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Friday Roundup

Two years ago today, you just can’t make this stuff up, no new trial for Bourke, more offensive use of the FCPA, and ICE is not melting away.  It’s all here in the Friday roundup.

Two Years Ago Today

Two years ago today, the Senate held a hearing titled “Examining Enforcement of the Foreign Corrupt Practices Act.”  (See here for the full hearing transcript.  I had the pleasure to testify at the hearing (see here for my written testimony).  I went to Capital Hill without an agenda and on behalf of no one but myself.  My testimony represented my beliefs and I was proud of what I said then and I remain proud today.

You Just Can’t Make This Stuff Up

Try as you might, you just can’t make up a better example of the double-standard I frequenlty write about.  (See here for numerous other prior posts).

Our FCPA enforcement agencies are bringing enforcement actions against companies for conduct that includes providing $600 bottles of wine, Cartier watches, cameras, kitchen appliances, business suits, and executive education classes to individuals employed by foreign companies that are allegedly state-owned or state-controlled.  (These are all allegations found in recent FCPA enforcement actions).

Assistant Attorney General Lanny Breuer recently declared (see here) that “we in the United States are in a unique position to spread the gospel of anti-corruption.”

Against this backdrop, the Wall Street Journal reports (here) that President Obama’s fundraising advisers “have urged the White House to accept corporate donations for his January 2013 inaugural celebration rather than rely exclusively on weary donors who underwrote his $1 billion re-election effort.”  Among the justifications put forward by the Obama team according to the Wall Street?  The inauguration is “more of a civic event than a partisan political affair.”

Bourke Development

Perhaps this is finally the end of the FCPA enforcement action against Frederick Bourke.  As noted in this previous post, in July 2009 Bourke was convicted by a jury for conspiring to pay bribes to Azerbaijan officials.  At sentencing, Judge Shira Scheindin (S.D.N.Y.) sentenced Bourke to 366 days in prison, even though she commented 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.”

An appeal to the Second Circuit followed, largely on knowledge issues.  As highlighted in this previous post, in December 2011, the Second Circuit affirmed Bourke’s conviction.  Bourke subsequently requested a new trial based on newly discovered evidence relating to alleged perjury of a key trial witness.  Judge Scheindin denied Bourke’s request.  Bourke then appealed the issue to the Second Circuit.

Earlier this week, in an order (here) the Second Circuit affirmed the trial court decision and rejected Bourke’s request for a new trial.  In short, the Second Circuit concluded that Bourke failed to present newly discovered evidence or that the key trial witness in fact committed perjury.

As noted in this Bloomberg article, Bourke’s lawyers plan to ask the Second Circuit to consider the case again.

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 with increasing frequency, the FCPA is being used offensively (at least it seems).  See this prior post for offensive use of the FCPA in the on-going Wynn-Okada dispute.

Recently Chris Matthews (Wall Street Journal Corruption Currents) has been reporting (here, here, and here) on seemingly offensive use of the FCPA in regards to CEDC Distribution Company, a company that has previously disclosed FCPA scrutiny.  (See here for the prior post).

In short, Russian billionaire Roustam Tariko, the founder of CEDC rival Russian Standard vodka brand and CEDC’s largest shareholder, claimed that CEDC executives themselves were the subject of FCPA investigation.

Tariko’s claims prompted CEDC to issue this letter to shareholders that stated, in pertinent part, as follows.

“As you may be aware, earlier this week, Mr. Roustam Tariko, Chairman of Russian Standard, published a letter to CEDC investors that has created anxiety and confusion in the marketplace.  What you may not be aware of is that Mr. Tariko’s letter was published less than 48 hours after the CEDC Board voted 5 to 3 (the 3 being Mr. Tariko and his Board designees) against Mr. Tariko’s request that he be given total control over CEDC’s operations and finance. This request follows repeated attempts by Russian Standard to remove the interim CEO.  The purpose of this letter is to provide you with (1) an explanation as to why we did not give Mr. Tariko complete control over CEDC last weekend when he asked us to; (2) correct information regarding FCPA matters; (3) a current and accurate picture of the CEDC/RTL Strategic Partnership; and (4) information as to the steps we are taking to address the challenges facing CEDC.”

ICE is Not Melting Away

Previous posts here and here (among others) have the detailed the unsuccessful peition by Instituto Constarricense de Electricidad of Costa Rica (“ICE”) for victim status of Alcatel-Lucent’s wide-ranging bribery scheme.  The petition followed the December 2010 announcement that Alcatel-Lucent and certain subsidiaries agreed to resolve a wide-ranging FCPA enforcement action, including conduct in Costa Rica involving payments to ICE officials.  Even though ICE acknowledged that “three disloyal and corrupt [ICE] Directors and two disloyal and corrupt employees” were the recipients of Alcatel Lucent’s bribe payments, it nevertheless claimed it was a victim because the corrupt activities of Alcatel-Lucent caused the company “massive losses” and “catastrophic harm.”

After several unsuccessful 11th Circuit appeals, ICE has petitioned the Supreme Court to hears it case (see here).  The question presented for review is as follows.  “Whether a crime victim who is denied rights conferred by the federal Crime Victims’ Rights Act has a right to directly appeal the denial of those rights.”

*****

A good weekend to all.

 

Friday Roundup

Beverage industry news, a long-running FCPA-related civil case settles, checking in on the World Bank, survey says, and on-point.  It’s all here in the Friday roundup.

