Something Is Missing From This Story
Last week, the DOJ announced that it “filed a motion to dismiss a forfeiture action against approximately $115 million alleged to be proceeds of foreign official corruption and involved in money laundering in accordance with a 2007 settlement that directed the funds to be used for the benefit of poor youth and families in Kazakhstan.”
As noted in the DOJ release, the funds were in connection with the “prosecution of James H. Giffen and his company, Mercator” and were “allegedly the proceeds of illegal bribe payments to senior Kazakh officials in exchange for oil transactions and property involved in money laundering.” The funds were previously released to “the BOTA Foundation, a new Kazakh foundation required to be independent of the government of Kazakhstan, managed by a respected international non-governmental organization and established with the assistance of the World Bank.”
In the DOJ release, Assistant Attorney General Leslie Caldwell stated:
“Transparent, responsible repatriation of corruption proceeds can make a real difference for communities harmed by the abuse of public office. In just five years of operations, the BOTA Foundation helped more than 208,000 people in need in Kazakhstan, turning more than $115 million in alleged bribe money into assistance to parents, families with disabled children and youth seeking higher education. Through our Kleptocracy Asset Recovery Initiative, the Department of Justice is committed to fighting back against impunity and seeking creative ways to reduce the harms caused by corruption.”
In this season of giving, it is easy to get warm, fuzzy feelings about the DOJ’s announcement.
However, something is missing from the story – something significant – and this post inserts the missing piece of the puzzle.
It is true that in 2003 James Giffen was criminally charged with “making 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.”
However, Giffen’s defense was that his actions were made with the knowledge and support of the CIA, the National Security Council, the Department of State and the White House. The DOJ did not dispute that Giffen had frequent contacts with senior U.S. intelligence officials or that he used his ties within the Kazakh government to assist the United States. With the court’s approval, Giffen sought discovery from the government to support his public authority defense and much of the delay in the case was due to the government’s resistance to such discovery and who was entitled to see such discovery.
In 2010, the enforcement action took a sudden and mysterious turn when Giffen agreed to plead guilty to a one-paragraph superseding indictment charging a misdemeanor tax violation. The enforcement action ended with the presiding judge imposing no jail time on Giffen, praising him for advancing U.S. “strategic interests,” calling him a Cold War hero, and commenting that the enforcement action should have never been brought in the first place. Giffen himself stated: “Would I do it again? Absolutely. What we were doing was important.”
Giffen presumably prevailed over the DOJ not because of the facts or the law, but because he possessed significant leverage over the government in that he asserted his actions were taken with the knowledge and support of the highest levels of our government. A Foreign Policy columnist noted that Giffen’s legal team “understood correctly that he could set up a collision between the DOJ and the CIA in which the latter would probably prevail.” Likewise, a Harpers columnist noted that the Giffen enforcement action had “been the focus of political manipulation concern for years” and that the end of the case seemed to ratify that view and “the notion of an independent, politically insulated criminal-justice administration in America [took] another severe hit.”
International Efforts in Support of the Recovery of Stolen Assets
Professor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Michelle Kennedy and Cassandra Myers are attending the Sixth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in St. Petersburg, Russia. For more on the opening of the Conference, see here and here. Over the next few days, FCPA Professor will be publishing various posts regarding the proceedings.
This post is from Michelle Kennedy.
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A central challenge to addressing corruption is the recovery of assets that were stolen through the course of the corrupt activity. This process, which requires complex international cooperation when the assets are secreted overseas, was explored in depth at an all-day special event that joined several important actors.
The Stolen Asset Recovery Initiative (“StAR”), a partnership between the World Bank Group and the UN Office on Drugs and Crime, facilitates the return of stolen assets by setting international standards and enhancing communication among countries. In order to act as an effective intermediary, StAR must receive an official request from the country itself, not from private parties. Surprisingly, the average time that StAR takes to respond to country requests ranges between just twenty-one days and four and a half months. StAR also provides case-based technical training to enable the participating countries to effectively deal with the asset recovery issues themselves. A common critique of the program, however, is that developing countries do not have the necessary resources to retain and maintain the components of an effective domestic asset recovery program, such as investigators and experts. StAR’s response that its purpose is to aid countries in asset recovery, not to do the job for them.
A central challenge StAR faces involves countries that have and continue to undergo dramatic changes in governance, which disrupts any programs StAR has helped implement. Similarly, a lack of mobilization and good will from certain countries creates roadblocks for compliant countries to effectively recover stolen assets. Overall though, StAR has successfully returned $28.8 million in stolen assets as well as $58 million worth of physical assets. In two examples discussed today, StAR aided Tunisia in overcoming the influx of corruption after its 2011 revolution by organizing meetings between Tunisian judges and their foreign counterparts to aid them in dealing with corruption cases. It also recently helped Mongolia in equipping its domestic law enforcement organizations with the necessary tools to trace, identify, and recover stolen assets as well as draft a handbook that is to be formally approved within the month.
