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Is This Appropriate?

Gibson Dunn is generally viewed as having a top tier Foreign Corrupt Practices Act practice.

The firm’s Year-End FCPA Update is always a quality read including this year’s version [1].

Yet, highlighted below is a paragraph from the Update that caught my eye and I ask: seriously – is this appropriate?

Early in the 36-page document is the following paragraph:

“With dozens of dedicated and talented enforcement lawyers at DOJ and the SEC, and a team of law enforcement agencies working alongside them, it is little wonder that the FCPA’s 40th year was one of its most prolific. There is an energy in the hallways of the Bond Building, where DOJ’s FCPA Unit is staffed with a driven and relatively young team of prosecutors—clocking in at a median age just shy of 40, most were not alive when the statute was signed into law. Led by the articulate and indefatigable Dan Kahn, the majority of the 31 attorneys currently assigned to the Unit attended elite law schools, nearly 70% completed prestigious federal judicial clerkships early in their careers, and while more than 80% have private practice experience, the majority started with prior prosecutorial experience. Charles Cain, a quick study who distills complicated scenarios effortlessly, just this year assumed leadership of the SEC’s FCPA Unit. His attorneys likewise have deep experience, with the majority of the 31 attorneys joining the Unit from other positions at the SEC and nearly half having spent five years or more in the Unit. Each agency’s commitment to anti-corruption enforcement was on display during the second half of the year, with 21 combined FCPA enforcement actions in the last six months, bringing the total to 39 in 2017.”

Granted some of the above is factual, but is it really appropriate for FCPA lawyers to publicly butter-up and bestow glowing superlatives on the public enforcement officials who have a huge amount of discretion over matters affecting their clients?

Is this what the FCPA practice has devolved into? Aren’t FCPA lawyers supposed to be zealous advocates for their clients – and thus view and act as if the DOJ/SEC are adversaries?

I am not suggesting a perfect parallel, but I invite you to consider that glowing public comments could be considered something of value to a public official (remember those charitable donation / internship / hiring practice FCPA enforcement actions in which the DOJ/SEC alleged that the foreign officials subjectively valued the thing of value), and that this something of value could be seen as an attempt to improperly influence the public official to exercise their discretion in a way advantageous to the one buttering-up the official.

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Regardless of what you think of the above topic, the Year-End FCPA Update is spot-on with the following observation.

“In 2017, DOJ and the SEC pushed the boundary on who constitutes a “foreign official” for purposes of the FCPA perhaps even a step further.  In two corporate FCPA settlements, they included allegations buried deep in the charging documents that, although they do not constitute binding precedent as they were settled outside of court, do give a window into the government’s increasingly expansive view of the statute’s coverage.

The SEC’s final FCPA charges of 2017 were levied against Massachusetts-based medical diagnostic test manufacturer Alere Inc. On September 28, 2017, the SEC announced that Alere consented to a cease-and-desist order alleging a variety of accounting violations, principally related to alleged revenue recognition violations, but which also included the failure to prevent and properly record improper payments to foreign officials in Colombia and India.  To resolve the charges, Alere without admitting or denying the SEC’s findings agreed to pay more than $3.8 million in disgorgement plus prejudgment interest and a $9.2 million civil penalty.  Alere has announced that DOJ closed its investigation without taking action.

The SEC alleged that Alere made corrupt payments to a manager of a health insurance company in Colombia.  Although the health insurance company was privately incorporated, the SEC alleged that Colombia’s Ministry of Health took control of the company following allegations of mismanagement.  According to the SEC, the health insurance company thus became “an instrumentality of the Government of Colombia and its employees were officials of the Government of Colombia.”

The second allegation of note in this regard concerns DOJ’s charges against SBM Offshore discussed above, and specifically the allegations of corruption in Kazakhstan.  SBM was alleged to have made corrupt payments to obtain oil exploration and development contracts both to an employee of KazMunayGas, Kazakhstan’s state-owned oil company, and to an employee of a subsidiary of an Italian oil and gas company.  Although the latter entity is clearly commercial in nature, DOJ alleged that its employee “was acting in an official capacity for or on behalf of KazMunayGas” because his employer was granted a concession to operate the oil field.  In other words, consistent with a view espoused in FCPA Opinion Procedure Release 2010-03, covered in our 2010 Year-End FCPA Update [3], DOJ treated an employee of a commercial company as a “foreign official” for purposes of the FCPA based on the company’s license to operate on behalf of a state-owned entity.”

See here [4] for the prior post titled “Foreign Official – Notable” regarding the SBM Offshore enforcement action.

Free 90 Minute 2017 FCPA Year In Review Video

A summary of every corporate enforcement action; notable statistics and issues to consider; compliance take-away points; and enforcement agency and related developments. Click below to view the engaging video tutorial.

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