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Summer Reading For Representative Conyers

By on June 22, 2011 in Alliance One International, Comverse Technology, Congressional Activity, Facilitating Payments, FCPA Scholarship, Foreign Official, Legislative History, Noble Corporation, Permits / Licenses / Customs / Tax, Successor Liability

During last week’s FCPA hearing in the House, Representative John Conyers (D-MI) had a contentious Q&A exchange with Shana-Tara Regon (Director, White Collar Crime Policy, National Association of Criminal Defense Lawyers). See here for the previous post regarding the hearing.

Conyers asked – “give me some examples of overcriminalization of the FCPA.” He repeatedly interrupted Regon and asked “just give me some examples” “give me an instance of where one case was ever brought by the DOJ that would constitute overcriminalization.” Conyers stated, “only 140 cases have been brought in 10 years -that averages 14 cases a year – is that overcriminalization to you?” Regon stated that overcriminlization occurs when a statute provides no reasonable limits and that she is concerned more about prosecutions that may occur in the future more so than prosecutions that have already occurred.

There should be plenty of concern regarding prosecutions that have already occurred, but given the glare of the cameras, the stress of testifying, and the disruption of being interrupted, it would have been difficult for any witness to retrieve from their memory bank specific FCPA enforcement actions.

This post provides a summer reading list of FCPA enforcement actions, commentary and analysis, and legal scholarship for Representative Conyers so that he can best seek answers to the question he posed to Regon.

For starters, what does overcriminalization mean?

To be sure, it can mean different things to different people in different circumstances. In “The Overcriminalization Phenomenon(here) Eric Luna provides this definition – “the overcriminalization phenomenon consists of: (1) untenable offenses; (2) superfluous statutes; (3) doctrines that
overextend culpability; (4) crimes without jurisdictional authority; (5) grossly disproportionate punishments; and (6) excessive or pretextual enforcement of petty violations. In this piece, Jeffrey Parker (while observing that “definitions of “overcriminalization” are a bit fuzzy and debatable”) identifies the following as among the factors that may contribute to overcriminalization: “the vague, arcane, or trivial nature of such prohibitions, as undermining citizens ability to conform, and debasing the moral moment of the criminal sanction” and “the lack of adequate mens rea standards in criminal prohibitions.”

Not all overcriminalization factors are relevant to this “new era of FCPA enforcement” (see here), but in the minds of many, several factors are.

Enforcement Actions

In the 2011 Comverse Technologies enforcement action (see here), the company paid $2.8 million in combined fines and penalties (and no doubt millions more in connection with the investigative and resolution process) to resolve a matter in which the DOJ did not allege that the company even knew about the improper payments at issue. The action was resolved via a non-prosecution agreement meaning there was no judicial scrutiny of the DOJ’s enforcement theory.

In the 2010 Alliance One International enforcement action (see here), the company paid approximately $20 million in combined fines and penalties (and millions more in connection with the investigative and resolution process) to resolve a matter in which it did absolutely nothing wrong. Rather, the entire DOJ enforcement action was based on a successor liability theory. Again, the action was resolved via a non-prosecution agreement meaning there was no judicial scrutiny of the DOJ’s enforcement theory.

In the 2010 Noble Corporation enforcement action (see here), the company paid approximately $8 million in combined fines and penalties (and millions more in connection with the investigative and resolution process) to resolve a matter involving the import and export of goods into Nigeria. When Congress passed the FCPA, its intent as to so-called facilitating or grease payments was clear. Senate Report No. 95-114 (May 2, 1977) states, in pertinent part, as follows. “The statute does not […] cover so-called ‘grease’ payments such as payments for expediting shipments through customs …”. The relevant House Report (No. 95-640, September 28, 1977) similarly states as follows. “The language of the bill is deliberately cast in terms which differentiate between [corrupt payments] and facilitating payments, sometimes called ‘grease payments.’ […] For example, a gratuity paid to a customs official to speed the processing of a customs document would not be reached by this bill. Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity be performed in any event. While payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are not necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments.” The Noble enforcement action was resolved via a non-prosecution agreement meaning, again, there was no judicial scrutiny of the DOJ’s enforcement theory.

