This previous post  mentioned that 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.
This previous post  highlighted the May 2015 civil case brought by Sanford Wadler (the former General Counsel of Bio-Rad) asserting various employment claims against the company in the aftermath of the company’s 2014 FCPA enforcement action  in which it agreed to pay approximately $55 million to resolve DOJ and SEC FCPA enforcement actions.
This post further highlights the DOJ’s individual criminal charges against Ng and Yin as well as the strange twist in the Wadler – Bio-Rad litigation.
To review, in his complaint Wadler asserted:
“This matter presents the classic case of whistleblower retaliation. After learning of his employer Bio-Rad’s involvement in extensive bribery occurring in Russia, Thailand, and Vietnam, Wadler investigated evidence of similar violations of the Foreign Corrupt Practices Act (“FCPA”) in China, where corruption is notoriously endemic. Key Bio-Rad officers and directors wanted Wadler to turn a blind eye to this misconduct or sweep it under the rug, but he refused. Instead, and following his mandatory duties under federal securities laws as the Company’s chief legal officer, Wadler investigated this potential criminal activity and reported it up the ladder. When Wadler reasonably began to believe that the conspiracy to violate the FCPA went all the way to the top of the corporate hierarchy, he reported his concerns to the Company’s audit committee. Then, just shortly before Bio-Rad was scheduled to present to the SEC and DOJ regarding the Company’s investigation into potential FCPA violations, the Company fired Wadler precisely because he refused to be complicit in its wrongdoing. A company is not allowed to attempt to silence whistleblowers in this manner.”
The court denied Bio-Rad’s motion to dismiss and the case is proceeding to trial and in this trial brief  Bio-Rad turns the table on Wadler and claims that he “invented a story of corruption in Bio-Rad’s China facility” to detract attention away from his own deficiencies while at the company regarding the FCPA.
The trial brief contains several redactions, but in summary fashion states in pertinent part:
“Notwithstanding the fact that the FCPA had been in existence the entire time Plaintiff Sanford Wadler had been General Counsel for Defendant Bio-Rad Laboratories, Inc., and had become a subject of substantial interest for lawyers representing global companies, Plaintiff took no action to protect the company. He literally did nothing. Despite the company’s growing international presence, Plaintiff:
- did not educate himself about the law;
- did not implement an FCPA compliance program;
- did not conduct FCPA training sessions;
- did not monitor his company’s compliance; and
- did not heed the warning of outside counsel that Bio-Rad’s lawyers needed to pay attention to FCPA issues and not “hide your head in the sand.”
Plaintiff—incredibly—has taken the position that the FCPA was no concern of his:
Plaintiff’s malpractice carried profound consequences for Bio-Rad. In 2009, long after BioRad should have had FCPA programs and compliance training in place, an employee reported FCPA violations in Vietnam. On the recommendation of Plaintiff, the company hired the international law firm of Steptoe and Johnson to investigate the matter. Steptoe lawyer Patrick Norton, considered to be at the top of the field, conducted a worldwide investigation, [redaction] and reported those to the government. The result was that Bio-Rad incurred a $55 million FCPA fine and paid millions more in legal fees and costs associated with his extensive investigation—all on Plaintiff’s watch.
The company should have fired Plaintiff right then and there for his breach of duty, a result some at the company urged on Defendant, CEO Norman Schwartz. But Mr. Schwartz, perhaps loyal to a fault, gave Plaintiff a second chance. Although Bio-Rad is a leading global company providing innovative products in life sciences and clinical diagnostics, the company retains the best virtues of a small family business and places a premium on loyalty to its employees, many of whom have been with Bio-Rad for decades. Mr. Schwartz, the son of the founders and a mild-mannered person, took into account Plaintiff’s tenure at the company and valued his skill in negotiating business deals and allowed Plaintiff to stay.
Although Plaintiff kept his job after the initial FCPA debacle, the matter still loomed over him as federal prosecutors continued their investigation throughout 2011 and 2012. Near the end of 2012, the Department of Justice began to assess Plaintiff’s role as General Counsel in deterring FCPA violations. In November 2012, [redaction] a term used to define senior management’s commitment to compliance with the law. Plaintiff was well aware that federal prosecutors would want to know why the company’s General Counsel had done nothing to ensure the company’s compliance for the 20 years prior to discovery of the violations. This development caused Plaintiff to grow increasingly concerned about his personal situation and to look for ways to justify himself to the federal prosecutors and to protect himself against a possible ruination of his career.
Plaintiff apparently decided the best way to present himself to the government was to show he was ferreting out corruption at the company—even if there was none [redaction] at least seven weeks before [redaction] seven months before he was fired, and, according to his own testimony, with no reason to think he would be fired. [Redaction] the same attorney who contacted the company to initiate settlement discussions just after he was fired, and filed the pre-requisite administrative complaint on Plaintiff’s behalf with OSHA. [Redaction] he invented a story of corruption in Bio-Rad’s China facility—a story no one ever understood or bought.
