Category: FCPA Inc.

The 100th Edition Of The Friday Roundup

Scrutiny alerts and updates, a first, blunt, and quotable.   It’s all here in this – the 100th edition – of the Friday roundup.

[I hope the Friday roundup is a value added end to your work week.  The Friday roundup alone represents several hours of work by highlighting recent FCPA and related news and developments not otherwise covered Monday – Thursday on FCPA Professor.  Ask yourself:  do you get your FCPA from FCPA Professor? If the answer is yes, you can help support this free website here]

Scrutiny Alerts and Updates

Wal-Mart

During its third quarter earnings call yesterday, Wal-Mart disclosed $69 million in “FCPA and compliance related expenses” in the quarter.  According to the company “approximately $43.0 million of these expenses represented costs incurred for the ongoing inquiries and investigations and approximately $26.0 million is related to our global compliance program and organizational enhancements.”

Doing the math, $69 million in the third quarter is approximately $1.06 million per working day.  As noted here, the figure for Q2 was approximately $1.26 million per working day and as noted here the figure for Q1 was approximately $1.16 million per working day.  For more on Wal-Mart’s pre-enforcement action professional fees and expenses, see this prior post.

For the fourth quarter, Wal-Mart estimated $75 – $80 million in expenses related to FCPA matters.

JPMorgan

The NY Times returns (here) to the JPMorgan story it first reported in August (see here for the prior post).  The article states:

“To promote its standing in China, JPMorgan Chase turned to a seemingly obscure consulting firm [Fullmark Consultants] run by a 32-year-old executive named Lily Chang.  Ms. Chang’s firm, which received a $75,000-a-month contract from JPMorgan, appeared to have only two employees. And on the surface, Ms. Chang lacked the influence and public name recognition needed to unlock business for the bank. But what was known to JPMorgan executives in Hong Kong, and some executives at other major companies, was that “Lily Chang” was not her real name. It was an alias for Wen Ruchun, the only daughter of Wen Jiabao, who at the time was China’s prime minister, with oversight of the economy and its financial institutions.

[…]

Now, United States authorities are scrutinizing JPMorgan’s ties to Ms. Wen, whose alias was government approved, as part of a wider bribery investigation into whether the bank swapped contracts and jobs for business deals with state-owned Chinese companies, according to the documents and interviews. The bank, which is cooperating with the inquiries and conducting its own internal review, has not been accused of any wrongdoing.  The investigation began with an examination of the bank’s decision to hire the daughter of a Chinese railway official and the son of a former banking regulator who is now the chairman of a state-controlled financial conglomerate.

[…]

Executives at JPMorgan’s headquarters in New York did not appear to be involved in retaining Fullmark, a decision that seemed to have fallen to executives in Hong Kong. And the documents reviewed by The Times do not identify a concrete link between the bank’s decision to hire children of Chinese officials and its ability to secure coveted business deals, a connection that authorities would probably need to demonstrate that the bank violated anti-bribery laws.”

Park-Ohio Holdings Corp.

The diversified manufacturing services and products holding company (here) disclosed as follows in a recent quarterly filing:

“In August 2013, the Company received a subpoena from the staff of the SEC in connection with the staff’s investigation of a third party. At that time, the Company also learned that the Department of Justice (DOJ) is conducting a criminal investigation of the third party. In connection with responding to the staff’s subpoena, the Company disclosed to the staff of the SEC that, in November 2007, the third party participated in a payment on behalf of the Company to a foreign tax official that implicates the Foreign Corrupt Practices Act (FCPA). The Board of Directors of the Company has formed a special committee to review the Company’s transactions with the third party and to make any recommendations to the Board of Directors with respect thereto. The Company intends to cooperate fully with the SEC and the DOJ in connection with their investigations of the third party and with the SEC in light of the Company’s disclosure. The Company is unable to predict the outcome or impact of the special committee’s investigation or the length, scope or results of the SEC’s review or the impact, if any, on its results of operations.”

Wynn Resorts

This previous Friday roundup highlighted the company’s disclosure that the SEC has ended its investigation of the company concerning a $135 million donation to the University of Macau.  In this recent filing, Wynn states as follows concerning a related DOJ investigation.

“[The DOJ] has been conducting a criminal investigation into Wynn Resorts’ donation to the University of Macau […]. Wynn Resorts has not received any target letter or subpoena in connection with such an investigation.  Wynn Resorts intends to cooperate fully with the government in response to any inquiry related to the donation to the University of Macau.”