In terms of available resources, the UNODC has created a Digest of Asset Recovery Cases, which highlights notable corruption cases and traces the recovery of the stolen assets involved. Within the next year, the UNODC will release a new resource, entitled the Effective Management and Disposal of Seized/Frozen and Confiscated Assets, to help states strengthen their domestic management of assets that are seized from corrupt networks. Countries who manage asset recovery funds in a transparent manner are more likely to receive support from other countries, which highlights the prominent theme that international cooperation is essential to improving the overall recovery of stolen assets. Another new resource is the “Silver Notice” now issued by Interpol, which aids countries in locating, identifying, monitoring, and seizing or freezing the confiscation of assets. This provides countries the opportunity to alert one another of any movement of illicit assets and thus enhance the speed of international cooperation.
To conclude the panel, Switzerland presented its 2014 draft of Proposed Practical Guidelines for Efficient Asset Recovery, which has yet to be officially adopted. The overall message was that the preliminary investigation phase of asset recovery is the most important, given that corrupt individuals are becoming increasingly clever and more aware of when they are suspected of possessing illegal proceeds or fruits of crime. States must therefore carefully identify their targets, create a clear strategy, and exhibit patience to ensure that their investigation of stolen assets and eventual recovery proves successful.
Friday Roundup
Scrutiny alerts and updates, asset recovery, Fokker DPA appeal, Holder to private practice, and for the reading stack. It’s all here in the Friday roundup.
Scrutiny Alerts and Updates
Former Yara Executives
Reuters reports:
“A Norwegian court sentenced four former top executives at Yara, the world’s biggest nitrate fertilizer maker, to prison on Tuesday for paying bribes in Libya and India, in one of Norway’s biggest corruption scandals. Prosecutors had accused the men of paying around $8 million in bribes to officials in Indiaand Libya – including to the family of former Libyan leader Muammar Gaddafi’s oil minister and the family of a financial adviser in India’s Ministry of Chemicals and Fertilizers – for the right to establish joint ventures. Former CEO Thorleif Enger got the longest sentence of three years. His lawyer said he would appeal the sentence. Former chief legal officer Kendrick Wallace was sentenced to 2-1/2 years in prison, while former head of upstream activities Tor Holba and former deputy CEO Daniel Clauw were both given two-year jail terms years, court documents showed.”
For more on the underlying Libya investigations, see here.
Cerberus Capital Management
Cerberus Capital Management has been the subject of several recent media articles (see here and here for instance) concerning its purchase of a portfolio of the National Asset Management Agency (Nama) in 2014 in Northern Ireland. According to reports:
“Northern Irish politicians have called for an investigation after a politican in Dublin alleged that Belfast law firm Tughans had £7m in an account, ‘reportedly earmarked for a Northern Ireland politician’.”
Tughans was engaged as local counsel by Brown Rudnick in connection with its representation of Cerberus. In response to the scrutiny, Brown Rudnick released this statement.
Asset Recovery
The DOJ recently filed this civil forfeiture complaint seeking “£22 million in British pounds (approximately $34 million at current exchange rates) that represent the value of 4,000,000 founders’ shares in Griffiths Energy International Inc. (“Griffiths Energy”), and that are traceable to, and involved in the laundering of, bribe payments made to Chadian diplomats …”.
According to the complaint, Griffiths Energy gave Mahamoud Adam Bechir (“Bechir”), Chad’s ambassador to the United States and Canada from approximately 2004 to 2012, and others “valuable company shares in exchange for Bechir exercising his official influence over the award to the company of lucrative oil development rights in Chad.”
The recent action is the second DOJ civil action filed in connection with the Griffiths Energy matter. (See here).
See here for the prior post regarding the underlying Canadian enforcement action against Griffiths Energy.
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As highlighted in this Bloomberg article:
“The Justice Department is seeking to seize $300 million claimed to be the proceeds of an international bribery conspiracy involving two Russian phone companies, as the U.S. joins a group of European nations in a telecom corruption probe. The U.S. claims VimpelCom Ltd., part-owned by Russian billionaire Mikhail Fridman, and Mobile TeleSystems OJSC used a web of shell companies and phony consulting contracts to funnel bribes to a close relative of Uzbekistan’s president, Islam Karimov, in exchange for access to that country’s telecommunications market. The assets sought by the U.S., in a complaint filed Monday in Manhattan federal court, are held in Bank of New York Mellon Corp. in Ireland, Luxembourg and Belgium. VimpelCom said in March 2014 that its Amsterdam headquarters had been raided by Dutch prosecutors and that the U.S. Securities and Exchange Commission demanded documents as part of the probe into its business.”
