Friday Roundup
Coming attractions, monitor talk, LatinNode related individual sentences, just who are those “gestores,” scholarship of note, and Supreme Court quotables. It’s all here in the Friday roundup.
Coming Attractions
This prior post contained FCPA practitioner Homer Moyer’s discussion of industry sweeps. Industries that have been subjected to industry sweeps or are reportedly in the middle of industry sweeps include: oil and gas, pharmaceutical / medical devices, and financial services.
Add Hollywood film studies to the list.
Reuters reports (here) that the SEC “has sent letters of inquiry to at least five movie studios in the past two months, including News Corp’s 20th Century Fox, Disney, and DreamWorks Animation” that “ask for information about potential inappropriate payments and how the companies dealt with certain government officials in China.”
The New York Times (here) also reported on the letters of inquiry and stated that the SEC “has begun an investigation into whether some of Hollywood’s biggest movie studios have made illegal payments to officials in China to gain the right to film and show movies there.”
In other disclosure news, Turkcell Iletisim Hizmetleri A.S. (Turkcell), Turkey’s only New York Stock Exchange listed company, recently disclosed in an SEC filing (here) as follows. “Some of [the countries the company operates in] also suffer from relatively high rates of fraud and corruption. For example, allegations have been made regarding improper payments relating to the operations of KCell, a mobile operator in Kazakhstan and 51% subsidiary of Fintur Holdings B.V., in which we hold a 41.45% stake, while TeliaSonera holds the remainder. The allegations were discussed by Turkcell’s Board of Directors, which requested an independent investigation of the allegations made. TeliaSonera initiated an independent investigation as agreed by the Fintur Board. The Turkcell Board has been informed that to date there has not been substantiated any such allegations and the Fintur Board informs us that it has completed its own investigation. Since no assurance can be given that there will not be further requests for investigation, we remain vigilant on this matter.”
In other disclosure news, in October 2006, the SEC informed the Bristol Myers Squibb Company that it had begun a formal inquiry into the activities of certain of the company’s German pharmaceutical subsidiaries and its employees and/or agents. The company previously disclosed that “the SEC’s inquiry encompasses matters formerly under investigation by the German prosecutor in Munich, Germany, which have since been resolved,” that the inquiry concerns potential violations of the FCPA and that “the company is cooperating with the SEC.” Yesterday, in a 10-Q filing, the company stated as follows. “In March, 2012, the Company received a subpoena from the SEC. The subpoena, issued in connection with an investigation under the FCPA, primarily relates to sales and marketing practices in various countries. The Company is cooperating with the government in its investigation of these matters.”
According to my tally, over the past two months, approximately 15 companies have newly disclosed, or been linked to, FCPA scrutiny. See here for the prior post “The Sun Rose, a Dog Barked, and a Company Disclosed FCPA Scrutiny.” (And no, Wal-Mart is not included in this list, the company disclosed its FCPA scrutiny in December 2011).
Hercules Offshore disclosed better news in its 10-Q filing yesterday. The company stated as follows. “On April 4, 2011, the Company received a subpoena issued by the Securities and Exchange Commission (“SEC”) requesting the delivery of certain documents to the SEC in connection with its investigation into possible violations of the securities laws, including possible violations of the Foreign Corrupt Practices Act (“FCPA”) in certain international jurisdictions where the Company conducts operations. The Company was also notified by the Department of Justice (“DOJ”) on April 5, 2011, that certain of the Company’s activities were under review by the DOJ. On April 24, 2012, the Company received a letter from the DOJ notifying the Company that the DOJ has closed its inquiry into the Company regarding possible violations of the FCPA and does not intend to pursue enforcement action against the Company. The DOJ indicated that its decision to close the matter was based on, among other factors, the thorough investigation conducted by the Company’s special counsel and the Company’s compliance program. The Company, through the Audit Committee of the Board of Directors, intends to continue to cooperate with the SEC in its investigation. At this time, it is not possible to predict the outcome of the SEC’s investigation, the expenses the Company will incur associated with this matter, or the impact on the price of the Company’s common stock or other securities as a result of this investigation.”
