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What You Need To Know From Q4

This post provides a summary of FCPA enforcement actions and FCPA related events from fourth quarter of 2011.  For similar posts regarding Q1, Q2 and Q3 of 2011 – see here [1],  here [2] and here [3].

As to enforcement actions, this post covers DOJ and SEC enforcement separately and only covers corporate enforcement actions initiated and resolved during the fourth quarter.  Thus, for example, the indictment of former Siemens executives and agents (see here [4] for the prior post) is not profiled below.

DOJ Enforcement

The DOJ resolved two FCPA enforcement action in fourth quarter.  Total DOJ recovery in these enforcement actions was approximately $65.7 million.

Magyar Telekom / Deutsche Telekom (Dec. 29th)

See here [5] for the prior post.

Charges:  Magyar Telekom – FCPA anti-bribery and books and records charges; Deutsche Telekom – N/A

Resolution Vehicle:  Magyar Telekom – DPA – term two years; Deutsche Telekom – NPA – term two years.

Guidelines Range:  Magyar Telekom – $72.5 million – $145 million; Deutsche Telekom – not set forth in the NPA.

Penalty:  Magyar Telekom – $59.6 million (18% below the minimum Guidelines range); Deutsche Telekom – $4.4 million

Disclosure:  Yes, voluntary disclosure.

Monitor:  No.

Individuals Charged:  No.

Aon Corp. (Dec. 20th)

See here [6] for the prior post.

Charges: N/A although the NPA refers to Aon’s knowing violation of the anti-bribery, books and records, and internal controls provisions.

Resolution Vehicle:  NPA – term two years.

Guidelines Range:  Not set forth in the NPA.

Penalty: $1.8 million.

Disclosure: Aon’s SEC filings stated that  “following inquiries from regulators, the Company commenced an internal review of its compliance with certain U.S. and non-U.S. anti-corruption laws, including the U.S. Foreign Corrupt Practices Act.”

Monitor: No.

Individuals Charged:  No.

SEC Enforcement

The SEC resolved three FCPA enforcement actions in the third quarter.  Total recovery in these enforcement actions was $49.5  million.

Magyar Telekom / Deutsche Telekom (Dec. 29th)

See here [5] for the prior post.

Charges:  Settled civil complaint charging FCPA anti-bribery and books and records and internal controls violations.

Settlement:  $31.2 million in disgorgement and pre-judgement interest.

Disclosure:  Yes, voluntary disclosure.

Individuals Charged:  Yes.

Related DOJ Enforcement Action:  Yes.

Aon Corp. (Dec. 20th)

See here [6] the prior post.

Charges:  Settled civil complaint charging FCPA books and records and internal controls violations.

Settlement: Approximately $14.5 million (disgorgement of $11,416,814 and prejudgment interest of $3,128,206).

Disclosure:  Aon’s SEC filings stated that  “following inquiries from regulators, the Company commenced an internal review of its compliance with certain U.S. and non-U.S. anti-corruption laws, including the U.S. Foreign Corrupt Practices Act.”

Individuals Charged:  No.

Related DOJ Enforcement Action: Yes.

Watts Water Technologies (Oct. 13th)

See here [7] for the prior post.

Charges:  None. SEC administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.

Settlement:  $3.8 million ($2.8 million in disgorgement, $820,000 in prejudgment interest and a $200,000 civil monetary penalty).

Disclosure:  Yes, voluntary disclosure.

Individuals Charged: Yes.

Related DOJ Enforcement Action: No.

Other Events

Lindsey Verdicts Tossed

As detailed in this [8] prior post, on December 1st, Judge Howard Matz (C.D. of Cal.), after months of legal wrangling, vacated the convictions and dismissed the indictment against Lindsey Manufacturing and its President (Keith Lindsey) and CFO (Steven Lee) after finding  numerous instances of prosecutorial misconduct.  On one level, Judge Matz’s ruling would seem to have little impact on FCPA enforcement; after all,  prosecutorial misconduct motions focus on specific actions by specific actors.  Yet it seems clear that Judge Matz’s decision was based in part on the quality of the DOJ’s case in the first instance.   Whatever impact Judge Matz’s decision will have on FCPA enforcement, this much is clear:  the DOJ is now 0-2 in corporate criminal prosecutions.

