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Some Data to Chew On

By on December 9, 2009 in FCPA Statistics

It’s been a while (see here) since I passed along what seems like a constant stream of FCPA survey results.

This morning in my inbox were the results of the Dow Jones State of Anti-Corruption Compliance Survey which I pass along (here).

The survey included responses from 182 company executives worldwide and among the more interesting survey results is that “51% of companies delayed key business plans such as new business partnerships and entry into new or developing markets and another 14% abandoned them completely because of legal questions arising from unclear anti-corruption regulations.”

The managing director of Risk & Compliance at Dow Jones & Company noted that the “findings appear to indicate improvements should be made” including that “regulators must provide clearer guidance to help companies better understand and comply with current laws.”

Today is U.N. International Anti-Corruption Day.

In observance of this day, the U.S. government agencies which enforce the FCPA (the Department of Justice and the Securities and Exchange Commission) should commit to providing those subject to the FCPA clear guidance, reasoned rationale and legal support for certain of their FCPA prosecution theories. As reflected by the Dow Jones survey results, such clarity and transparency is greatly needed.

Indicting a “Foreign Official”

By on December 8, 2009 in Antonio Perez, Carlos Rodriguez, DOJ Enforcement Action, FCPA Related Charges, Foreign Official, Haiti, Individual Enforcement Action, Jean Rene Duperval, Joel Esquenazi, Juan Diaz, Marguerite Grandison, Robert Antoine

Yesterday, the DOJ announced (see here) the unsealing of an indictment (see here) against Joel Esquenazi, Carlos Rodriguez, and Marguerite Grandison which charges (among other things) conspiracy to violate the FCPA and substantive FCPA violations for an alleged scheme to bribe two former employees of Haiti Teleco, the alleged “state-owned national telecommunications company.”

Esquenazi and Rodriguez are former executives of a privately owned, Florida-based telecommunications company and Grandison was the President of Telecom Consulting Services Corp., a Florida based company which served as an intermediary.

The unsealed indictment is the latest chapter in this matter; in May 2009, the DOJ announced (see here) the guilty pleas of Juan Diaz and Antonio Perez in connection with the same scheme.

This matter is also yet another example of an FCPA enforcement action in which the “foreign official” is an employee of an alleged state-owned or state-controlled entity.

That, however, is not why this enforcement action is noteworthy.

It is noteworthy because DOJ also indicted Robert Antoine and Jean Rene Duperval – the alleged “foreign officials.” According to the indictment, Antoine and Duperval both served as the “Director of International Relations of Haiti Teleco” and were responsible for negotiating contracts with international telecommunications companies on behalf of Haiti Teleco.

Of course, the charges were not FCPA charges, because the FCPA only covers “bribe-payers” not “bribe-takers” (see here, here, for prior posts on this subject).

Rather the charges against Antoine and Duperval were money laundering conspiracy and/or substantive money laundering charges.

According to the DOJ release, Antoine is from “Miami and Haiti” and Duperval is from “Miramar, Fla. and Haiti.” Further, according to the indictment, both individuals had bank accounts in the U.S. and these accounts were used in connection with the bribery scheme. (I wonder if Washington Mutual, Wachovia, or Miami Federal Credit Union were aware that Haitian “foreign officials” were among its customers!)

To my knowledge this is the first time “foreign officials” have been specifically charged as defendants in connection with an FCPA enforcement action. This indictment of “foreign officials” comes on the heels of AG Holder’s recent speech (see here) in which he stated that the U.S. government was committed to recovering funds obtained by “foreign officials” through bribery.

Dubai “Foreign Officials”?

By on December 7, 2009 in Dubai, Foreign Official

Financial news the last two weeks or so has been dominated by news that the Dubai government apparently will not back the debt of Dubai World, Dubai’s wholly-owned investment vehicle.

Because I tend to view news with “FCPA goggles on,” the Dubai story got me thinking again about a critical FCPA topic and that is the DOJ/SEC’s untested and unchallenged theory that all employees (regardless of rank or title) of alleged state-owned or state-controlled entities are “foreign officials” under the FCPA. See here for my prior posts on this subject. This theory has been applied not just to business entities wholly or majority owned by a foreign government, but also minority owned entities as well (see the KBR / Halliburton matters involving Nigeria).

So just who are Dubai “foreign officials”?

Dubai World owns a host of real estate, leisure and financial service assets both inside and outside of Dubai. In fact “the sun never sets on Dubai World” (at least that is what it says on its website see here) and its investment portfolio extends across 100 different cities in the world.

Many of Dubai World’s entities bear all the resemblences of a private sector business, such as public stock offerings, loan agreements from private banks, etc.

Are such entities, which in theory are suppose to advance the public sector goal of their government “owners or controllers,” state-owned or state-controlled entities even though another purpose of these entities is to maximize profit for the benefit of private investors?

Consider also that “westerners” run some of Dubai World’s main holdings. Under the Dubai World umbrella is Nakheel (“the world’s largest privately held real estate company”) (see here). The CEO of Nakheel is an Australian (see here). Same with Istithmar World (an investment house 100% owned by Dubai World, which is in turn wholly owned by the Government of Dubai) (see here). The CEO of Istithmar is an American (see here).

Would DOJ/SEC consider an Australian and an American to be Dubai “foreign officials” under the FCPA simply because they work for Dubai World?

If DOJ/SEC prosecution theories in other FCPA enforcement actions were to be consistently applied, the answer (it seems) would have to be yes.