And then of course there is the issue of “foreign official” and the fact that most FCPA enforcement actions in this new era are based on alleged improper payments to employees of alleged state-owned or state-controlled enterprises (“SOEs”) on the theory that such business entities are “instrumentalities” of a foreign government and thus all employees, regardless of rank or position, are “foreign officials” under the FCPA. Yet, (1) During its multi-year investigation of foreign corporate payments, Congress was aware of the existence of SOEs and that some of the questionable payments uncovered or disclosed may have involved such entities. (2) In certain of the bills introduced in Congress to address foreign corporate payments, the definition of “foreign government” expressly included SOE entities. These bills were introduced in both the Senate and the House during both the 94th and 95th Congress. (3) Despite being aware of SOEs and despite exhibiting a capability for drafting a definition that expressly included SOEs in other bills, Congress chose not to include such definitions or concepts in what ultimately become the FCPA in 1977. See here for extensive reading on this issue.

Commentary and Analysis

In 2010, Forbes ran a feature article (here) titled “The Bribery Racket” – “How Federal Crackdown on Bribery Hurts Business And Enriches Insiders.” Lucinda Low, a respected FCPA practitioner, notes in the article that “the scope of things companies have to worry about is enlarging all the time as the government asserts violations in circumstances where it’s unclear if they would prevail in court” and that “you don’t have the checks and balances you would normally have if you had more litigation.” Commenting on the current era of FCPA enforcement, Joseph Covington (who headed the DOJ’s FCPA efforts in the 1980’s) said that the current era “is good business for law firms […] good business for accounting firms, it’s good business for consulting firms, the media–and Justice Department lawyers who create the marketplace and then get yourself a job.”

Here, Michael Levy (a former Assistant United States Attorney in the District of Columbia and law clerk to U.S. Supreme Court Justice Lewis F. Powell Jr.) talks about what he calls prosecutorial common law. Levy states that “prosecutors don’t set out deliberately to interpret criminal statutes in ways that convict hundreds of people on the basis of a standard that not a single Supreme Court Justice finds supportable …”. Levy notes that “we have seen this before in connection with the interpretation of the honest services fraud and obstruction of justice statutes, and it is certainly happening today with the FCPA.”

In this publication, an author group including Philip Urofsky (former Assistant Chief of the DOJ Fraud Section responsible for FCPA enforcement) and Danforth Newcomb (a dean of the FCPA bar) noted that in several recent FCPA enforcement actions “the theories used to hold parents accountable for the acts of subsidiaries and vice versa appear to be unclear.” In other cases, the author group states that in many cases critical elements of the statute were not pleaded or were pled in a way “that is not consistent with established precedent and the language of the statute.”

In a September 10, 2010 interview with the Corporate Crime Reporter, Mark Mendelsohn (the former head of DOJ FCPA enforcement during this era of resurgence who departed the DOJ for private practice in 2010) stated that “some of the factors” the DOJ uses to resolve FCPA cases are transparent, but “there are other factors less easy to see from the outside.” Mendelsohn also noted, in connection with non-prosecution and deferred prosecution agreements (the common way FCPA enforcement actions are resolved) that the “danger” “is that it is tempting for the Department, or the SEC [to use these vehicles] to seek to resolve cases through DPAs or NPAs that don’t actually constitute violations of the law.”

In this Q&A exchange, Martin Weinstein (a former DOJ FCPA attorney who prosecuted the Lockheed case in the mid-1990’s and is now a prominent FCPA practitioner) stated as follows. “The last decade of FCPA enforcement has seen extraordinary evolution, and I think you have to say that when Congress passed the law in 1977, they did not envision the wide reach of enforcement today and the types of things that the government gets involved in, such as transactions, joint ventures, and successor liability.”

Legal Scholarship

In “Enthusiastic Enforcement, Informal Legislation: The Unruly Expansion of the Foreign Corrupt Practices Act” (here), Amy Westbrook (Washburn University School of Law) argues that the recent “transformation of the FCPA has been brought about by ad hoc enforcement actions, rather than legislation, judicial decision, or regulation” and that “in the absence of formal process or reasoned articulation, the actual scope of the law is unclear.”

