The U.K. SFO flexes its pre-Bribery Act muscle in criminally charging an Alstom subsidiary, other scrutiny alerts and updates, nominate, double standard, quotable, and for the reading stack. It’s all here in the Friday roundup.
As has been widely reported (see here and here for instance), the U.K. Serious Fraud Office announced:
“Alstom Network UK Ltd, formerly called Alstom International Ltd, a UK subsidiary of Alstom, has been charged with three offences of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as three offences of Conspiracy to Corrupt contrary to section 1 of the Criminal Law Act 1977. The alleged offences are said to have taken place between 1 June 2000 and 30 November 2006 and concern large transport projects in India, Poland and Tunisia.”
According to the release, “the SFO investigation commenced as a result of information provided to the SFO by the Office of the Attorney General in Switzerland concerning the Alstom Group, in particular Alstom Network UK Ltd.”
I inquired with the SFO press office regarding any original source charging documents and was informed as follows. “Beyond our press release today, the nearest date for documents likely to be made available would be the charge sheet at the first court hearing – presently arranged for 9 September, at Westminster Magistrates’ Court.”
As readers likely know, since April 2013 the DOJ has charged four individuals associated with Alstom Power Inc., a subsidiary of Alstom, in connection with an alleged bribery scheme involving the Tarahan coal-fired steam power plant project in Indonesia. (See more below for a recent guilty plea).
As was the case in the U.S. – U.K. enforcement action against BAE (see here for the prior post) there may have been and/or currently is turf war issues between the agencies as to which agency is going to prosecute alleged conduct occurring in various countries.
Speaking of the DOJ action against various individuals associated with Alstom Power, last week, the DOJ announced that William Pomponi, a former vice president of regional sales at Alstom Power, pleaded guilty to a criminal information charging him with conspiracy to violate the FCPA in connection with the awarding of the Tarahan power project in Indonesia.
Assistant Attorney General Leslie R. Caldwell stated:
“The Criminal Division of the Department of Justice will follow evidence of corruption wherever it leads, including into corporate boardrooms and corner offices. As this case demonstrates, we will hold both companies and their executives responsible for criminal conduct.”
As noted in the DOJ release:
“Pomponi is the fourth defendant to plead guilty to charges stemming from this investigation. Frederic Pierucci, the vice president of global boiler sales at Alstom, pleaded guilty on July 29, 2013, to one count of conspiracy to violate the FCPA and one count of violating the FCPA; and, David Rothschild, a former vice president of regional sales at Alstom Power Inc., pleaded guilty to conspiring to violate the FCPA on Nov. 2, 2012. Marubeni Corporation, Alstom’s consortium partner on the Tarahan project, pleaded guilty on March 19, 2014, to one count of conspiracy to violate the FCPA and seven counts of violating the FCPA, and was sentenced to pay a criminal fine of $88 million. FCPA and money laundering charges remain pending against Lawrence Hoskins, the former senior vice president for the Asia region for Alstom, and trial is scheduled for June 2, 2015.”
See here for the original post highlighting the enforcement action against the individuals associated with Alstom and here for the original post regarding the Marubeni enforcement action.
Scrutiny Alerts and Updates
SEC Enforcement Action Against Former Magyar Telekom Executives
“The SEC has slimmed down its FCPA case against three former Magyar Telekom PLC executives, dropping claims they bribed government officials in Montenegro, according to a new complaint … The amended complaint alleged former Magyar CEO Elek Straub and two other former executives, Andras Balogh and Tamas Morvai, authorized bribe payments to government officials in the Republic of Macedonia in exchange for regulations designed to hurt a competitor. The SEC, in its initial complaint in December 2011, had also alleged the defendants engaged in a second bribery scheme in Montenegro. The agency said in a July 14 court filing that it would “continue to pursue the same legal causes of action alleged in its original complaint,” but without the claims related to Montenegro. The SEC previously advised the court and defense attorneys in January 2014 of its intention to narrow the suit.”
Interesting, isn’t it, what happens when the SEC is put to its burden of proof.