For the second straight day, I say kudos to the DOJ. Yet, I also ask on consecutive days – would anything really change with an FCPA compliance defense? As I note in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here) the DOJ already recognizes a de facto FCPA compliance defense albeit in opaque, inconsistent and unpredictable ways. Thus, an FCPA compliance defense accomplishes, among other things, the policy goal of removing factors relevant to corporate criminal liability from the opaque, inconsistent, and unpredictable world of DOJ decision making towards a more transparent, consistent, and predictable model best accomplished through a compliance defense amendment to the FCPA.
Monitor Talk
As discussed in this prior post, in March Biomet resolved an FCPA enforcement action involving $22.8 million in combined fines and penalties ($17.3 million via a DOJ deferred prosecution agreement, and $5.5 million via a settled SEC civil complaint). Pursuant to the DPA, Biomet agreed to engage an independent compliance monitor “for a period of not less than 18 months” and to provide periodic reports to the DOJ regarding remediation and implementation of the enhanced compliance measures as described in an attachment to the DPA.
As evidence that investor concern regarding FCPA issues does not end on enforcement action day, during a recent earnings conference call, an analyst asked Biomet CEO Jeff Binder the following question.
“I guess just with regard to the DOJ settlement that was announced for the FCPA potential violations, I’m just wondering — I guess you’re going to have an 18-month monitoring period. So I assume that would only apply to your international business? And then maybe even within the international business, would that only apply to certain regions where there have been problems found? And then what sort of a pricing — sorry, not pricing, but cost impact do you expect from that monitoring? Is it something material or not?”
Binder responded as follows. “Yes. You’re correct that the monitorship will apply to our businesses outside the United States, but the monitors purview is broad outside the United States. The monitor has the ability to take a look at our businesses across the world. The monitor will do a risk assessment upfront. They’ll understand where our issues have been and they’ll take a look at our processes. They’ll develop that risk assessment. They’ll come up with a work plan that’s based on that risk assessment. And we’ll take it from there. We don’t expect that additional expenses for the monitor will be material to the business. DOJ and SEC require the candidates for the monitorship to submit budgets of the projected services for their work. And I’d just say that the amounts that were set forth in those budgets are not material, and we don’t anticipate significant internal expenses associated with the monitorship.”
LatiNode Individual Sentences
As noted in this DOJ release, in April 2009 LatiNode, a privately held Florida corporation, pleaded guilty to violating the Foreign Corrupt Practices Act in connection with improper payments in Honduras and Yemen and agreed to pay a $2 million criminal penalty. Thereafter, several of its former executives – Jorge Granados, Manuel Caceres, Manuel Salvoch, and Juan Vasquez were criminally charged and pleaded guility.
Earlier this week Caceres (former vice president of business development at LatiNode) and Vasquez (a former senior commercial executive at LatiNode) were sentenced. U.S. District Court Judge Joan Lenard (S.D. of Fl.) sentenced Caceres to 23 months followed by 1 year supervised release – the DOJ sought a 36 month sentence. U.S. District Court Judge Patrricia Seitz (S.D. of Fl.) sentenced Vasquez to 3 years probation, community service, home detention and monitoring and ordered him to pay a $7,500 criminal fine – the DOJ originally sought a 36 month sentence and recently stated that it “would not oppose a sentence for Vasquez that was less than the sentence for Caceres and Salvoch [who is yet to be sentenced].”
As noted in this prior post, in September 2011, Granados was sentenced to 46 months in prison.
“Gestores”
The New York Times article suggested that many of the Wal-Mart Mexican payments at issue were routed through Mexican gestores. Just who are those “gestores.”? I found this article from CBS of interest. The article states as follows. “A visit to any government office is likely to bring the sighting of a well-dressed man carrying reams of documents who will glide past the long lines, shake hands with the official behind the counter and get ushered into a backroom, where his affairs presumably get a fast-track service. The suspicion is these go-betweens funnel a portion of the fees they charge clients to corrupt officials to smooth the issuance of permits, approvals and other government stamps. In a country where laws on zoning rules, construction codes and building permits are vague or laxly enforced, the difference between opening a store quickly and having it held up for months may depend on using a gestor.”