In “The Facade of FCPA Enforcement” (here), I argue that “the FCPA often means what the enforcement agencies say it means” and that “even though the resolution vehicles typically used to resolve an FCPA enforcement action are not subject to judicial scrutiny and [thus] the vehicles do not necessarily reflect the triumph of the enforcement agencies’ theories, in the absence of substantive FCPA case law, these privately negotiated resolution vehicles have come to represent de facto FCPA case law” which breed “inefficient overcompliance by risk averse business actors fearful of enterprise – threatening liability because of the enforcement agencies’ untested and dubious theories.”

Global Financial Integrity Responds

By on June 21, 2011 in Compliance Defense, FCPA Reform, Foreign Official, Guest Posts, U.K. Bribery Act

The goal of FCPA Professor (see here) is to foster a forum for critical analysis and discussion of the FCPA (and related topics) among FCPA practitioners, business and compliance professionals, scholars and students, and other interested persons.

With that goal in mind, I asked Heather A. Lowe, Esq. (Legal Counsel & Director of Government Affairs, Global Financial Integrity (“GFI”)) to consider a guest post to respond to my criticism last week of certain of GFI’s statements in connection with the House FCPA hearing (see here for the prior post).

I am glad she accepted and below is Ms. Lowe’s guest post.

If other readers want to make their voice heard on the topic of FCPA reform as well, please consider FCPA Professor as a suitable forum.

*****

I appreciate the invitation from Prof. Koehler to provide some comments on this forum as a guest blogger.

On June 14, 2011, Prof. Koehler commented (here) on documents provided by Global Financial Integrity and other civil society organizations and GFI’s press release (here) circulated on Monday, prior to the House of Representatives’ hearing on the FCPA. Additional arguments are included in GFI’s formal submission (here) for the record at the hearing. Karen Lissakers, Director of the Revenue Watch Institute, and Corinna Gilfillan, Head of U.S. Office at Global Witness, each provided statements (see here and here) for the hearing record as well. I am sure readers will find our full submissions to be of interest.

One of the primary reasons that GFI wanted to provide a submission for the hearing was to ensure that Members of Congress were aware that (a) businesses and the Department of Justice were not the only stakeholders with views to be considered in this discussion, (b) proposed changes to the FCPA must be considered within an international context, and any changes will have international implications, and (c) there are strong economic arguments for carefully considering changes to the FCPA that might lead to a reduction in enforcement.

Anti-bribery laws are not enacted in this world without years of blood, sweat and tears from anti-corruption campaigners around the world, and I don’t expect that they will be willing to lose ground on this flagship anti-bribery legislation without making their voices heard. When I say “blood, sweat and tears” I literally mean blood, sweat and tears. There are activists around the world who have been threatened with violence, jailed and even killed over the years to achieve the progress that has been made. It would be inaccurate, therefore, to believe that corporations are the only ones with “skin” in this game.

GFI would not presume to speak on behalf of these organizations without their permission, but we did not want to miss the opportunity to provide at least one civil society submission as a place-holder for a critical group of stakeholders.

We appreciated Prof. Koehler’s comments on the documents he posted. We are trying to begin a meaningful dialogue on these issues that more civil society organizations with direct experience in the field, around the world, can join. His comments demonstrate that we have been successful in starting that conversation.

Prof. Koehler did not invite me to blog for my motivational comments, however. He would like me to respond to his post of June 14, 2011.

Apart from quoting the opinion of a former SEC Commissioner in a statement made 20 years ago

• during a hearing on bills proposing changes that the Professor considers to be similar to changes being proposed today,
• which were ultimately never adopted by Congress, and
• during a time preceding the international proliferation of anti-bribery conventions and national laws that we have to support our FCPA enforcement efforts today,

Prof. Koehler seems to be focusing on two main subjects: the proposed amendment to further define “foreign official” and the proposal to include a compliance defense in the FCPA.

