Wynn – Okada And Offensive Use Of The FCPA
Rarely does one hear of offensive use of the FCPA to accomplish a business objective. Usually it is the other way around – the FCPA thwarts a business objective such as acquiring a foreign target, not hiring the foreign agent who says he knows a way to get that lucrative contract, etc.
But then again, rarely does one hear of a corporate board member accusing the company of conduct that could implicate the FCPA, which then causes the SEC to open an inquiry, which then results in the company accusing the board member of separate and distinct conduct that could implicate the FCPA.
This post discusses Wynn’s internal investigation report that accuses Kazuo Okada (a member of its board) of prima facie FCPA violations. For previous posts on the Wynn-Okada dispute, see here and here. The Wynn internal investigation report (here) discusses a number of issues (such as breach of fiduciary duty, issues under Nevada gaming laws and issues under Philippine law), but this post will focus on the FCPA issues in the report authored Louis Freeh (former Director of the FBI) of Freeh, Sporkin & Sullivan LLP.
In summary, the Freeh Report states as follows. “Mr. Okada, his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two (2) chief gaming regulators at the Philippines Amusement and Gaming Corporation (“PAGCOR”), who directly oversee and regulate Mr. Okada’s Provisional Licensing Agreement to operate in that country. Since 2008, Mr. Okada and his associates have made multiple payments to and on behalf of these chief regulators, former PAGCOR Chairman Efraim Genuino and Chairman Cristino Naguiat (his current chief regulator), their families and PAGCOR associates, in an amount exceeding $110,000.” The report categorizes this conduct as “prima facie violations” of the FCPA.
Because jurisdiction will clearly be an issue in any potential FCPA enforcement action against Okada (a Japanese national currently serving as Director and Chairman of the Board of Universal Entertainment Corporation, a Japanese company), the Freeh Report sensibly begins with a jurisdictional analysis.
According to the report, Aruze USA Inc. (“Aruze USA”) is a wholly-owned subsidiary of Universal incorporated in Nevada and Okada is a Director of Aruze USA and serves as its President, Secretary, and Treasurer. In addition, the report states that Okada also currently serves as a Director, Secretary, and Treasurer of Aruze Gaming America, Inc. (“Aruze Gaming”), a U.S. company.
Thus, based on the information in the Freeh report, depending upon which “hat” Okada wears at any given time, he is, in the language of the FCPA, a “domestic concern” or “any person other than an issuer or a domestic concern.” The Freeh Report covers both bases and correctly notes that FCPA violations can be committed by a “domestic concern” regardless of any U.S. nexus (this was part of the FCPA’s 1998 amendments), but that FCPA violations can be committed by “any person” only if the “while in the territory of the U.S.” jurisdictional test is met. If Okada is merely “any person” under the FCPA, the Freeh Report states that “means or instrumentalties of interstate commerce” were used by Okada. Specifically, the Freeh Report states that many of Okada payments at issue passed through the accounts (either the Universal City Ledger Account or the Aruze City Ledger Account) “maintained at the corporate offices of Wynn Resorts, Limited in Las Vegas, Nevada where periodic deposits are made from Universal into the Wynn Resorts, Limited operating account at Bank of America in Las Vegas, Nevada.”
Back to the Freeh Report’s discussion of Philippine PAGCOR Officials at Wynn Resort properties. The report highlights 36 “separate instances, from May 2008 through June 2011 when Mr. Okada, his associates and companies made payments exceeding $110,000 which directly benefited senior PAGCOR officials, including two chairman and their family members.” For starters, 35 of the 36 instances involve charges to the Aruze City Ledger account in amounts ranging from $253 to $5,380 for stays (generally multi-night stays) at the Wynn Macau or Wynn Las Vegas. As separately discussed below, the one instance that sticks out is the September 2010 stay of various PAGCOR officials at the Wynn Macau for which approximately $50,000 was charged to the Aruze City Ledger.
The Freeh Report terms all of these instances “prima facie” FCPA violations, a term presumably chosen carefully because as every first-year law student knows “prima facie” means on first appearance, on the face of it, a fact presumed to be true unless disproved by some evidence to the contrary.