Scholarship of Note
Pre-Wal-Mart, the FCPA conversation of the spring focused on charitable contributions in the context of the Wynn-Okada dispute. See here, here and here for the prior posts. Other posts have noted (see here) that, strange as it may sound, the FCPA’s anti-bribery provisions are only implicated when something of value is provided, directly or indirectly, to a foreign official to influence the official in obtaining or retaining business. The FCPA’s anti-bribery provisions are not implicated when the thing of value is provided to a foreign government itself. Other prior posts (here and here) have discussed Dodd-Frank Act Section 1504’s Resource Extraction Disclosure Provisions.
Given my prior writings on these issues, I was pleased when Emory University School of Law student Francesca Pisano sent me the student comment “Anti-Corruption Law & Corporate Philanthropy: Rethinking the Regulations” (here) selected for publication in a forthcoming issue of the Emory Law Journal.
The abstract states as follows.
“When the 2010 earthquake hit Port-au-Prince, Haiti, U.S. companies donated over $146.8 million to the relief effort. Despite this impressive display of global engagement, commentators suggested that the US anti-corruption laws had discouraged corporations from greater involvement. Even with the laws in force, however, reports of corruption in the relief effort soon surfaced, derailing Haiti’s recovery. Foreign aid that feeds corruption will never achieve sustainable growth, but development efforts will similarly fail if U.S. anti-corruption laws discourage corporate philanthropy. This comment analyzes the application of two U.S. anti-corruption laws, the Foreign Corrupt Practices Act (“FCPA”) and the Dodd-Frank Section 1504, to international corporate charity. It shows how the FCPA’s ambiguous nature has the unfortunate effect of being both over- and under-inclusive, discouraging bona fide charity while at the same time failing to capture corrupt donations. The recently-enacted Dodd-Frank Section 1504 has great potential, but the SEC’s proposed rules have created a loophole to allow corruption to continue if hidden in corporate charity. This comment proposes a modification to FCPA enforcement: creating a Safe Harbor Option. This will offer businesses the opportunity to “buy” a rebuttable presumption of legitimacy for their charitable donations by publically disclosing the payments, projects, and recipients of their philanthropy. Granting a presumption of legitimacy to disclosed donations will ameliorate many of the over-inclusive aspects of the FCPA. The increased disclosure will allow the public to monitor corporate charity and question suspicious gifts, ameliorating the under-inclusive aspects of FCPA enforcement. This comment also argues that Section 1504 should be defined expansively to prevent charity from being used to circumvent the congressional goals of increasing transparency and combating corruption. If properly defined, Section 1504 is an excellent example of regulation through disclosure and transparency, rather than prohibitions.”
Supreme Court Quotable
This recent post discussed non-FCPA caselaw that touched upon issues relevant to the recent “foreign official” challenges. Last week, the Supreme Court issued its opinion (here) in Mohamad v. Palestinian Authority concerning the scope of the Torture Victim Protection Act. The Court, in an opinion authored by Justice Sotomayor held that the term “individual” in the TVPA encompasses only natural persons, and thus the law does not impose liability against corporatons. In her opinion, Justice Sotomayor’s stated, among other things, as follows.
“Congress remains free, as always, to give the word [individual] a broader or different meaning. But before we will assume it has done so, there must be some indication Congress intended such a result.”
“We add only that Congress appeared well aware of the limited nature of the cause of action it established in the Act.”
“The text of the TVPA convinces us that Congress did not extend liability to organizations, sovereign or not. There are no doubt valid arguments for such an extension. But Congress has seen fit to proceed in more modest steps in the Act, and it is not the province of this Branch to do otherwise.”
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I went to Walmart last night. After completing my purchase and before exiting the store, I stopped, looked around, and thought, wow, what a week!
A good weekend to all.
