) significantly trimmed the DOJ’s FCPA enforcement action against Lawrence Hoskins (a former Alstom executive criminally charged in August 2013 – see here) by granting in part his motion to dismiss and denying a DOJ motion in limine.
The DOJ moved to have Judge Arterton reconsider her ruling but the DOJ’s second bite at the apple ended the same as its first. In this recent ruling, the court stated:
“Although the Government clearly disagrees with Court’s interpretation of the FCPA and theories of secondary liability, disagreement does not provide a ground for reconsideration.”
The court noted that “a motion for reconsideration is not an opportunity to relitigate the merits of prior arguments and the Government has failed to show how the Court’s interpretation was “clear error.” “Rather than provide new evidence or case law to support its position,” Judge Arterton noted the DOJ “recycle[d] its previously rejected argument.”
As noted in the original post, the disputed issue hinged primarily on the FCPA’s legislative history and the court again rejected the DOJ’s views of the legislative history.
Regarding the development the DOJ wants you to know about, in this recent press release the DOJ announced Abraham Jose Shiera Bastidas “pleaded guilty yesterday to foreign bribery and fraud charges for his role in a scheme to corruptly secure energy contracts from Venezuela’s state-owned and state-controlled energy company, Petroleos de Venezuela S.A. (PDVSA).” (See here for the December 2015 post when the enforcement action was announced).
In the release, Assistant Attorney General Leslie Caldwell stated:
“The five convictions announced today hold to account bribe payors as well as the corrupt foreign officials who laundered the bribe money through the United States. These individual prosecutions are the result of a tenacious and coordinated effort by our prosecutors and agents to unravel a complex web of bribes paid to Venezuelan officials. And they demonstrate our commitment to building cases from the ground up, instead of counting on companies and other wrongdoers to self-disclose their crimes.”
U.S. Attorney Kenneth Magidson of the Southern District of Texas stated:
“The pleas of guilty in this case are the result of the strict enforcement of the FCPA in this district. Bribery under this law is a serious federal crime that undermines commercial and political relations around the world. This case is an example of our reach to expose this criminal conduct.”
As noted in the release, criminal charges were also recently unsealed against Moises Abraham Millan Escobar (Millan), Shiera’s former employee, who also pleaded guilty under seal to one count of conspiracy to violate the FCPA for his role in the PDVSA bribery scheme.
You Gotta Be Kidding Me
Some commentators appear to be incapable or at least unwilling to accept or acknowledge the fact that some FCPA enforcement actions are based on the conduct of a rogue actor who conceals conduct from the company.
Thus, when an enforcement action is announced that certainly appears to involve a rogue actor – such as the recent Nordion enforcement action – the commentator speculates that other relevant facts (not set forth in the resolution documents) must have been at play and that based on those supposed other relevant facts, the corporate enforcement action was therefore “more than justified.” (See here).
You gotta be kidding me!
It’s a Numbers Game
More law enforcement (regardless of theory, regardless of resolution vehicle, and indeed regardless of end result) is not necessarily effective law enforcement.
Yet tell that to the folks recently gathered in Paris for the OECD Anti-Bribery Group Ministerial Meeting.
To most of those gathered, it’s a numbers game, as highlighted in this excerpt from Attorney General Loretta Lynch’s speech:
“Since 2009, the U.S. Department of Justice has brought more than 60 criminal cases against individuals and more than 60 cases against corporations in connection with foreign bribery charges, resulting in the collection of more than $4 billion in penalties. Over that same time period, our colleagues at the U.S. Securities and Exchange Commission, or SEC, have brought actions against more than 85 companies and approximately 35 individuals, resulting in fines, disgorgement and prejudgment interest of about $2.5 billion.”
Former FCPA Unit Chief Duross On …
An interesting recent podcast here (scroll down for #5) from the Center for International Private Enterprise with former DOJ FCPA Unit Chief Chuck Duross.
In the podcast, Duross talks about how he went from a “guns, drugs, and thugs” prosecutor who had never heard of the FCPA to becoming the FCPA Unit Chief. He also talks about how the OECD Convention has facilitated greater information sharing among signatory countries, the variety of origins of FCPA enforcement actions, and third-party issues.