SEC’s First Individual DPA

When the SEC announced in January 2010 (see here for the prior post) a series of measures, including non-prosecution and deferred prosecution agreements, “to further strengthen its enforcement program by encouraging greater cooperation from individuals and companies in the agency’s investigations and enforcement actions,” I called the development a blow to those who prefer government law enforcement agencies to enforce a law in an open, transparent matter and in the context of an adversary proceeding.  Not that there was much judicial scrutiny of SEC enforcement prior to January 2010 (largely on account of the SEC’s then neither admit nor deny settlement policy), but the new measures, I noted, would lead to even less judicial scrutiny.

Earlier this week, the SEC announced “a [five year] deferred prosecution agreement with a former hedge fund administrator who helped the agency take action against a hedge fund manager who stole investor assets.”  According to the SEC, the DPA – outside the context of the FCPA – is the SEC’s “first with an individual” and the SEC’s release further states:

“Deferred prosecution agreements (DPAs) encourage individuals and companies to provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation.  In return, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings.”

Obviously the above statement is an opinion statement, not a factual statement.

As highlighted in this prior post, the FCPA Guidance indicated that the DOJ has in the past used non-public non-prosecution against individuals in the FCPA context.  Despite claims by the DOJ that its FCPA enforcement program is transparent, my attempts to learn more about these secret FCPA NPA’s with individuals was unsuccessful.

Blunt

DOJ FCPA enforcement attorneys have publicly stated that among the many ways they learn of conduct which could implicate the FCPA is by reading the newspaper.

If so, this recent article in the Miami Herald may generate some interest.  In the article concerning the satellite telephone business in Cuba, a “Miami Man” states that “he installs each system in Cuba for $3,500 to $4,200 — cash paid in South Florida, with part of the mark up going to bribes on the island. The costs are usually paid by U.S. relatives of the recipients.”

Quotable

From a recent poll regarding corruption in Africa: “corruption is a national sport every day at the direction of customs officials” (see here).

An extensive interview with U.K. Serious Fraud Director David Green (“DG”) in Fraud Magazine (“FM”) in which he discusses:  corporate criminal liability, facilitation payments, Bribery Act Inc., voluntary disclosure and DPAs.  Relevant excerpts include:

FM: What current changes, if any, to the legal system and or legislation would make the SFO more efficient?

DG: To our effectiveness and our reach, I would very much like the test for corporate criminal liability to be looked at again. As you know, in this country, it is extremely difficult to convict a company of an offence because the prosecution has to show that the controlling minds of the company — somebody at the board level — were complicit in the criminality you are trying to prove.  I think that bar is too high, and is a very unrealistic test — not least because I think anyone will agree that if you’re looking into allegations of corporate misconduct spookily the e-mail trail tends to dry up at a fairly junior level.  Where it can be shown that the company had really profited from the criminality of its employees then I think there is a sound case for expanding the ambit of section 7 of the U.K. Bribery Act. Section 7 creates the corporate offence of ‘failing to prevent bribery or corruption by an agent or employee’ with a statutory defence that they took all reasonable precautions.  Now why can’t that be extended to cover fraud and offences of dishonesty so the offence would be failing to prevent fraud or offenses of dishonesty by members of your staff? It seems to me absolutely right that a corporation should have criminal liability for that when it has profited from it. Why should a company which has, in the way I’ve explained, been complicit in criminality just throw a few people over the side and sail bravely on? Why shouldn’t it have its ears clipped and marked as a company that has had dishonest employees and benefitted from it?  Another argument is: Well you’d just be punishing a company for negligence. I would say it would be a pretty high degree of negligence when a company acts in that way and benefits from the dishonesty of its employees.

FM: Doesn’t the Bribery Act prejudice British business in that is a bit too harsh in relation to facilitation payments and hospitality payments?

DG: First of all, I don’t buy this argument that complying with the law is going to hold business back. Secondly, facilitation payments have always been illegal. However, it is a question of the public interest as to whether or not they are prosecuted.  What would be a common facilitation payment? A 20-pound note and a bottle of whisky to some [maritime] pilot to take your ship from somewhere to somewhere else in a single payment; the SFO wouldn’t be interested in that. [Maritime pilots will guide ships into ports for hire.] But if it was a course of conduct over a number of years, then, of course, that becomes not just a very small insignificant little bribe but actually a regular payment over time to ensure that you get that business.

FM: What do you say about those medium to small companies who have ignored the preventative measures required by the Bribery Act?

