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The “Foreign Officials” Of 2014

A “foreign official.”

Without one, there can be no FCPA anti-bribery violation (civil or criminal).  Who were the alleged “foreign officials” of 2014?

This post, describes the alleged “foreign officials” from 2014 corporate DOJ and SEC FCPA enforcement actions.

There were 10 core corporate enforcement actions in 2014.  Of the 10 enforcement actions, 6 (60%) involved, in whole or in part, employees of alleged state-owned or state-controlled entities (“SOEs”).  These entities ranged from power and electric companies, hospitals and labs, an oil and gas company, and an aluminium smelter.

By way of comparison, in 2013, 55% of corporate enforcement actions involved, in whole or in part, employees of alleged SOEs (see here [1]). In 2012, 42% of corporate enforcement actions involved, in whole or in part, employees of alleged SOEs (see here [2] at pages 348-353).  In 2011, 81% of corporate enforcement actions involved, in whole or in part, employees of alleged SOEs (see here [3] at pages 29-41).  In 2010, 60% of corporate FCPA enforcement actions involved, in whole or in part, employees of alleged SOEs (see here  [4]at pages 108-119).  In 2009, 66% of corporate FCPA enforcement actions involved, in whole or in part, employees of alleged SOEs (see here [5] at pages 410-44).

In 2014, in an issue of first impression for an appellate court, the 11th Circuit [6] set forth a control and function test for whether an alleged SOE can be “instrumentality” under the FCPA such that its employees are “foreign officials” under the FCPA.  As highlighted here [7] and more extensively in my Supreme Court amicus brief [8] supporting the cert petition, there were many flaws in the 11th Circuit’s reasoning.  The Supreme Court declined [9] to hear the case.  As to whether Congress intended employees of SOEs to be “foreign officials” under the FCPA, see here [10] for my “foreign official” declaration.

The remainder of this post describes (as per DOJ/SEC allegations) the “foreign officials” of 2014.  As is apparent from the specific descriptions below, in certain instances the enforcement agencies describe the “foreign official” with reasonable specificity; in other instances with virtually no specificity.

[Note:  certain of the enforcement actions below technically only involved FCPA books and records and internal control charges.  As most readers know, actual charges in most FCPA enforcement actions hinge on voluntary disclosure, cooperation, collateral consequences, and other non-legal issues.  Thus, even if an FCPA enforcement action is resolved without FCPA anti-bribery charges, the actions remain very much about the “foreign officials” involved.]

Alstom Entities

DOJ

Individuals associated with Indonesia’s alleged state-owned and state-controlled electricity company, Perusahaan Listrik Negara (“PLN”).  The alleged “foreign officials” are described as follows.

“Official 1 … a member of Parliament in Indonesia [who] had influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 2 … a high-ranking official at PLN [who] had broad decision-making authority and influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 3 … an official at PLN [who] was a high-ranking member of the evaluation committee for the Tarahan Project. Official 3 had broad decision-making authority and influence over the award of the Tarahan contract.”

Individuals associated with Saudi Electric Company (“SEC”), Saudi Arabia’s alleged state-owned and state-controlled electricity company.

Individuals assocaited with the Egyptian Electricity Holding Company, the alleged state-owned and state-controlled electricity company in Egypt. Individuals associated with the Egyptian Electricity Transmission Company, the alleged state-owned and state-controlled electricity transmission company. Asem Elgawhart (an employee of Bechtel Corporation a U.S. company) who was assigned by Bechtel to be the General Manager of Power Generation Engineering and Services Company (PGESCo), a joint venture between Bechtel and the Egyptian Electricity Holding Company.

Individuals associated with the Bahamas Electricity Corporation, the alleged state-owned and state-controlled power company.

Individuals associated with Taipei’s Department of Rapid Transit System.

Avon Entities

DOJ

Government officials in China including officials from the Guandong Food and Drug Administration.

SEC

Same as above.

Various Chinese government officials, including government officials responsible for awarding a test license, and subsequently a direct sales business license, that would allow a company to utilize direct door-to-door selling in China. Certain of the Chinese “foreign officials” are alleged to be individuals associated with the Ministry of Commerce and the State Administration for Industry and Commerce.

Dallas Airmotive

DOJ

Official 1 (a Sub-Officer in the Brazilian Air Force – BAF), Official 2 (a Sergeant in the BAF), Official 3 (a Captain for the Governor of the Brazilian state of Roraima).

