Friday Roundup
Efforts to influence the upcoming guidance, a stiff FCPA-related sentence, Representatives Cummings and Waxman think they are on to something, and thumbs up – it’s all here in the Friday roundup.
Guidance
Earlier this week, Global Financial Integrity, Open Society Foundations, and others released this letter to the DOJ and SEC concerning upcoming FCPA guidance. The letter addresses “foreign official,” a compliance defense, voluntary disclosure, declination decisions, parent-subsidiary liability, successor liability, de minimis gifts and hospitality, and mens rea and corporate criminal liability.
As to “foreign official” the letter states “that ownership of companies around the world, including in the U.S., is impossible to determine independently” and that “the staff of a U.S. company is not likely to be able to independently verify the direct and indirect ownership of foreign companies.” The letter also states, as to control of an instrumentality by a foreign government, that control can be conferred, among other ways, by “unspoken custom.”
Should one laugh or cry when reading such statements concerning a key element of the most important U.S. law governing international business transactions? Perhaps the groups don’t care. After all, as noted here, some of the groups have previously stated as follows regarding “foreign official” – “The U.S. Chamber is promoting the creation of a definition of “foreign official” so that companies have greater legal certainty. Greater certainty of what? Greater certainty of who they are permitted to bribe and who they are not permitted to bribe. […] In short, defining the term “foreign official” would underscore the idea that it is OK to bribe certain people and not others, a principle the United States surely does not want to promulgate.”
Duperval Sentenced
Earlier this week, the DOJ announced (here) that “Jean Rene Duperval, a former director of international relations for Telecommunications D’Haiti S.A.M. (Haiti Teleco), a Haitian state-owned telecommunications company, was sentenced [by U.S. District Court Judge Jose Martinez in the Southern District of Florida] to nine years in prison for his role in a scheme to launder bribes paid to him by two Miami-based telecommunications companies.” The stiff sentence continues the trend of the Southern District of Florida (and Judge Martinez in particular) handing out the toughest FCPA or FCPA-related sentences in the country.
As noted in the release, Duperval was convicted in March 2012 of two counts of conspiracy to commit money laundering and 19 counts of money laundering. According to the release, “Judge Martinez also ordered Duperval to forfeit $497,331.” Assistant Attorney General Lanny Breuer stated as follows. “Mr. Duperval took bribes in exchange for giving companies an unfair and illegal advantage in the marketplace, and then tried to hide these illicit transactions behind the cloak of shell corporations and fake invoices. Just as we prosecute corrupt businesspeople under the FCPA, we will hold accountable corrupt foreign officials when they seek to launder the proceeds of that bribery through the U.S. financial system. Today’s nine-year prison sentence sends a strong message to foreign officials and others who would facilitate foreign corruption that they will face serious consequences.”
As noted in this prior post, the Haiti Teleco case (minus the manufactured and now former Africa Sting case) is the largest in FCPA history in terms of defendants charged – 13. The prior post provides a summary of all the enforcement actions.
The Latest FCPA Reform Volley
If your third cousin received a speeding ticket years ago does this prohibit you from forever seeking reform of speed limit laws? Probably not the best analogy, but Representatives Elijah Cummings and Henry Waxman seem to think so. As noted in this previous post, Cummings (Ranking Member of the House Committee on Oversight and Government Reform) and Waxman (Ranking Member of the House Committee on Energy and Commerce) sent letters to the Chairman of the Board of Directors of the Retail Industry Leaders Association and the President of the U.S. Chamber of Commerce stating as follows. “We are concerned about the role that Wal-Mart officials may have played in the Chamber’s Institute for Legal Reform (“ILR”). It would appear to be a conflict of interest for Wal-Mart officials to advise on ways to weaken the Foreign Corrupt Practices Act at a time when the leadership of the company was apparently aware of corporate conduct that may have violated the law.”
