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By on November 23, 2012 in Declination Decisions, Enforcement Agency Speeches, Guidance

Once I started, it was hard to stop.  This previous post linked to and provided brief excerpts from law firm client alerts 48 hours after release of the Foreign Corrupt Practices Act guidance by the DOJ and SEC.  (See here).   I updated the post throughout the week and it now contains links and excerpts to approximately 40 law firm alerts.  If nothing else, the release of the FCPA guidance was news and demonstrates once again the existence of a vibrant and competitive FCPA industry.  The clear consensus – among those who have publicly stated a position on the guidance – is the same as noted last week – the guidance offers little in terms of actual new substance and FCPA reform issues remain.

Several posts next week will explore various aspects of the guidance.

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As many in FCPA Inc. know, the release of the guidance occurred one day before a major industry event in Washington D.C.  It was at this event last year that Assistant Attorney General Lanny Breuer announced the DOJ’s intention to issue guidance in 2012.  (See here for the prior post).

Breuer once again spoke at the event and in his speech he largely carried forward the empty rhetoric from his other recent FCPA speech.  (See here for the previous post).  Breuer even used religious allegory in describing the DOJ’s FCPA enforcement program when he stated as follows.  “[W]e in the United States are in a unique position to spread the gospel of anti-corruption, because there is no country that enforces its anti-bribery laws more vigorously than we do.”

Below are additional excerpts from his speech.

“As a result of our efforts over the past three-and-a-half years, robust FCPA enforcement has become part of the fabric of the Justice Department:  Our global anti-corruption mission has seeped into the Criminal Division’s core.  And there is no turning back.  The FCPA is now a reality that companies know they must live with and adjust to; and this nation is better off for it.”

“We are focused on bribes of consequence – ones that have a fundamentally corrosive effect on the way companies do business abroad.”

In his speech, Breuer also gave props to the FCPA blogosphere when he stated as follows.  “I’ve heard that there are even several blogs that keep track of each one of our cases, which I think is terrific.”  It is terrific to fact-check FCPA enforcement agency speeches and to hold public officials accountable in enforcing a high-profile law.

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Speaking of the FCPA blogosphere (broadly speaking), several covered the industry event at which Breuer spoke.

See here from the Corporate Crime Reporter (focusing on DOJ and SEC declinations).

See here from Morrison & Foerster (a general discussion of DOJ and SEC comments).

See here from Howard Sklar at his Open Air Blog (apparently taking credit for the fact that the FCPA has always contained a corrupt intent element).

See here from Matteson Ellis at his FCPAmericas Blog (general discussion of issues).

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Breuer (along with other FCPA notables) also recently spoke at a Federalist Society event in Washington, D.C .  See here for the writeup by Main Justice (an on-line news agency).  For more on the event, see here from Law360.

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The DOJ’s FCPA website (here) has always contained a list of its FCPA Opinion Procedure Releases.  Recently, the site was updated to provide a useful subject-matter index of the releases (here) as well as summaries (here).

Canada’s Jurisdictional Test

By on November 21, 2012 in Canada, Guest Posts

Today’s post is from FCPA Professor Canada expert Mark Morrison (Blake, Cassels & Graydon).   Michael Dixon (Blake, Cassels & Graydon) and Derek Jugnauth (Student of Law) also contributed to the post.

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Canada’s Jurisdictional Test

Like many of its international partners, Canada has domestic legislation designed to advance bedrock anti-corruption principles underlying the OECD Convention against bribing foreign public officials. However, Canada stands alone in terms of its jurisdictional approach. While all other signatories have embraced both nationality and territoriality based jurisdictional principles, Canada relies solely on the latter to give effect to the Corruption of Foreign Public Officials Act (CFPOA).

Territorial jurisdiction means that unless a significant portion of the activities constituting the offence take place in Canada the CFPOA does not apply. Considering the CFPOA is intended to capture conduct that is inherently likely to take place outside of the country, the Canadian approach appears at odds with the inherent purpose of the CFPOA. In practical terms, this could mean that a Canadian flying from a Canadian airport to a foreign jurisdiction to meet with a foreign public official in order to pay or promise a benefit is conduct that would likely be beyond the reach of the CFPOA.

However, change “Canadian” to “American” and “Canada” to the “United States” in the above example and the outcome would be diametrically opposite under the U.S. Foreign Corrupt Practice Act. Why the difference? When drafting the CFPOA, Parliament expressed its confidence in the sufficiency of Canada’s common law test for extending the territorial reach of the criminal law to circumstances taking place, in part, outside of the country. That test is whether there is “a real and substantial link” between the offence and Canada. If not, Canadian law does not apply

Of course whether a real and substantial link exists will turn on the facts, can be unpredictable, and will – at times – yield questionable results. For example, in a case called R. v. B.(O.), the Ontario Court of Appeal held that Canadian courts did not have jurisdiction over a Canadian trucker who sexually assaulted his 13-year-old Canadian granddaughter in his Canadian registered vehicle while travelling through the U.S. en route back to Canada. Moreover, given that Canada has only recorded two convictions under the CFPOA – both the result of guilty pleas – courts have not yet had the opportunity to consider the jurisdictional question in the context of foreign bribery. Until now.