The Professor refers to the UK Bribery Act Guidance to shore up his position in support of creating a compliance defense for companies. The U.S. Chamber refers to the UK Bribery Act (the “UK Act”) itself to support its position that a compliance defense is a reasonable amendment to request. The compliance defense in the UK Act should not be taken out of context, however. It must be viewed in light of the other provisions of the UK Act. The UK Bribery Act criminalizes ALL forms of commercial bribery. The FCPA criminalizes only payments made to foreign officials. The UK Act does not permit facilitation payments. The FCPA permits facilitation payments and has an express provision creating an affirmative defense for reasonable travel and lodging and other types of expenses one might incur as a “host” of a trading partner. The UK Act’s extraterritoriality provisions have been described as more far-reaching than the FCPA’s.

The U.S. Chamber’s proposals to amend the FCPA are entitled “Restoring Balance.” The UK Act’s compliance defense could conceivably be seen as an attempt to balance provisions that go well beyond those of the FCPA. A compliance defense in the FCPA would, in fact, be out of balance when viewed in full context. However, if there is a genuine move to bring the FCPA in line with the UK Bribery Act then let’s talk!

I also found it interesting that the Professor referenced the UK Bribery Act Guidance in his support of the compliance defense. The Guidance he refers to is the Guidance from the UK Ministry of Justice. At the very beginning of that document, in paragraph 4, the Ministry states, “The question of whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case. The onus will remain on the organisation, in any case where it seeks to rely on the defence, to prove that it had adequate procedures in place to prevent bribery. However, departures from the suggested procedures contained within the guidance will not of itself give rise to a presumption that an organisation does not have adequate procedures.”

So, what does a compliance defense actually accomplish in the UK? A company still has to prove that it had adequate procedures in place to prevent the criminal activity (which means all of the investigation into what actually took place must still be undertaken) and the matter still has to be adjudicated by the courts. Compliance in the UK is not an absolute defense that can be relied upon to avoid the cost of investigation and litigation at all, as seems to be the idea behind the U.S. Chambers’ proposal! The burden on a UK company is, in practical terms, the same as that of a company defending an FCPA violation under the current form of the statute.

Prof. Koehler characterized some of my statements as “unsophisticated” and “naïve,” so I was surprised by his argument that the real reason that companies want a clearer definition of “foreign official” is so that they can more easily determine who they can take out for a round of golf and a few drinks at the 19th without thinking too hard about it. While I do not doubt that this is something companies do have to think about, I stand by my statement that a clearer definition of foreign official can just as easily be used to determine who a company can bribe and who it can’t bribe and I am not naïve enough to think that this isn’t a frequent question. Let’s get on board with the UK on this one and just not bribe anyone.

I will say, however, that I think I have a fairly accurate view of what motivates corporations. Corporations are motivated by their bottom line and their cost/benefit analysis. There are externalities that also factor into decisions, like reputational risk, but in the end the externalities are quantified and factored in. This is not a bad thing – corporations exist to make money and are vital to support a strong economy.

For the reasons set forth in GFI’s submission, I don’t think that most companies set out to engage in bribery, unless they do not have the attributes to be truly competitive in the market they are entering in the first place (which should not be overlooked as a possible motivating factor). When faced with a bribe, however, the choice on the spot may be perceived to be one of paying a bribe or losing business worth many times the value of the bribe. A strongly enforced FCPA makes that bribe much more expensive in any cost/benefit analysis.

The perception that the choice a company is making is whether to pay a bribe or lose the business is where we should be focusing our energy, however. Many companies have created strategies, policies and outreach to governments in the countries in which they operate in order to ensure that it is understood by those with whom they do business that they are subject to the FCPA and cannot pay bribes. We are pretty sure that the whole notion of the FCPA isn’t a surprise to their business counterparts when the subject is raised.

As I stated in GFI’s submission for the hearing, “Some companies, like Newmont Mining, view the FCPA in a positive light. Newmont Mining, based in Colorado, is the second largest gold mining company in the world. Newmont’s Director Corporate & External Affairs for Africa, Chris Andersen, stated during a panel discussion at the Extractive Industries Transparency Initiative Global Conference in March of this year that,

“…Newmont’s experience, particularly in Africa, has been that FCPA has been an enormously valuable protective device for us…when you have a government person saying…‘we’ll give you that license if you buy us a car or something’…it’s not about look ‘I’m a mean guy and I don’t value our relationship, and therefore I’m not going to give it to you,’ you say ‘look, there’s a law out there that means I’m going to go to jail if I do that, I’m not going to go to jail for you or anybody else.’”