Earlier this week, Representatives Cummings and Waxman again put pen to paper and sent this letter to the President of the U.S. Chamber of Commerce stating as follows. “A new analysis by our staff reveals that Wal-Mart is not the only company represented on the ILR’s board that has faced allegations that it violated the Foreign Corrupt Practices Act. Our review of ILR’s tax filings from 2007 to 20 10, member companies’ filings with the U.S. Securities and Exchange Commission (SEC), and other documents reveals that 14 out of 55 ILR board members-almost one in four- were affiliated with companies that were reportedly under investigation for violations or had settled allegations that they violated the Foreign Corrupt Practices Act.” See here for more.
Closing with the analogy, perhaps Representatives Cummings and Waxman should instead inquire about how the speeding laws are being enforced – or at the very least – read this prior post titled “The Sun Rose, A Dog Barked, And A Company Disclosed FCPA Scrutiny.”
Thumbs Up
To Howard Sklar for this recent post on his Open Air Blog. I agree with the general thrust of Howard’s argument. So did Congress when it passed the FCPA. For that reason, and here is where I disagree with Howard, the issues he identifies are legal issues, not merely policy issues.
*****
A good weekend to all.
Friday Roundup
Wal-Mart news, the shadow regulatory state, save the date, checking in on Wynn-Okada, and there’s an app for that.
Wal-Mart News
Yesterday Wal-Mart released its first quarter financial results and stated as follows in its SEC filing.
The Audit Committee of the Company’s Board of Directors (the “Audit Committee”), which is composed solely of independent directors, is conducting an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other alleged crimes or misconduct in connection with foreign subsidiaries including Wal-Mart de México, S.A.B. de C.V. (“Walmex”) and whether prior allegations of such violations and/or misconduct were appropriately handled by the Company. The Audit Committee and the Company have engaged outside counsel from a number of law firms and other advisors who are assisting in the on-going investigation of these matters. The Company is also conducting a voluntary global review of its policies, practices and internal controls for FCPA compliance. The Company is engaged in strengthening its global anti-corruption compliance programs through appropriate remedial anti-corruption measures. In November 2011, the Company voluntarily disclosed that investigative activity to the U.S. Department of Justice (the “DOJ”) and the SEC.
The Company has been informed by the DOJ and the SEC that it is also the subject of their respective investigations into possible violations of the FCPA. The Company is cooperating with the investigations by the DOJ and the SEC. A number of federal and local government agencies in Mexico have also recently initiated investigations of these matters. Walmex is cooperating with the Mexican governmental agencies conducting these investigations. Furthermore, lawsuits relating to the matters under investigation have recently been filed by several of the Company’s shareholders against it, its current directors, certain of its former directors, certain of its current and former officers and certain of Walmex’s current and former officers.
The Company could be exposed to a variety of negative consequences as a result of the matters noted above. There could be one or more enforcement actions in respect of the matters that are the subject of some or all of the ongoing government investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders or other relief, criminal convictions and/or penalties. The shareholder lawsuits may result in judgments against the Company and its current and former directors and officers named in those proceedings. The Company cannot predict accurately at this time the outcome or impact of the government investigations, the shareholder lawsuits, or its own internal investigation and review. In addition, the Company expects to incur costs in responding to requests for information or subpoenas seeking documents, testimony and other information in connection with the government investigations, in defending the shareholder lawsuits, and in conducting its internal investigation and review, and it cannot predict at this time the ultimate amount of all such costs. These matters may require the involvement of certain members of the Company’s senior management that could impinge on the time they have available to devote to other matters relating to the business. The Company may also see ongoing media and governmental interest in these matters that could impact the perception among certain audiences of its role as a corporate citizen.
The Company is in the early stages of assessing and responding to the governmental investigations, the shareholder lawsuits, and its internal investigation and review are on-going. Although the Company does not presently believe that these matters will have a material adverse effect on its business, given the inherent uncertainties in such situations, the Company can provide no assurance that these matters will not be material to its business in the future.
