Assistant Attorney General Lanny Breuer On …
Yesterday, Assistant Attorney General Lanny Breuer spoke at IBC Legal’s World Bribery & Corruption Compliance Forum in London. See here for his remarks. Breuer touched upon a number of topics (but not FCPA guidance as noted by the FCPA Blog here), including the following as excerpted below.
General
“I am asked to speak about efforts in the United States to fight foreign bribery perhaps more than on any other subject, and all over the world.”
“As you may know, no criminal FCPA case can be brought in the United States without the Fraud Section’s authorization. I have said before that I personally believe our FCPA work is so important. It helps to level the playing field for U.S. and foreign companies, and motivates corporations to create genuine cultures of compliance. Moreover, corruption has such negative effects, particular in emerging economies, that we must use every tool at our disposal to fight it. Not only does corruption corrode the public trust and weaken democratic institutions, but it also creates gaps in government structures that organized criminal groups and terrorist networks can exploit. The FCPA, which has been on the books for approximately 35 years, was the first effort of any nation to specifically criminalize the act of bribing foreign officials. But only in the last several years has the law become a strong enforcement tool.”
“In recent years, we have witnessed a significant awakening to the problem of corruption around the globe. Russia, China and India are taking foreign bribery more seriously than ever before; the U.K. has an important new Bribery Act; and, perhaps due in part to United States enforcement efforts, companies and individuals doing business around the world are coming to appreciate that they will be held accountable for the way they conduct business with foreign officials. In short, the world is moving in one direction only with respect to anti-corruption efforts. There is still plenty of work to be done. But we are making progress, and I hope and believe that we will continue to make strides in this area together.”
Asset Recovery
“Criminal enforcement is a critically important aspect of our anti-corruption work. But, in the Criminal Division, we have also been developing an asset forfeiture initiative – the Kleptocracy Asset Recovery Initiative – that involves civil actions against the proceeds of foreign official corruption. Attorney General Holder announced the initiative in Uganda in 2010, and my team and I have been building the initiative in the Criminal Division’s Asset Forfeiture and Money Laundering Section since then. Our theory is simple: Even if we cannot pursue you criminally in the United States – because we lack criminal jurisdiction, for example – corrupt leaders should not be permitted to use the United States as a safe haven for the proceeds of their corrupt activities. We have recently had our first Kleptocracy Initiative successes. In July, for example, we announced that we had secured a restraining order against more than $3 million in corruption proceeds related to James Onanefe Ibori, the former governor of the oil-producing Delta State in Nigeria; and, earlier this month, we executed restraints against an additional $4 million in Ibori assets, including the proceeds from the sale of a penthouse unit in the Ritz-Carlton in Washington, D.C. Ibori was previously convicted here in the United Kingdom on money laundering and fraud charges and sentenced to 13 years in prison. Another example involves two civil forfeiture complaints we have filed against approximately $70 million in assets allegedly belonging to Teodoro Nguema Obiang Mangue, a government minister for Equatorial Guinea and the son of that country’s president. According to the complaints, despite an official government salary of less than $100,000 per year, Minister Obiang corruptly amassed wealth of more than $100 million. Among the items that we are seeking to forfeit are a Gulfstream jet, a mansion in Malibu, Calif., and $1.8 million worth of Michael Jackson memorabilia.”
DPAs / NPAs
“As a result both of increased FCPA enforcement and increased policing of corporate conduct in general, I think that the culture of corporate compliance has improved in recent years. As I explained in a speech in New York City recently, until roughly 20 years ago, prosecutors in the United States, when they encountered corporate misconduct, were usually faced with a stark choice – either to indict, or walk away. That began to change in the 1990s, when the government started doing something new: agreeing to defer prosecution against the corporation in exchange for an admission of wrongdoing; cooperation with the government’s investigation, including against individual employees; payment of monetary penalties; and concrete steps to improve the company’s behavior. And, over the past decade, deferred prosecution agreements, or DPAs, have become an important part of corporate criminal law enforcement. I am aware that the U.K. government recently put forth a proposal to introduce DPAs as a way of resolving corporate cases in the U.K. Based on the United States experience, my sense is that the availability of DPAs here would represent a positive step forward. In the United States, the increased use of DPAs has meant far greater accountability for corporate wrongdoing. Whereas prosecutors often declined when their only choice was to indict or walk away, now companies know that avoiding the disaster scenario of an indictment does not mean an escape from accountability. […] DPAs and NPAs are appropriate in certain circumstances and, therefore, they can be useful alternatives to criminal indictments. But they cannot be a substitute for criminal charges.”