There are many more arguments to be made on all sides of this debate, I have no doubt. Let’s make sure that all relevant voices are being heard moving forward.

ICE Appeal Receives Chilly Reception At 11th Circuit

By on June 20, 2011 in Alcatel-Lucent, Costa Rica, FCPA Jurisprudence, Victims

It is one of the FCPA’s most bizarre issues.

If bribery is not a victimless crime, then why do Foreign Corrupt Practices Act fines and penalties simply go directly into the U.S. Treasury? Why are there no efforts to identify the victims of FCPA violations and to compensate those victims?

As detailed in this prior post, in May Instituto Constarricense de Electricidad (“ICE”) of Costa Rica petitioned “for protection of its rights as a victim” of Alcatel-Lucent’s bribery scheme. (See here for a prior analysis of the December 2010 enforcement action).

In early June, Judge Marcia Cooke (Southern District of Florida) denied ICE’s petition.

On June 15th, ICE filed this petition in the 11th Circuit for a writ of mandamus “directing the District Court to recognize ICE is a ‘crime victim’ under the Crime Victims’ Rights Act of [Alcatel-Lucent’s] crimes and to afford it all rights the CVRA guarantees to crime victims, including restitution.”

The two issues presented on appeal were: (i) whether the district court erred by denying ICE victim status under the CVRA; and (ii) whether the district court erred in denying ICE restitution.

Last Friday, in a short 3-page decision (here), the 11th Circuit denied ICE’s petition.

After noting the clearly erroneous standard of review, the 11th Circuit held that “the district court did not clearly err in finding that [ICE] actually functioned as the offenders’ coconspirator” and that the district court did not “err in finding that ICE failed to establish that it was directly and proximately harmed by the offenders’ criminal conduct.”

The petition for victim status was factually difficult from the start and it is not surprising that ICE did not prevail. Yet, the ICE petition did succeed in raising the victim issue and causing those interested in bribery and corruption issues to ponder the valid and legitimate question of victims a bit more closely.

Russian FCPA: The Law Has Been Signed, Will The Culture Change Result?

By on June 17, 2011 in Guest Posts, International Initiatives, OECD, Russia

Last month, Russian President Dimitri Medvedev signed legislation that criminalizes foreign bribery, with monetary sanctions for companies and individuals who bribe foreign public officials. Soon thereafter, the OECD formally invited Russia to join the OECD’s Working Group on Bribery and to accede to the OECD’s Anti-Bribery Convention (see here for the OECD release).

Max Chester (Senior Counsel at Foley & Lardner – see here) takes the stage today with this guest post. Chester, a native speaker of Russian with significant experience representing U.S. clients in commercial transactions in Russia, provides an overview and analysis of the new Russian “FCPA-like” law.

*****

Russian FCPA: The Law Has Been Signed, Will The Culture Change As A Result?

On May 4, 2011, Russian President Dmitriy Medvedev signed into law a measure that significantly increases fines for bribery in Russia and now specifically applies to bribery of foreign government officials. The new federal law (here) is entitled “Federal Law dated May 4, 2011 No. 97-FZ On inclusion of changes to the Criminal Code of Russian Federation and to the Code of Administrative Offences in Connection with the Improvement of Government Administration in the Area of Fighting Corruption.” While the Russian title of the new law is not easy to understand even for a native Russian speaker, its objective is clear: it is intended to fight corruption in Russia, one of President Medvedev’s highest stated priorities, and to support Russia’s bid to accede to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Because the new law specifically prohibits offering or acceptance of a bribe by a foreign government official, we’ll refer to the new law as the “Russian FCPA.” Because the Russian FCPA prohibits commercial bribery and both receiving and offering corrupt payments to foreign government officials, the new law appears to resemble the UK Bribery Act and can be said to have even further reach than the US FCPA.