In 2010 the Royal Canadian Mounted Police laid charges under the CFPOA against Nazir Karigar. Investigators allege Mr. Karigar paid significant bribes to a former Mumbai police chief and Indian cabinet minister in exchange for showing favour to a Canadian security company in relation to a lucrative $100-million Air India contract. At the time Mr. Karigar was head of that company’s Indian operations, and he is alleged to have facilitated a $250,000 payment to a political ally of India’s then Minister of Aviation. He has pled not guilty.

As the case is still pending before the Ontario Superior Court of Justice many details are not yet available. However, the conduct alleged to constitute the offence appears to have taken place predominantly in India and comments from Mr. Karigar’s lawyer suggest that challenging Canada’s jurisdiction will form one pillar of the defence.

As this case unfolds Canada will likely have its first judicial statement on the extent of its territorial reach over foreign corruption. If Mr. Karigar’s jurisdictional challenge carries the day, the federal government will come under increasing pressure to expressly legislate extraterritorial application to the CFPOA based on nationality, as it has for a series of other Criminal Code offences. In fact, the OECD and Transparency International have been calling for this change for some time and in 2009 a legislative amendment to this effect was proposed but died on the order paper.

Regardless of the result of Mr. Karigar’s case, recent signs are that the government has again been seeking input on an amendment to broaden the jurisdictional reach of the CFPOA. In the end, our prediction is that it is only a matter of time before Canada closes this jurisdictional loophole in its legislation.

New Wal-Mart Details Emerge

By on November 20, 2012 in FCPA Investigative Costs, Wal-Mart

Last week the New York Times ran a front-page story (here) regarding Wal-Mart and its FCPA scrutiny.  The story did not receive nearly the attention of the April New York Times story (see here for the prior post), but the recent article includes new details relevant to Wal-Mart’s potential FCPA scrutiny.

And no, I am not talking about the unsurprising fact that Wal-Mart’s scrutiny has expanded beyond Mexico to also include China, India and Brazil.  (See here for the prior post discussing how this was likely to happen).

Rather, the new details suggest that Wal-Mart’s internal review is less of a knee-jerk reaction upon learning of the New York Times April story, but more an instance of the company pro-actively seeking to understand its FCPA risk, notwithstanding whatever may have occurred within the company in 2005 and 2006 upon learning of potentially problematic payments in Mexico.

According to the recent Times article, Wal-Mart’s internal review began in Spring 2011 when Jeffrey Gearhart (Wal-Mart’s general counsel) learned of an FCPA enforcement action against Tyson Foods (like Wal-Mart, a company headquartered in Arkansas – see here for the prior post discussing the Tyson enforcement action).  According to the Times article, “the audit began in Mexico, China and Brazil, the countries Wal-Mart executives considered the most likely source of problems” and Wal-Mart hired KPMG and Greenberg Traurig to conduct the audit.  The Times article notes that “in July 2011” the firms “had identified significant weaknesses in all three subsidiaries.”

The Times article next rightly states as follows.  “The audit was uncovering the kinds of problems and oversights that plague many global corporations.”

The Times article notes that Wal-Mart has spent $99 million on its FCPA review in the past nine months.

To learn more about Wal-Mart’s potential FCPA scrutiny and what it says about this current era of FCPA enforcement, see my article “Foreign Corrupt Practices Act Enforcement As Seen Through Wal-Mart’s Potential Exposure.”

The Noticeably Missing Hypothetical And The Government’s Two “Instrumentality” Positions

By on November 19, 2012 in Foreign Official, Guidance

The FCPA guidance issued last week by the DOJ and SEC contains 18 hypotheticals (including sub-parts) ranging from jurisdictional issues; to gifts, travel and entertainment; to facilitation payments; to successor liability; to third party due-diligence.  In addition to these hypotheticals, the guidance also contains 12 (what I will call) vignettes – information set apart from the text that discuss issues ranging from “how can I tell if my company is a issuer;” to obtain and retain business, to numerous other issues such as charitable donations and routine government action.

One hypothetical noticeably missing from the FCPA guidance concerns the most important element of an FCPA anti-bribery violation – the “foreign official” element.  The DOJ’s position on this important FCPA element has become so discombobulated (for example, see here for a recent post) that it was probably easiest to take a pass.

Not only does the guidance pass on providing a “foreign official” hypothetical, but the guidance also creates a situation where the government now has two “instrumentality” positions.  I am not talking about a position based on informal statements delivered on the FCPA conference circuit, but a position set forth in official government documents.

In pertinent part, the FCPA guidance states that “as a practical matter, an entity is unlikely to qualify as an instrumentality if a government does not own or control a majority of its shares.  However, there are circumstances in which an entity would qualify as an instrumentality absent 50% or greater foreign government ownership, which is reflected in the limited number of DOJ or SEC enforcement actions brought in such situations.”  The guidance then lists as an example the Alcatel-Lucent enforcement action (see here for a prior post) in which the enforcement agencies asserted that Telekom Malaysia Berhad was a state-owned and controlled entity, even though the Malaysian Ministry of Finance only owned approximately 43% of the company’s shares, because the Ministry of Finance was a “special shareholder” with apparent veto power over major expenditures and control over important operational decisions.