Individual Prosecutions
“As I have said repeatedly, the strongest deterrent against corporate wrongdoing is the prospect of prison time. That is why I have put such a high priority on making sure that individuals are prosecuted when the evidence warrants prosecution.”
Morgan Stanley
“A former managing director of Morgan Stanley, Peterson pleaded guilty to conspiring to evade the bank’s internal FCPA controls and was sentenced to prison in August. Because Morgan Stanley voluntarily disclosed Peterson’s misconduct, fully cooperated with our investigation and showed us that it maintained a rigorous compliance program, including extensive training of bank employees on the FCPA and other anti-corruption measures, we declined to bring any enforcement action against the institution in connection with Peterson’s conduct. Prosecutors need to be smart about how they use their discretion in the FCPA context, as in every context. And, as we did in the Peterson case, we always attempt to strike an appropriate balance between vigorous and responsible enforcement.”
*****
I had the pleasure to Chair the 2010 World Bribery & Corruption Compliance Forum in London. See here for my opening remarks.
In my remarks I stated as follows regarding NPAs and DPAs. “Non and deferred prosecution agreements share a common thread – they both remove, whether in whole or in part, an independent judiciary from a critical role in a transparent legal system founded on the rule of law – and that is ensuring that provable facts support each element of the crime alleged and ensuring that resolution specifics are in the public interest. In his recent Innospec sentencing remarks, Lord Justice Thomas cited a paper – “The Risk of Abusing a Dominant Position” – that notes, among other things, that the newly enacted SFO guidance on“alternative methods to the disposal of criminal investigations by way of negotiated pleas or other resolutions by corporate defendants” may “introduce some unintended risks of abuse.” I share this concern and assert that it is troubling when an area of law largely develops outside of the judicial system via privately negotiated agreements – agreements that corporates often feel compelled to enter into, regardless of facts or legal theories, mindful of the “sticks” the enforcement agencies posses. I support the study Transparency International (“TI”) has called for in its recent “Progress Report on the OECD Convention.” That report expresses a concern that negotiated settlements could be“questionable deals” between enforcement agencies and companies and it calls for procedures to make settlement terms subject to judicial approval independent from the prosecutor’s office.”
See here for my recent post on Breuer’s unconvincing defense of NPAs and DPAs.
Friday Roundup
A focus on asset recovery, a substantial upgrade to the DOJ’s FCPA website, might Comverse Technologies face a double prosecution, Cosgrove is sentenced to home confinement, and on-point. It’s all here in the Friday roundup.
Asset Recovery
The Arab Forum of Asset Recovery (here) took place earlier this week in Doha, Qatar. President Obama delivered this recorded message. Attorney General Eric Holder delivered this speech at the event and stated as follows. “Corruption has long been recognized as a transnational problem that demands a coordinated, global response. Time and again, we’ve seen its destructive, corrosive effects – hindering development, impeding advancement, and siphoning precious resources away from those in need at a time when they could hardly be more scarce – and when the world economy could hardly be more vulnerable. We’ve come to understand its impact in eroding trust, favoring the interests of a dishonest few over the needs of the hardworking many, and even breeding contempt for the rule of law.” In his speech, Holder provided some highlights of the DOJ’s Kleptocracy Asset Recovery Initiative as well as outlined a U.S. committment to additional resources including two additional Justice Department attorneys to work exclusively on asset recovery and mutual legal assistance issues.
During this speech Holder further stated as follows. “As Attorney General, I’ve consistently worked to ensure that anticorruption remains a top priority for my colleagues at every level of the Justice Department. From our robust enforcement of the Foreign Corrupt Practices Act – an important law under which we have secured more than 30 individual convictions and over 40 corporate resolutions, totaling more than $2.1 billion in penalties, over the last three years alone; to the anticorruption work of our prosecutors stationed both in the United States and overseas – I’m proud to report that we’ve made great strides in our fight against corruption, within – as well as beyond – our borders.”
DOJ FCPA Website
As previously reported by the on-line news site Main Justice (here), the DOJ recently upgraded its FCPA website. Of particular note from a research perspective, the DOJ’s list of enforcement actions now appears to be complete – see here. A link to the DOJ’s FCPA website, as well as numerous other resources, is included on the resources page of this website – here.
