Top Menu

Navigation

Report Cards

By on June 30, 2011 in Canada, Deferred Prosecution Agreements, Non-Prosecution Agreement, OECD, Transparency International

Imagine I give a test to the 37 students in my class. However, because of reasons uniquely relevant to many of the students, not all students are equally capable of passing the test.

I hope all would view this test to be a bit empty.

This post summarizes the OECD Working Group on Bribery Annual Report and Transparency International’s Annual Progress Report of the OECD Anti-Bribery Convention.

For reasons discussed below, these two report cards suffer from the same dynamic described in the above hypothetical.

In many OECD member countries there is no such thing as corporate criminal liability – or even if there is – such corporate liability can only be based on the actions of high-ranking executives or officers. This of course is materially different than in the U.S. where, under respondeat superior principles, a business organization can face legal liability (civil and criminal) based on the actions of any employee to the extent the employee was acting within the scope of his or her duties and to the extent the conduct was intended to benefit, at least in part, the organization.

In most OECD member countries prosecuting authorities have two choices – to prosecute or not to prosecute – there is no such thing as non-prosecution or deferred prosecution agreements (NPAs/DPAs). Not so in the U.S. where the majority of these alternative resolution vehicles are used to resolve FCPA enforcement actions. As the OECD itself stated in its Phase 3 Report of U.S. enforcement of the FCPA – “it seems quite clear that the use of these agreements is one of the reasons for the impressive FCPA enforcement record in the U.S.” (See here for the prior post). Former DOJ FCPA enforcement chief Mark Mendelsohn was asked directly – if the DOJ “did not have the choice of deferred or non prosecution agreements, what would happen to the number of FCPA settlements every year,” and he stated as follows: “if the Department only had the option of bringing a criminal case or declining to bring a case, you would certainly bring fewer cases.”

In certain other OECD member countries, there is a compliance defense relevant to the prosecution of bribery and corruption offenses. (See here for the prior post).

Given these differing dynamics (among others), it is fairly obvious why OECD member countries have varying degrees of enforcement of bribery and corruption offenses.

With that in mind, on to the report cards.

Transparency International Progress Report 2011 – Enforcement of the OECD Anti-Bribery Convention

On May 24th, Transparency International (TI) released (here) its seventh annual Progress Report on Enforcement of the OECD Convention.

The report “shows no improvement in the enforcement of the OECD Anti-Bribery Convention in the past year and warns that this could signal a dangerous loss of momentum in the fight against corruption.”

The report covers 37 countries and “shows that there are still only seven countries with active enforcement, nine with moderate enforcement, and 21 with little or no enforcement.” Huguette Labelle, Chair of TI, stated that “the collective commitment to stamp out foreign bribery made by all OECD parties is undermined when a large number of countries have inadequate enforcement.”

The introduction of the report includes the following statement.

“Continued lack of enforcement in 21 countries a decade after the Convention entered into force, notwithstanding repeated OECD reviews, clearly indicates lack of political commitment by their governments. And in some of those with moderate enforcement, the level of commitment is also uncertain. This is a danger signal because the OECD Convention depends on the collective commitment of all parties to ending foreign bribery.”

The reports “major conclusions” include the following: “risk of loss of momentum” and “lack of political commitment.”

As to the former, the report states as follows. “The Convention has not yet reached the point at which the prohibition of foreign bribery is consistently enforced. With little or no enforcement by half of the signatory governments, backsliding by enforcing governments is a serious threat. This concern is aggravated in a troubled global economy in which companies are scrambling for business. Business organisations have increasingly criticised anti-bribery enforcement as a competitive obstacle. The present position of the Convention is unstable, and unless forward momentum is recovered, the progress made in the past decade could unravel.”

As to the “lack of political commitment”, the report states as follows. “Reviews conducted by TI experts indicate that the principal cause of lagging enforcement is lack of political commitment by government leaders. In countries where there is committed political leadership, the OECD’s rigorous monitoring programme has helped improve laws and enforcement programmes. However, in the absence of political will, even repeated OECD reviews have little effect.”

Once again, Canada received a public lashing from TI.