Fokker DPA Appeal
This previous post concerned the pending D.C. Circuit appeal of the DOJ – Fokker Services deferred prosecution agreement. Recently David Debruin (Jenner & Block), the court appointed amicus, filed this brief.
Regarding the following issue: “whether the District Court abused its discretion by denying the parties’ motion to exclude time under the Speedy Trial Act […] which provides for the exclusion of a period of delay pursuant to a deferred prosecution agreement “with the approval of the court.”, the brief states in pertinent part:
“If the Court reaches the merits, it should hold that the District Court had the authority to consider the substantive fairness of the DPA. Under 18 U.S.C. § 3161(h)(2), a DPA requires “approval of the court.” The plain text of this provision grants a district court the discretion to consider the substantive fairness of a DPA before approving it. The parties argue that a district court may reject a DPA only if it concludes that the parties are using the DPA as a pretext for a continuance, but that artificial restriction on judges’ discretion finds no basis in § 3161(h)(2). The legislative history, structure, and purpose of the Speedy Trial Act similarly confirm a district court’s discretion to consider a DPA’s substantive fairness.
Contrary to the parties’ contentions, the District Court’s rejection of the DPA poses no separation-of-powers problem. The District Court’s order does not force the Government to pursue a criminal prosecution. The Government remains free to negotiate a new DPA, try its case, or dismiss the charges. Prosecutorial discretion does not confer upon the Government the right to force a judge to exclude time from the Speedy Trial Act clock for 18 months. A district court order excluding time under the Speedy Trial Act is a judicial act, and separation-ofpowers principles give a judge the authority and the obligation to exercise independent judgment in performing that judicial act. If the Government had wanted to avoid judicial involvement, it should have signed a non-prosecution agreement; by instead choosing to invoke judicial process and filing a motion to exclude time under the Speedy Trial Act, it cannot now characterize the District Court’s denial of that motion as a separation-of-powers violation.
On the merits, the District Court did not abuse its discretion in rejecting the DPA. FSBV willfully violated the U.S. sanctions regime over 1,000 times and repeatedly provided assistance to the Iranian military. Yet under the DPA, as long as it agreed to pay back the revenues it earned and promised not to break the law, it would get off scot-free. The District Court’s conclusion that the DPA was grossly disproportionate to FSBV’s conduct was entirely reasonable.”
Holder to Covington
Recently Covington & Burling announced:
“Former U.S. Attorney General Eric H. Holder, Jr., is returning to Covington as a partner after more than six years of service as the nation’s top law enforcement officer. Mr. Holder will be resident in the firm’s Washington office and focus on complex investigations and litigation matters, including matters that are international in scope and raise significant regulatory enforcement issues and substantial reputational concerns. […] Mr. Holder was a partner at Covington from 2001 until February 2009, when President Obama appointed and the Senate confirmed him as the nation’s 82nd Attorney General.”
Reading Stack
Gibson Dunn’s Mid-Year FCPA Update is here.
Gibson Dunn’s Mid-Year Update on Corporate NPAs and DPAs is here.
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A good weekend to all.
Friday Roundup
Looking for talent – got talent, FBI announcement, Bourke related, to FCPA Inc., and for the reading stack. It’s all here in the Friday Roundup.
Looking for FCPA Talent? Got Talent
If your firm or organization is looking for either a summer associate or full-time lawyer with a solid foundation in the FCPA, FCPA enforcement, and FCPA compliance, please e-mail me at fcpaprofessor@gmail.com. I teach one of the only FCPA specific law school classes in the country (see here) and my Southern Illinois University law students who excelled in the class have, I am confident in saying, more practical skills and knowledge on FCPA topics than other law students.
I can recommend several students and I encourage you to give them an opportunity.
FBI Announcement
The FBI recently announced the establishment of international corruption squads. In pertinent part, the release states:
“The FCPA … makes it illegal for U.S. companies, U.S. persons, and foreign corporations with certain U.S. ties to bribe foreign officials to obtain or retain business overseas. And we take these crimes very seriously—foreign bribery has the ability to impact U.S. financial markets, economic growth, and national security. It also breaks down the international free market system by promoting anti-competitive behavior and, ultimately, makes consumers pay more.