Comverse Technology
As noted in this previous post, in 2011 Comverse Technology resolved a DOJ and SEC enforcement action by agreeing to pay $2.8 million (a $1.2 million criminal fine via a DOJ non prosecution agreement; $1.6 million in disgorgement and prejudgment interest via a SEC settled complaint).
The resolution documents contained the standard template clauses.
The two-year NPA (here) stated that for the term of the agreement, Comverse shall “commit no crimes whatsover” and that if the “Department in its sole discretion determines that Comverse has committed any crime after signing this Agreement” that Comverse “shall thereafter be subject to prosecution for any violation of federal law of which the Department has knowledge …”.
The SEC release (here) noted that Comverse consented to a “conduct-based injunction that prohibits Comverse from having books and records that do not accurately reflect, or from having internal controls that do not prevent or detect, any illegal payments made to obtain or retain business.”
Last week in an SEC filing (here) Comverse (CTI) disclosed as follows, after describing its 2011 resolution action and compliance obligations.
“CTI had implemented safeguards in an effort to eliminate improper practices by our employees, consultants, external sales agents and resellers. These safeguards, however, have proven to be ineffective in some instances. In response to the findings of the CTI Audit Committee’s internal investigation, CTI identified a material weakness in our anti-fraud program controls, including those relating to the FCPA, and as part of its remediation our safeguards were modified. However, these modified safeguards, the implementation of these remedial measures and any future improvements may prove to be less than effective, and our employees, consultants, external sales agents or distributors may engage in the future in conduct for which we might be held responsible. Violations of the FCPA and other laws of the United States and other countries may result in significant civil and/or criminal penalties and other sanctions, which could have a material adverse effect on our business, financial condition and results of operations.”
One can look at Comverse’s recent disclosure in two ways. That the company does not have a committment to FCPA compliance and has not taken its post-enforcement action compliance obligations seriously. The other is that even a company under the threat of double prosecution (the first being for conduct at issue in the NPA, the second being the post-enforcement action conduct) can not, despite presumed good faith best efforts, guarantee FCPA compliance across its vast business organization and can not ensure that its numerous employees, consultants, external sales agents and resellers will not engage in problematic conduct.
Cosgrove Sentence
As noted in this previous post, in May Paul Cosgrove (one of the defendants in the so-called Carson case involving former employees of Control Components Inc.) pleaded guilty to a one-count superseding information charging him with making a “corrupt payment to a foreign government official in China in violation of the FCPA.” As noted in the prior post and as detailed in the plea agreement, Cosgrove suffers from significant health issues. The DOJ stated, in its sentencing memo (here) as follows. “Absent defendant’s health condition, the government would recommend a term of incarceration of 15 months. However, to the extent the Court believes that defendant’s health condition warrants a non-incarceratory sentence, the government recommends that the term of home confinement be 15 months.”
As noted in this article from the Orange County Register, yesterday U.S. District Court Judge James Selna sentenced Cosgrove to 13 months home confinement.
On-Point
Russell Ryan (a former assistant director of the SEC’s division of enforcement and currently with King & Spalding – here) had a dandy op-ed (here) recently in the Wall Street Journal concerning the SEC seeking to punish, not just conduct, but an individual being “unrepentant” and “impenitent.” Ryan’s piece reminded me of this prior post in which the DOJ criticized an FCPA corporate defendant for not cooperating “based on jurisdictional issues.” Once again, do the enforcement agencies expect defendants to roll over and play dead?
*****
A good weekend to all.
U.S. v. Siriwan Filing Sheds Light On Extradition Relations With Thailand In Pivotal Justice Department Case
Today’s post is from Mike Dearington, a rising 3L at Vanderbilt Law School and FCPA Professor reader.
*****
U.S. v. Siriwan Filing Sheds Light on Extradition Relations with Thailand in Pivotal Justice Department Case
Prosecutors in United States v. Siriwan submitted an extradition status report (here) last Friday in the Central District of California, revealing a potentially strained diplomatic relationship between officials in the U.S. and the Thai Attorney General’s office. Prosecutors charged Juthamas Siriwan, ex-governor of Tourism Authority of Thailand, and her daughter, Jittisopa, in 2009 with accepting bribes from Hollywood movie executives Gerald and Patricia Green in exchange for lucrative contracts. (See here for the previous FCPA Professor post.) The Greens were convicted in 2010 and sentenced to six months imprisonment. (See here for the previous post.)