Wal-Mart stock closed yesterday at $61.68. On Friday April 20th (the day before the New York Times article – see here for the prior post) Wal-Mart stock closed at $62.45. See here for a recent Forbes column titled “Mexican Bribery Gave Me A Chance To Make Money In Wal-Mart” in which the contributor states as follows. “My 30 years of experience in the markets has repeatedly shown to me that whenever a company is accused of violations of FCPA, headlines are always scary, but in the end, the downdraft in the stock invariably becomes a buying opportunity.”
In other Wal-Mart news, as highlighted in this prior post, Elijah Cummings (D-MD), Ranking Member, House Committee on Oversight and Government Reform, and Henry Waxman (D-CA), Ranking Member, House Committee on Energy and Commerce have taken a keen interest in Wal-Mart’s potential FCPA exposure. Yesterday, the Congressmen sent this letter to Wal-Mart CEO Michael Dukes in which they state, among other things, that “we have obtained hundreds of internal documents relating to the Wal-Mart bribery allegations.”
The Shadow Regulatory State
In this previous post, I called for the abolition of non-prosecution and deferred prosecution agreements in the FCPA context. I noted how use of NPAs and DPAs to resolve alleged corporate criminal liability in the FCPA context present two distinct, yet equally problematic public policy issues and highlighted other critiques of NPAs and DPAs as well.
This recent report titled “The Shadow Regulatory State: The Rise of Deferred Prosecution Agreements” by James Copland (Senior Fellow, Manhattan Institute for Policy Research) caught my eye. Copland states as follows.
“… [P]rosecutors’ virtually unchecked powers under DPAs and NPAs threaten our constitutional framework. To be sure, prosecutors are acting upon duly enacted laws, but federal criminal provisions are often vague or ambiguous, and the fact that prosecutors and large corporations alike feel obliged to reach agreement, rather than follow an orderly regulatory process and litigate disagreements in court, denies the judiciary an opportunity to clarify the boundaries of such laws. Instead, the laws come to mean what the prosecutors say they mean—and companies do what the prosecutors say they must. Federal prosecutors are thus assuming the role of judge (interpreting the law) and of legislature (setting broad policy choices about industry conduct), substantially eroding the separation of powers. That such discretion is often delegated to private contractors with sweeping powers—namely, corporate monitors—makes the denial of justice even graver.”
Save the Date
I am pleased to be participating in this June 5th program sponsored by The American Bar Association Criminal Justice Section and the ABA Center for Continuing Legal Education in cooperation with Dorsey & Whitney & LLP, and Pepper Hamilton, LLP. Titled “The New Era of FCPA Enforcement and the Collapse of the Africa Sting Cases: Time to Reevaluate?” the program will “evaluate the impact of Africa Sting cases in view of key New Era trends, calls for FCPA reform, and a reevaluation of the prosecution standards utilized by the DOJ and the SEC in enforcing statutes.” Panelists include DOJ, SEC, and OECD representatives, Stanley Sporkin and noted FCPA practitioners including Greg Andres (former DOJ who testified on behalf of the DOJ at the November 2010 Senate and June 2011 House FCPA hearings).
Wynn-Okada
Remember that Wynn-Okada dispute? (See here, here, here, and here for the prior posts).
Here is an update from Vegas Inc.
There’s An App For That
Click 4 Compliance recently launched “C4C Mobile Compliance Officer App” (see here). In a release (here) the company says the free mobile app “places practical anti-corruption compliance tips (including the FCPA and UK Bribery Act) in the hands of your company’s workforce and partners.”
*****
It’s an FCPA world – a good weekend to all.
Wal-Mart And FCPA Reform
A hot topic of late is what impact Wal-Mart’s FCPA scrutiny will have on FCPA reform efforts.
Last week, in an editorial (here) USA TODAY stated as follows. “Supporters of weakening the act argue that the Justice Department has become too powerful and arbitrary. Some Chamber proposals, such as clearer enforcement guidelines, are relatively non-controversial. But others would seriously undermine the law. The most troublesome would give companies an automatic defense merely for implementing internal compliance programs to prevent and police bribery. The proposal would amount to giving companies a get-out-of-jail-free card. It’s not hard to imagine corporations drawing up a set of cookie-cutter guidelines designed to meet the letter of the law, which might or might not reflect their commitment to thwarting corruption.”