Kowalewski Pleads Guilty
The DOJ announced:
“Bernd Kowalewski, the former President and CEO of BizJet, pleaded guilty … to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and a substantive violation of the FCPA in connection with a scheme to pay bribes to officials in Mexico and Panama in exchange for those officials’ assistance in securing contracts for BizJet to perform aircraft maintenance, repair and overhaul services.”
Assistant Attorney General Leslie Caldwell stated:
“The former CEO of BizJet, Bernd Kowalewski, has become the third and most senior Bizjet executive to plead guilty to bribing officials in Mexico and Panama to get contracts for aircraft services. While Kowalewski and his fellow executives referred to the corrupt payments as ‘commissions’ and ‘incentives,’ they were bribes, plain and simple. Though he was living abroad when the charges were unsealed, the reach of the law extends beyond U.S. borders, resulting in Kowalewski’s arrest in Amsterdam and his appearance in court today in the United States. Today’s guilty plea is an example of our continued determination to hold corporate executives responsible for criminal wrongdoing whenever the evidence allows.”
U.S. Attorney Danny Williams (N.D. Okla.) stated:
“I commend the investigators and prosecutors who worked together across borders and jurisdictions to vigorously enforce the Foreign Corrupt Practices Act. Partnership is a necessity in all investigations. By forging and strengthening international partnerships to combat bribery, the Department of Justice is advancing its efforts to prevent crime and to protect citizens.”
See here and here for posts regarding the 2012 DOJ enforcement action against BizJet and here and here for the 2013 DOJ enforcement action against Kowalewski and others associated with BizJet.
As noted in this prior post, in April 2013 the DOJ announced (here) that “Frederic Cilins a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.” The Criminal Complaint charged Cilins with one count of tampering with a witness, victim, or informant; one count of obstruction of a criminal investigation; and one count of destruction, alteration, and falsification of records in a federal investigation. Cilins was linked to Guernsey-based BSG Resources Ltd and in March 2014 the DOJ announced that Cilins pleaded guilty “to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.” (See this prior post).
Last week, the DOJ announced that Cilins was sentenced to 24 months in prison. In the DOJ release, U.S. Attorney Preet Bharara said:
“Frederic Cilins went to great lengths to thwart a Manhattan federal grand jury’s investigation into an alleged bribery scheme in the Republic of Guinea. In an effort to prevent the federal authorities from learning the truth, Cilins paid a witness for her silence and to destroy key documents. Today, Cilins learned that no one can manipulate justice.”
Assistant Attorney General Leslie Caldwell said:
“Cilins offered to bribe a witness in an FCPA investigation to stop the witness from talking to the FBI. Today’s sentence holds Cilins accountable for his effort to undermine the integrity of our justice system, and sends a message that those who interfere with federal investigations will be prosecuted and sent to prison.”
FBI Assistant Director-in-Charge George Venizelos said:
“Cilins obstructed the efforts of the FBI during the course of this investigation. His guilty plea and sentence demonstrate our shared commitment with the U.S. Attorney’s Office to hold accountable those who seek to interfere with the administration of justice. This case should be a reminder to all those who try to circumvent the efforts of a law enforcement investigation: the original crime and the cover-up both lend themselves to prosecution.”
According to the release, Cilins was also ordered to pay a fine of $75,000 and to forfeit $20,000.
“GlaxoSmithKline faces new allegations of corruption, this time in Syria, where the drugmaker and its distributor have been accused of paying bribes to secure business, according to a whistleblower’s email reviewed by Reuters. Britain’s biggest drugmaker said on Thursday it was investigating the latest claims dating back to 2010, which were laid out in the email received by the company on July 18. The allegations relate to its former consumer healthcare operations in Syria, which were closed down in 2012 due to the worsening civil war in the country. […] GSK has been rocked by corruption allegations since last July, when Chinese authorities accused it of funneling up to 3 billion yuan ($480 million) to doctors and officials to encourage them to use its medicines. The former British boss of the drugmaker’s China business was accused in May of being behind those bribes. Since then, smaller-scale bribery claims have surfaced in other countries and GSK is now investigating possible staff misconduct in Poland, Iraq, Jordan and Lebanon. Syria is the sixth country to be added to the list. The allegations there center on the company’s consumer business, including its popular painkiller Panadol and oral care products. Although rules governing the promotion of non-prescription products are not as strict as for prescription medicines, the email from a person familiar with GSK’s Syrian operations said alleged bribes in the form of cash, speakers’ fees, trips and free samples were in breach of corruption laws. The detailed 5,000-word document, addressed to Chief Executive Andrew Witty and Judy Lewent, chair of GSK’s audit committee, said incentives were paid to doctors, dentists, pharmacists and government officials to win tenders and to obtain improper business advantages.”