This result would seem to be at odds with common sense and, more importantly, the intent of Congress in enacting the FCPA (as reflected in the FCPA’s extensive legislative history).

The Dubai World example is not unique, there are countless other examples that could also be discussed.

With foreign government owned sovereign wealth funds making investments around the world (including in U.S. companies) and with alleged “state-owned or state-controlled” entities listing public shares on various exchanges and otherwise doing business around the world, there has never been a more opportune (and critical) time for the government to make clear its reasoning and support for its prosecuting theory on this issue.

This is not merely a side issue.

Most FCPA enforcement actions in recent years (i.e. the time period during which FCPA enforcement has escalated) involve not core government officials, but rather “foreign officials” only under this untested and unchallenged theory. Case in point, the FCPA enforcement action announced late this afternoon (see here) involving employees of Haiti’s alleged state-owned national telecommunications company – a matter I will post on shortly.

Did An FCPA Enforcement Action Contribute to a Foreign Coup?

By on December 4, 2009 in Honduras, Hungary, Latin Node, Macedonia, Magyar Telekom, Montenegro

Law firms crank out FCPA news releases, client alerts, etc. all the time to inform clients and potential clients about FCPA risks or the who, what, and where of a recent enforcement action ending with a few compliance lessons.

These pieces are informative, but rarely do they raise provocative questions.

That is, until Gregory Paw’s (Pepper Hamilton LLP) recent piece (see here) in which he asks whether the Latin Node FCPA enforcement action in the U.S. contributed to the June 2009 coup of Honduran president Manuel Zelaya.

By way of background, in April 2009, DOJ announced (see here) that Latin Node, Inc. (a privately-held telecommunication services company headquartered in Miami) pled guilty to violating the FCPA’s anti-bribery provisions in connection with improper payments made to officials in Honduras and Yemen in order to obtain and retain business. The criminal information (see here) details Latin Node’s efforts to obtain and retain business with Hondutel (the Honduran government-owned telecommunications company) and charges that despite recognized “financial weaknesses” in Latin Node’s proposal, Hondutel ultimately selected Latin Node for the agreement because of various improper payments Latin Node made or authorized to various Honduran “foreign officials.”

*****

Hungry for more?

Yesterday, Magyar Telekom, the leading Hungarian telecommunications service provider with shares traded on a U.S. exchange, issued what is perhaps the longest, most detailed press release ever about a potential FCPA issue (see here).

The potential issue was first voluntarily disclosed in February 2006 (see here – p. 14) and yesterday the company announced that it’s Audit Committee issued the final report of FCPA’s counsel investigation.

I will leave it for you to think about potential application of the issues/questions I raised earlier this week in this post.

A Trip Around the World

By on December 3, 2009 in Australia, DePuy, Extradition, Greece, Kozeny, Robert John Dougall, Securency International, Serious Fraud Office, Siemens

Grab your bags and your passport, it’s time for a quick trip around the world.

First stop, Germany.

Siemens

In December 2008, Siemens (a global corporation organized under the laws of Germany with shares listed on the New York Stock Exchange since March 2001) agreed to pay $800 million in combined fines and penalties to settle FCPA charges for a pattern of bribery the Department of Justice (“DOJ”) termed “unprecedented in scale and geographic scope.” The combined fines and penalties were easily the largest ever levied against an FCPA violator.

This week, Siemens announced (see here) that it “has come to an agreement about settlements with six further former Board members against whom damages were claimed in connection with past cases of corruption in the company.” See (here) for press coverage.

Next stop, the U.K.

SFO Charges Former DePuy Executive

The U.K.’s Serious Fraud Office (“SFO”) (an enforcement agency similar to the U.S. DOJ), recently announced (see here) that Robert John Dougall, the former Vice President of Market Development of DePuy International Limited was charged with conspiracy for “making corrupt payments and/or giving other inducements to medical professionals working in the Greek public healthcare system.” The SFO has previously indicated (see here) that it seeks to generally model DOJ’s enforcement strategies, and that model now seems to include a broad interpretation of the potential universe of recipients of improper payments (i.e. not just core government officials, but also employees of public healthcare systems). There is greater cooperation between law enforcement agencies around the world in investigating cases of alleged improper payments, a fact highlighted by the SFO release which notes that the case “was referred to the [SFO] by the [DOJ] and accepted in March 2008.” Depuy (see here) is “part of the Johnson & Johnson family of companies.” In February 2007, Johnson & Johnson disclosed a potential FCPA issue and the company’s most recent announcement on the issue is in its November 2009 10-K filing (see here).

Next stop, Australia.

Money to Print Money

The Age of Melbourne has reported (see here) that Securency International (see here) and certain of its executives are being investigated by the Australian Federal Police for alleged breaches of Australia’s criminal code which prohibit payments to foreign government officials to obtain a business advantage. According to the article, Securency (according to its website – a world leader in secure polymer substrate technology and the supplier of a range of unique substrates which are used for the printing of banknotes and other security documents), is also under scrutiny in the U.K., Vietnam, and Nigeria. The article notes that the Securency matter could be Australia’s first prosecution for foreign bribery.

Final stop, the beaches of the Bahamas.

Kozeny Extradition Hearing

While Frederic Bourke (see here) prepares his appeal, Viktor Kozeny, the alleged master-mind of the bribery scheme, continues to enjoy life in the Bahamas as U.S. government attempts at extradition have thus far failed. This week, the U.S. government’s appeal hearing was heard in the Bahamas. See here for press coverage.

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