DG: Well, it’s always difficult, isn’t it? On the one hand, I am very conscious that since the enactment of the act there has grown up a Bribery Act industry in London populated by a lot of American and British lawyers, accountants and so-called experts. I even came across a firm the other day that actually offers certificates to companies saying that they are compliant, and I suppose if the company were to land in court they would try to produce this certificate to say, “We can’t be prosecuted because we’ve got a certificate.”  The effect of this is that these so-called experts have scared the pants off of medium and small enterprises. It is really a question of getting some sensible, reasonably priced legal advice to discern their risk areas and put in place basic safeguards. But the idea that the Serious Fraud Office is going after a ticket to Wimbledon or a bottle of Champagne is, and always has been, utter nonsense.  If, on the other hand, we saw a situation in which the entire board and their spouses of a major corporation were put up in London for a week and then given tickets for the men’s finals at Wimbledon with a couple of banquets before, during and afterwards, then that would be very worrying. Throw in first-class airfare and that would become extremely worrying.  But the key to all this in relation to bribery investigations and whether or not we are interested in them has to do with value and importance but also timing, the motive and the effect of it — was it done at a time when some enormously important decision was going down with a view to influencing it? This is fairly common sense; we use a reasonable approach.

FM: Will companies that self-report escape criminal proceedings?

DG: My predecessor had guidance on self-reporting, in which though it did not say it in so many words, was a very clear implication that if you self-reported as a company you would not be prosecuted, and there would be a civil disposal of what you had done. I disagree with that absolutely and fundamentally as a matter of principle because no prosecutor can ever give guarantees in advance. We have no idea what set of facts are going to come in through the door next. So, we have returned to the old guidance, which has always been there; we will apply the Code for the Crown Prosecutors. In other words, in each situation we would see if there’s enough evidence to prosecute. If there is, we consider if it’s in the public interest to prosecute this company. Now if a company were to come in and say, “Look, we have discovered this misconduct. We have conducted a full investigation; here are the results. We are willing for you to investigate it as you wish. We’ve gotten rid of all the people involved in this, we will hand over any illegal profits obtained as a result of this crime.” In such circumstances, one does struggle to think how it would be in the public interest to prosecute such a company. But it is a question of principle here. If you start — and I feel very strongly about this — if you start blurring the boundaries between what people involved in the criminal justice system do then it’s a dangerous path to follow. Prosecutors shouldn’t be doing deals or making offers in advance and defenders shouldn’t be too familiar with prosecutors. We need to stay where we are and within our own divisions. That’s my view.

FM: Could the deferred prosecution arrangement (DPA) be seen as a type of deal?

DG: Well, I think if you looked at the American model of DPAs you might think it could be described as a deal. We’ve adapted it for use in this country to have judicial involvement and scrutiny from the very beginning. The reason for that is to preserve the principle we have in this country, which they don’t have in the States, that sentencing is a matter for the judge. It’s not a matter for some cozy deal between prosecutor and defence.  If we believe a case is appropriate for a DPA we would go before a judge and say, “Judge, these are the charges which we would be minded to bring against these people. However, we think for these reasons it’s an appropriate case for a DPA. Do you agree?”  Now if the judge says, “No, I don’t I think this is a suitable case for a DPA,” we’ll carry on prosecuting. So, it is a transparent process. Ultimately, if a DPA did go ahead there would be a statement of facts read in court. Nothing would be hushed up.  You can’t really go wrong if you’re transparent. Things go wrong in the criminal justice system if anything appears to be opaque. You lose public confidence and you lose the confidence of the people involved.

Professor Ellen Podgor states, in pertinent part, in this New York Times opinion piece:

“If we intend to punish people, shouldn’t we reasonably expect that they knew their actions were crimes?  […]  The accumulation of laws and rules has made it harder to assure that individuals who are punished understood that they were breaking the law.  When the law is clear, and an individual deliberately transgresses the law, punishment serves an important purpose.  Attributing criminality to business-related activities is not always so easy. The line between criminal activities and acceptable business judgments can be fuzzy. The conduct may not have a long biblical history of being offensive, and there may be no posted signs. […]  In the corporate or financial world, multiple individuals may have a finger in a business decision — and some may be unaware that one has breached the law.  Add to this ambiguity in both the law and the corporate world that business-related decisions are often made by individuals who find themselves placed in a forest of regulations and criminal statutes with varying interpretations that even legal scholars can’t agree upon.  Overcriminalization presents unique issues in the white collar and business arena.  There are thousands of criminal statutes scattered throughout the federal code, and there are thousands of regulations with accompanying criminal penalties. The prosecutor’s toolbox also includes overly broad statutes like RICO, mail fraud, wire fraud and offenses like making false statements.   The bottom line is that the government’s power to indict has few restrictions, and overcriminalization provides federal prosecutors with super powers that they can easily abuse.  Congress’s continuous and haphazard adding of criminal statutes and regulations is making it more difficult to assure that individuals who are punished truly understand that they are breaking the law.”