Second Circuit Bourke Decision

As detailed in this [9] prior post, on December 14th, the Second Circuit Court of Appeals affirmed Frederic Bourke’s 2009 conviction of conspiring to violate the FCPA and the Travel Act and of making false statements.    The Bourke case was arguably the most complex and convoluted case in the history of the FCPA and focused on the conduct of Bourke and others – including most notably Viktor Kozeny – in a bribery scheme connected to the privatization of the Azerbaijan state-owned oil company, SOCAR.  The legal issues largely focused on the FCPA’s knowledge element and whether Bourke, as an investor, had sufficient knowledge of the bribery scheme.  In principal part, the Second Circuit held that Bourke enabled himself to participate in a bribery scheme without acquiring actual knowledge of the specific conduct at issue and that such conscious avoidance, even if supported primarily by circumstantial evidence, is sufficient to warrant  FCPA-related charges.   Soon after the Second Circuit’s decision,  Judge Scheindin (S.D.N.Y.) denied Bourke’s request for a new trial and ordered Bourke to begin serving his 366 day sentence in January 2012.

FCPA Reform Related Issues

There was much activity in Q4 as to FCPA reform (broadly speaking).  As detailed in this [10] prior post, in December the International Business Transactions Committee of the Association of the Bar of the City of New York released  a report titled “The FCPA and its Impact on International Business Transactions – Should Anything Be Done to Minimize the Consequences of the U.S.’s Unique Position on Combating Offshore Corruption?”  As detailed in this [11] prior post, the American Bar Association is also pondering FCPA reform.

As detailed in this [12] prior post, in November Assistant Attorney General Lanny Breuer announced before an FCPA audience that in 2012 the DOJ hopes to “release detailed new guidance on the [FCPA’s] criminal and civil enforcement provisions.”  While a welcome development, the DOJ’s promise of FCPA guidance in 2012 will not cure many of the issues that are being debated during this new era of FCPA enforcement.  DOJ’s guidance is likely to be little more than a compilation in one document of information that is already in the public domain for those who know where to look.  

As to bills actually introduced in Congress, as detailed in this [13] prior post, in December Representative Peter Welch (D-VT) and Representative Jason Chaffetz (R-Utah) introduced the “Overseas Contractor Reform Act.”  The bill is a revised version of the impotent legislation Welch previously introduced in May 2010 and that unanimously passed the House in September 2010.  The bill states that “it is the policy of the United States Government that no Government contracts or grants should be awarded to individuals or companies who violate the FCPA after the date of the enactment of this Act.”  This is a sound policy statement, however, the problem with the bill, as with the previous bill, is its trigger for debarment – “any person found to be in violation of the [FCPA – defined to include only the FCPA’s antibribery provisions] shall be proposed for debarment from any contract or grant awarded by the Federal Government within 30 days after the judgment finding such person to be in violation becomes final.”  As strange as it may sound, in this “new era” of FCPA enforcement or this “facade era” of FCPA enforcement if you prefer (see here [14]) few companies are actually ever “found to be in violation of the FCPA.” 

As detailed in this [15] prior post, in November Representative Ed Perlmutter (D-CO) introduced the “Foreign Business Bribery Prohibition Act of 2011.”  The bill is similar to other bills Perlmutter introduced in the past  and would “authorize certain private rights of action under the [FCPA] for violations by foreign concerns that damage domestic business.”  However, the bill would have limited application as it seeks to amend only the 78dd-3 prong of the FCPA because a foreign concern can only violate the FCPA “while in the territory of the U.S.”

Record-Setting Sentence 

As detailed in this [16] prior post, on October 25th in the Southern District of Florida (a district quickly earning the distinction of handing out the toughest FCPA sentences in the country), Judge Jose Martinez sentenced Joel Esquenazi to a record-setting 15 years .   The previous record for an FCPA sentence was in April 2010 when Charles Jumet was sentenced to a then record 7.25 years.