[Dear USA TODAY Editorial Board, as noted in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here) an FCPA compliance defense would not eliminate corporate criminal liability under the FCPA or reward “fig leaf” or “purely paper” compliance programs. A compliance defense would not apply to corrupt business organizations, activity engaged in or condoned by executive officers, or activity by any employee if it occurred in the absence of preexisting compliance policies and procedures. A growing chorus of former Department of Justice officials, including those who used to enforce the FCPA, support an FCPA compliance defense and a compliance defense will better incentivize more robust corporate compliance, reduce improper conduct, and thus best advance the FCPA’s objective of reducing bribery. As noted in this prior post, that’s not weakening the FCPA, that is strengthening the FCPA and best advancing its objective of reducing bribery.]
In an opposing view (here) also published by USA TODAY, former U.S. Attorney General Michael Mukasey (who represents the U.S. Chamber Institute for Legal Reform with regard to the Foreign Corrupt Practices Act) stated as follows. “Some suggest that increased FCPA enforcement has proved the law’s utility without the need for changes. But the opposite is true: Aggressive enforcement has alerted business and the courts alike to its flaws. That is why clarifying the FCPA has drawn bipartisan support.”
[I agree that high-profile instances of FCPA scrutiny such as News Corp.’s and Wal-Mart’s has shined a much needed light on FCPA enforcement and caused those who do not ponder FCPA issues every day to take notice. See here and here for prior posts. And indeed, Mukasey is right, as noted in this previous post, certain aspects of FCPA reform share bipartisan support.]
This Wall Street Journal Corruption Currents post by Samuel Rubenfeld titled “Wal-Mart Bribery Allegations Stir Up FCPA Debate Anew” contains the views of many including a statement I liked from Ian Koski, a spokesman for Sen. Chris Coons (D., Del. who has been open to amending the FCPA) that the Wal-Mart investigation is ongoing and that the senator wouldn’t decide legislative policy based on a news story.
In this post Tom Fox (FCPA Compliance and Ethics Blog) said that Wal-Mart’s FCPA scrutiny “will sound the death knell for any efforts to amend” the FCPA. Fox also penned a guest post on the FCPA Blog (here) titled “How Wal-Mart Killed The Compliance Defense.” Also on the FCPA Blog, (here) Professor Andy Spalding penned a post titled “The Good Faith Compliance Defense, Unscathed.” Professor Peter Henning, writing on the New York Times DealBook page (here), stated as follows. “The investigation of Wal-Mart has brought the Foreign Corrupt Practices Act to the attention of the public in a way not seen since the 1970s scandals that led to its adoption. Congress may find it politically impossible to adopt changes to the statute that would arguably make it more difficult to pursue cases as long as the allegations of foreign bribery by a leading American company remain in the headlines.” Likewise, Michael Volkov (Corruption, Crime and Compliance Blog) stated (here) that “Congress is not going to amend the FCPA anytime soon, and especially not in an election year” and yesterday he stated (here) that “FCPA reform is dead — not just for this year but for years to come.”
What to make of all this?
For starters, let’s observe what I submit are facts. The reason Wal-Mart has dominated the news cycle the past few weeks is not because the company is under FCPA scrutiny, this was known in December 2011 when Wal-Mart disclosed its FCPA scrutiny, becoming one of approximately 100 companies known to be under FCPA investigation. Rather, the reason Wal-Mart has dominated the news is because of how the company acted, or failed to act, since learning of potential FCPA issues in approximately 2005. This is a corporate governance issue, not an FCPA issue, and thus should not impact limited and sensible FCPA reform.
However, many people, including politicians who are ultimately responsible for reform, are unlikely to make this critical distinction and thus the recent news regarding Wal-Mart could impact FCPA reform.