Also, in this recent Corporate Crime Reporter interview Duross states:
“When I was leaving the Department, one of the things I thought to myself was — as a newly minted defense attorney, what would my advice be to a company and under what circumstances would a voluntary disclosure make sense to them? I always thought that it was a legitimate criticism for people to say — the problem with voluntary disclosure is — it takes too long and it costs too much and on top of that the benefits are too uncertain.”
The company has been under FCPA scrutiny since December 2011 and Bloomberg reports:
“U.S. prosecutors are in the final phase of a globe-spanning investigation into bribery allegations at Wal-Mart Stores Inc., according to people familiar with the matter, who said work in China has been bedeviled by disclosure rules and lack of evidence.
As part of a four-year investigation into alleged corruption at the retail giant, Justice Department officials over the past few months have been interviewing former executives and others associated with Wal-Mart’s China operations, according to people familiar with the matter. Investigators haven’t found widespread corrupt payments to government officials there, said the people, who asked not to be named because the investigation is confidential.”
Over the past several months, U.S. prosecutors have been questioning people about Wal-Mart’s China business in interviews in Texas, Washington and Virginia, where a grand jury was convened to consider criminal charges, the people said. Some of the questions have been about Wal-Mart’s acquisitions in China between 2007 and 2011, the people said.”
The Wall Street Journal returns, yet again, to Goldman’s relationship with 1MDB, the Malaysian government-investment fund, in this article:
“U.S. authorities are investigating whether Goldman Sachs Group Inc. misled bondholders when the firm sold securities issued by a Malaysian government-investment fund that is at the center of a corruption scandal according to a person familiar with the matter. As part of an inquiry being examined by a U.S. grand jury, investigators are trying to determine if Goldman’s employees had reason to believe that some of the proceeds from bond deals done for the fund, 1Malaysia Development Bhd., known as 1MDB, weren’t being used for their intended purpose, the person said. Federal authorities also are exploring whether Goldman’s hiring practices in the region violated U.S. anticorruption laws, the person said.”
Regarding the first portion of the above article, to the extent there is an enforcement action it may look like the recent SEC enforcement action against Standard Bank (see here). For on Goldman’s scrutiny, see also this recent article.
“Foreign Official” Teaser
Although a flawed decision (see here), U.S. v. Esquenazi, a 2014 11th Circuit decision, is the only court decision of precedent concerning the meaning of “foreign official” in the context of state-owned or state-controlled enterprises.
The key language from the decision was as follows.
“An ‘instrumentality’ [under the FCPA] is an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own. Certainly, what constitutes control and what constitutes a function the government treats as its own are fact-bound questions. It would be unwise and likely impossible to exhaustively answer them in the abstract.”
The court highlighted the following factors relevant to deciding whether an entity is an instrumentality of a foreign government such that its employees will be considered “foreign officials” under the FCPA.
“To decide if the government ‘controls’ an entity, courts and juries should look to the:
- foreign government’s formal designation of that entity
- whether the government has a majority interest in the entity
- the government’s ability to hire and fire the entity’s principals
- the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break evenand the length of time these indicia have existed.”
As to the second element – “deciding if the entity performs a function the government treats as its own, Courts and juries should examine whether
- the entity has a monopoly over the function it exists to carry out;
- whether the government subsidizes the costs associated with the entity providing services;
- whether the entity provides services to the public at large in the foreign country;
- and whether the public and the government of that foreign country generally perceive the entity to be performing a governmental function.”
Against this backdrop, the FCPAmericas blog shares:
“Pemex [Mexico’s state-owned oil and gas company] has now been converted into a State-Owned Productive Enterprise, no longer acting as the only operator in the country but instead as one of many actors in the oil and gas industry alongside private companies. Pemex has been stripped of its monopoly and of the many regulatory and social functions it once performed.”
Under Esquenazi, are Pemex employees “foreign officials”?
Compliance Risk Assessment Bracket
No worries, come up with a different bracket – a compliance risk assessment bracket what can inform corporate risk assessment. Innovative idea – kudos to Ryan McConnell and Meagan Baker for the idea as described in this article.
A good weekend to all. On Wisconsin.