It is here that the Freeh Report is shockingly deficient as it does not contain any discussion of the FCPA’s affirmative defense for payments, gifts, etc. that are a “reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official … directly related to (a) the promotion, demonstration, or explanation of products or services; or (b) the execution or performance of a contract with a foreign government or agency thereof.” The Freeh Report notes, yet disagrees with, Okada’s assertion that “all his efforts in the Philippines prior to the change of presidential administration in the summer of 2010 were undertaken on behalf of and for the benefit of Steve Wynn and Wynn Resorts.” Summer 2010 is obviously a vague term, but Okada’s assertion could be relevant to 23 of the 36 instances detailed in the Freeh Report.
The one instance identified in the Freeh Report that sticks out is approximately $50,000 charged to the Aruze City Ledger in September 2010 for a five day stay at the Wynn Macau by “then and current PAGCOR Chairman and CEO Cristino L. Naguiat, Jr., his wife, three children, nanny and other PAGCOR officials.” The Freeh Report devotes five pages to this visit and states, among other things, that Chairman Naguiat occupied Villa 81 (the most expensive accommodation at Wynn Macau – a room that costs approximately $6,000 per day and is mostly reserved for “high-rollers”). Even if Chairman Naguiat and his delegation visited the resort, in whole or in part, for a business purpose it is unlikely that such expenses would be viewed as “reasonable and bona fide” and directly related to a business purpose – even if the Freeh Report does note that some of the charges may have been reimbursed by Chairman Naguiat’s delegation.
In addition, the Freeh Report says that “Mr. Okada, his associates and companies” made “similar payments to a Korean government official who oversees Mr. Okada’s initial gaming investment in that country.” The report notes that Okada was pursuing development of a resort complex in the Incheon Free Economic Zone and the report notes six instances in which “possible Korean government officials” stayed at Wynn properties. Total charges to the Aruze City Account were $5,945 and ranged from $507 to $1,597. The Freeh Report states that “these payments made for or on behalf of possible Korean government officials may be part of a continuing pattern by Mr. Okada and his associates to commit prima facie violations of the FCPA.”
Finally, the Freeh Report also states that “Universal paid expenses related to then-PAGCOR Chairman Genuino’s trip to Beijing during the 2008 Olympics.
Have there been FCPA enforcement actions focused on excessive and travel entertainment expenses paid to “foreign officials”? The answer is yes. In 2007, Lucent Technologies resolved related DOJ and SEC enforcement actions (see here and here) focused on hundreds of trips for Chinese “foreign officials” that included primarily sightseeing, entertainment and leisure. According to the allegations in that enforcement action, Chinese “foreign officials” were treated to trips to Boston, Las Vegas, the Grand Canyon and Hawaii “for strictly entertainment, travel and leisure purposes.” In 2009 UTStarcom resolved related DOJ and SEC enforcement actions (see here for the prior post) focused on hundreds of trips for Chinese “foreign officials” that likewise were to places such as Hawaii, Las Vegas, and New York.
However, in pointing numerous FCPA fingers at Okada, even the Freeh Report points a few fingers back at Wynn. For instance, as to the accounts Okada allegedly used to make the improper payments the report states as follows.
“As a Director of Wynn Resorts, Mr. Okada is entitled to receive the courtesy of what is called a “City Ledger Account.” Such accounts were originally instituted as a result of Sarbanes Oxley’s prohibition of extensions of credit, in the form of a personal loan from an issuer to an officer or director. The accounts were funded by deposits from the director or his company. Such an account exists for billing conveniences related to charges incurred at various Wynn Resorts locales. Mr. Okada has availed himself of this courtesy and established such a City Ledger Account. Within Wynn Resorts, this Okada City Ledger Account is referred to either as the “Universal City Ledger Account” or as the “Aruze City Ledger Account.””
Elsewhere, the Freeh Report states that funds in connection with the problematic September 2010 visit were “advanced from the Wynn Macau” to a representative of Aruze USA.
In other words, while accusing Okada of committing “prima facie” FCPA violations through his use of the accounts, including the September 2010 visit, the Freeh Report acknowledges that the accounts were provided to him by Wynn as a courtesy for billing conveniences related to charges incurred at various Wynn Resort locales and that portions of the money used in connection with the problematic September 2010 visit were advanced from the Wynn Macau.
