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The Compendium

By on November 20, 2009 in Research Tools

Earlier this week, Trace International Inc. (a leading non-profit membership association focused on anti-bribery compliance) released its Compendium – a fully searchable (and free) online data-base of all FCPA enforcement actions – as well as anti-bribery enforcement actions and investigations in other signatory countries to the OECD anti-bribery convention. (see here).

As noted in the past, there is little substantive FCPA case law.

Thus FCPA enforcement actions serve (unfortunately) as de facto case law and FCPA practitioners are often left to read the “tea leaves” from the enforcement actions (at the urging the enforcement agencies) as to legal theories, etc.

As they say, “it is what it is.”

In any event, after spending some time “in” the Compendium, I have that “kid in the candy store” type of feeling.

Interested in 2008 enforcement actions, brought by the DOJ, involving Chinese officials, that resulted in a deferred prosecution agreement? The answer requires only a few clicks.

Interested in 2007 enforcement actions, brought by the SEC, charging books and records violations, resulting in disgorgement? The answer requires only a few clicks.

Interested in all enforcement actions concerning business conduct in Burkina Faso … well, there is no such an action, but you can bet that if there is, it will be in the Compendium.

The Compendium is a treasure trove of information and will be of great use to FCPA practitioners and scholars (both academics and law students) and any one else interested in FCPA developments.

I have read just about every piece of FCPA scholarship published and one thing continually amazes me. That is the frequency in which an author states a position without ever discussing or even footnoting an enforcement action that is seemingly in direct conflict with the position stated. Granted there is little FCPA case law, but those writing in the FCPA area should be aware of how, and under what circumstances, the statute is actually enforced even if such enforcement do not result in case law. The end result is that many FCPA articles have the “authority of scholarship,” yet contain some rather basic errors as to how the FCPA is enforced, against whom it is enforced, and under what factual circumstances it is enforced.

The enforcement actions have never been hard to find (they are on the DOJ and SEC website, there is the Shearman & Sterling FCPA Digest (see here) and Foley & Lardner’s FCPA website (see here) among other sources).

And now there is the grand-daddy of them all – the fully searchable Compendium.

Happy searching.

Statoil Charges Dismissed

By on November 19, 2009 in Deferred Prosecution Agreements, Foreign Issuers, Statoil

In October 2006, Statoil ASA (a Norwegian company with shares traded on a U.S. exchange – and thus an “issuer” under the FCPA) settled an FCPA enforcement action by agreeing to pay $21 million in combined DOJ and SEC fines and penalties for improper payments that assisted the company in securing contracts for the South Pars field in Iran.

The DOJ action was settled through a three-year deferred prosecution agreement (see here).

Under a deferred prosecution agreement, criminal charges against the company are filed with a court, but prosecution of the charges is deferred if the company adheres to the requirements of the agreement (such as acknowledging and accepting responsibility for the alleged conduct, cooperating with the DOJ’s continued investigation, engaging a compliance monitor, and implementing more stringent FCPA policies and procedures, etc.) throughout the term of the agreement.

At the end of the term, usually 2-3 years, and if the company has complied with its obligations, DOJ agrees that it will seek dismissal of the charges.

Deferred prosecution agreements and non-prosecution agreements have become the most common method of resolving corporate FCPA enforcement actions.

The Statoil prosecution was precedent setting at the time as it was the first time the DOJ brought criminal FCPA charges against a non-U.S. company.

The DOJ announced today (see here) that Statoil satisfied its obligations under the deferred prosecution agreement and that a court has formally dismissed the charges.

In this respect, Statoil may again be precedent setting as I am not aware of any other instance in which the DOJ has issued a press release announcing the end of a deferred prosecution agreement (even though it would seem that several others have ended).

If my recollection is correct and if this perhaps is a change in DOJ policy, “hear-hear” as it increases transparency.

Other posts which have mentioned Statoil can be found here and here.

If HR 2152 Were to Be Enacted … Part II

By on November 19, 2009 in Congressional Activity, HR 2152, Private Right of Action

In September, I posted (see here) about H.R. 2152 – the Foreign Business Bribery Prohibition Act of 2009.

Big picture, under the proposed law, any “foreign concern” (defined to mean any person other than an issuer, domestic concern or U.S. person) that violates the FCPA’s anti-bribery provisions would be liable to any issuer, domestic concern or U.S. person for damages caused by the FCPA violation.

Under the proposed law, a plaintiff would need to prove that: (i) the “foreign concern” violated the FCPA’s anti-bribery provisions; and (ii) the violation prevented the plaintiff from obtaining or retaining business and assisted the foreign concern in obtaining or retaining business.