Under the heading “lack of progress in Canada,” the report states as follows. “Canada is the only G7 country in the little or no enforcement category, and has been in this category since the first edition of this report in 2005. It is also the only OECD member that does not provide nationality jurisdiction, which presents a serious obstacle to enforcement. […] TI welcomes that the government of Canada has publicly reported the number of investigations for the first time. It is promising that 23 foreign bribery investigations are under way. If these investigations lead to prosecutions, Canada may finally move out of the little or no enforcement category.” (A future post will summarize the recent Canadian enforcement action against Niko Resources).

TI’s 2010 report (see here for the prior post) included reference to many big picture enforcement issues such as the use of negotiated settlements (NPAs and DPAs), judicial scrutiny of enforcement actions, and the proper amount of fines and penalties. However, TI’s 2011 report was silent as to many big picture issues.

OECD Working Group on Bribery Annual Report

On April 20th, the OECD Working Group on Bribery released its annual report (here). The release (here) states as follows. “Most governments are not meeting their international commitments to clamp down on bribery and corruption in international business, with only five signatories to the OECD Anti-Bribery Convention having sanctioned individuals or companies in the past year.”

The Compliance Defense Around The World

By on June 28, 2011 in Australia, Chile, Compliance Defense, FCPA Reform, Germany, Hungary, Italy, Japan, Korea, OECD, Poland, Portugal, Sweden, Switzerland, U.K. Bribery Act

As highlighted in this prior post, numerous FCPA reform bills in the 1980’s included a specific defense which stated a company would not be held vicariously liable for a violation of the FCPA’s anti-bribery provisions by its employees or agents, who were not an officer or director, if the company established procedures reasonably designed to prevent and detect FCPA violations by employees and agents. An FCPA reform bill containing such a provision did pass the U.S. House, but was not enacted into law.

Amending the FCPA to include a compliance defense is one of the U.S. Chamber’s FCPA reform proposals (see here). In November 2010, Andrew Weissman, on behalf of the Chamber, testified in favor of a compliance defense (and other reform proposals) during the Senate’s FCPA hearing (see here for the prior post) and during the House hearing earlier this month (see here for the prior post), former Attorney General Michael Mukasey, on behalf of the Chamber, also testified in favor of a compliance defense (and other reform proposals).

During the House hearing, there appeared to be bi-partisan support for consideration of an FCPA compliance defense.

Even so, Greg Andres, testifying on behalf of the DOJ, stated that a potential FCPA compliance defense was “novel and risky” and that the “time is not right to consider it.”

Public debate on a potential compliance defense has thus far focused, from a comparative standpoint, on the United Kingdom and Italy.

The purpose of this post is to further inform the public debate on a potential compliance defense by highlighting various compliance-like defenses around the world in other countries that are signatories (like the U.S.) to the OECD Anti-Bribery Convention.

This post is further to my work in progress – Revisiting an FCPA Compliance Defense – and represents hours of research analyzing 38 OECD Country Reports.

The post provides an overview of compliance-like defenses in the following OECD Convention signatory countries: Australia, Chile, Germany, Hungary, Italy, Japan, Korea, Poland, Portugal, Sweden, and Switzerland. [The U.K. Bribery Act, set to go live on July 1st, also contains a compliance-like defense in Section 7].

A first reaction might be – only 12 of the 38 OECD member countries have a compliance-like defense.

However, this number must be viewed against the backdrop of the following dynamics: (i) in many OECD Convention signatory countries, the concept of legal person criminal liability (as opposed to natural person criminal liability) is non-existent; and (ii) in many OECD Convention signatory countries that do have legal person criminal liability, such legal person liability can only result from the actions of high-level executive personnel or other so-called “controlling minds” of the legal person.

Obviously if a foreign country does not provide for legal person liability, there is no need for a compliance defense, and the rationale for a compliance defense is less compelling if legal exposure can result only from the conduct of high-level executive personnel or other “controlling minds.”

When properly viewed against these dynamics, a compliance-like defense (whether specifically part of a foreign country’s “FCPA-like” law or otherwise generally part of a foreign country’s legal principles) is far from a “novel” idea, but rather common among OECD Anti-Bribery Convention signatory countries that – like the U.S. – have legal person criminal liability that can attach based on the conduct of non-executive officers or other “controlling minds.”