*****

A good weekend to all.

Friday Roundup

That’s just so fringe, where now?, the pulse of FCPA Inc., scrutiny alerts and updates, for the reading stack, and save the date.  It’s all here in the Friday Roundup.

That’s Just So Fringe

Many in the anti-corruption space have latched onto developments in other countries and carried forward the torch of reform.  Just goggle Anna Hazare’s hunger strike in India or discover the wealth of material written about marches and demonstrations in Brazil prior to Brazil’s bribery laws being amended.

Recently there was a march in Washington D.C., protesting, in part, government corruption.  (See here).  Why has there not been similar coverage in the anti-corruption space?  Where are those who otherwise carried forward the torch of reform?  Apparently the reaction is – when it happens here in the U.S. – well, that’s just so fringe.

Where Now?

As DOJ Deputy Assistant Attorney, John Burretta “oversaw the Criminal Division’s Fraud Section, among others, including the Fraud Section’s FCPA Unit.”  He also “supervised the preparation of the DOJ and SEC’s Resource Guide to the U.S. Foreign Corrupt Practices Act, issued in November 2012.”

Like most other DOJ policy leaders and FCPA enforcement attorneys with supervisory powers during this new era of FCPA enforcement, Burretta is now in the private sector as he recently joined Cravath as a partner.  (See here).  According to his Cravath bio, “his practice focuses on investigations and white collar criminal defense, including advising and representing clients in matters related to the FCPA” among other things.

The Pulse of FCPA Inc.

Few FCPA Inc. participants are publicy-traded companies.  Thus, it is often difficult to take the pulse of FCPA Inc. other than anecdotal information.

However, one FCPA Inc. participant that is publicly traded is FTI Consulting.  The company recently disclosed that revenues for the quarter in its relevant business segment increased nearly 2% compared to the prior year “due to higher services revenues primarily for investigations involving the Foreign Corrupt Practices Act and interest rate setting process concerning the London Interbank Offered Rate (“LIBOR”) …”.

It’s only one company, but with few FCPA Inc. datapoints publicly available, it is a relevant datapoint.

Scrutiny Alerts and Updates

Weatherford

Weatherford International recently disclosed as follows concerning its long-running FCPA scrutiny:

“During the quarter ended June 30, 2013, negotiations related to the oil-for-food and FCPA matters progressed to a point where we recognized a liability for a loss contingency that we believe is probable and for which a reasonable estimate can be made.  The Company estimates that the amount of this loss is $153 million and recognized a loss contingency equal to such amount in the quarter ended June 30, 2013.  Since our last 10-Q filing, substantial progress in the negotiations was made, and these negotiations have recently concluded. These negotiations have resulted in agreements with representatives of the DOJ and the SEC enforcement staff relating to terms and total payments to be made to government agencies relating to the oil-for-food and FCPA matters subject in each case to final review and approval by the DOJ and SEC Commission as well as judicial approval.  The agreements would require total payments to government agencies equal to the $153 million loss contingency that the Company recognized in the quarter ended June 30, 2013.  The agreements would also include (1) an agreement under which criminal prosecution for the Company would be deferred for three years and a plea agreement would impose a criminal conviction on one of the Company’s subsidiaries; (2) a requirement to retain, for a period of at least 18 months, an independent monitor responsible to assess the Company’s compliance with the terms of the agreement so as to address and reduce the risk of recurrence of alleged misconduct, after which the Company would continue to evaluate its own compliance program and make periodic reports to the DOJ and SEC; and (3) a requirement to maintain agreed compliance monitoring and reporting systems.  If final settlement terms differ from the agreements we have reached with DOJ and SEC representatives or if necessary approvals are not ultimately obtained, we could become subject to injunctive relief, disgorgement, fines, penalties, sanctions or imposed modifications to business practices that could adversely affect our results of operations.”

A $153 million FCPA settlement amount would be 8th largest of all time based on the current top ten settlement list.

Layne Christensen Co.

