Scrutiny alerts and updates regarding Elek Straub, Platform Speciality Products, Cobalt International, Bombardier, and the Mormon Church.
In December 2011, in connection with the Foreign Corrupt Practices Act enforcement action against Magyar Telekom, the SEC also charged former Magyar Telekom executives Elek Straub (former Chairman and CEO); Andras Balogh (former Director of Central Strategic Organization); and Tamas Morvai (former Director of Business Development and Acquisitions) with various FCPA and related offenses. (See here  for the prior post).
The complaint alleged, in connection with a bribery scheme in Macedonia and Montenegro, that the individuals violated or aided and abetted violations of the FCPA’s anti-bribery, books and records, and internal controls provisions; knowingly circumvented internal controls and falsified books and records; and made false statements to the company’s auditor.
Unlike most FCPA individual defendants (criminal or civil), the individuals mounted a defense (see here ) and the SEC was put in the rare position of having to prove an FCPA case. A motion to dismiss was filed (largely on jurisdictional and statue of limitations issues) and in February 2013 the court denied the motion to dismiss. (See here  for the prior post).
Put in a position to prove its case, the SEC ultimately dropped its claims that the individuals bribed Montenegro officials. (See here ).
The case proceeded through discovery and competing motions for summary judgment were filed. In late August 2016 oral argument on the motions were heard as to the following issues:
- statute of limitations issues;
- the jurisdictional element of the FCPA’s anti-bribery provisions including whether a key document in the SEC’s complaint was indeed in furtherance of a bribery scheme or merely a legitimate business document;
- general personal jurisdiction issues; and
- two of the SEC’s claims that do not necessarily involve bribery, but rather falsification of books and records and false statements to auditors.
As highlighted in posts here  and here , in September 2016 the court denied the motions for summary judgment and in doing so rejected the SEC’s position that it may pursue FCPA violations that occurred out of the limitations period on the basis that those violations were similar in character to and part of the same alleged “scheme” as violations that occurred within the limitations.
Trial was scheduled to begin in May 2017.
As highlighted in this prior post , last month without admitting or denying the SEC’s allegations, Morvai agreed to resolve the action by agreeing to pay a $60,000 civil penalty and other remedial relief.
As recent docket entry states:
“The Court is in receipt of a single-page joint letter dated March 10, 2017 informing the Court that Plaintiff U.S. Securities and Exchange Commission (“SEC”) and Defendant Elek Straub have reached “an agreement in-principle” to resolve the SEC’s claims. (Doc. No. 301.) The parties report that the settlement is contingent upon approval by the SEC, which typically takes about six weeks. While the parties wait for the Commission to vote, they request that “all proceedings with respect to Mr. Straub be held in abeyance,” including three motions in limine to which the SEC’s responses are due today and four motions in limine to which Mr. Straub’s responses are due today. The parties’ request is DENIED. Unless and until there is an executed settlement and dismissal of all remaining claims, the parties shall comply with the Court’s prior scheduling orders. Of course, if the parties are confident that their agreement in-principle will result in settlement, they may choose not to respond to the pending motions in limine. But the Court will not re-open pre-trial motion practice if the settlement negotiations do not produce a consummated agreement, and trial will commence on May 8, 2017 absent such an approved settlement.”
Platform Speciality Products Group
As highlighted in this previous post , in March 2016 Platform Speciality Products Group disclosed:
“In connection with the implementation of internal controls at Arysta, a newly acquired subsidiary, we discovered certain payments made to third-party agents in connection with Arysta’s government tender business in West Africa which may be illegal or otherwise inappropriate. We have engaged outside counsel and an outside accounting firm to conduct an internal investigation to review the legality of these and other payments made in Arysta’s West Africa tender business, including Arysta’s compliance with the FCPA. We contacted the SEC and the U.S. Department of Justice to voluntarily inform them of this matter and we are fully cooperating with these governmental authorities as the investigation continues and as they review the matter. Although the internal investigation is ongoing, based on the results to date, management does not currently believe that the amount of the payments in question, or any revenue or operating income related to those payments, are material to our business, results of operations, financial condition or liquidity.”
