This previous post went in-depth into the $170 million Foreign Corrupt Practices Act enforcement action against U.K. based Rolls-Royce announced on January 17th. This post continues the analysis by highlighting additional issues to consider.
Unusual Aspect of the DPA
The Rolls-Royce DPA contains an unusual feature. Of the approximate $170 criminal penalty “$30 million will be paid to the Consumer Financial Fraud Fund.”
This has never happened before in an FCPA enforcement and set forth below is my e-mail exchange with the DOJ press office on this issue.
Q: Can you please explain what the Consumer Financial Fraud Fund is, why $30 million is going to this fund, and whether this has been ever been done before in an FCPA enforcement action?
Here is the answer I received back.
A: The fund is administered by the U.S. Postal Inspection Service and can be used for costs related to the prevention, education and investigation of consumer fraud. This is the first time it’s been used in an FCPA case, but below are some recent Fraud Section cases where it has been used:
- AIG (2006)
- BP North America (2007)
- Ronald Ferguson (2008)
- Health South (2009)
- General Reinsurance (2010)
- Univision Services (2010)
- Convergex (2014)
Granted the conduct at issue in the U.S. action does not go back to 1989 (an unconscionable 28 years prior to the enforcement action) as it does in the U.K. Serious Fraud Office enforcement action against Rolls-Royce. Nevertheless the DOJ’s enforcement action is largely based on old conduct beyond any conceivable statute of limitations period.
For instance, the Thailand conduct contains allegations concerning conduct in 2002 – 2004 (12-14 years prior to the enforcement action) and the vast majority of payments alleged occurred prior to 2009. Likewise, the Brazil conduct contains allegations in 2003 with no specific references to payments within the past five years.
The Kazakhstan conduct (the most “recent” conduct alleged) contains allegations regarding conduct in 2008 and 2009 with payments occurring between 2010 and 2012 with only one payment occurring within the past five years.
The Azerbaijan conduct alleged is sparse (a mere three paragraphs) and makes generic allegations concerning conduct between 2000 and 2009.
The Iraq conduct contains allegations concerning conduct between 2006 and 2009 and the Angola conduct contains allegations concerning conduct between 2008 and 2011.
Statute of limitations, as well as other legal principles and elements, of course matter only to the extent prosecutors have to prove things in the context of an adversarial proceeding. This is not how FCPA enforcement typically works though where cooperation is the name of the game.
Thus, Rolls-Royce is the latest example of a corporate FCPA enforcement action alleging conduct beyond any conceivable limitations period.
The DOJ charged Rolls-Royce with conspiracy to violate the FCPA’s anti-bribery provisions and specifically invoked 78dd-2 (the “domestic concern” prong of the FCPA) and 78dd-3 (the person other than an “issuer” or “domestic concern” prong of the FCPA).
As to 78dd-2, the DOJ alleged that Rolls-Royce “conspired with and aided and abetted domestic concerns” – namely Rolls-Royce Energy Systems, Inc. (RRESI), an indirect subsidiary of Rolls-Royce, headquartered in Mount Vernon Ohio – “including conspiring to send, and aiding and abetting, wire transfers and e-mails to and through the United States.”
In this regard, the Thailand and Kazakhstan conduct alleges “corrupt commission payments from RRESI’s banks accounts” located in Ohio to intermediary bank accounts in furtherance of the bribery scheme. However, there is no specific U.S. nexus alleged as to the Brazil, Azerbaijan, Iraq and Angola conduct alleged.
As to the 78dd-3, the portion of the FCPA that contains the most demanding jurisdictional hook (i.e. “while in the territory of the U.S.,”) the summary portion of the information states that “Rolls-Royce employees and agents took corrupt acts while in the territory of the United States.” However, the information is noticeably silent as to specific acts by any Rolls-Royce employees.
In short, the entire enforcement action against Rolls-Royce appears, from a jurisdiction standpoint, to be based on the conduct of RRESI, an indirect U.S. based subsidiary.
As stated in the DPA, Rolls-Royce’s scrutiny began after media reports first alleged corruption by the company. Those media reports began in 2012 and as highlighted in this prior post Rolls-Royce’s FCPA specific scrutiny began in late 2012.
Thus, from start to finish, Rolls-Royce FCPA scrutiny lasted a bit longer than 4 years.
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