Layne Christensen Co. recently disclosed as follows concerning its long-running FCPA scrutiny:

“The Company is engaged in discussions with the DOJ and the SEC regarding a potential negotiated resolution of these matters. The Company believes that it is likely that any settlement will include both the payment of a monetary fine and the disgorgement of any improper benefits. In May 2013, the staff of the SEC orally advised the Company that they calculated the estimated benefits to the Company from allegedly improper payments, plus interest thereon, to be approximately $4.8 million, which amount was accrued by the Company as of April 30, 2013. Based on the results of the Company’s internal investigation, an analysis of the resolution of recent and similar FCPA resolutions, the Company currently estimates a potential settlement range for resolving these matters (including the amount of a monetary penalty and the disgorgement of any improper benefits plus and interest) of $10.4 million to $16.0 million. The Company has increased its reserve for the settlement of these matters from $4.8 million to $10.4 million, representing the low end of this range.  At this time, we can provide no assurances as to whether the Company will be able to settle for an amount equal to its current reserve or within its estimated settlement range or whether the SEC or DOJ will accept voluntary settlement terms that would be acceptable to the Company. Furthermore, the Company cannot currently assess the potential liability that might be incurred if a settlement is not reached and the government was to litigate the matter. As such, based on the information available at this time, any additional liability related to this matter is not reasonably estimable. The Company will continue to evaluate the amount of its liability pending final resolution of the investigation, and any related settlement discussions with the government; the amount of the actual liability for any fines, penalties, disgorgement or interest that may be recorded in connection with a final settlement could be significantly higher than the liability accrued to date.  Other than the indication of the estimated disgorgement amount noted above, the Company has not received any proposed settlement offers from the SEC or DOJ and there can be no assurance that its discussions with the DOJ and SEC will result in a final settlement of any or all of these issues or, if a settlement is reached, the timing of any such settlement or that the terms of any such settlement would not have a material adverse effect on the Company.”

ADM

ADM recently disclosed as follows concerning its long-running FCPA scrutiny.

“The Company has completed its internal review and is engaged in discussions with the DOJ and SEC to resolve this matter. In connection with this review, government agencies could impose civil penalties or criminal fines and/or order that the Company disgorge any profits derived from any contracts involving inappropriate payments. Included in selling, general, and administrative expenses for the nine months ended September 30, 2013 were charges for the Company’s current estimate of potential disgorgement, penalties, and fines that may be paid by the Company in connection with this matter of $54 million. As of September 30, 2013, the estimated loss provision liability of $54 million is included in accrued expenses and other payables in the Company’s consolidated balance sheet. These events have not had, and are not expected to have, a material impact on the Company’s business or financial condition.”

GSK

In my first GSK post over the summer, I posed the question – based on GSK disclosures and public statements – whether GSK is the victim of rogue employee conduct?

According to this U.K. Independent article:

“GlaxoSmithKline, the British drug company at the heart of a bribery investigation in China, is likely to avoid a company-wide charge for  allegedly funneling up to £300m in kickbacks to doctors and government officials.  Instead, police are likely to charge some of its Chinese executives, according to reports citing legal and industry sources.  Such an outcome would see Chinese police drop  claims made in September that corruption was co-ordinated at a company level.  […] The [Chinese] police investigation into GSK is likely to be concluded around the end of November or in December, said a person with direct knowledge of the probe. The sources noted it was difficult to predict what Chinese authorities would ultimately do. But the most likely legal scenario was that they would charge Chinese GSK executives, said the person with direct knowledge of the investigation and two other sources familiar with the matter. The sources declined to be identified because of the sensitivity of the case. Indeed, the Ministry of Public Security had tried to find evidence tying GSK   as a legal entity to the alleged wrongdoing, but it was unlikely authorities would be able to prove its involvement at a corporate level, said the person with direct knowledge of the investigation.” (emphasis added).

Bio-Rad Labs

Bio-Rad recently disclosed that it recorded “an accrued expense of $20 million in connection with the Company’s initial efforts to resolve the previously disclosed investigation of the Company in connection with the United States Foreign Corrupt Practices Act.”

For The Reading Stack

The always informative Miller & Chevalier quarterly update is out.  (See here for the Autumn 2012 FCPA Review).

From an article titled “The ‘Mens Rea’ Component Within the Issue of the Over-Federalization of Crime” by John Baker and William Haun in Engage, a Federalist Society publication.