Recently the company disclosed :
“As previously disclosed in our 2015 Annual Report, in connection with the implementation of our internal controls, policies and procedures at Arysta, following our acquisition of that business in February 2015, we discovered certain payments made to third-party agents in connection with Arysta’s government tender business in West Africa which may be illegal or otherwise inappropriate. We have engaged outside counsel and an outside accounting firm to conduct an internal investigation to review the legality of these and other payments made in Arysta’s West Africa tender business, including Arysta’s compliance with the FCPA. We contacted the SEC and the U.S. Department of Justice to voluntarily inform them of this matter and fully cooperate with their review of the matter. The SEC has advised that they have closed out the matter, and the U.S. Department of Justice has advised that they have no further requests at this time. Our internal investigation is largely complete. Management does not believe that the amount of the payments in question, or any revenue or operating income related to those payments, are material to our business, results of operations, financial condition or liquidity.”
See here  for a long-standing proposal when a company voluntarily discloses an FCPA internal investigation to the DOJ and/or SEC and when one or both of the enforcement agencies do not bring an enforcement action.
As highlighted in this prior post , Cobalt International, long under FCPA scrutiny for its business practices in Angola, prevailed over the SEC in early 2015.
Yet, Cobalt is again under FCPA scrutiny by the SEC for its business practices in Angola. Recently, Cobalt disclosed:
“In connection with entering into our RSAs for Blocks 9 and 21 offshore Angola, two Angolan–based E&P companies were assigned as part of the contractor group by the Angolan government. We had not worked with either of these companies in the past, and, therefore, our familiarity with these companies was limited. In 2010, we were made aware of allegations of a connection between senior Angolan government officials and one of these companies. In 2011, a formal order of investigation was issued by the SEC related to these allegations and, to avoid non–overlapping information requests, we voluntarily contacted the U.S. Department of Justice (“DOJ”) with respect to the SEC’s investigation and offered to respond to any requests the DOJ may have. We were notified in January 2015 that the SEC’s investigation had concluded and that the SEC did not intend to recommend any enforcement action. In February 2017, we received a letter from the DOJ advising us that the DOJ has closed its investigation into our operations in Angola. This formally concluded the DOJ investigation and no regulatory action has been taken against us as a result of these investigations. On March 13, 2017, the SEC informed us by telephone that it had initiated an informal inquiry regarding Cobalt related to the Sonangol Research and Technology Center (the “Technology Center”). As background, on December 20, 2011, we executed the PSC under which we and BP are required to make certain social contributions to Sonangol, including for the Technology Center. On March 13, 2017, we also received a voluntary request for information regarding such inquiry. We believe our activities in Angola have complied with all applicable laws, including the FCPA, and we will cooperate with the SEC’s inquiry.”
As highlighted in this August 2014 post , Global Witness issued a press release stating:
“BP and its partners including Houston-based Cobalt have contributed US$175 million over the past two-and-a-half years to fund a project in Angola known as the Sonangol Research and Technology Center (SRTC), with another US$175 million due to be paid by January 2016. Global Witness asked BP and Cobalt to provide any information that confirms the SRTC exists. The companies did not provide this information in their responses. BP stated that Sonangol, Angola’s state-owned oil company, “has informed BP that the SRTC is still in planning stage.” Cobalt said they “monitor the progress of our social contributions in Angola, including the Research and Technology Center” but did not provide any further information about the project. Global Witness asked Sonangol for information to confirm the existence of the SRTC, but the company did not respond. We commissioned interviews with well-placed industry insiders, but none of them could confirm that the SRTC exists. Global Witness is calling on the Angolan authorities to disclose where this money has gone.”
The Montreal, Canada based manufacturer of trains and planes with a class of common shares traded “over the counter” in the U.S. is under scrutiny for alleged conduct in Sweden. As highlighted here :
“Prosecutors with Sweden’s anti-corruption unit [recently] announced they had arrested Evgeny Pavlov, a 37-year-old Russian national, in connection with a 2013 railway procurement deal by a Bombardier-led consortium in Azerbaijan. The consortium won a US$288 million order to design, manufacture and install a double-track line on the Kars-Baku corridor connecting Asia and Europe.
In the statement, the Swedish prosecutors said they had spoken with other Bombardier employees and obtained email evidence following a raid on the company’s office in October. “Despite the fact that Bombardier was in fifth place in terms of price, they won the 2013 tender when competitors that had offered a better price were disqualified by the rail authority in Azerbaijan,” the prosecutors said.”
Nothing something you see everyday, but Secular Coalition for America Rights and Equal Rights are requesting a DOJ investigation  into whether the Mormon Church violated the FCPA in connection with Indian visas.
FCPA Institute - Houston (March 26-27, 2020)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.