[The below information is based strictly on OECD country reports and is subject to the qualification that in many instances the most recent information concerning a particular country may be several years old. If anyone has more recent information concerning any particular country, how the compliance defense in a particular country has worked in practice, or any other relevant information, please leave a comment on this site or contact me at mjkoehle@butler.edu]

*****

Australia

Australian law implementing the OECD Convention entered into force on December 18, 1999.

Thereafter, a section of the Criminal Code on corporate criminal liability came into full force establishing an organizational model for the liability of legal persons. “Bodies corporate” are liable for offences committed by “an employee, agent or officer of a body corporate acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority” where the body corporate “expressly, tacitly, or impliedly authorised or permitted the commission of the offence”.

Pursuant to the Criminal Code, authorisation or permission by the body corporate may be established in the following ways: (1) the board of directors intentionally, knowingly or recklessly carried out the conduct, or expressly, tacitly or impliedly authorised or permitted it to occur; (2) a high managerial agent intentionally, knowingly or recklessly carried out the conduct, or expressly, tacitly or impliedly authorised or permitted it to occur; (3) a corporate culture existed that directed, encouraged, tolerated or led to the offence; or (4) the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision.

However, under the Criminal Code, “if a high managerial agent is directly or indirectly involved in the conduct, no offence is committed where the body corporate proves that it “exercised due diligence to prevent the conduct, or the authorisation or permission.”

Chile

Chilean law implementing the OECD Convention entered into force on October 8, 2002.

In December 2009, a separate Chilean law entered into force establishing criminal responsibility of legal persons for a limited list of offences including bribery of foreign public officials.

In order for a legal person to be held responsible for a foreign bribery offence, the following “three cumulative requirements” must be satisfied: (1) the offence must be committed by a person acting as a representative, director or manager, a person exercising powers of administration or supervision, or a person under the “direction or supervision” of one of the aforementioned persons; (2) the offence must be committed for the direct and immediate benefit or interest of the legal entity. No offence is committed where the natural person commits the offence exclusively in his/her own interest or in the interest of a third party; and (3) the offence must have been made possible as a consequence of a failure of the legal entity to comply with its duties of management and supervision. An entity will have failed to comply with its duties if it violates the obligation to implement a model for the prevention of offences, or when having implemented the model, it was insufficient.”

As to the final element, the OECD report states as follows. “The final cumulative requirement for responsibility stresses that the offence must have been made possible as a consequence of the failure of the legal person to comply with its duties of administration and supervision. The entity will have failed to comply with its duties if it violated the obligation to implement a model for the prevention of offences, or when having implemented the model, the latter was insufficient. It shall be considered that the functions of direction and supervision have been met if, before the commission of the offense, the legal person had adopted and implemented organization, administration and supervision models, pursuant to the following article, to prevent such offenses as the one committed.”

The minimum features of a prevention system under the law are as follows: identify the different activities or processes of the entity, whether habitual or sporadic, in whose context the risk of commission of the offences emerges or increases; establish protocols, rules and procedures that permit persons involved in above-mentioned activities or processes to program and implement their tasks or functions in a manner that prevents the commission of the indicated offences; identify procedures for the administration and auditing that allow the entity to impede their use in the listed offences; establish internal administrative sanctions, as well as procedures for reporting or pursuing pecuniary responsibility against persons who violate the prevention system; introduce the above-mentioned duties, prohibitions and sanctions into the internal regulations of the legal person, and ensure that they are known by all persons bound to apply it (workers, employees, and service providers).

The OECD report states – as to the minimum requirements as follows. “It also aims to introduce a system of self-regulation by companies. Having a code of conduct on paper will not be sufficient to avoid responsibility. If prosecutors can prove that the code does not meet the minimum requirements of or that it is not implemented, the company can be responsible for the offence.”

Under Chilean law, “the failure to comply with duties of management and supervision is an element of the offence rather than a defence. Therefore the burden of proof lies on prosecutors, i.e. it will be up to prosecutors to prove that the entity failed to comply with its duties of management and supervision.”