In the DOJ’s filing, prosecutors expressed discomfort with providing an extradition-status update pursuant to court order, which they noted was “highly unusual in a public setting and strongly discouraged for many policy and case specific reasons.” One of these reasons, no doubt, was that the status update forced prosecutors to admit that the U.S. “has not yet received a response from Thailand regarding extradition.”
The Siriwan case is interesting also because it could be instrumental to DOJ efforts to curb foreign bribery, as it is an example of prosecutors uniquely targeting a “foreign official.” One of the oft-cited shortcomings of the FCPA is that it is purely a “supply side” enforcement scheme. In other words, the FCPA targets only those paying bribes, and does not prohibit receipt of such bribes by the foreign officials who demand them.
Indeed, critics have declared that, by targeting only the supply side, the law fails to appreciate the nature of foreign bribery. Bribery is not economically beneficial to corporations because of the risks and costs, yet corporate representatives nonetheless often pay bribes because they are economically extorted by foreign officials. Officials like Siriwan have been known to set the bidding process and are often first to broach the subject because of their powerful bargaining positions. Although the FCPA prohibits only bribe payments—and not receipts—the Siriwan case is somewhat of a DOJ workaround.
In Siriwan, prosecutors did not charge FCPA violations, as the Siriwans made no bribery payments. But prosecutors did charge substantive money-laundering. The Money Laundering Control Act (MLCA) prohibits the conveyance of funds to or from the U.S. “with the intent to promote the carrying on of specified unlawful activity.” Just what unlawful activity qualifies is an open question here.
Prosecutors argue that the Greens’ bribe payments represent specified unlawful activity, as do the Siriwans’ violations of Thai laws. On the other hand, the Siriwans contend the money-laundering charges are pulling “double duty” and that one cannot promote illegal payments by receiving illegal payments. The Siriwans’ motion to dismiss (see here for the prior post) has been pending since August 2011.
Siriwan may determine whether money-laundering is a viable tactic in the DOJ’s efforts to curb foreign bribery. The DOJ has expressed an interest in demand-side prosecutions. In 2009, prosecutors charged Robert Antoine and Jean Rene Duperval, formerly of Haiti Teleco, a state-owned national telecommunications company, with money laundering after each allegedly accepted bribes. (See here for the prior post.) Antoine pled guilty and was sentenced to four years in prison; Duperval was convicted and sentenced to nine years in prison in May 2012.
If prosecutors prevail in Siriwan, we can expect the DOJ to pursue a greater number of foreign officials under the MLCA, reminiscent of the way prosecutors pursued foreign executives in the 1990s/2000s under U.S. Antitrust laws due to a lag in foreign anti-trust enforcement. If U.S. prosecutors can bring foreign officials within their purview, the DOJ may have more tools to reign in foreign bribery.
DOJ Guidance – Better Late Than Never, But Will It Matter?
The FCPA’s 1988 amendments required that the Attorney General, “after consultation with the [the SEC], the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtaining the views of all interested persons through public notice and comment procedures, shall determine to what extent compliance with [the anti-bribery provisions] would be enhanced and the business community would be assisted by further clarification” of its various provisions. Among other things, Congress requested that the Attorney General consider issuing guidelines as to “general precautionary procedures [companies] may use on a voluntary basis to conform their conduct to the Department of Justice’s present enforcement policy …”.
Following the 1988 Congressional mandate, the DOJ did issue a formal notice inviting all interested persons “to submit their views concerning the extent to which compliance with [the anti-bribery provisions] would be enhanced and the business community assisted by further clarification of the provisions of the anti-bribery provisions through the issuance of guidelines.” However, the DOJ stated that “only 5 responses were received, and 3 of the responses were to the effect that guidelines were unnecessary” and based on this information it declined to issue FCPA compliance guidelines envisioned by Congress. In July 1990, the DOJ stated as follows. “After consideration of the comments received, and after consultation with the appropriate agencies, the Attorney General has determined that no guidelines are necessary…. [C]ompliance with the [anti-bribery provisions] would not be enhanced nor would the business community be assisted by further clarification of these provisions through the issuance of guidelines.”
From the Dockets
This post details developments as to FCPA or related litigation previously reported.