This position in the guidance conflicts with the recent rule promulgated by the SEC (which co-authored the FCPA guidance) in connection with Section 1504 of Dodd-Frank.  As highlighted in this prior post, Section 1504 defines “foreign government” to mean a “department, agency or instrumentality of a foreign government, or a company owned by a foreign government, as determined by the Commission.”  On page 101 of its  final rules (here), the SEC states as follows.  “[T]he final rules clarify that a company owned by a foreign government is a company that is at least majority-owned by a foreign government.”

Prosecutors Stymied By Thai Attorney General’s Office In Siriwan Case

By on November 19, 2012 in Extradition, FCPA Related Charges, Guest Posts, Siriwan

This post is from Mike Dearington (a third-year law student at Vanderbilt University Law School) who discusses the DOJ’s FCPA-related enforcement action against the “foreign officials” in the Gerald and Patricia Green enforcement action.  Dearington previously authored this guest post on the action and provides an update below.

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Prosecutors Stymied by Thai Attorney General’s Office in Siriwan Case

Mike Dearington

Take a break from digesting the recently released FCPA guidance to read about happenings in a more remote region of the FCPA world.  For the second time since July, the court in United States v. Siriwan has asked the DOJ to show its cards with respect to its extradition request to Thailand.

Siriwan involves charges that Juthamas Siriwan, ex-governor of Tourism Authority of Thailand, and her daughter, Jittisopa, accepted bribes from Hollywood movie executives Gerald and Patricia Green in exchange for contracts.  Prosecutors face a substantial hurdle in convincing the court that their novel use of the money‑laundering statute (MLCA) to prosecute the Siriwans is permissible even when the defendants are foreign officials otherwise outside the reach of the FCPA.  But based on a November 15 filing (here), prosecutors apparently face a separate hurdle in convincing the court to even reach the merits.  This is because, despite the government’s request, Thailand appears unprepared to extradite the Siriwans.

In July, the government reluctantly revealed that it had “not yet received a response from Thailand regarding extradition.”  The government has finally received its response.  Prosecutors filed a status report this past Thursday updating the court about the government’s struggle to obtain extradition from the Kingdom of Thailand.  Appended to the government’s status report is a translated letter from Thavorn Panichpant, Acting Thai Attorney General, stating that Thailand is “in the process of gathering further evidences [sic] before completing the investigation in order to bring both offenders to court to be formally charged. Hence, we must postpone the extradition of both [defendants] as requested by the U.S. Government, according to the Extradition Act . . . .”

The government has interpreted “postpone” as an indication that Thailand may be willing to ultimately extradite the Siriwans.  Prosecutors appended a letter from the US Office of Law Enforcement and Intelligence, a unit of the Department of State’s Office of the Legal Adviser, interpreting the Thai Acting Attorney General’s letter, “not as a rejection, nor an assertion of jurisdiction over this matter . . . .”  And in its brief, the prosecution argued that Thailand’s response “does not constitute a denial of the government’s extradition request.”  Nonetheless, it appears that Thailand’s response poses serious problems for prosecutors.

First, after reading the letter, the court may decline to exercise jurisdiction over the Siriwans in consideration of “the comity of nations.”  In Hilton v. Guyot, the Supreme Court in 1895 described comity, not as “a matter of absolute obligation . . . nor of mere courtesy and good will,” but rather as a “recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation . . . .”

Second, the court may decline to exercise jurisdiction based on the international-law principle of “reasonableness.”  Section 403 of The Restatement (Third) of Foreign Relations suggests, “[A] state may not exercise jurisdiction to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable.”  One of The Restatement’s reasonableness factors is “the extent to which another state may have an interest in regulating the activity,” a factor that weighs heavily in the Siriwans’ favor since the Thai Attorney General’s Office has expressed an interest in prosecuting the Siriwans domestically.

If the court decides to dismiss the action, it will probably operate as a dismissal with prejudice, even if dismissed without prejudice.  The statute of limitations for money laundering under § 1956 is five years, and the most recent act of money laundering allegedly occurred in March 2006.  Although the Ninth Circuit has yet to rule on the issue, courts in the Central District of California have typically held that, absent a savings clause, a statute of limitations continues to run despite a dismissal without prejudice, as if the original complaint had never been filed.  See, e.g., Sperling v. White (C.D. Cal. 1998). 

The letter from the Thai Attorney General’s Office could have a substantial impact on the DOJ’s efforts to curb foreign bribery.  If the court decides to dismiss the action, not only will prosecutors lose the opportunity to prosecute the Siriwans, but the DOJ will also lose the opportunity to test its novel prosecution theory that would allow it to hold foreign officials accountable for bribery via the money-laundering statute.  If the court dismisses the action, we can expect prosecutors to appeal such a dismissal as a final order.

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