Separately, this Reuters article states that the U.K. SFO “is working with authorities in China in a first for such Anglo-Chinese cooperation as it carries out its own investigation into alleged corruption at GSK.” The article quotes SFO Director David Green as follows: “Certainly, so far as I am aware it is the first time we have had cooperation with the Chinese on an SFO case.”
Separately, in the U.S. this Wall Street Journal article states:
“Federal Bureau of Investigation agents have been interviewing current and former GSK employees in connection with bribery allegations made against the drug maker in China, according to a person familiar with the matter, as fresh claims of corruption surfaced against Glaxo’s operations in Syria. The interviews have taken place in Washington, D.C., in the past few months and are part of a Justice Department investigation into GSK’s activities in China, the person added. The U.S. Securities and Exchange Commission also is investigating the company’s business in China, according to people familiar with the matter.”
Key Energy Services
The company stated as follows in its Second Quarter 2014 Update and Earnings Release.
“Pre-tax expenses of approximately $5 million were incurred in connection with the previously disclosed Foreign Corrupt Practices Act investigations.”
If FCPA Professor adds value to your practice or business or otherwise enlightens your day and causes you to contemplate the issues in a more sophisticated way, please consider nominating FCPA Professor for the ABA Journal’s Blawg 100 list (see here).
Beginning in 2009, I began writing about the “double standard” and how – despite the similarities between the FCPA and 18 USC 201 (the domestic bribery statute) – a U.S. company’s interaction with a “foreign official” is subject to more scrutiny and different standards than interaction with a U.S. official. Since 2009, approximately 30 posts have appeared under the “double standard” subject matter tag.
Against this backdrop, I was happy to see another individual tackle the same general topic. See here from the Global AntiCorruption Blog – “Is U.S. Campaign Finance Law More Permissive of Corruption Than the FCPA?”
In this Corporate Crime Reporter interview, former U.S. Attorney Neil MacBride (E.D. Va.) says the following regarding the use of non-prosecution and deferred prosecution agreements: “The Department now has the ability to reach more ambiguous conduct where it might be more difficult to prove a criminal conviction in court.”
Wait a minute!
If the conduct is ambiguous and the DOJ would have a difficult time to prove a criminal conviction in court, there should be no non-prosecution or deferred prosecution agreement. Period. End of story. The rule of law commands such a result.
Over at the FCPA Compliance & Ethics blog, Tom Fox recently published a three-part series on M&A issues and the FCPA. See Part I, Part II, and Part III.
Sherman & Sterling’s mid-year FCPA Digest, including its “Trends and Patterns” is here. Among the trends and patterns:
“Recent paper victories by the SEC could be perceived as setbacks in the Commission’s actions against
individual defendants; and
The SEC has continued its practice of pursuing its theory of strict liability against a parent corporation
for the acts of its corporate subsidiaries.”
Kudos to Sherman & Sterling for adopting the “core” approach to keeping FCPA statistics. (See here for the prior post regarding my suggested “core” approach). The Digest states:
“We count all actions against a corporate “family” as one action. Thus, if the DOJ charges a subsidiary and the SEC charges a parent issuer, that counts as one action. In addition, we count as a “case” both filed enforcement actions (pleas, deferred prosecution agreements, and complaints) and other resolutions such as non-prosecution agreements that include enforcement-type aspects, such as financial penalties, tolling of the statute of limitations, and compliance requirements.”
The most recent edition of Miller & Chevalier’s FCPA Update is here. Debevoise & Plimpton’s always informative FCPA Update is here and Mayer Brown’s FCPA mid-year update is here.
Warning, the enforcement statistics cited in certain of the above updates will cause confusion because they do not adopt the “core” approach.
A good weekend to all.