The Freeh Report puts the DOJ (and perhaps even the SEC given Okada’s membership on the Wynn Board) in a difficult position. How can the agencies not investigate the conduct at issue when the former Director of the FBI is terming the conduct “prima facie” FCPA violations. An analogy would be like calling the fire department to inform that your house is on the fire, but the fire department fails to show up. Based on media reports, it appears that the agencies are indeed in active investigation mode. According to a Feb. 24th article in the Financial Times (“US Probes Wynn Resorts’ Allegations), “the US Securities and Exchange Commission’s investigation is looking into allegations that Mr Okada made at least $110,000 in unauthorised payments to two gaming officials in the Philippines” and last week “Wynn’s attorney, Debra Yang, a partner with Gibson Dunn & Crutcher and former US attorney for the Los Angeles area, flew to Washington and met with criminal prosecutors at the Department of Justice.”
Does the Freeh Report and the FCPA allegations against Okada evidence offensive use of the FCPA to accomplish a business objective? The FCPA allegations against Okada – a Wynn business rival – contributed to a finding that Okada was “unsuitable” under Nevada gaming regulations, which then facilitated Wynn’s purchase of Okada’s Wynn shares at a substantial discount.
Another way of asking the same question is as follows – if the Freeh report found the same exact conduct (i.e. 36 instances – 35 of which were very minor in scope, totaling $110,000 involving a person other than Okada) would Wynn have gone public with such “prima facie” FCPA violations through a voluntary disclosure? I highly doubt it.
By publicly stating that Okada’s conduct (36 instances of lodging expenses and entertainment for “foreign officials” – 35 of which were very minor in scope) evidences “prima facie” FCPA violations, is Wynn opening itself up to greater scrutiny as to its own relationships with the “foreign officials” which regulate its businesses abroad? Is Wynn supremely confident that someone associated with the company did not charge $253 to a corporate account for a “foreign official” to stay a night at one of its hotels? Did Wynn leave a chocolate for the “foreign official” on his pillow or pay for a fancy dinner?
In a strange twist to the story, yesterday the Wall Street Journal reported that Wynn competitor Las Vegas Sands CEO Sheldon Adelson stated that “complimentary hotel rooms is a common practice in the gambling industry.” Las Vegas Sands is already under FCPA scrutiny (see here for the prior post) and if that investigation was not already focused on travel and entertainment issues, you can bet it is headed in that direction.
I agree with Professor Peter Henning who writes the White Collar Crime Watch at the New York Times that Wynn’s accusations against Okada “open up a can of worms” (see here) and that Wynn’s accusations “means the Justice Department and the Securities and Exchange Commission will be scouring the company’s books for possible violations, a front that neither side can control” and that “by invoking the specter of overseas bribery, Wynn has effectively opened itself up to a wide-ranging federal investigation of its dealings in Macao and elsewhere.”
The question Wynn will have to ask itself as this presumably goes forward is whether it was worth using the unhinged FCPA enforcement theories defining this new era to oust a business rival?
As to the big, big picture, if the DOJ or SEC do bring an enforcement action against Okada (or Wynn) for the conduct described in the Freeh Report, are we prepared to confront the glaring double standard increasingly coming into focus during this new era of FCPA enforcement? For more on the double standard and corporate benefits given to U.S. officials, see here, here, here, and here.
Latest FCPA Opinion Procedure Release Reflects High Level Of Anxiety
During last month’s House hearing on the FCPA (see here for the prior post) Representative James Sensenbrenner told Greg Andres (DOJ) that if Andres were the general counsel of a company advising the CEO and everyone else, he would likely be advising the company in the “most narrow way” and “exercising the greatest amount of caution.”
Indeed, the current era of FCPA enforcement has led to a high level of anxiety and skittishness over things that should not, with the end result being overcompliance and inefficient use of resources.
Case in point, the latest FCPA Opinion Procedure Release.
Despite a statutory affirmative defense concerning reasonable and bona fide expenses concerning promotion, demonstration or explanation of products or services, and despite several past “on-point” Opinion Procedure Releases that a first-year associate would be capable of analyzing, the Requestor in Release 11-01 was still apparently skittish enough to go through the time (and no doubt expense) of obtaining a DOJ seal of approval as to conduct that would not raise an eyebrow if directed to a non-foreign official
On June 30th, the DOJ released (here) its first FCPA Opinion Procedure Release of the year – a release dealing with reasonable and bona fide travel expenses in connection with the promotion, demonstration or explanation of products or services – an affirmative defense under the FCPA’s anti-bribery provisions.