With respect to commercial bribery, the new law changes art. 46 of the Criminal Code and imposes the maximum fine for bribery in the amount of 100 times the amount of the bribe not to exceed 500 million rubles) (approximately $17.8 million). Prior to the amendment, the maximum monetary fine for acceptance of a bribe was 1 million rubles or an amount equaling salary/other income for the previous 5 year period and the maximum monetary fine for offering a bribe was 500,000 rubles or an amount equaling salary/other income for the previous 3 year period. The monetary fines for commercial grease payments (подкуп “podkup” in Russian) were even lower: the offeror could face a maximum fine of only 300,000 rubles or an amount equaling salary/other income for the previous 2 year period, and the acceptor could face a maximum fine of only 1 million rubles or an amount equaling salary/other income for a 5 year period.

While incarceration up to 12 years for bribery/grease payments was possible prior to the amendment, according Larisa Brycheva, the chair of the Office of Legal Affairs to the President of Russian Federation, only 26% of those convicted for bribery-related offenses were incarcerated. Furthermore, most of those convicted were offering/accepting small bribes (from 500 rubles to 10,000 rubles), making it difficult for Russian judges to impose sentences of up to 12 years in prison resulting from bribes equaling the cost of an average dinner for two at a Moscow restaurant.

Given this unimpressive to-date enforcement regime, the Russian lawmakers have decided that a significantly higher monetary fine would be more effective than a possibility of a lengthy prison sentence. While the anti-corruption professionals should welcome this change in the Russian law, a big question still remains exactly how aggressively Russian authorities will enforce the new law. It may not be palatable to impose a 500 million ruble fine on a Russian bureaucrat whose official government salary is 40,000 rubles and whose only official assets are his apartment (where his family lives and thus is not subject to forfeiture) and his dacha, the title to which is likely held by his relatives. The same can not be said of foreign businesses, however, on whom it would be much easier for Russian authorities to impose and collect fines equaling 100 times the bribe. There is no indication in the Russian FCPA that it would not apply to US companies doing business in Russia. In other words, if a US company or its constituents engage in commercial or foreign government official bribery in Russia, the offenders would be subject to fines and potential incarceration in Russia.

The Specific Provisions of the New Law

Acceptance of a Bribe

The Russian FCPA now specifically prohibits bribery involving foreign government officials. Thus, art. 290 of the Criminal Code (which prohibits acceptance of bribes directly or through intermediaries) as amended applies to government officials, foreign government officials or officials of public international organizations. The new law breaks down the fines into several categories depending on the conduct at issue and the amount of the bribe. In every case, however, in addition to the monetary penalty or a prison sentence with a monetary penalty, the offender may be restricted from occupying certain positions in government or commercial entities. For example, part 1 of art. 290 of the Criminal Code now imposes a penalty between 25-50 times the bribe amount or incarceration up to 3 years with a fine equaling 20 times the bribe amount if the bribe is under 25,000 rubles and was used to have an official perform an act (or refrain from performing an act) which falls within the official’s duties and responsibilities. Part 2 of article 290 states further that if the bribe amount is between 25,000 and 150,000 rubles, then the maximum penalty for a violation is a fine between 30-60 times the bribe amount or incarceration up to 6 years with a fine equaling 30 times the bribe.

If the actions (inactions) of government officials, foreign government officials or officials of public international organizations for which they accept a bribe are considered illegal, Part 3 of art. 290 of the Criminal Code now imposes a penalty equaling 40-70 times the bribe amount or incarceration for a period of 3-7 years with a fine equaling 40 times the bribe amount.

Even stiffer penalties (60-80 times the bribe amount or incarceration for a period of 5-10 years with a fine equaling 50 times the bribe amount) apply if the bribe is accepted by a federal Russian government official or an official of an equivalent body of local government administration. Art. 290, Part 4.

If the actions prohibited by parts 1-3 above involve a conspiracy, or a threat or the amount at issue is over 150,000 rubles, the penalty is 70-90 times the bribe or incarceration for a period of 7-12 years. Art. 290, Part 5

If the actions prohibited by parts 1-4 involve an amount greater than 1 million rubles, then the penalty is 80-100 times the bribe amount or incarceration for a period of 8-15 years with a penalty equaling 70 times the bribe amount.