“Designed to prohibit bribery of foreign officials for any business advantage, the [FCPA’s] breadth allows the federal government to hold businesses liable for actions by rogue agents.  As former U.S. Attorney General Michael Mukasey and Jones Day partner James Dunlop note, this “adds unnecessary uncertainty and opens businesses to massive, largely unavoidable, liability, with few offsetting benefits.”  The statute’s broad language can transgress the intent of Congress.  In discussing the example of Wal-Mart, Professor Mike Koehler has shown that Congress had no desire to apply the Act against “grease payments” to clerical employees, but that the backroom nature of FCPA enforcement gives that congressional limitation uncertain relevance. The reluctance of corporations to go to trial minimizes judicial review of the FCPA’s use. As a result, the FCPA investigations have developed a “prosecutorial common law,” allowing the Department of Justice (DOJ) to impose burdensome compliance costs without having to prove in court that criminal activity has actually occurred or is likely to occur.  Companies spend millions to “comply” with requirements possessing an unknown reach.  In remarks on the FCPA, former U.S. Attorney General Mukasey observed that, given how few FCPA cases actually see a court room, “there is a whole body of law being developed” in prosecutor’s offices through negotiated FCPA settlements with major companies. Even if the settlements are reasonable, as General Mukasey noted, they do not provide any clarity or consistency necessary to “demystify” an ordinary person’s responsibilities under the law.  He noted that DOJ and the business community reached an understanding on some aspects of the FCPA.  Such agreements, however, should not serve as the functional equivalent of legislation.  It is the obligation of Congress to establish clear mens rea requirements for the FCPA and other statutes, not the executive via piecemeal prosecution.”

What’s one takeaway point from the recent Diebold enforcement actions?  According to Richard Smith (Norton Rose Fulbright) in this recent Law360 article:

“The Diebold settlements underscore the need for companies to fully evaluate whether voluntary disclosure is in the company’s best interest. Although U.S. authorities may be willing to reward companies for self-disclosing FCPA issues — indeed, the DOJ specifically stated in the DPA that it credited Diebold for making such a disclosure — the positive credit received is not always clear. The ultimate financial and operational burden on a company may, in any given instance, outweigh credit received.  Based on previous enforcement action settlements, some companies may have assumed that voluntary disclosure assists the company in avoiding the imposition of a compliance monitor. In light of the Diebold settlements, however, companies assessing the option of self-disclosure must consider the real possibility that doing so may not shield them from the increased costs and scrutiny associated with the retention of independent compliance monitors.”

Save The Date

On December 4th in Washington, D.C., George Washington University Law School is hosting a full-day symposium titled “The International Fight Against Corruption: Are the OECD and UN Conventions Achieving their Objectives?”  To learn more about the event, see here.

Once Again, Not The Media’s Finest FCPA Moment

As readers no doubt know, I have my fair share of concerns regarding this new era of Foreign Corrupt Practices Act enforcement.  (See here for my article “The Facade of FCPA Enforcement,” and here for my 2010 Senate testimony, among other things).

Peter Schweizer has concerns about this new era of FCPA enforcement as well.

However, attributing various aspects of FCPA enforcement to the Obama administration is just simply off-base.

That is what Schweizer, author of the new book “Extortion:  How Politicians Extract Your Money, Buy Votes and Line Their Own Pockets,” recently did on CNN’s Lou Dobbs Tonight.  Set forth below is what he said – see here for the video.

DOBBS: The Obama administration has a long history of  rewarding its friends and punishing its political enemies. Joining me now to  explain the administration’s — well, what he calls extortion tactics and  maneuvers, Peter Schweizer, president of the Government Accountability Institute  and author of the explosive new best-seller “Extortion: How Politicians Extract  Your Money, Buy Votes and Line” — of course — “Their Own Pockets.” I added the  “of course.”

Peter, great to have you back with us.

SCHWEIZER:  Thank you, Lou. It’s  great to be on with you.

DOBBS: You know, last night  here, we talked about Congress and the ways in which it is lining its pockets,  doing business, and in fact, institutional corruption is what much of it appears  to be. The executive branch is certainly — certainly in every bit the same  league, and its — its favorite device, you write, is the Foreign Corrupt Practices Act.

What are some — what are some of the companies that it  has attacked with this?

SCHWEIZER: Well, here’s what’s  interesting about the Foreign Corrupt  Practices Act. It was created in 1977. It was actually written by  attorneys at Covington and Burling, which is the law firm that Eric Holder  and a lot of top DOJ people came from.

And for 30  years, Lou, it was pretty much a dormant law. You had on average three cases a  year. When President Obama came into office, it exploded. And what’s concerning  about how this law has been used is it’s been targeted against companies or  entities that the administration deemed to be anti-Obama or not supportive of  his policies.

So over the last several years, you saw  everyone from Koch Industries to News Corp., your parent company, to HP, who’s  headed by a Republican, to Las Vegas Sands, which, of course, is — is largely  owned by a gentleman who’s funneled tens of millions of dollars into Republican  causes…

DOBBS: Sheldon Adelson, the billionaire.

SCHWEIZER: Exactly. And you’ve also seen industries that  were very, very supportive in 2010 of the Republican takeover of Congress,  namely the independent oil and gas industry and the hedge fund industry were  targeted with so-called search — sorry, with sweep letters where they basically  said, We’re going after your industry. And so it’s a major intimidation tool.