In other words, if a U.S. company can prove that it lost business because a “foreign concern” gained that same business by violating the FCPA, the U.S. company could bring a lawsuit seeking damages.

Under the proposed law, the damages would be the higher of the total amount of the contract or agreement that the “foreign concern” gained in obtaining or retaining the business or the total amount of the contract or agreement that the plaintiff failed to gain. To sweeten the pot, the proposed law requires treble damages along with attorneys fees and costs.

What got me thinking about H.R. 2152 back in September was a NY Times Article titled “China Spreads Aid in Africa, With a Catch for Recipients” (see here).

What has me thinking about H.R. 2152 again is a recent article in the Washington Post titled “Afghan Minister Accused of Taking Bribe” (see here).

The article alleges that the current Afghan Minister of Mines accepted an approximate $30 million bribe around December 2007 from China Metallurgical Group Corp. in exchange for awarding a $2.9 billion contract to extract copper from one of the largest unexploited deposits in the world.

The article mentions that U.S. officials worked on the bidding process for this project and that, because of the alleged bribe payment, the Minister did not give a “fair hearing to the proposals of Western firms.”

It would thus seem that a U.S. company was competing for this project and, in fact, other media reports have suggested that Phelps Dodge bid on the project.

If so, and if H.R. 2152 were to enacted, Phelps Dodge (or any other U.S. company that bid) would have a cause of action against China Metallurgical Group Corp.

Given the damages provision of H.R. 2152, a recovery could be north of $8.7 billion … plus attorney fees and costs. Ye gods that’s a lot of money!

If H.R. 2152 ever “gets out of committee,” supporters of the bill can now point to two recent examples demonstrating a need for the bill.

What I find most interesting about H.R. 2152 is that if enacted, I think it will be a “game-changer” in terms of FCPA enforcement.

Private plaintiffs will have to prove every element of an FCPA anti-bribery violation.

A private plaintiff will not carry the “big stick” that the enforcement agencies’ carry (which means in the corporate context, that nearly all FCPA enforcement actions are settled by way of a non-prosecution or deferred prosecution agreement or a consent decree) and FCPA case law will surely follow.

Which means that a court will actually be called upon to construe FCPA elements and legal theories of liability.

Another FCPA Speech

By on November 18, 2009 in Asset Recovery, Declination Decisions, DOJ, Enforcement Agency Policy, Enforcement Agency Speeches, FCPA Inc., Individual Enforcement Action, Monitor, Voluntary Disclosure

Last week it was the Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum (see here), this week the audience for Assistant Attorney General Lanny Breuer was ACI’s National Forum on the FCPA

The ACI conference (see here) is a signature event for the FCPA bar and FCPA compliance community. Breuer participated in past ACI events as a private FCPA practitioner at Covington & Burling and yesterday he gave the keynote luncheon address.

The link to the speech on the DOJ website is inactive, but the speech is embedded in this piece from the WSJ Law Blog (see here).

The speech covers a wide range of topics and will be of interest to all FCPA practitioners and others interested in following FCPA developments.

Here are a few highlights:

On individual prosecutions – “…we tried more individuals for FCPA violations than in any prior year. And we indicted more individuals than ever before. That is no accident. In fact, prosecution of individuals is a cornerstone of our enforcement strategy. […] Put simply, the prospect of significant prison sentences for individuals should make clear to every corporate executive, every board member, and every sales agent that we will seek to hold you personally accountable for FCPA violations.”

On how the DOJ learns of FCPA issues – “Although many of these cases come to us through voluntary disclosures, which we certainly encourage and will appropriately reward, I want to be clear: the majority of our cases do not come from voluntary disclosures. They are the result of pro-active investigations, whistle blower tips, newspaper stories, referrals from our law enforcement counterparts in foreign countries, and our Embassy personnel abroad, among other sources.”

On resolving corporate FCPA matters – “…despite rumors to the contrary, we do also decline prosecution in appropriate cases. […] With regard to corporate cases, the Department will continue to pursue guilty pleas or, if necessary, indictments against corporations – when the criminal conduct is egregious, pervasive and systemic, or when the corporation fails to implement compliance reforms, changes to its corporate culture, and undertake other measures designed to prevent a recurrence of the criminal conduct. We also recognize that there will be situations in which guilty pleas or criminal charges are not appropriate. Now, we may have good-faith disagreements about when those circumstances present themselves, but we do not take our task lightly. We are mindful of direct impact on the company itself, as well as the numerous collateral consequences that often flow from these charging decisions. We are sophisticated attorneys, and we understand the challenges and complexities involved in doing business around the globe.”

On corporate monitors – “In appropriate cases, we will also continue to insist on a corporate monitor, mindful that monitors can be costly and disruptive to a business, and are not necessary in every case. That said, corporate monitors continue to play a crucial role and responsibility in ensuring the proper implementation of effective compliance measures and in deterring and detecting future violations.”