The OECD report notes as follows. “This will require prosecutors to prove that the company failed in the design and/or implementation of the offense prevention model including why, in the circumstances, the prevention model was insufficient. This would appear to also require the prosecutor to establish that this failure made perpetration of the offence possible.”

As noted in the OECD report, the Chilean “standard of liability is inspired from the Italian system of liability of legal persons” (discussed below).

Germany

German law implementing the OECD Convention entered into force on February 15, 1999.

German law establishes the liability of legal persons, including liability for the foreign bribery offence, under an administrative (i.e. non-criminal form) act.

Pursuant to the administrative act, “the liability of legal persons is triggered where any “responsible person” (which includes a broad range of senior managerial stakeholders and not only an authorised representative or manager), acting for the management of the entity commits i) a criminal offence including bribery; or ii) an administrative offence including a violation of supervisory duties which either violates duties of the legal entity, or by which the legal entity gained or was supposed to gain a “profit”.”

As noted in the OECD report, “in other words, Germany enables corporations to be imputed with offences i) by senior managers, and, somewhat indirectly, ii) with offences by lower level personnel which result from a failure by a senior corporate figure to faithfully discharge his/her duties of supervision.”

The OECD report states that the “standards for a violation of supervisory duties include consideration of factors such as whether the company has in place a monitoring system or in-house regulations for employees.”

Hungary

Hungarian law implementing the OECD Convention entered into force on March 1, 1999.

In 2004, a separate law was enacted specifying the individuals whose actions can trigger the liability of the legal person.

The OECD report states as follows. “The specific persons and additional conditions for liability are defined as follows: (i) the bribery is committed by one of the members or officers [of the legal entity] entitled to manage or represent it, or a supervisory board member and/or their representatives acting within the legal scope of activity of the legal person ; (ii) the bribery is committed by one of the members of the legal entity or an employee acting within the legal scope of activity of the legal person provided the bribery could have been prevented by the chief executive fulfilling his supervisory or control obligations; and (iii) the bribery is committed by a third party individual, provided that the legal entity’s member or officer entitled to manage or represent the it had knowledge of the facts.”

According to the OECD report, the relevant law does not provide any guidance as to the necessary degree of supervision to avoid liability for bribery.

Italy

Italian law implementing the OECD Convention entered into force on October 26, 2000.

Under Italian law, “criminal liability cannot be attributed to legal persons” however, “administrative liability may be attributed to legal persons for certain criminal offences (including foreign bribery) committed by a natural person.

The relevant administrative decree provides a “defence of organisational models” to a body which makes reasonable efforts to prevent the commission of an offence.

The OECD report states as follows. “… [A] body is not liable for offences committed by persons in senior positions if it proves the following. First, before the offence was committed, the body’s management had adopted and effectively implemented an appropriate organisational and management model to prevent offences of the kind that has occurred. Second, the body had set up an autonomous organ to supervise, enforce and update the model. Third, this autonomous organ had sufficiently supervised the operation of the model. Fourth, the perpetrator committed the offence by fraudulently evading the operation of the model.” The defence of organisation models operates as a full defence which completely exculpates a legal person.

The relevant administrative decree stipulates the essential elements of an acceptable organisational model described in the OECD report as follows. “First, the model must identify activities which may give rise to offences. Second, the model must define procedures through which the body makes and implements decisions relating to the offences to be prevented. It must also prescribe procedures for managing financial resources to prevent offences from being committed. Third, the model must oblige the internal organ responsible for supervision and enforcement to provide information to the body. Finally, the model must include a disciplinary system for non-compliance.”

Japan

Japanese law implementing the OECD Convention entered into force on February 15, 1999 .

“Under Japanese law, criminal responsibility of a legal person is based on the principle that the company did not exercise due care in the supervision, selection, etc. of an officer or employee to prevent the culpable act.

The burden rests on the legal person to prove that due care was exercised. Where a legal person raises the defence, a person must be identified as having exercised due care, etc., and the court must determine whether it was exercised properly having regard to the nature of the legal person and the circumstances of the case.”