Exhibit A and B in the politicization of FCPA reform are nearly identical letters here and here from Elijah Cummings (Ranking Member of the House Committee on Oversight and Government Reform) and Henry Waxman (Ranking Member of the House Committee on Energy and Commerce) to the Chairman of the Board of Directors of the Retail Industry Leaders Association and the President of the U.S. Chamber of Commerce. The letters state as follows. “We are concerned about the role that Wal-Mart officials may have played in the Chamber’s Institute for Legal Reform. It would appear to be a conflict of interest for Wal-Mart officials to advise on ways to weaken the Foreign Corrupt Practices Act at a time when the leadership of the company was apparently aware of corporate conduct that may have violated the law.”
Regardless of any impact Wal-Mart’s FCPA scrutiny may have on FCPA reform, FCPA reform was unlikely to happen this year even before the recent coverage of Wal-Mart. When the DOJ in November 2011 promised FCPA guidance in 2012 (see here for the prior post), this forestalled introduction of an actual FCPA reform bill. Guidance has still not been released and when it is, there is likely to be an absorption period that flows into the election season.
Honestly debating and considering changes to a statute titled the “Foreign Corrupt Practices Act’ is a political hot potato. It always has been and will always be. For instance, several reform bills in the 1980’s sought to change the name of the law to the “Business Accounting and Foreign Trade Simplification Act” so that an honest and considered debate could occur.
Certain FCPA amendments occurred in 1998, but the last period of major substantive FCPA reform occurred in the 1980’s. Those reform efforts took approximately eight years.
FCPA reform is not dead, nor should it be. But it is likely going on a summer vacation. For more on my views on FCPA reform see this recent video (with many thanks to Levick Strategic Communications for the opportunity).
I conclude this post with guiding words from key players during the FCPA reform debates in the 1980’s.
In 1981, Senator Alfonse D’Amato opened Senate hearings on a bill to amend the FCPA. He stated that the bill “provides us with a good opportunity to assess the effect of recently enacted legislation and its implementation.” Senator D’Amato noted as follows. “The discussion which takes place during these hearings is not a debate between those who oppose bribery and those who support it. I see the major issue before us to be whether the law, including both its antibribery and accounting provisions, is the best approach, or whether it has created unnecessary costs and burdens out of proportion to the purposes for which it was enacted, and whether it serves our national interests.”
In an opening statement during Senate hearings, Senator John Chafee, a leader in the FCPA reform movement stated: “We’ve learned a great deal about the Foreign Corrupt Practices Act in the last three years. We’ve learned that the best of intentions can go awry and create confusion and great cost to our economy.” During the hearing, Senator Chafee further stated as follows: “Critics have attempted to characterize my bill as a signal to U.S. companies that they can return to the ‘bad old days’ of foreign bribery. That is not my intent, nor should it be the signal. I abhor bribery, whether domestic or foreign, but I also dislike confusion. Thus, my bill will eliminate uncertainty while maintaining strong prohibitions against bribery. The ambiguities and murkiness of the bill’s language have caused U.S. companies to withdraw from legitimate markets and contributed to the decline in the U.S. share of world exports. We need to end this confusion.”
During Senate hearings, Senator D’Amato also noted as follows: “The thing that bothers me about this kind of a debate is that we tend to posture this thing as if somebody were for or against bribery. I think it is important to state for the record that bribery of any foreign official by any U.S. concern is bad for our national health, and it is something that we have got to stop, we have got to deal with, and we have, I think, gone a long way with the FCPA. What we proposed to do is to simplify that law and to make it workable so that we can set that standard in concrete from now on and not have the abuses that occurred prior to 1977, but not by stopping exports, but by stopping bribery. That is the objective.” Senator D’Amato further stated as follows. “I think it is very important that in the committee’s work that we not create the attitude that this committee is making it easier for businesses to engage in illegal activity. That has, in fact, been suggested, not only by our distinguished colleague from Wisconsin [Senator Proxmire, a Senate leader in enactment of the FCPA who generally opposed the reform efforts], but also by certain journalists, who are questioning the need for proposed changes. I think that rather than hampering prosecution of illegal acts, [the reform bill at issue] would clarify and make possible just prosecution of those who engage in bribery. It would eliminate any ‘gray area’ by clearly spelling out the limits of the law.”