That’s Strengthening, Not Weakening And That’s A Race To The Top, Not The Bottom
In a recent speech at Transparency International-USA’s Annual Integrity Award Dinner, Secretary of State Hillary Clinton stated (see here) as follows. “We [the Obama administration] are unequivocally opposed to weakening the Foreign Corrupt Practices Act. We don’t need to lower our standards. We need to work with other countries to raise theirs. I actually think a race to the bottom would probably disadvantage us. It would not give us the leverage and the credibility that we are seeking.”
The FCPA is a fundamentally sound, but not perfect, statute.
A way to strengthen the FCPA and best advance its objective of reducing bribery is to amend the FCPA to include a compliance defense. See here for my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”
The FCPA’s objective of reducing bribery is best accomplished not solely through ad hoc enforcement actions, but by also better incentivizing corporate compliance designed to prevent improper payments. Existing incentives merely lessen the impact of legal exposure and are thus “baby carrots.” What is needed to better incentivize more robust FCPA compliance are real “carrots.”
An FCPA compliance defense is a real “carrot” that will better incentivize compliance across the business landscape. Organizations with existing FCPA compliance policies and procedures will be incentivized to make existing programs better. Likewise, organizations currently without stand-alone FCPA policies and procedures—and statistics indicate there are many—will be incentivized to spend finite resources to implement FCPA compliance policies and procedures. By better incentivizing organizations to implement more robust FCPA policies and procedures, an FCPA compliance defense can reduce instances of improper conduct and thereby advance the FCPA’s objectives.
I also argue in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” that an FCPA compliance defense will also increase public confidence in FCPA enforcement actions (no more enforcement actions against the World’s Most Ethical FCPA Violators – see here for the prior post) and allow the Department of Justice to better allocate its limited prosecutorial resources to cases involving corrupt business organizations and the individuals who actually engaged in the improper conduct thereby increasing the deterrent effect of FCPA enforcement actions.
That’s not weakening the FCPA, Secretary Clinton, that is strengthening the FCPA and best advancing its objective of reducing bribery. That’s not a race to the bottom, that’s a race to the top.
Potpourri
“Can Someone Please Turn On the Lights”
Former U.S. Attorney General Michael Mukasey (here – currently at Debevoise & Plimpton and active in the FCPA reform movement on behalf of the Chamber of Commerce) and James Dunlop (here – Jones Day) recently published “Can Someone Please Turn On the Lights? Bringing Transparency to the Foreign Corrupt Practices Act” (here). Published in Engage, a publication of the Federalist Society, the article asserts as follows.
” … [The] unobjectionable vision [of the FCPA] has virtually disappeared in a miasma of aggressive prosecutions by the Justice Department … The FCPA is almost never litigated in court. Public companies are the typical FCPA target, and such defendants are rarely positioned to litigate criminal charges, or even risk indictment, given (among other things) the substantial risk of federal contract debarment in many industries. The same is often true for individuals, most of whom face substantial prison time if convicted and who are thus unwilling to hang their hopes on uncertain interpretive arguments. As a result, the FCPA has had almost no judicial oversight, with the result that corporations trying to comply with its mandates find they are fighting corruption in the dark, their quest for standards confined to making mitigation arguments in prosecutors’ offices. This has enabled the FCPA’s enforcers, the Justice Department, and the Securities and Exchange Commission, to ‘win’ most FCPA cases through plea bargains or settlements, in which regulators set the terms, and into which regulators import their capacious constructions of the FCPA. This regulatory latitude has, in turn, transformed the FCPA into a catch-all for illicit conduct abroad, no matter how removed the target of the enforcement action is from the underlying offense. As Professor Mike Koehler has put it, ‘the FCPA means what the enforcement agencies say it means.'”
The article next states that “because the FCPA will never be heavily litigated—thus depriving the courts of the opportunity to clarify its murky text—Congress must speak clearly about what conduct does and does not violate the FCPA.” The article then largely tracks the reform proposals originally set forth in the Chamber sponsored white paper “Restoring Balance” (here).
Regardless of your views on FCPA reform, the Mukasey, Dunlop article is well written, extensively footnoted, and should find a place on your reading stack.
Checking in on the Carson Case
This previous post highlighted the Carson defendants recent motion to suppress (here) and motion to dismiss (here).