Giving of a Bribe

The Russian FCPA similarly amends art. 291 of the Criminal Code, which now prohibits giving of a bribe (directly or through an intermediary) to a government official, foreign government official or an official of a public international organization. The giving of a bribe in the amount less than 25,000 rubles is punishable by a fine equaling 15-30 times the bribe amount or incarceration of up to 2 years with a fine equaling 10 times the bribe amount. Art. 291, Part 1.

The giving of a bribe in the amount between 25,000 rubles and 150,000 rubles is punishable by a fine equaling 20-40 times the bribe amount or incarceration of up to 3 years with a fine equaling 15 times the bribe amount. Art. 291, Part. 2.

If the actions prohibited by parts 1-3 above involve a conspiracy or the amount at issue is over 150,000 rubles, the penalty is 60-80 times the bribe or incarceration for a period of 5-8 years with a fine equaling 30 times the bribe amount. Art. 291, Part 4.

The giving of a bribe in the amount exceeding 1 million rubles is punishable by a fine equaling 70-90 times the bribe amount or incarceration for a period between 7 and 12 years with a fine equaling 70 times the bribe amount. Art. 291, Part. 2.

Giving of a bribe to a government official, foreign government official or an official of a public international organization to secure an action/inaction which is itself deemed illegal is punishable by a fine equaling 30-60 times the bribe amount or incarceration of up to 8 years with a fine equaling 30 times the bribe amount. Art. 291, Part 3.

Aiding and Abetting Bribery

The Russian FCPA also introduces new article 2911 to the Criminal Code, which prohibits aiding and abetting bribery if the amount of the bribe exceeds 25,000 rubles. In such circumstances, the Russian FCPA imposes a fine equaling 20-40 times the bribe or incarceration for a period of up to 5 years with a fine equaling 20 times the bribe amount.

If an aider assists with a bribery for an official’s act that itself is considered illegal or if an aider uses his official position in aiding the bribery, the penalty is 30-60 times the bribe or incarceration for a period of time between 3-7 years with a fine equaling 30 times the bribe amount.

If the aiding is committed by an organized group or pursuant to a conspiracy, or the amount of the bribe exceeds 150,000 rubles, the penalty is 60-80 times the bribe amount or incarceration for a period of time between 7-12 years with a fine equaling 60 times the bribe amount.

The penalty for aiding bribery in the amount exceeding 1 million rubles is 70-90 times the bribe amount or incarceration for a period of time between 7-12 years with a fine equaling 70 times the bribe amount.

A promise or an offer to aid in the bribery is also punishable by a penalty equaling 15-70 times the bribe or incarceration for a period of up to 7 years with a fine equaling 10-60 times the bribe amount.

Definition of Foreign Government Official

The Russian FCPA defines a “foreign government official” as any appointed or elected official who has a position in any legislative, executive, administrative, or judicial branch of a foreign country or an individual who serves any public function for a foreign country or a public agency or a public enterprise. This definition seems to suggest that Russian lawmakers embrace the position taken by the DOJ that employees of government owned enterprises are “foreign government officials” for purposes of the FCPA. It would be interesting to see if Russian authorities deem employees of General Motors, AIG or other large US companies where the US government has a substantial equity position, “foreign government officials” for purposes of the Russian FCPA.

Amendments to the Code of Administrative Offences of Russian Federation

The Russian FCPA also amends several provisions of the Code of Administrative Offences of Russian Federation. Among those is amendment to article 19.28, which imposes penalties on legal entities for commercial bribery or bribery of foreign government officials if a payment of a bribe or an offer of a bribe was made on a legal entity’s behalf. In such circumstances, the penalty is 3 times the amount of the bribe but not less than 1 million rubles. If the amount of the bribe at issue is greater than 1 million rubles, then the penalty is up to 30 times the bribe amount but not less than 20 million rubles. If the amount of the bribe at issue is over 20 million rubles, then the penalty is up to 100 times the bribe amount but not less than 100 million rubles.