Korea

Korean law implementing the OECD Convention entered into force on February 15, 1999.

Korean law establishes the criminal responsibility of legal persons for the bribery of a foreign public official, however, a legal person is exempt from liability where it has paid “due attention” or exercised “proper supervision” to prevent the offence.

The statute itself does not provide information about what constitutes “due attention” or “proper supervision.” A representative of the Supreme Public Prosecutor’s Office informed the OECD that “the exemption is triggered when a director or ‘superior person’ exercises due attention.” The Explanatory Manual published by the Ministry of Justice states that “it is difficult to standardize the extent of attention or supervision in deciding whether a legal person can be exempted from criminal punishment.” The Explanatory Manual further states that whether the exemption applies depends upon “general circumstances such as the motive and background that led to the bribery, intervention of exclusive members of the legal person, whether it was informed earlier, and how much effort was usually made by the corporation to prevent bribery, etc.” and that companies involved in international business must prevent violations of the law by all employees and executives of the company “through sufficient necessary management”.

Poland

Polish law implementing the OECD Convention entered into force on February 4, 2001.

Polish law provides “a noncriminal form of responsibility for collective entities.” Among the requirements for liability is the offence was committed “in the effect of at least absence of due diligence in electing the natural person [committing the act] or of at least the absence of due supervision over this person by an authority or a representative of the collective entity.”

According to the relevant Polish legislative history, “the perpetration of a prohibited act by a natural person will trigger liability of the
collective entity where the act occurred as a result of negligence on the part of the authority or representative of the collective entity.”

Portugal

Portuguese law implementing the OECD Convention entered into force on June 9, 2001.

Under Portuguese law relevant to corruption in international business transactions, legal persons can be liable for conduct committed “on their behalf and in the collective interest by natural persons occupying a leadership position within the legal person structure” or by “whoever acts under the authority” of such natural persons.

However, “[t]he liability of legal persons and equivalent entities is excluded when the actor has acted against the orders or express instructions of the person responsible.”

Sweden

Swedish law implementing the OECD Convention entered into force on July 1, 1999.

Under Swedish Law, only natural persons can commit crimes. However, pursuant to the Swedish Penal Code, a “kind of quasi-criminal liability is applied to an ‘entrepreneur’ (a general term meaning “any natural or legal person that professionally runs a business of an economic nature) for a ‘crime committed in the exercise of business activities.’”

However, one requirement under the Penal Code is that “the entrepreneur has not done what could reasonable be required of him for prevention of the crime.”

Switzerland

Swiss law implementing the OECD Convention entered into force on May 1, 2000.

Article 100quater of the Swiss Criminal Code requires “defective organisation as a condition for corporate criminal liability.”

In order to incur criminal liability, “the enterprise must not have taken all reasonable and necessary organisational measures to prevent the individual from committing the offence.”

Under Swiss law, the burden is on the prosecutor to furnish proof of defective organization and according to Swiss authorities contacted by the OECD “steps should be taken to assess whether employees have been sufficiently informed, supervised and controlled” and “the fact that an enterprise is organised in compliance with international management standards will not be sufficient to rule out all liability on its part; it will be one element to take into consideration among others …”. In the view of Swiss authorities, “ shifting the burden of proof in criminal cases would contravene Article 6 of the European Convention on Human Rights.”

Mission Creep At The SEC?

By on June 27, 2011 in FCPA Inc., Foreign Official, Guest Posts, Jurisdiction, SEC

Today’s post is from Bruce W. Bean (Professor and Director, LLM Program at Michigan State University College of Law – here).

*****

Last week FCPA Professor had a post (see here) describing the SEC’s internal search for the new Head of the Division of Enforcement’s FCPA Unit.

As previously reported (see here), Cheryl Scarboro, Head of the Commission’s FCPA Unit, will shortly join the Washington, D.C. office of Simpson Thacher.

The internal SEC marketing materials for this position state that this “Unit seeks to expand the Commission’s global reach in this area by executing targeted sweeps and sector-wide investigations, identifying systemic practices that give rise to potential FCPA violations and aggressively enforcing anti-bribery statutes.”