We’re seeing that foreign bribery incidents are increasingly tied to a type of government corruption known as kleptocracy, which is when foreign officials steal from their own government treasuries at the expense of their citizens. And that’s basically what these foreign officials are doing when they accept bribes in their official capability for personal gain, sometimes using the U.S. banking system to hide and/or launder their criminal proceeds.
The FBI—in conjunction with the Department of Justice’s (DOJ) Fraud Section—recently announced another weapon in the battle against foreign bribery and kleptocracy-related criminal activity: the establishment of three dedicated international corruption squads, based in New York City, Los Angeles, and Washington, D.C.
Special Agent George McEachern, who heads up our International Corruption Unit at FBI Headquarters, explains that the squads were created to address the national and international implications of corruption. “The FCPA allows us to target the supply side of corruption—the entities giving the bribes,” he said. “Kleptocracy cases allow us to address the demand side—the corrupt officials and their illicit financial assets. By placing both threats under one squad, we anticipate that an investigation into one of these criminal activities could potentially generate an investigation into the other.”
Corruption cases in general are tough to investigate because much of the actual criminal activity is hidden from view. But international corruption cases are even tougher because the criminal activity usually takes place outside of the U.S. However, members of these three squads—agents, analysts, and other professional staff—have a great deal of experience investigating white-collar crimes and, in particular, following the money trail in these crimes. And they’ll have at their disposal a number of investigative tools the Bureau uses so successfully in other areas—like financial analysis, court-authorized wiretaps, undercover operations, informants, and sources.
Partnerships with our overseas law enforcement counterparts—facilitated by our network of legal attaché offices situated strategically around the world—are an important part of our investigative arsenal. The FBI also takes part in a number of international working groups, including the Foreign Bribery Task Force, to share information with our partners and help strengthen investigative efforts everywhere. And we coordinate with DOJ’s Fraud Section—which criminally prosecutes FCPA violators—and the Securities and Exchange Commission—which uses civil actions to go after U.S. companies engaging in foreign bribery.
Our new squads will help keep the Bureau at the forefront of U.S. and global law enforcement efforts to battle international corruption and kleptocracy.”
Bourke Related
This October 2013 post highlighted a Democracy Now program that attempted to re-script the Frederic Bourke FCPA enforcement action.
Democracy Now returns to the story in this recent interview with former U.S. Senator George Mitchell. Mitchell, like Bourke, invested in the Azeri project at issue, but unlike Bourke was not prosecuted.
Set forth below is the Q&A:
Democracy Now: Do you believe [Bourke] is a whistleblower, and do you believe that he should be exonerated.
Mitchell: Well, I believe that he should not have been convicted in the trial, in which conviction did occur. I think it was a very unfortunate circumstance, and as you describe it, regrettable from Rick Bourke’s standpoint.
Democracy Now: Do you believe he should now be exonerated, to be able to clear his name fully?
Mitchell: Well, yes, but I’m not sure what process would occur. He was tried, convicted. The conviction was upheld on appeal. But, as I said, I repeat, I do not believe he should have been convicted in the first place.
As noted in the prior post, while each is entitled to his/her own opinion about the Bourke case, the fact is – the case received more judicial scrutiny than arguably any other FCPA enforcement action.
To FCPA Inc.
It happens so often it is difficult to keep track of, but I try my best.
In the latest example of a DOJ FCPA enforcement attorney departing for FCPA Inc., Sidley Austin recently announced that James Cole (former DOJ Deputy Attorney General) ” has joined the firm in Washington, D.C. as a partner in its White Collar: Government Litigation & Investigations practice.” As stated in the release, ““[Cole’s] experience at the highest levels of law enforcement will enable him to counsel our clients facing the most difficult and complex challenges.” Cole’s law firm bio states that he will focus “his practice on the full range of federal enforcement and internal investigation matters, with a particular emphasis on cross-border and multi-jurisdictional matters.”
While at the DOJ, Cole frequently articulated DOJ FCPA positions and enforcement policies. (See here for example).
For the Reading Stack
From Professor Peter Henning in his New York Times Dealbook column – “Lawmakers Focus on How the SEC Does Its Job.”
From Miller & Chevalier attorneys – “DOJ is Losing the Battle to Prosecute Foreign Executives.” An informative article regarding the DOJ’s struggles to prosecute foreign nationals for a variety of offenses (antitrust, FCPA, etc.).
An informative article here in the New York Law Journal by Marcus Asner and Daniel Ostrow titled “A New Focus On Victims’ Rights in FCPA Restitution Cases.”
An interesting read here from the Wall Street Journal regarding China National Cereals, Oils and Foodstuffs Corp (Cotfco), a state-owned enterprise.