During Senate hearings, Senator John Heinz stated as follows. “… There are many people that are extremist, and there are others who get carried away by their enthusiasm who are going to argue that even if we change the provisions in the present act, that are unnecessary or ambiguous or uncertain, that even though we are not doing so, we are legalizing bribery. That strikes me as the worst kind of demagoguery, because it implies that everything that Congress has done in the past is perfect. And does anybody believe that?”
During the Senate hearing, William Satterwhite (Senior VP, General Counsel and Chief Legal Officer of Enserch Corp.) testified. He began his testimony as follows: “Before I begin my comments, I would like to state for the record, Enserch Corp. is not in favor of bribery. It is a sad commentary on the political atmosphere surrounding this legislation that those who support the bill feel compelled to make clear that they do not condone corruption.”
My favorite quote from the FCPA reform debates of the 1980’s and one that rings true today is from William Brock (U.S. Trade Representative) who observed, during a 1982 FCPA reform hearing, as follows. “Just because the Foreign Corrupt Practices Act spotlights a sensitive subject, some people wish to turn a ‘blind eye’ to its shortcomings rather than risk being accused of being ‘soft on bribery.’ That is too easy a way out. Retreating from controversy will not cure the law’s deficiencies. [… ] Is there any U.S. law that ought to be above such review and clarification – especially one as complex as the FCPA.”
It’s An FCPA World
For the second time in the last several months (News Corp in July was the other example), the Foreign Corrupt Practices Act was the dominant news story around the world. As a friend stated mid-day, it really is an FCPA world.
Today’s post will be a short post, but will keep you informed on Wal-Mart related developments.
The company’s stock dropped approximately 4.7% in the first day of trading after the New York Times investigative piece from the weekend. See here for the prior post discussing the Times article and here for additional analysis.
Congress is demanding answers. In this letter to Wal-Mart CEO Michael Dukes, Elijah Cummings (D-MD), Ranking Member, House Committee on Oversight and Government Reform, and Henry Waxman (D-CA), Ranking Member, House Committee on Energy and Commerce state “we are initiating an investigation into [the matters discussed in the New York Times article] and request a meeting with company officials who can respond to these allegations no later than April 27.”
Plaintiff law firms are also already demanding answers. See here, here, and here.
Others – just like in the News Corp. situation from last summer – are using Wal-Mart’s FCPA scrutiny to further their anti-FCPA reform positions – see here (“while Wal-Mart’s largest subsidiary spent millions of dollars systematically bribing Mexican officials, the company back home has been working, through big business groups like the U.S. Chamber of Commerce, to weaken the Foreign Corrupt Practices Act”); while others predict, wrongly in my estimation, that Wal-Mart’s FCPA scrutiny “will sound the death knell for any efforts to amend the Foreign Corrupt Practices Act” (see here).
It’s an FCPA world.
Friday Roundup
The Chamber and others weigh in on the DOJ’s promised FCPA guidance, a re-run worth watching, the DOJ dismisses its FCPA case against defunct Cinergy Telecommunications, this week’s FCPA disclosure, a World Bank debarment, and reflecting on this “new era” of FCPA enforcement. It’s all here in a souped-up version of the Friday roundup.
Guidance
The conventional wisdom is that when the DOJ announced in November 2011 (see here for the prior post) that it would be issuing FCPA guidance in 2012, that this stalled introduction of an FCPA reform bill. The current conversation thus seems to be focused on DOJ’s promised guidance.
This prior post highlighted how Senator Charles Grassley is curious about DOJ’s guidance and this prior post highlighted how Senators Amy Klobuchar and Chris Coons are as well.
Earlier this week, the Chamber of Commerce (and approximately 30 other trade associations or councils ranging from the American Gaming Association, the Financial Services Roundtable, the Poultry Federation, and the West Virginia Bankers Association) sent a letter (here) to Assistant Attorney General Lanny Breuer and SEC Director of Enforcement Robert Khuzami titled “Guidance Concerning the Foreign Corrupt Practices Act.”