In substance, the motion to suppress argued that “from the outset of [Control Component Inc’s] CCI’s internal investigation in August 2007, CCI, through its counsel Steptoe & Johnson LLP (“Steptoe”), worked hand-in-hand with DOJ to investigate the matters at issue in this case.” The motion further argued as follows. “The DOJ and CCI essentially agreed to a private information-sharing arrangement between them. With this agreement in place, CCI selectively disclosed only information CCI believed inculpated Defendants and DOJ did not seek additional information.” According to the motion, “the collaborative nature of DOJ’s and CCI’s relationship provided both parties benefits, to the detriment of Defendants …”.
Last week the DOJ filed (here) its opposition brief. In summary, the DOJ asserts as follows. “Only state actors can violate a defendant’s Fifth Amendment rights, and the evidence shows that the Company’s actions were not the result of any pressure or influence from the government sufficient to convert the Company’s lawyers to state actors.”
The government submitted in camera the notes of Mark Mendelsohn, then Deputy Chief of the DOJ’s Fraud Section, reflecting his summary of the Company’s voluntary disclosure and many of the factual issues in dispute concern e-mails between Steptoe & Johnson and Mendelsohn. As to these e-mails, the DOJ states as follows. “These e-mails show no nexus between the Company and the government. Instead, they show a company in cooperative mode informing the government of what is transpiring in its internal investigation. [….] At no time did the government direct the actions of Steptoe/CCI. The government did not instruct the company who to interview or what questions to ask. In fact, the government provided no direction or instruction as to the conduct of the interviews.”
Citing caselaw that purports to show that a company’s efforts to cooperate with the government do not transform it into an arm of the state, the DOJ states that a company’s voluntary disclosure coupled with DOJ policy regarding a company’s cooperative efforts does not equate to state action and that finding state action “on these facts alone would be unprecedented and unwarranted, the effect of which would be to turn the cooperating company into a government agent in every case. There is no precedent for such an outcome.”
The DOJ also filed last week (here) its opposition to the motion to dismiss which mostly focused on due process / discovery issues.
Common Ground
Recently, Ann Hollingshead, writing on Global Financial Integrity’s (GFI) blog (here), made a spot-on observation regarding the type of “petty corruption” (or what I will call “harassment bribery”) common throughout the world. Hollingshead stated as follows.
“But this type of corruption is pervasive and deeply entrenched in the culture of many nations. It makes life difficult for citizens trying to live their lives and carry out what should be ordinary tasks. And in many countries—like India for example—where paying a bribe is illegal, the corrupt official forces everyday citizens to choose between completing your transaction and complying with the law. It is in this way that systematic corruption creates both a power imbalance and a forced cooperative between those demanding the bribe and those paying it.” (emphasis added).
I agree and the same is precisely the point I argue in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here) as to a specific reason, among others, warranting an FCPA compliance defense. Like Hollingshead, I too focus on India and note as follows. “Recent FCPA enforcement actions concerning business conduct in India demonstrate that harassment bribery is common and that companies operating in India face – just as locals face – difficult conditions simply to get things done.” I further note that “companies seeking to do business in many foreign countries are often funneled into an arbitrary world of low-paying civil servants who frequently supplement their meager salaries through bribe payments condoned in the host country.”
It is encouraging to see that proponents of an FCPA compliance defense and opponents on an FCPA compliance defense seem to at least agree on the business conditions present in many foreign markets giving rise to discussion of an FCPA compliance defense.
Hollinghead’s comments on GFI’s blog would seem drastically different from GFI’s previous statements concerning the general issue. Previously, in connection with the June 2011 House FCPA hearing, GFI (and others) release a statement (here) that stated as follows. “If a company is found to be in violation of the FCPA, then the existence of a company’s compliance program must not have prevented the acts of bribery. So why should the existence of their compliance program be a defense to the charge of bribery?”
Basurto Sentenced to Time Served
As detailed in this prior post, Fernando Maya Basurto was charged along with John Joseph O’Shea. Unlike O’Shea, who decided to put the DOJ to its burden of proof – and when he did he prevailed (see here), Basurto (the principal of the Mexican company that performed work for ABB’s business unit on its contracts with CFE) pleaded guilty.