The Requestor was a “U.S. adoption service provider” that “proposes to pay certain expenses for a trip to the United States by one official from each of two foreign government agencies to learn more about the services provided by the Requestor.”
According to the Release, “the two officials will be selected by their agencies, without the involvement of the Requestor” and the Requestor “has no non-routine business pending before the foreign government agencies that employ these officials.”
The Requestor “intends to pay for economy class air fare, domestic lodging, local transport, and meals” and it represented, among other things, that:
it “will host only the designated officials, and not their spouses or family members;”
it “intends to pay all cost directly to the providers [and] no cash will be provided directly to the officials;
any souvenirs to the officials “would reflect Requestor’s business and/or logo and would be of nominal value;” and
it will not “fund, organize, or host any other entertainment, side trips, or leisure activities for the officials, or provide the officials with any stipend or spending money.”
Based on the Requestor’s representations and the above facts and circumstances, the DOJ stated that “the expenses contemplated are reasonable under the circumstances and directly relate to ‘the promotion, demonstration, or explanation of [the Requestor’s] products or services” and therefore the DOJ “does not presently intend to take any enforcement action with respect to the planned program and proposed payments described in the request.”
For additional commentary on the Release 11-01, see here from Thomas Fox (“the question posed to the Department of Justice (DOJ) is so straight-forward, and has been previously asked and answered, that it is difficult to understand how any first year compliance practitioner did not know the answer to it”); here from Howard Sklar (“this is, simply put, not a situation that should have gone to the DOJ”); and here from the FCPA Blog (“in its first FCPA Opinion Procedure Release of 2011, the DOJ confirmed what should be obvious — that the promotional expenses affirmative defense can be used to pay travel expenses of government officials who are being shown a company’s products”).
The Shrinking U.K. Bribery Act
Recent developments reported by the U.K. Telegraph suggest that when Bribery Act guidance is finalized and released, the Bribery Act will look very much like the FCPA. In fact, because of the Bribery Act’s adequate procedures defense and other hinted at limitations, the Bribery Act may turn out to be more lenient than the FCPA.
The Telegraph reported (here) that eventual guidance to be released by the U.K. government “will make allowances for the use of so-called ‘facilitating payments'” and that the guidance “will clarify how the law will view corporate hospitality and will give companies some protection against illegal acts committed by joint venture partners.”
According to the Telegraph, “the new guidance will acknowledge [facilitating payments] payments are a global problem that cannot be eradicated overnight.” According to the Telegraph, the eventual guidance “will say that while facilitating payments remain illegal, payments not considered ‘serious’ may not attract prosecution.”
This eventual guidance seems to be similar to the conclusion Congress arrived at in 1977 when enacting the FCPA. For instance, House Report No. 95-640 (September 28, 1977) 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. As a result, the committee has not attempted to reach such payments.”
Even though the Bribery Act will still apparently prohibit facilitating payments – in contrast to the FCPA’s express facilitating payment exception – numerous prior posts (see here, here and here for example as well as all the CustomsGate enforcement actions) raise the issue of whether the enforcement agencies recognize such an exception and whether the FCPA’s facilitating payment exception has any real meaning.
The expected U.K. guidance on corporate hospitality would seem to be akin to the FCPA’s current affirmative defense for “reasonable and bona fide expenditures, such as travel and lodging expenses, incurred by or on behalf of a foreign official” ” directly related to (A) the promotion, demonstration, or explanation of products or services; or (B) the execution or performance of a contract with a foreign government or agency theorof.”
Without the benefit of an actual analysis of the expected guidance on joint ventures, it is a bit difficult to draw conclusions from the Telegraph article. But if, as reported, the eventual guidance “will give companies some protection against illegal acts committed by joint venture partners” this protection will make the Bribery Act even more lenient than the FCPA (or at least FCPA enforcement theories).
Several FCPA enforcement actions in recent years, including some of the most high profile (see e.g., Bonny Island, Nigeria enforcement actions), have been based on conduct of joint venture partners.