The letter begins as follows. “On behalf of the more than three million businesses and organizations whose interests we represent, we the undersigned organizations, write to request that this guidance address several issues and questions of significant concern to businesses seeking in good faith to comply with the FCPA. Detailed, authoritative guidance on these matters will enhance companies’ compliance with the FCPA by clarifying the “rules of the road” and by mitigating the significant interpretive challenges that companies face when applying the text of the statute to complex real-world circumstances.”
Topics addressed in the letter include: “definitions of ‘foreign official’ and ‘instrumentality'”; “consideration of compliance programs in enforcement decisions”; “parent-subsidiary liability”; “successor liability”; “de minimis gifts and hospitality”; “mens rea standard for corporate criminal liability”; and “declination issues.”
In this previous post regarding the DOJ’s promised guidance I commented that while a welcome development, DOJ’s promise of FCPA guidance in 2012 will not cure many of the issues that are being debated in good faith during this new era of FCPA enforcement. Furthermore, I expect DOJ’s guidance to be little more than a compilation in one document of information that is already in the public domain for those who know where to look. The Chamber letter similarly states as follows concerning compliance programs. “If the forthcoming guidance on this issue consists merely of a recitation in summary form of specific corporate compliance programs that have been adopted pursuant to deferred prosecution agreements, non-prosecution agreements or SEC settlements, the marginal utility of such guidance to the cause of FCPA compliance in the business community will be limited.”
Whenever released and whatever it says, the DOJ’s guidance will be merely that – guidance. What the FCPA needs is not guidance, but limited structural reforms (such as a compliance defense) as well as a change in DOJ policy (such as elimination of non-prosecution and deferred prosecution agreements).
A Re-Run Worth Watching
If you missed “The FCPA Compliance: Yes Or No” debate between Howard Sklar and I earlier this week on Securities Docket, here is the audio replay (approximately 70 minutes) along with the presentation slides. At the end of the presentation participants were asked to vote “yes” or “no” and the vote tally was 68% “yes” 32% “no.” Many thanks to Bruce Carton at Securities Docket for hosting.
Cinergy Telecommunications
In July 2011, Cinergy Telecommunications was added to the Haiti Teleco enforcement action (see here for the prior post). In a superceding indictment, the privately-held telecommunications company incorporated in Florida was charged
with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering. In addition, Washington Vasconez Cruz (the president of Cinergy) was also charged as was Amadeus Richers (a former director of Cinergy). As noted in this January post by Samuel Rubenfeld (Wall Street Journal Corruption Currents) in a second superceding indictment Cecilia Zurita (a former vice president of Cinergy as well as Cruz’s wife) was also added to the case.
Earlier this week, the DOJ moved to dismiss (see here) its case against Cinergy. The motion states as follows. “The government has recently learned that defendant Cinergy Telecommunications, Inc. is a non-operational entity that effectively exists only on paper for the benefit of two fugitive defendants, Washington Vasconez Cruz and Cecilia Zurita. For several years, these defendants took actions making it appear as though Cinergy was an on-going operational company.” The motion states that “defense counsel recently confirmed that Cinergy is in fact now non-operational, has no employees, and has no assets of any real value.” The motion concludes as follows. “In light of persuasive information the government has developed that Cinergy no longer exists in any real sense and that it was portrayed as existing at least in part to further fugitive defendants’ litigation strategy, the government in its discretion and under the circumstances presented has elected not to proceed with a trial against Cinergy.”
Joel Hirschhorn (here – Hirschhorn & Bieber P.A.) represents Cinergy as well as certain individual defendants in the case.
This Week’s FCPA Disclosure
In this prior post, I commented (somewhat tongue-in-cheek) that every week another company seems to be disclosing FCPA scrutiny. So far so good. This week’s disclosure is from Cobalt International Energy which disclosed as follows in its recent annual report.