Beverage Industry News

Disclosure by Central European Distribution Corp.

As noted in this Wall Street Journal Corruption Currents post, Central European Distribution Corp. (here – one of the world’s largest vodka producers) recently made an FCPA disclosure.  In this filing, the company (a Delaware company headquartered in New Jersey) stated as follows.

“It has […] been determined that there has been a breach of the books and records provisions of the Foreign Corrupt Practices Act (FCPA) of the United States and potentially other breaches of the FCPA. It was determined that payments or gifts were made in a foreign jurisdiction in which the Company operates, and that there was a failure to maintain documentation in respect of certain of these payments or gifts adequate to establish whether there was a valid business purpose in making the payments or gifts. Furthermore, our management also identified a material weakness in our internal control over financial reporting regarding the implementation of our policy on compliance with applicable laws as of December 31, 2011. Our conclusion that this deficiency is a material weakness in our internal control over financial reporting is not based on misstatements in our historical consolidated financial statements or our consolidated financial statements as of and for the period ended December 31, 2011, but instead on the determination that we did not design or maintain sufficient policies, procedures, controls, communications or training to deter or prevent the risk of violations of law, including the Foreign Corrupt Practices Act (“FCPA”) of the United States.”

Beam Inc. Investigating Possible FCPA Violations

In other beverage industry news, the Times of India reports (here) that Beam Inc.  (here) “has initiated investigations into whistleblower allegations of financial misdemeanours at its India unit.”  According to the report, the investigation covers possible violations of Foreign Corrupt Practices Act.

As noted in this previous post, in July 2011 the SEC brought an FCPA enforcement action against beverage company Diageo PLC.

Alba-Alcoa Civil Case Settles

Earlier this week, Alcoa announced (here) that it “entered into a settlement agreement with Aluminium Bahrain B.S.C. (“Alba”) resolving a civil lawsuit that had been pending … since 2008.  Without admitting any liability, Alcoa agreed to make a cash payment to Alba of $85 million payable in two installments.”

Alba was represented by Akin Gump which put out this release.   The release notes that “the settlement arises out of a claim brought by Alba under the Racketeer Influenced and Corrupt Organizations (RICO) Act against Alcoa, an Alcoa subsidiary and Canadian businessman Victor Dahdaleh alleging a “pattern of corrupt activities by the defendants and officials in Bahrain in order to obtain long-term contract and pricing advantages in the sale of raw materials.”  As noted in the release,  ‘the case was stayed for nearly four years while the U.S. Department of Justice pursued a criminal investigation under the Foreign Corrupt Practices Act” and the settlement “represents the first time that a foreign-owned corporation has successfully sued a U.S. company in a federal court to recover losses suffered due to allegations of corrupt activity. “

As highlighted in this previous post, Alcoa’s agent (Dahdaleh) has been criminally charged in the U.K.

The DOJ and SEC’s investigation of Alcoa concerning the conduct at issue in the civil lawsuit is ongoing.

In its most recent quarterly filing, Alcoa stated as follows.

The DOJ’s and the SEC’s investigations are ongoing. Alcoa has been in dialogue with both the DOJ and the SEC and is exploring whether a settlement can be reached. Given the uncertainty regarding whether a settlement can be reached and what the terms of any such settlement would be, Alcoa is unable to estimate a range of reasonably possible loss with regard to any such settlement, However, Alcoa expects the amount of any such settlement would be material in a particular period to Alcoa’s results of operations. If a settlement cannot be reached, Alcoa will proceed to trial with the DOJ and the SEC and under those circumstances is unable to predict an outcome or to estimate a range of reasonably possible loss. There can be no assurance that the final outcome of the government’s investigations would not have a material adverse effect on Alcoa.”

World Bank

The World Bank’s fraud and corruption unit, the Integrity Vice Presidency (INT), recently released its annual report (see here for the full report). This release states as follows.  The INT “concluded another strong year in its preventive and investigative efforts, with 83 debarments of wrongdoing firms, new agreements with national law enforcement authorities to expand the impact of INT’s investigations, numerous referrals to law enforcement agencies, and robust preventive efforts to help ensure Bank-financed projects deliver results.”

Survey Says

This past July, FTI Consulting conducted an on-line survey of 571 executives in UK businesses in board-level, senior management and middle management positions.  As noted in this release, among the survey findings were the following.

  • 40% of UK businesses surveyed think the current economic climate is encouraging risk taking around compliance with the UK Bribery Act
  • 27% do not believe the government will prosecute offenders
  • 25% of board-level employees surveyed might breach Bribery Act regulations to win business
  • 63% of respondents believe the UK Bribery Act eventually will have a positive effect on prospects for UK business

Spot-On

In the aftermath of the Wall Street Journal’s FCPA Inc.: Business of Bribery series (see here), the WSJ published the following letter to the editor from Steve Travis of Mercer Island, WA.

“The Foreign Corrupt Practices Act makes it illegal to offer money or a gift to foreign government officials or employees to gain a business advantage. Yet in the U.S., every business worthy of its name has lobbyists whose sole job in Washington, D.C., is to do exactly that: give money or gifts to our elected officials or employees of our government in a position to steer contracts their way. Does anyone really think that things like flying government officials around on company private jets or putting them up in private homes on vacations don’t come with a quid pro quo? Who is naive enough to think that contributions to election campaigns don’t come with strings attached?”

Spot-on – see here for a prior post (as well as numerous previous posts embedded therein).

*****

A good weekend to all.

 

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