Of note, the reported U.K. guidance regarding joint ventures would seem to conflict with the justification underlining the recent SFO charges against MK Kellog Ltd. under the Proceeds of Crime Act. (See here).
The oft-cited statement that the Bribery Act is the “FCPA on steroids” was curious to begin with; the statement now appears to be completely off-base given expected guidance on the Bribery Act.
My Two Cents On The FCPA’s Affirmative Defenses
Students looking for scholarship ideas, should consider the Foreign Corrupt Practices Act.
Why?
There is a good chance that publication of an article will generate coverage and discussion on the blogosphere and elsewhere.
Case in point is Kyle Sheahen’s “I’m Not Going to Disneyland: Illusory Affirmative Defenses Under the Foreign Corrupt Practices Act.” (see here).
For prior coverage of Sheahen’s article see here, here and here.
Sheahen’s article is about the FCPA’s two affirmative defenses – the so-called local law and promotional expense defenses.
Big picture, Sheahen terms these defenses as being “hollow,” “illusory,” and “useless in practice.”
For starters, I respectfully disagree with Sheahen’s statement that “business and businessmen accused of giving bribes to foreign officials have fared poorly in federal courts” as well as the implication that this somehow supports his thesis.
The three FCPA trials cited from 2009 – Frederick Bourke, William Jefferson, and Gerald and Patricia Greene were a mixed bag for the DOJ, not slam-dunk successes.
For starters, the jury found Jefferson not guilty of substantive FCPA anti-bribery violations (see here).
Sure, Bourke was found guilty by a jury of conspiracy to violate the FCPA and the Travel Act (as well as making false statements to the FBI) (see here), yet when the DOJ alleges that one is a key participant of a “massive bribery scheme” yet secures only a 366 day sentence (see here) from a judge who remarks that “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both” – I struggle to put such a case in the decisive “win” category for the DOJ. Plus, Bourke’s case is currently on appeal (see here).
The Green case (see here) would seem to represent the cleanest win for the DOJ even though the sentencing judge expressed concerns whether the Green’s conduct caused any harm in sentencing the couple to six months in prison thereby rejecting the DOJ’s recommended ten year sentence. (See here).
Sheahen’s article was published before the Giffen Gaffe (see here). Giffen aggressively mounted a legal defense and, whether for legal, political or other reasons, the case that began with charges that Giffen made “more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan” ended with a one-paragraph superseding information charging a misdemeanor tax violation. Further, back in 2004, Giffen was successful in having FCPA-related criminal charges dismissed when the trial court judge (see here) concluded that the DOJ offered “the slenderest of reeds” to support the collateral criminal charge.
Going back in time …
George McLean won his FCPA case when the Fifth Circuit concluded, see 738 F.2d 655 (5th Cir. 1984) that the FCPA, as it then existed because of the subsequently repealed Eckhardt Amendment, barred prosecution.
Donald Castle and Darrell Lowry (two Canadian “foreign officials”) won their FCPA-related cases, see 741 F.Supp. 116 (N.D. Tex. 1990), when the court dismissed their criminal indictments. The DOJ asserted that even though the officials could not be prosecuted under the FCPA, they could be prosecuted under the general conspiracy statute (18 USC 371) for conspiring to violate the FCPA. However, the court declined DOJ’s invitation to extend the reach of the FCPA through the application of the conspiracy statute to Castle and Lowry.
Richard Liebo was acquitted, following a three week jury trial, of several counts including nine counts of violating the FCPA’s anti-bribery provisions and one count of violating the FCPA’s accounting and record keeping provisions. See 923 F.2d 1308 (8th Cir. 1991). He was found guilty of one FCPA count concerning his company’s purchase of honeymoon airline tickets for the cousin and close friend of Captain Ali Tiemogo, the chief of maintenance for the Niger Air Force. In connection with this conviction, the Eighth Circuit found that the district court “clearly abused its discretion in denying Liebo’s motion for a new trial” and remanded for a new trial.
Hans Bodmer didn’t fare too badly either in 2004 when Judge Shira Scheindlin (the same judge in the Bourke case) held that the portion of the criminal indictment “charging Bodmer with conspiracy to violate the FCPA contravenes the constitutional fair notice requirement, and the rule of lenity demands its dismissal.”