On whether to make a voluntary disclosure – this is a “sometimes difficult question” […] a question I grappled with as a defense lawyer. I strongly urge any corporation that discovers an FCPA violation to seriously consider making a voluntary disclosure and always to cooperate with the Department. The Sentencing Guidelines and the Principles of Federal Prosecution of Business Organizations obviously encourage such conduct, and the Department has repeatedly stated that a company will receive meaningful credit for that disclosure and that cooperation. […] I can assure you that the Department’s commitment to meaningfully reward voluntary disclosures and full and complete cooperation will continue to be honored in both letter and spirit. I am committed to no less.”

On the road ahead – “In addition to holding culpable individuals accountable and meaningfully rewarding voluntary disclosures and genuine cooperation, we will continue to focus our attention on areas and on industries where we can have the biggest impact in reducing foreign corruption.” Breuer then discusses the pharma industry in particular.

On asset forfeiture and recovery – “We will seek forfeiture in all appropriate cases going forward. […] We will be taking advantage of the expertise of both the Fraud Section and our Asset Forfeiture and Money Laundering Section to forfeit and recover the proceeds of foreign corruption offenses.” Breuer’s comments on this topic largely shadow the recent comments of Attorney General Holder (see here).

On enhanced resources – “As I imagine most of you have heard, in 2007 the FBI created a squad with agents dedicated to investigating potential FCPA violations. The squad has been growing in size and in expertise over the past two years. In addition, we have begun discussions with the Internal Revenue Service’s Criminal Investigation Division about partnering with us on FCPA cases around the country. Finally, we are now pursuing strategic partnerships with certain U.S. Attorney’s Offices throughout the United States where there are a concentration of FCPA investigations.”

On Mark Mendelsohn’s rumored departure as DOJ Deputy Chief – FCPA – “… as we look to the future, we will be building on the extraordinary efforts and success of our Deputy Chief over the FCPA area, my friend Mark Mendelsohn, who is beginning to explore options for the next phase of his career. Mark has been an exceptional public servant and a visionary steward of the FCPA Program. Regardless of where Mark chooses to go, we will miss him greatly.”

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Last week, I questioned Breuer’s characterization of the Jefferson verdict in his pharma address (see here). In that address he said as follows:

“In the past few months, we have the completed the trials of the Greens in California, of Mr. Bourke in New York and of former Congressman William Jefferson in Virginia. In each of these cases, individuals were found guilty of FCPA violations and face jail time.”

Yesterday, Breuer correctly noted, as to the Jefferson case, as follows: Jefferson “was convicted of a conspiracy of which one object was to violate the FCPA by bribing former high-ranking Nigerian government officials.”

Of Course It’s Because of the Oil

By on November 17, 2009 in Equitorial Guinea, Foreign Official, Proclamation 7750

“Bribe takers” get a free pass under the FCPA as the statute only applies to “bribe givers.”

However, in 2004, President Bush signed Proclamation 7750 “To Suspend Entry As Immigrants or Nonimmigrants of Persons Engaged In or Benefiting From Corruption” (see here). The Proclamation states:

“…that it is in the interests of the United States to take action to restrict the international travel and to suspend the entry into the United States, as immigrants or nonimmigrants, of certain persons who have committed, participated in, or are beneficiaries of corruption in the performance of public functions where that corruption has serious adverse effects on international activity of U.S. businesses, U.S. foreign assistance goals, the security of the United States against transnational crime and terrorism, or the stability of democratic institutions and nations.”

Section 2 of the Proclamation says that its prohibitions “shall not apply with respect to any person otherwise covered […] where entry of the person into the United States would not be contrary to the interests of the United States.”

So what happens when the Forest and Agriculture Minister of Equatorial Guinea and the son of Equatorial Guinea’s president shows up at the U.S. “doorstep” on his way to his $35 million Malibu estate?

To find out, here is the article from today’s NY Times.

Short answer, he is let in. Despite the fact that federal law enforcement officials believe that “most if not all” of his wealth came from corruption related to oil and gas reserves in his home country. Despite the fact that the DOJ believes that he “may be receiving bribes or extortion payments” from oil companies operating in the country.

Why is he allowed in the U.S. in seeming contradiction to Proclamation 7750?

Well, at least according to the former U.S. ambassador to Equatorial Guinea it is “of course because of oil.”

A former State Department official says that the State Department (which is responsible for enforcing the proclamation) “seem[s] to lack the backbone to use this prohibition.”

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Interesting side note – in contrast to the FCPA’s “foreign official” definition, Proclamation 7750 applies to “public officials or former public officials.”

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