The DOJ release (here) stated as follows. “Basurto pleaded guilty … to a one-count information charging him for his role in the conspiracy. In his plea, Basurto admitted that while he acted as a sales representative for the Texas business unit, he conspired with others to make corrupt payments to CFE officials, helped launder the bribe monies, and engaged in a cover up to obstruct the investigations of the Department of Justice and the SEC. Basurto also admitted that he submitted false invoices and helped fabricate correspondence in contemplation of federal investigations into the bribery.”
As part of his plea agreement, Basurto agreed to cooperate with the DOJ in its prosecution of O’Shea and Basurto was a key DOJ witness at O’Shea’s trial. However, the presiding judge, Judge Lynn Hughes (S.D. Tex.), stated, in dismissing the FCPA charges against O’Shea, that Basurto knew ” almost nothing” and that his answers “were abstract and vague, generally relating to gossip.”
Last week, Hughes granted the DOJ’s request and sentenced Basurto to time served. As noted by Christopher Matthews (here – Wall Street Journal Corruption Currents), Basurto was arrested in April 2009 and was released on bail in July 2011, according to court records.
Former DOJ Deputy Attorney General Larry Thompson Calls For FCPA Reform
Larry Thompson (former DOJ Deputy Attorney General, former general counsel for PepsiCo, and currently a professor at the University of Georgia School of Law – see here) participated in last week’s “FCPA At Thirty-Five” symposium at The Ohio State University Moritz College of Law (see here and here for prior posts).
This post summarizes Thompson’s comments at the event regarding FCPA reform.
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Thompson began his comments by noting his experience with the FCPA from various vantage points: as a lawyer in private practice representing business organizations in FCPA enforcement actions; as the DOJ’s Deputy Attorney General; as the general counsel of a large multinational; and currently as an academic. Thompson stated that there are things that can be done to make the FCPA more effective and he focused his remarks on M&A issues and an FCPA compliance defense.
As to M&A issues, Thompson noted that it is hard for U.S. companies to pursue legitimate business opportunities abroad when the “Sword of Damocles” hangs over their head because of potential legal liability for the pre-acquisition conduct by the target company. He called the DOJ’s Halliburton FCPA Opinion Release on M&A issues (see here) “too rigid” and “impractical.” The end result, according to Thompson, is a limited ability by the acquiring company to conduct pre-acquisition due diligence and thus often missed business opportunities for companies. More broadly, Thompson suggested that the DOJ’s current approach to FCPA M&A liability is not good for shareholders and harms worldwide efforts to reduce corruption.
Thompson suggested that there should be a defined period – a safe harbor period – in which an acquiring company, post-closing, be allowed to conduct FCPA specific due diligence, report any adverse findings to the DOJ, and implement remedial measures – all without fear of prosecution. Thompson noted that such a system would go “a long way to instill values around the world to foster the rule of law and make anti-corruption campaigns more effective.” [Thompson’s call for an M&A safe harbor provision is similar to an FCPA reform proposal from another former DOJ Deputy Attorney General, George Terwilliger, see here and here for prior posts].
As to an FCPA compliance defense, Thompson began by noting that the U.S. Supreme Court has taken steps in recent years to undercut respondeat superior theories of liability. Thompson noted that this doctrine often “undercuts a corporation’s ability to do the right thing.” Thompson criticized the DOJ for not adequately recognizing a company’s pre-existing compliance policies and procedures. In doing so, Thompson invoked the 2003 DOJ memo titled “Principles of Federal Prosecution of Business Organizations” bearing his name – the so-called Thompson Memo (see here) – and stated that when the memo was re-issued in 2008 (see here, the so-called Filip memo currently found in the U.S. Attorneys Manual) it retreated from prior practice and “diminished credit for effective compliance programs.” Thompson stated that it was “unfortunate that the DOJ has retreated.”