DOBBS: An intimidation tool and an intimidation tool to be  used as intimidation often is any  part of life to — to raise money…

SCHWEIZER: Yes.

DOBBS: …  whether it be contributions, whether it is to line the pocket of a specific  friend of this administration, correct?

SCHWEIZER: Yes,  that’s exactly right. And actually, there — there is academic evidence,  statistical studies that have been done that shows that if you are a company or  an individual who gives campaign donations, if your corporate PAC gives campaign  donations to the right people, you basically are going to cut in half the  chances that you are going to have the book thrown at you and face criminal  charges and civil charges.

So there’s evidence that  this works. And the timing is also very, very disconcerting. For example, days  after the 2010 election, and only a couple weeks after President Obama had said  in a radio interview, we’re going to punish our political enemies, that’s when  they send out the industry sweep letters to the independent oil and gas industry  and they said we are now coming after you. And the oil and gas industry in 2010  had basically gone four to one for Republicans as opposed to Democrats so the  timing is very, very suspect as well.

DOBBS: Let me —  let me share with our — with our viewers that quote from — from the President  telling an audience, quote, “We’re going to — we’re going to punish our enemies  and we’re going to reward our friends who stand with us on issues that are  important to us” — a blatant declaration of purpose and intent of which as you  document they seemed to have fulfilled.

By the way I do  want to point out 120 of those investigations under the Foreign Practices Act in  2009 about the same number in 2010 then it drops to about half of that in 2011  and 2012 does that the extortion rate is declining that there is some constraint on the administration?

SCHWEIZER: No there is not any constraint unfortunately the problem is that a lot of companies are  realizing you know what we’re not even going to fight this we’re basically going to cave and give them what they want because even if we end up winning in some sort of trial it’s going to be so costly to us in terms of legal fees, it’s also  going to affect our stock price.

And it needs to be  pointed out Lou that part of the problem part of what’s happen is that this Department of Justice is more politicized than really any I would say since the  Nixon administration. And you don’t have to look any further than the fact that  when Obama was elected in 2008 the Department of Justice was populated at top  with no less than five major campaign bumpers including — including the  attorney general himself Eric Holder. These are people that were raising huge  sums of money for President Obama’s election. That’s unprecedented — that has  not happened before.

DOBBS: Peter thanks so much for  being with us. It’s fascinating and if you want to know how your government  works, Peter Schweizer he’ll tell you in here. His book is “Extortion” it’s  available online at bookstores now. We recommend it to you highly. We need a lot  of people who understand how this government works. Peter thanks for being here  and thanks for your contribution to our knowledge. We’re coming right back.

Where to start?

FCPA enforcement has not exploded under President Obama.  For starters, this is yet another example why having accurate and reliable FCPA enforcement statistics is important because inaccurate and unreliable FCPA enforcement statistics muddy the conversational waters.  (See this prior post for more information on what is an FCPA enforcement action and how the “core” approach yields the most reliable answer).

Sure, if one counts the Africa Sting cases (announced in early 2010 – see here) as 22 enforcement actions instead of 1 core enforcement action, one can make it appear that FCPA enforcement has increased under Obama.  If you look at many FCPA Inc. enforcement statistics and see the “blip” for 2010 this is why.

Sure, if one counts the Siemens individual enforcement actions (announced in 2011 see here) as 15 enforcement actions (the DOJ charged 8 individuals and the SEC charged 7 individuals) instead of 1 core enforcement action, one can make it appear that FCPA enforcement has increased under Obama.  If you look at many FCPA Inc. enforcement statistics, this one core action comprises a meaningful chuck of 2011 FCPA enforcement.

Wholly apart from how one counts enforcement actions is the issue that very little FCPA enforcement activity since January 2009 (when Obama became President) can be attributed to his presidency.

For instance, the Africa Sting enforcement action (a manufactured FCPA case involving FBI agents posing as a representative of a Gabon “foreign official”) was set into motion before Obama became President.  Likewise, the Siemens individual enforcement actions are the direct result of the 2008 Siemens corporate enforcement action.

The most recent Stryker enforcement action from October happened during Obama’s presidency, but that enforcement action was set into motion in 2007 when SEC requested information from the company concerning its FCPA compliance.

Perhaps most importantly, the majority of corporate FCPA enforcement actions are the result of voluntary disclosures, not pro-active enforcement actions!

The above information is not complex nor difficult to learn about … if one wants to.