“[E]xpand the Commission’s global reach?” We do not find this concept in the FCPA. Nor is it in the original Securities Exchange Act that established the SEC. Has the Commission really run out of legitimate domestic prosecution targets? Does the Commission actually believe that, having long ignored stock manipulation by Wall Street traders (who can afford to mount a vigorous defense), it should declare victory in the domestic equities markets, shout “Mission Accomplished” and move on to police the rest of the world?

The most revealing aspect of this internal job posting for the new Head of the FCPA Enforcement Unit is this sentence, which encapsulates the SEC’s jurisdictional philosophy. “The Unit selects cases that present unique legal, evidentiary and policy challenges and attempts to develop case law and legal precedent that will have the greatest deterrent impact on conduct that violates the FCPA.”

Certainly “unique legal, evidentiary and policy challenges” are presented each time we have the Commission stretch and distort the language of the FCPA as it “attempts to develop case law.” For example, there is no FCPA language supporting the determination that millions of Chinese employees at State-Owned Enterprises are “foreign officials.” Similarly, we search in vain for the statutory basis for FCPA liability for a foreign company whose foreign subsidiary committed an act which the prosecutor claims violates the FCPA.

This newly developed FCPA “case law,” of course, is largely created by the enforcement attorneys. (See here for a prior post on “prosecutorial common law”). It is seldom fully litigated before the Judicial Branch. After all, few defendants can afford to litigate against the Government, and those that could most often do not wish to risk “debarment” from doing further business with the Government until proven innocent.

FCPA enforcement has come to mean, “Let’s see just how far we can push the inherent ambiguities in the statute.” When that rare defendant does stand up and fight as in U.S. v. Giffen, we see a multi-year, multi-million dollar legal defense during which a Federal Court ultimately did not endorse the prosecutor’s attempt to “develop new case law.”

Unquestionably, there is marvelous deterrent value when the SEC makes clear that it aggressively pursues FCPA violators. Prosecutors also find good value in high profile prosecutions, since this accelerates their passage through the SEC’s revolving door to much more lucrative private practice.

A closing note of warning. As outrageous as it may seem, the SEC’s jurisdictional and enforcement philosophy is comparatively good news. On Friday, July 1, the former Head of the Unit, Cheryl Scarboro, is likely to start at Simpson Thacher. That is also the date the U.K. Bribery Act comes into force. The Bribery Act actually does purport to give British prosecutors statutory authority to pursue bribery anywhere on the planet Earth. Stay tuned!

Breuer On The DOJ’s “Comprehensive Approach To Fighting Corruption”

By on June 24, 2011 in Asset Recovery, Enforcement Agency Policy, Enforcement Agency Speeches, FCPA Statistics, Legislative History

Last month, Assistant Attorney General Lanny Breuer delivered the Franz-Hermann Brüner Memorial Lecture at the World Bank and focused his remarks on the DOJ Criminal Division’s “comprehensive approach to fighting corruption.” (See here for the transcript).

This post provides an overview of Breuer’s remarks.

*****

“Corruption corrodes the public trust in countries rich and poor, and has particularly negative effects on emerging economies. When a developing country’s public officials routinely abuse their power for personal gain, its people suffer tremendously. At a concrete level, roads are not built, schools lie in ruin, and basic public services go unprovided. At a more abstract, but no less important, level, political institutions lose legitimacy, threatening democratic stability and the rule of law, and people begin to lose hope that they will ever be able to improve their lot. As the President put it last week, you cannot reach your potential when you “cannot start a business without paying a bribe.””

“There are of course many ways in which the U.S. government addresses the problem of corruption abroad. As the head of Criminal Division, I want to focus on three: our criminal prosecution efforts; our work to build the prosecutorial and law enforcement capacity of foreign nations; and our emerging focus on recovering and repatriating the proceeds of foreign official corruption.”

As to criminal prosecution efforts, after highlighting recent corruption cases involving federal, state, and local officials, Breuer talked about the FCPA. He stated as follows.