According to Thompson, most companies that learn of improper conduct within its ranks “want to do the right thing,” but are faced with “uncertainty” in making the voluntary disclosure decision because of the DOJ’s current enforcement policies concerning respondeat superior. Thompson again invoked reference to the “Sword of Damocles” and renewed his call (see here for Thompson’s comments in 2011) for an FCPA compliance defense. As noted in my forthcoming article, “Revisiting A Foreign Corrupt Practices Act Compliance Defense” (here), Thompson is part of a growing chorus of former DOJ officials who support a compliance defense.
Friday Roundup
A week (so far) without a new disclosure, quotable, and from the archives. It is all here in the Friday roundup.
Is It Possible?
Granted the week is not yet over, but thus far this week there has not been a new FCPA disclosure. The past three weeks, I have (somewhat tongue in cheek) noted – what seems like – new FCPA related disclosures every week. See here and here for prior posts.
While not a new FCPA disclosure, Total S.A. did indicate as follows in a recent Form 6-K filing.
“In 2003, the United States Securities and Exchange Commission (SEC) followed by the Department of Justice (DoJ) issued a formal order directing an investigation in connection with the pursuit of business in Iran, by certain oil companies including, among others, TOTAL. The inquiry concerns an agreement concluded by the Company with a consultant concerning a gas field in Iran and aims to verify whether certain payments made under this agreement would have benefited Iranian officials in violation of the Foreign Corrupt Practices Act (FCPA) and the Company’s accounting obligations. Investigations are still pending and the Company is cooperating with the SEC and the DoJ. In 2010, the Company opened talks with U.S. authorities, without any acknowledgement of facts, to consider an out-of-court settlement as it is often the case in this kind of proceeding. Late in 2011, the SEC and the DoJ proposed to TOTAL out-of-court settlements that would close their inquiries, in exchange for TOTAL’s committing to a number of obligations and paying fines. As TOTAL was unable to agree to several substantial elements of the proposal, the Company is continuing discussions with the U.S. authorities. The Company is free not to accept an out-of-court settlement solution, in which case it would be exposed to the risk of prosecution in the United States.”
Quotable
A collection of recent statements by DOJ officials concerning its recent trial setbacks and the future of FCPA enforcement.
See here from Reuters quoting Charles Duross (DOJ FCPA Unit Chief) as saying. “I know there is a lot of commentary out there about what this portends for the FCPA program, the use of certain law enforcement techniques. I would caution everybody not to draw too much from that. In terms of pursuing cases moving forward, I don’t think a lot is going to change.”
See here from Wall Street Journal Corruption Currents quoting Nathaniel Edmonds (DOJ) as saying – “the Department of Justice is going to continue to fight corruption, we’re committed to it, and we’re in it for the long haul.”
See here from the Blog of Legal Times quoting Edmonds as saying – FCPA violations are “not a regulatory offense. It’s a criminal violation. You cannot assume it’s a cost of doing business. People go to jail…it’s not just a regulatory fine.” The Blog of Legal Times also quotes Kara Brockmeyer (SEC FCPA Unit Chief) as saying “you can never stamp out someone who wants to pay a bribe somewhere … but if a company has strong internal controls, they can find the problem and fix it quickly.”
Meanwhile, Brockmeyer’s predecessor, Cheryl Scarboro (who left the SEC for private practice last summer – see here for the prior post) said in this recent Q&A with Trustlaw as follows. “There hasn’t been much litigation in this area and so if a particular area of a statute is open to interpretation, then typically the DOJ or the SEC will interpret it themselves and those are in the settled context.” After referencing the recent foreign official challenges, Scarboro states as follows. “But I think that it is correct (to say) that there is very little guidance as it relates to decided court cases in this area and that it leaves certain key areas open to interpretation.” Scarboro also recently co-authored a Law360 article (here) titled “Mounting Pressure for FCPA Reform.”
From the Archives
It was inappropriate when issued on January 26, 2010. Looking back it perhaps foreshadowed future difficulties. It is the FBI’s press release in the Africa Sting case (see here). It states that the “ruse played out with all the intrigue of a spy novel” and then on January 18, 2010 “we arrested them.” The release closed as follows. “You never know, that individual willing to take a bribe may really be an undercover FBI agent.” For the rest of the story, see this recent story in the Washington Post.