“In connection with entering into our RSAs for Blocks 9 and 21 offshore Angola, two Angolan-based E&P companies were assigned as part of the contractor group by the Angolan government. We had not worked with either of these companies in the past, and, therefore, our familiarity with these companies was limited. In the fall of 2010, we were made aware of allegations of a connection between senior Angolan government officials and one of these companies, Nazaki Oil and Gáz, S.A. (“Nazaki”), which is a full paying member of the contractor group. Nazaki has repeatedly denied the allegations in writing. In March 2011, the SEC commenced an informal inquiry into these allegations. To avoid non-overlapping information requests, we voluntarily contacted the U.S. Department of Justice (“DOJ”) with respect to the SEC’s informal request and offered to respond to any requests the DOJ may have. Since such time, we have been complying with all requests from the SEC and DOJ with respect to their inquiry. In November 2011, a formal order of investigation was issued by the SEC related to our operations in Angola. We are fully cooperating with the SEC and DOJ investigations, have conducted an extensive investigation into these allegations and believe that our activities in Angola have complied with all laws, including the FCPA. We cannot provide any assurance regarding the duration, scope, developments in, results of or consequences of these investigations.”
World Bank Debarment
Earlier this week, the World Bank announced (here) “debarment of Alstom Hydro France and Alstom Network Schweiz AG (Switzerland) – in addition to their affiliates – for a period of three years following Alstom’s acknowledgment of misconduct in relation to a Bank-financed hydropower project.” According to the release, “in 2002, Alstom made an improper payment of €110,000, to an entity controlled by a former senior government official for consultancy services in relation to the World Bank-financed Zambia Power Rehabilitation Project.” The release further states as follows. “The debarment is part of a Negotiated Resolution Agreement between Alstom and the World Bank which also includes a restitution payment by the two companies totaling approximately $9.5 million. The debarment can be reduced to 21 months – with enhanced oversight – if the companies comply with all conditions of the agreement.”
What to make of the debarment based on conduct 10 years ago is a bit difficult. This Wall Street Journal Story by Dionne Searcey and David Crawford states as follows. “There was some confusion about the company’s official response. Early Wednesday, Alstom spokesman Patrick Bessy said Alstom didn’t admit guilt in its settlement with the World Bank. “The World Bank made assumptions which were not proved,” he said, adding that because the matter was so old, “Alstom was unable to find evidence it could present in its own defense so we decided to settle.” Mr. Bessy said the blacklisting won’t affect Alstom Group, which has had only one project that involved World Bank funding since 2007. He said the company has several other subsidiaries engaged in hydroelectric projects that aren’t affected by the ban and will be eligible for World Bank funding of their projects. In all only about 5% of Alstom sales are in the hydroelectric field, Mr. Bessy said. In a later statement, the company rejected Mr. Bessy’s comments: “Alstom’s general counsel … stated that any comments that were previously made by Alstom are not valid.”
Reflecting On The New Era of FCPA Enforcement
As discussed in this previous post, in November 2010 Assistant Attorney General Lanny Breuer declared as follows. “We are in a new era of FCPA enforcement’ and we are here to stay.” Thomas Gorman (Dorsey Whitney) runs the always informative SEC Actions blog – see here. In this post, titled “The New Era of FCPA Enforcement: A Time For Reflection” Gorman hit the ball out of the park when he states as follows.
“Perhaps now is a good time to stop and reflect on what the courts and jurors have said about the “new era” of FCPA enforcement. Surely that era should be more than a dazzling array of ever increasing monetary payments by corporations or actions against individuals built on questionable blue collar tactics. Surely it should be more than business organizations spending ever increasing sums to conduct far reaching and perhaps at times unnecessary investigations at huge expense in a effort to win cooperation credit. Surely it should be more than brining increasing numbers of charges against individuals and demanding longer and longer prison terms. Perhaps now is the time to craft meaningful reform to the Act and enforcement policy to ensure clearer guidance and a more balanced application of the statutes to ensure that the laudable goals of the statute in a fair and balanced manner in the future. That would truly be a “new era” of FCPA enforcement.”
For additional reflections on this “new era” of FCPA enforcement, see this piece I published with the ABA Global Anti-Corruption Task Force.
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A good weekend to all.