At the same time Plaintiff was setting up his whistleblower claim, he began engaging in conduct so seriously disruptive that by June 2013, Mr. Schwartz was left with no choice but to terminate him. Over that seven month period, Plaintiff’s conduct became intolerable, creating a toxic environment for virtually everyone who had to work with him. He went into rages at meetings, screaming at people and pounding the table. One executive became so unnerved by his behavior, she considered installing a home alarm system. By the time he was fired, Plaintiff had become so obstreperous, uncooperative, and abusive, he had alienated and destroyed his relationships with every single member of senior management, and had disrupted the company’s securities filings. A small selection of executives and lower-level employees will describe what it was like to work with Plaintiff during that period, which one described as a “terrible terrible time” at the company.”
Interestingly, last week the SEC filed a notice in the case stating that it may seek leave to file an amicus curaie brief in support of Wadler.
The trial is currently scheduled for early February 2017.
Ng and Yin FCPA Charges
As highlighted in this prior post , the DOJ’s October 2015 enforcement action highlighted alleged bribery at the United Nations charging John Ashe (described as having various positions at the U.N. including serving as the Permanent Representative of Antigua to the U.N. and recently serving as the President of the U.N. General Assembly) and others with a variety of criminal offenses based on allegations that payments were made to Ashe in connection with a U.N. sponsored conference center in Macau, China and to influence business interactions with Antiguan government officials.
The post noted that although the alleged bribery was charged under 18 USC 666 (theft or bribery concerning programs receiving federal funds) on account of the U.N. receiving U.S. federal government funds, Ashe was likely a “foreign official” under the FCPA given that the definition of “foreign official” includes individuals associated with “public international organizations” and the U.N. has been designated  as such an organization.
It was further noted that the alleged payors of the bribes to Ashe were predominately naturalized U.S. citizens subject to the FCPA’s anti-bribery provisions and that the Chinese national defendant was alleged to have engaged in conduct in the U.S. likely sufficient to satisfy the dd-3 prong of the FCPA.
This superseding indictment  follows the above analysis.
In it the DOJ alleges that the U.N. is a public international organization as that term is used in the FCPA and that the Antiguan Ambassador and Dominican Ambassador to the U.N. were “foreign officials.”
According to the indictment, in 2009 NG “helped to found a non-governmental organization based in New York (NGO-1), purportedly as a media platform dedicated to covering stories regarding sustainable development, the UN, and related topics.” According to the indictment:
“Since its creation, NG has served as at least the principal source of funding for NGO-1, and has wired millions of dollars from Macau, China to NGO-1 in New York, New York. NG appointed the Dominican Ambassador “Honorary President” of NGO-1 and, acting in part through NGO-1, paid the Dominican Ambassador at least hundreds of thousands of dollars between 2010 and 2015.”
According to the indictment, money was paid to both Ambassadors “in exchange for official action to benefit Ng and his company, the Macau Real Estate Development Company.”
As alleged in the indictment, the principal objective of the defendants “was to obtain official action from the UN with respect to a multi-billion dollar conference center that Ng hoped to build in Macau, China using his company the Macau Real Estate Development Company. In particular, Ng sought formal UN support for the Macau Conference Center, including establishing the Macau Conference Center as the permanent site of the annual UNOSSC Expo and as a location for other meetings, forums, and events associated with the UN.”
According to the indictment, the alleged bribes to the Ambassadors took various forms such cash, payments to the Antiguan Ambassador’s wife, and payments to one or more third-parties to cover the Antiguan Ambassador’s personal expenses.
As alleged in the indictment, “each of the Ambassadors agreed to and did, among other things, use their positions to advance and to seek to have others advance Ng’s interest in obtaining Formal UN Support for the Macau Conference Center.”
According to the indictment, the defendants “agreed to and did transmit funds from China to the United States and from the United States to the Dominican Republic.”
The indictment invokes 78dd-2 (the “domestic concern”) prong of the FCPA and 78dd-3 (the “person other than an issuer of domestic concern”) prong of the FCPA.
According to this Law360 article :
“Judge Broderick asked the prosecution why it had to keep the new indictment under wraps, especially given the fact that nobody else was charged. “Why couldn’t we have known about this earlier?” asked Judge Broderick, who referred to the new indictment as a “November surprise.” Prosecutor Janis Echenberg said that the prosecution needed to get clearance from the FCPA unit of the U.S. Department of Justice in Washington. Ng co-counsel Tai Hyun Park of Park Jensen Bennett LLP called that explanation “patently incredible. “I’m sorry judge, I don’t think the court should accept that explanation,” Park said.”