Another claim from the Schweizer interview is that Sheldon Adelson (the CEO of Las Vegas Sands) has somehow been targeted for FCPA scrutiny because he supports Republican causes.    As highlighted in this previous post, the origins of Las Vegas Sands’s FCPA scrutiny is a civil complaint filed in Nevada state court in 2010 by Steven Jacobs (the former President of Macau Operations for Las Vegas Sands).

Likewise, this information is not complex nor difficult to learn about … if one wants to.

Another claim from the Schweizer interview is that the oil and gas industry has been targeted by the Obama administration.  Sure, if you want to make that claim you could easily reference the 2010 enforcement actions against various oil and gas companies that utilized the services of freight forwarder Panalpina.  (See here – as well as posts under CustomsGate on the search feature of this website).  However, those enforcement actions were the direct result of the 2007 Veto Gray FCPA enforcement action (see here).

Once again, this information is not complex nor difficult to learn about … if one wants to.

In short, while I share Schweizer’s concerns about certain aspects of FCPA enforcement, his attempt to pin this on the Obama administration is completely off-base.

Having a proper perspective on FCPA enforcement statistics (see here for the prior post) is so very important as – once again – demonstrated by the Schweizer CNN interview.

The CNN interview – in providing a platform for an author to articulate completely off-base opinions – was once again not the media’s finest FCPA moment.  (See here and here for other examples).

This And That

Friday Roundup

Cooperation vs. capitulation, quotable, and for the reading stack.  It’s all here in the Friday roundup.

Cooperation vs. Capitulation

A good read (here) from George Terwilliger (Morgan, Lewis &  Bockius and a former Deputy Attorney General) regarding the difference between cooperation vs. capitulation in DOJ inquiries.  All sound advice and worth noting.

However, when the DOJ publicly states that a foreign company declined “to cooperate with the DOJ based on jurisdictional arguments” – as it did in the JGC FCPA enforcement action – the message being sent is that indeed the DOJ expects FCPA counsel to roll over and play dead.  (See here for the prior post).

When the DOJ publicly “warn[s] defendants facing charges under the foreign bribery law against contesting [the] definition [of foreign official]” – as it did in connection with the Carson enforcement action – the message being sent is to capitulate.  (See here for the prior post).

Quotable

Regarding JPMorgan’s recent $920 million to settle civil allegations brought by the SEC and other regulators in connection with a multibillion-dollar trading loss that’s come to be known as the London Whale case, the New York Times DealBook states:

“At first glance, it sounded like a lot of money and, frankly, it sounded as if the S.E.C. had a strong case and had exacted quite a settlement.  But look closer and scrutinize the S.E.C.’s 15-page description of its findings. Then think about this: When the S.E.C. says that JPMorgan is ‘paying’ a record fine, where is the money actually coming from?  The answer: shareholders. The same shareholders who were ostensibly the victims of the scandal that already cost them $6 billion. The victims, if you want to call them that, become victimized twice.”

The article then quotes Columbia University Law Professor John Coffee as follows.

“It is perversely inappropriate. You are adding injury to injury. All we’re doing is punishing the shareholders more,” said John C. Coffee Jr., a professor of securities law at Columbia Law School. “This is a case where the victims are the shareholders.”

If you’re wondering why the S.E.C. sought to settle with “the firm” — in truth, JPMorgan’s shareholders, who don’t have say in the matter — rather than bring cases against the individuals who were responsible for the admitted failures of “the firm,” Mr. Coffee has a skeptical, if not necessarily cynical, theory that bears repeating: “You could have tried to sue some individuals for negligence, but I don’t think those cases they would have easily won.”

Instead, he said, the S.E.C. pursued what he described as “the path of least resistance” by suing the firm itself.

“It is much easier for the S.E.C. to settle for very high penalties which are borne by the shareholders,” he said. “The S.E.C. often desperately needs a victory. This way you can get a victory that you can celebrate.”

But on the merits of the case, the settlement, Mr. Coffee said, begins to look a lot like bribery — to some degree, on both sides. Without a strong case against any individuals, the S.E.C. looks as if it held the firm for ransom. And on the other side, the firm’s senior management appears to have bribed the S.E.C., using shareholder money, not to bring cases against individuals.

“It’s a form of self-dealing,” Mr. Coffee said.”

Reading Stack

See here for the upswing in white collar defense work among large Philadelphia firms.  The article stated, “to promote its white-collar practice, [a firm] recently began showing a corporate training film to potential clients that depicts the travails of a multinational company whose share price crashed after employees were charged with bribery in a foreign jurisdiction.  The takeaway: This is what can happen without good white-collar legal advice.”

For a better way to prosecute corporations, look overseas says Professors Brandon Garrett and David Zaring in the NY Times DealBook.

*****

A good weekend to all.