In addition, the Russian FCPA introduces several new protocols for Russian authorities to seek information from their foreign counterparts in connection with the investigation by Russian authorities of violations set forth above as well as protocols for Russian authorities to respond to inquiries from foreign law enforcement agencies in connection with foreign law enforcement agencies’ investigation of crimes. These provisions will undoubtedly strengthen the level of cooperation between Russian and foreign law enforcement agencies in implementing anti-corruption measures. Such efforts are already underway, as evidenced by the recent meetings between Alexander Yakovenko, the Russian Ambassador to the United Kingdom in London, with Richard Alderman, Director of the Serious Fraud Office.

Conclusion

No law by itself can change overnight or even within a short period of time the “threatening” level of corruption that exists in Russia, as acknowledged by the Russian President himself. The current state of affairs in Russia is a product of 70+ years of socialist dictatorship and the resulting mindset of many government officials. This state of affairs will change, undoubtedly, and the passing of the Russian FCPA is the step in the right direction for Russia. It is up to the Russian authorities to follow through on the provisions of the new law.

Carson Defendants Move To Dismiss Travel Act Counts

By on June 16, 2011 in Carson, FCPA Jurisprudence, FCPA Trials, Travel Act

The Foreign Corrupt Practices Act is not the only tool the DOJ has used to charge alleged bribery schemes. The FCPA, after all, requires a “foreign official.”

With increasing frequency, the DOJ – often in conjunction with FCPA charges – charges Travel Act violations when the conduct at issue is missing a “foreign official” yet concerns allegations of commercial bribery. For a useful overview of the Travel Act and its relevance to FCPA enforcement (broadly speaking), see this recent post from the FCPA Blog.

The DOJ’s use of the Travel Act is being challenged in the Carson matter pending in the Central District of California. This is the same case in which “foreign official” was and is being challenged. (See here and here for the prior posts).

Earlier this week, in a significant FCPA-related event, certain of the Carson defendants filed a motion to dismiss the Travel Act charges. As noted in the brief (here), in addition to FCPA charges, the moving defendants were charged with Travel Act violations based on alleged bribes to employees of private companies located in China and Russia.

In sum, the Carson defendants argue as follows.

“In Morrison v. Nat’l Australia Bank Ltd., 130 S. Ct. 2869, 2878 (2010), the Supreme Court explained that unless Congress has clearly indicated that a statute applies extraterritorially, it does not. The Travel Act criminalizes “bribery . . . in violation of the law of the state in which committed,” i.e., domestic bribery. Travel Act application to the foreign bribery alleged in this case violates Morrison’spresumption against the extraterritoriality of United States (“U.S.”) laws.”

“While the face of the Travel Act, considered with Morrison’s presumption against extraterritoriality, shows that the Travel Act has no foreign application, the statute’s legislative history confirms it. Consideration of the Travel Act in conjunction with the subsequently enacted FCPA also demonstrates that Congress did not intend that the Travel Act extend to foreign bribery.”

“Further, the Travel Act Counts are predicated upon California’s commercial bribery statute, Cal. Penal Code § 641.3 (“PC 641.3”), so the applicability of that statute to Defendants’ conduct is essential to the government’s case. PC 641.3 has never been applied to foreign commercial bribery and its legislative history shows its foreign application was never considered.”

“Application of the Travel Act and PC 641.3 would also be unconstitutionally vague. Defendants had no notice that either the Travel Act or PC 641.3 would reach the alleged conduct. The government’s recent application of this fifty-year old statute against foreign commercial bribery, in the face of strong skepticism that it even applies, shows the enforcement of this statute is arbitrary.”

“Additionally, the Travel Act allegations are simply defective. The Travel Act prohibits travel or the use of a facility in interstate or foreign commerce with the intent to promote unlawful activity (i.e., state-law bribery), followed by an act to promote the bribery. But the Travel Act Counts fail to allege the essential element of an act following the travel or use of a facility in interstate commerce to promote the alleged bribery. So too, Counts Twelve and Fourteen fail to adequately allege the jurisdictional element of travel or use of a facility in interstate or foreign commerce. Because the Travel Act Counts omit necessary elements, they fail.”

“Finally, the Court cannot guess whether the Grand Jury would have even indicted Defendants for conspiracy had it known that the Travel Act did not apply to Defendants’ alleged conduct. Because the defective Travel Act allegations infect the entire conspiracy count, Count One must be dismissed in its entirety.”

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