Of course, the DOJ has had its fair share of FCPA successes, but it remains a misperception that FCPA defendants have “fare[d] so badly” in FCPA trials as Sheahen, and others, have asserted.
Returning to the substance of Sheahen’s article, he discusses the October 2008 Bourke decision by Judge Scheindlin (see 582 F.Supp.2d 535) – a case of first impression on the FCPA’s local law defense.
Bourke argued that the FCPA’s local law affirmative defense was applicable because, under Azeri law even though the payments were illegal, he was relieved from criminal responsibility when he reported the payments at issue to the President of Azerbaijan.
Judge Scheindlin disagreed, drawing a hard line between payments – the focus of the FCPA’s local law affirmative defense in her mind – and the related issue of whether a person could not be prosecuted in the foreign country because a provision may relieve that person from criminal responsibility.
Judge Scheindlin concluded that “an individual may be prosecuted under the FCPA for a payment that violates foreign law even if the individual is relieved of criminal responsibility for his actions by a provision of the foreign law.”
I agree with Sheahen’s statement that Judge Scheindlin’s decision of first impression narrowed the FCPA’s local law defense “to the point of extinction.”
I would go a step further and argue that Judge Scheindlin’s decision would seem to violate the basic axiom that a statute should be construed so that effect is given to all of its provisions, so that no part will be inoperative or superfluous, void or insignificant.
In other words, courts should not suppose that Congress intended to enact unnecessary statutes and there is a presumption against interpreting a statute in a way that renders it ineffective.
The local law affirmative defense was added to the FCPA in 1988 and we must presume that Congress intended to enact the affirmative defense for some reason.
It was widely assumed by Congress in 1977 (when the FCPA was enacted), and by the Congress that amended the FCPA in 1988 to include the local law defense as well, that no nation’s written law permitted bribery of its officials.
Yet, given Judge Scheindlin’s narrow construction of the local law defense, the decision would appear to render the local-law defense (a statutory term that must have some meaning) inoperative, superfluous and insignificant.
As to the promotional expense defense, I would respectfully disagree with Sheahen’s apparent conclusion that the defense is meaningless just because it has never been successfully invoked by an FCPA defendant at trial.
Because of the “carrots” and “sticks” the DOJ and SEC possess in an FCPA enforcement action, and because of the resolution vehicles typically offered to FCPA defendants to resolve an FCPA enforcement action (such as non and deferred prosecution agreements) there is much about the FCPA that has never been subjected to judicial scrutiny.
That does not mean however that an element or defense not successfully invoked at trial renders that element or defense meaningless or hallow.
Indeed, Sheahen discusses the FCPA Opinion Procedure Release process. Through this mechanism, those subject to the FCPA have gained degrees of comfort from DOJ “no enforcement” opinions that are based on the promotional expense defense.
Although the Opinion Procedure Releases are not precedent, countless others in the legal, business, and compliance communities find comfort in these releases, as well as the statute itself, when analyzing real-world conduct for potential FCPA exposure.
FCPA enforcement is in need of many fixes and indeed the Opinion Procedure Release process is likely not the best way for the DOJ to make its enforcement positions known.
However, these structural flaws in FCPA enforcement, coupled with the typical ways in which FCPA enforcement actions are resolved, necessarily leads to the conclusion that the FCPA’s affirmative defenses are “hollow,” “illusory,” and “useless in practice.”
*****
I provided Sheahen with my draft post so that he could respond and here is what he said.
“Professor Koehler,
Thank you for your thorough analysis. Although DOJ’s trial record in FCPA prosecutions is not a clean sheet, the government has still been substantively successful in almost every FCPA case that has gone to trial. Further, the fact remains that no FCPA defendant has successfully invoked either the local law or the promotional expenses defense in an FCPA enforcement action.
Also, while I agree that the promotional expenses defense provides some guidelines for compliance with the FCPA, neither it nor the local law defense provide a meaningful defense to an enforcement action. Accordingly, Congress must take action to ensure that individual and corporate defendants have the actual ability to raise the affirmative defenses contemplated by the statutory scheme.
Thanks again and all the best,
Kyle Sheahen
sheahen2010@lawnet.ucla.edu