“In a few short years, Cofco has spent a couple billion dollars quietly buying up Australian cane fields, French vineyards and soybean pastures in Brazil, helping it become one of the world’s largest food companies. Now, Cofco is exploring deals in the world’s biggest exporter of agricultural commodities: the U.S.”
Weekend assignment: are Cofco employees Chinese “foreign officials” under the 11th Circuit’s Esquenazi decision?
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A good weekend to all and “On Wisconsin.”
Friday Roundup
Scrutiny alerts, asset recovery, and for the reading stack. It’s all here in the Friday roundup.
Scrutiny Alerts
Akamai Technologies
Akamai Technologies, Inc., a company that provides cloud services for delivering, optimizing and securing online content and business applications, recently disclosed:
“We are conducting an internal investigation, with the assistance of outside counsel, relating to sales practices in a country outside the U.S. that represented less than 1% of our revenue in each of the years ended December 31, 2014, 2013 and 2012. The internal investigation includes a review of compliance with the requirements of the U.S. Foreign Corrupt Practices Act and other applicable laws and regulations by employees in that market. In February 2015, we voluntarily contacted the U.S. Securities and Exchange Commission and Department of Justice to advise both agencies of this internal investigation.”
Soco International
As reported by Global Witness:
“A leader of a cross-party anti-corruption group of British MPs yesterday called for UK and US authorities to investigate claims that Soco International, a London-listed oil company, may have breached anti-corruption legislation in the course of its work in Africa’s oldest national park in the Democratic Republic of Congo.”
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[At a recent] Westminster Hall debate Tessa Munt, Liberal Democrat MP for Wells and vice-chair of the All-Party Parliamentary Group on Anti-Corruption, said: “It is surely incumbent on the UK government and its agencies to ensure that any credible evidence of corruption and other criminal behaviour by a UK company, as we have here, is fully investigated by the relevant authorities.”
Munt explained that Soco’s American executive directors are employed by a Delaware-registered subsidiary. As a result, she said, “these individuals fall within the jurisdiction of the United States, and there seems to be a case to be made that Soco International, under their stewardship, has breached the terms of America’s Foreign Corrupt Practices Act.” Anas Sarwar MP, co-chair of the anti-corruption group, also raised concerns about the involvement of offshore companies in Soco’s corporate structure.
“The questions raised by British Members of Parliament highlight the urgent need for both Soco and the relevant authorities in the UK and the US to closely examine the company’s conduct in Virunga,” said Nathaniel Dyer, a campaigner at Global Witness. “Companies cannot be allowed to get away with criminal behaviour just because it happens in remote locations like Congo – if Soco is found to have broken the law, it must face the consequences.”
David Lidington MP, a Foreign Office Minister responding on behalf of the government, said that the UK’s Serious Fraud Office was aware of allegations against Soco and that he would look into the channels for exchanging information with US authorities.”
Asset Recovery
Separate from FCPA enforcement, another prong of the DOJ’s fight against global corruption is its Kleptocracy Asset Recovery Initiative which seeks return of the proceeds of foreign official corruption to benefit the people harmed by acts of corruption and abuse of office.
As noted in this recent release:
“[The] Department of Justice has reached a settlement of its civil forfeiture cases against $1.2 million in assets in the United States traceable to corruption proceeds accumulated by Chun Doo Hwan, the former president of the Republic of Korea. The department also assisted the government of the Republic of Korea in recovering an additional $27.5 million in satisfaction of an outstanding criminal restitution order against former President Chun.”
In the release, Assistant Attorney General Leslie Caldwell stated:
“Chun Doo Hwan’s campaign of corruption and bribery while serving as Korea’s president betrayed the trust of the Korean people, deprived Korea’s government of precious resources and undermined the rule of law. Fighting corruption is a global imperative that demands a coordinated global response. The close cooperation between the United States and Korea in successfully recovering corruption proceeds stands as a testament to our resolve to battle the scourge of corruption through international collaboration.”
Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Field Office stated:
“The U.S. will not idly standby and serve as a money laundering haven for foreign officials to hide corrupt activities. The FBI will continue to collaborate with our foreign partners by leveraging its resources in order to identify those engaged in foreign corruption and to recover their ill-gotten gains.”
For the Reading Stack
Proposals for U.S. FCPA enforcement agencies to share FCPA settlement amounts with so-called victims in the country at issue may sound good, but are not warranted. In this Center for International Private Enterprise article I explain why.
A Q&A with the author of “Thieves of State: Why Corruption Threatens Global Security.” For additional coverage of the book, see here.
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A good weekend to all.