Haiti Teleco Case
Previous posts (here and here) detailed Joe Esquenazi’s and Carlos Rodriguez’s motion for acquittal or a new trial based on statements made (and then seemingly retracted) by Jean Max Bellerive (Prime Minister of Haiti) concerning the ownership of Haiti Teleco – the entity at the middle of the bribery scheme. In the DOJ’s response (here) to the defendants’ motion, the DOJ argues, among other things, that “the Government did not seek the first Bellerive declaration from the Republic of Haiti, and there is no need for an evidentiary hearing as to when or how the Government obtained it.” As to the second Bellerive declaration, the DOJ stated that “the Government assisted Mr. Bellerive in preparing the declaration” in which Bellerive, as noted in the prior post, stated that the first declaration was strictly for internal purposes and he did not know it was going to be used in criminal legal proceedings in the U.S. or that it was going to be used in support of the argument that Teleco was not part of Public Administration of Haiti.
Substantively, the DOJ argues that the first Bellerive declaration does not “contain newly discovered evidence” because the jury “heard most of” the points addressed in the first Bellerive declaration from Garry Lissade, the DOJ’s expert witness, who testified as to the legal status of Haiti Teleco after “he conducted extensive research, including legal research and interviews, in reaching his conclusions.”
The DOJ’s position in many FCPA enforcement actions concerning state-owned or state-controlled entities seems to be that the ownership structure of the entity at issue should be obvious and easily ascertainable to defendants. If so, why did Lissade (Haiti’s former Minister of Justice) have to “conduct extensive research, including legal research and interviews, in reaching his conclusion” that Teleco was a Haitian public entity?
Africa Sting Case
The second Africa Sting trial involving defendants John Mushriqui, Jeana Mushriqui, R. Patrick Caldwell, Stephen Giordanella, John Godsey, and Marc Morales is set to begin on September 22nd. The second trial will be more narrowly focused than the first Africa Sting trial that resulted in a mistrial (as well as dismissal of certain counts including money laundering conspiracy charges).
Why? Because the DOJ did not oppose defendants’ motion to dismiss the money laundering conspiracy charges. In pre-trial briefing, the DOJ stated as follows. “At the conclusion of the government’s case-in-chief in the first trial, the Court granted a motion for judgment of acquittal on Count Forty-Four of the Superseding Indictment with respect to the defendants in the first trial. The government continues to believe that the Court should not have granted the motion and that Count Forty-Four should have been submitted to the jury. But the government understands the Court’s ruling and will not object to the Defendant’s motion. The government’s position in this filing recognizes the Court’s past ruling, and in no way suggests that the government will not seek to bring similar charges in future cases.”
Siriwan “Foreign Official” Case
A previous post (here) detailed how Juthamas Siriwan and Jittisopa Siriwan (the “foreign officials” in the Green FCPA enforcement action) were fighting back against DOJ criminal charges. As noted in the post, the Siriwans argued as follows. “This is the first judicial challenge to a novel prosecutorial approach the Government recently developed to charge foreign officials allegedly involved in corruption. That approach is aimed at overcoming a fundamental FCPA limitation. The FCPA does not criminalize a foreign public official’s receipt of a bribe. Nor can the Government employ an FCPA conspiracy charge against a foreign public official. Accordingly, these new enforcement initiatives require expansive interpretations [of] “promotion money laundering” [under the Money Laundering Control Act].” The Siriwans further argued as follows. “Congress has extensively amended the FCPA, yet it deliberately has not extended FCPA liability to foreign officials. If the Government wishes to extend U.S. criminal penalties to foreign officials accepting a bribe, it must go back to Congress, rather than employ dubious charging tactics to evade the direct and repeated congressional choice not to apply FCPA criminal liability to such officials.”
In its opposition brief (here) filed last week, the DOJ stated as follows. “Upon analysis of defendants’ arguments, it is quickly evident that, in support of their positions, defendants routinely conflate and confuse multiple statutes, interpret and argue the elements of uncharged statutes, and ignore case law relevant to the statutes actually charged.” Among other things, the DOJ stated as follows. “That foreign officials cannot face liability for FCPA offenses does not give foreign officials a free pass to commit other, entirely separate, crimes.” The DOJ noted that the Siriwans are not charged with accepting a bribe, or conspiring to violate the FCPA, but rather with “the separate, and entirely analytically distinct, crime of international transportation money laundering to promote the Greens’ violation of the FCPA.” The DOJ noted that just because Siriwan “was a foreign official at the time of these offenses, and therefore, not charged under the FCPA does not change the analysis.”
As reported by Samuel Rubenfeld at Wall Street Journal Corruption Currents, a hearing on Siriwans’ motion to dismiss is scheduled for Oct. 20.