Officials of the Peruvian Air Force and the office of the Governor of the Argentinean State of San Juan.

Bio-Rad

DOJ

Individuals associated with government customers in Russia, including the Russian Ministry of Health

SEC

Same as above.

Officials at government-owned hospitals and laboratories in Vietnam.

Government officials in Thailand.

Bruker

SEC

Individuals employed by state owned entities (“SOEs”) in China.

Layne Christensen

SEC

Tax officials in Mali, Guinea, and the Democratic Republic of the Congo.

Customs officials in Burkina Faso and the Democratic Republic of Congo.

Police, border patrol, immigration officials, and labor inspectors in Burkina Faso, Guinea, Tanzania, and the Democratic Republic of Congo.

Smith & Wesson

SEC

Pakistani police officials.

Indonesian police officials.

Attempts to make improper payments to Turkish police and Turkish military officials, as well as foreign officials in Nepal and Bangladesh.

HP Entities

DOJ

Individuals associated with the Russian Office of the Prosecutor General of Russia (“GPO” or “GP”).  As alleged, the Russian government used a state-owned entity organized under the Department of Affairs of the President of the Russian Federation, to manage the GPO project tender and execution. “Russian Official A,” a director of a Russian government agency who assumed responsibility for the GPO Project as well as “Individual A,” an associate of Russian Official A.

A Polish Official (the Director of Information and Communications Technology within the Polish National Police Agency (“KGP”) which was part of the Polish Ministry of the Interior and Administration.

Individuals associated with Pemex, Mexico’s alleged state-owned petroleum company.  Official A is described as Pemex’s Chief Operating Officer and Official B is described as Pemex’s Chief Information Officer.

SEC

Same as above.

Marubeni

DOJ

Individuals associated with Indonesia’s alleged state-owned and state-controlled electricity company, Perusahaan Listrik Negara (“PLN”).  The alleged “foreign officials” are described as follows.

“Official 1 … a member of Parliament in Indonesia [who] had influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 2 … a high-ranking official at PLN [who] had broad decision-making authority and influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 3 … an official at PLN [who] was a high-ranking member of the evaluation committee for the Tarahan Project. Official 3 had broad decision-making authority and influence over the award of the Tarahan contract.”

Alcoa

DOJ

Individuals associated with Aluminium Bahrain B.S.C. (Alba), an aluminium smelter operating in Bahrain.  Alba is described as follows.

“The state holding company of the Kingdom of Bahrain, the Mumtalakat, which was controlled by the Ministry of Finance, held 77% of the shares of Alba.  The Saudi Basic Industries Corp. (SABIC), which was majority-owned and controlled by the government of the Kingdom of Saudi Arabia, held a 20 percent minority stake in Alba, and three percent of Alba’s shares were held by a German investment group.  The majority of profits earned by Alba belonged to the Mumtalakat, through part of the profit was permitted to be used by Alba for its operations.  The Ministry of Finance had to approve any change in Alba’s capital structure and had to be consulted on any major capital projects or contracts material to Alba’s operations.  Members of the Royal Family of Bahrain and representatives of the government sat on the Board of Directors of Alba, controlled its board, and had primary authority in selecting its chief executive and chief financial officer.”

The alleged “foreign officials” are described as follows.

“Official A was a member of Bahrain’s Royal Family and served as a member of the board of directors of Alba from 1982 to 1997.  From 1988 to 1990, Official A was also a member of Alba’s tender committee, which was responsible in part for awarding major contracts to Alba’s suppliers, such as Alcoa entities supplying alumina to Alba.”

“Official B served on Alba’s board from at least 1986 to 2000 as a representative of SABIC.  From 1988 to 1990, Official B also served on Alba’s tender committee with Official A.”

“Official C was a senior member of Bahrain’s Royal Family, a senior government official of Bahrain from at least 1995 to 2005, and served as a high-ranking officer of Alba from 1995 to 2005.  As a high-ranking officer of Alba, Official C was extremely influential over the assignment of contracts to Alba’s suppliers.  Official C relied on Consultant A to assist him in opening international bank accounts using various aliases or shell entities for the purpose of receiving corrupt funds from kickbacks from Alba’s suppliers.”

“Official D was a senior member of Bahrain’s Royal Family and a senior government official of Bahrain for many decades.  Official C was a close associate of Official D.  Official D’s office was required to be consulted before Alba could commit to a long term alumina supply contract with Alcoa.”

SEC

Same as above.