“The FCPA was the first effort of any nation to specifically criminalize the act of bribing foreign officials. The statute was enacted in the wake of the Watergate scandal, which led to the resignation of President Richard Nixon in 1974 and resulted in a dramatic plunge in Americans’ overall trust in government.”

“In 1976, following certain prosecutions for illegal use of corporate funds arising out of Watergate, the U.S. Securities and Exchange Commission issued a report in which it determined that foreign bribery by U.S. corporations was “serious and sufficiently widespread to be a cause for deep concern.” S.E.C. investigations revealed that hundreds of U.S. companies had made corrupt foreign payments involving hundreds of millions of dollars. With this background, the Senate concluded that there was a strong need for anti-bribery legislation in the United States. “Corporate bribery is bad business,” the Senate Banking Committee said in its report on the legislation. “In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery is fundamentally destructive of this basic tenet.””

“That was true then, and it’s true now. And over the two-plus years of this Administration, we have dramatically increased our enforcement of the FCPA. The numbers speak for themselves. In 2004, the Justice Department charged two individuals under the Act and collected around $11 million in criminal fines. In 2005, we charged five individuals and collected around $16½ million. By contrast, in 2009 and 2010 combined, we charged over 50 individuals and collected nearly $2 billion.”

“And we are only moving forward. Earlier this month, we secured the first jury conviction ever against a corporation in an FCPA case. The case, which also resulted in trial verdicts against the company’s president and its CFO, involved a scheme to pay bribes to Mexican government officials at CFE, a state-owned utility company.”

“Last week, the former CEO of a Miami-based telecommunications company pleaded guilty to conspiring to pay bribes to government officials in Honduras in connection with a scheme to secure contracts from Hondutel, the state-owned telecommunications authority. Last month, the former vice-president of sales for Europe, Africa, and the Middle East at the multi-national valve company Control Components Inc., or CCI, pleaded guilty to conspiring to bribe government officials in Saudi Arabia, Qatar, and other countries.”

” … [T]he point is this: FCPA enforcement matters. When U.S. businesspersons, foreign executives, and even foreign officials know that they risk liability under the FCPA and related statutes, behavior changes. In addition to motivating U.S. and foreign corporations to change the way they do business – something that I believe is already happening – the threat of liability can help corporations resist corrupt demands from foreign officials, which can lead the officials themselves to alter their practices. Beyond that, through our FCPA enforcement, we are also sending a signal to ordinary people – […] across the globe – that we stand with you: we support you in your desire to have fair and transparent institutions, and to have the chance to compete in marketplaces large and small.”

As to the DOJ’s “emerging focus on recovering and repatriating the proceeds of foreign official corruption,” Breuer talked about the DOJ’s “new Kleptocracy Asset Recovery Initiative.”

He stated as follows.

“The goal of the Kleptocracy Asset Recovery Initiative, which Attorney General Holder announced last July and which my team and I have been working to build over the past year, is to identify the proceeds of foreign official corruption, forfeit them, and repatriate the recouped funds for the benefit of the people harmed.”

“In the context of a criminal prosecution, a court can order forfeiture, upon conviction, as part of the defendant’s sentence. Thus, for example, if we were to bring a criminal case against a kleptocrat in the United States, we would be able to seek criminal forfeiture of his or her stolen assets.”

“Often, however, it may be impractical or impossible to bring a criminal prosecution against a kleptocrat. He or she may be immune from prosecution, beyond the jurisdiction of the United States, or otherwise unavailable. In these circumstances, the Kleptocracy Team can bring a civil forfeiture action to recover the stolen property. This is sometimes referred to internationally as non-conviction based confiscation.”

“The Kleptocracy Team recently brought its first cases, and we expect more to come in the near future. Let me provide a specific example. Diepreye Solomon Peter Alamieyeseigha, also known as DSP, was the elected governor of the oil-producing Bayelsa State in Nigeria from 1999 until his impeachment in 2005. According to court papers, DSP’s official salary for this entire period was approximately $81,000, and his declared income from all sources during the period was approximately $248,000. Nevertheless, as governor, DSP accumulated enormous wealth through corruption and other illegal activities. He acquired at least four properties in the United Kingdom worth approximately $8.8 million, he had money in bank accounts around the world, and he also acquired property in the United States. When he was ultimately arrested at Heathrow Airport in 2005, the Metropolitan Police Service in London found approximately $1.6 million in cash in his house.”

“In March and April of this year, we brought two separate civil forfeiture actions to recover over $1,000,000 in what we allege are DSP’s ill-gotten gains. In Maryland, we are seeking forfeiture of a private residence worth more than $600,000, and in Massachusetts we are seeking forfeiture of close to $400,000 in a Fidelity brokerage account.”

“We were able to bring these cases, even though DSP long ago absconded to Nigeria, because the law permits us to bring a civil action against the corrupt proceeds themselves rather than against the person to whom they belong.”

*****

A good weekend to all.

What Does The SEC FCPA Unit Chief Do?

By on June 23, 2011 in FCPA Inc., SEC

[The below post has been revised since first posted]

Wonder no longer.

Given Cheryl Scarboro’s recently announced departure from the FCPA Unit Chief position (see here for the prior post), the SEC recently posted the opening for the position.

The “Major Duties” portion of the job posting is actually an interesting and informative read.

Want proof that the SEC executes “targeted sweeps and sector-wide investigations.” It is in the job description.

The “Major Duties” section of the job posting states, in full, as follows.

“The Division of Enforcement assists the Commission in executing its law enforcement functions by, among other things, conducting investigations of possible violations of the federal securities laws, making recommendations to the Commission concerning enforcement actions and initiating and conducting administrative proceedings and civil actions arising out of its investigations. The Division of Enforcement’s Foreign Corrupt Practices Act Unit operates on a nationwide basis, exercises the full range of the Division’s investigative and law enforcement powers and focuses on actual and suspected violations of the Foreign Corrupt Practices Act (collectively, “FCPA”) . The Unit is comprised of staff from the Division of Enforcement and Regional Offices. The principal functions of the Unit include developing and maintaining significant specialized knowledge and expertise in the identification and investigation of FCPA violations. Members of the Unit gain in-depth knowledge of industries and regional practices as they may relate to potential FCPA violations on a global basis. Over the course of its investigations, and from case-to-case, the Unit develops specialized insights and understanding of foreign business practices by U.S. and international public companies involving all manner of questionable payments (bribes, kickbacks, gratuitous payments etc.) involving foreign officials, U.S. and foreign executives and the agents and intermediaries through whom they may operate. The Unit seeks to expand the Commission’s global reach in this area by executing targeted sweeps and sector-wide investigations, identifying systemic practices that give rise to potential FCPA violations and aggressively enforcing anti-bribery statutes. The Unit selects cases that present unique legal, evidentiary and policy challenges and attempts to develop case law and legal precedent that will have the greatest deterrent impact on conduct that violates the FCPA. Members of the Unit establish contacts and forge close relationships with foreign regulators and law enforcement authorities and US counterparts, including the U.S. Department of Justice and other federal and state regulatory authorities with interests in this area. The Unit communicates with staff throughout the Commission, the Division and regions and with other specialized units to disseminate information, share analysis, develop and distribute high quality enforcement leads and determine investigative strategies. The Unit performs risk assessment relating to areas within its specialty and communicates with the Division and other Commission offices and divisions concerning its findings. The Unit conducts regular and ongoing training for its staff, engages in public outreach and represents the Commission in industry meetings, conferences and other market-related events.”

One has to reach far into FCPA history to discover an instance where the SEC was challenged in an adversary proceeding and put to its burden of proof in an FCPA case. Thus the following sentence from the job description was a bit amusing – “the Unit selects cases that present unique legal, evidentiary and policy challenges and attempts to develop case law and legal precedent that will have the greatest deterrent impact on conduct that violates the FCPA.”

The position, only open to current SEC employees, has a pay range of $150,372 to $226,160.

However, the prestige of this position, the national and international platform it provides for speeches etc., and the knowledge and experience gained will allow the successful applicant (should he or she choose) a smooth transition into an FCPA private practice career at a major law firm and the ability to make several times the above salary range.

Powered by WordPress. Designed by WooThemes