How Should the District Court in Siriwan Interpret Thailand’s Response to the US Government’s Extradition Request?
Today’s post is from Mike Dearington, a third-year law student at Vanderbilt University Law School. The post concerns the DOJ’s FCPA-related enforcement action against the “foreign officials” in the Gerald and Patricia Green enforcement action. Dearington previously authored guests posts here and here on the action and provides an update below.
*****
How Should the District Court in Siriwan Interpret Thailand’s Response to the US Government’s Extradition Request?
Prosecutors in United States v. Siriwan filed a response last week (here) to address arguments raised by the Siriwans in mid-January. Arguing against dismissal, prosecutors advanced the government’s position that Thailand’s responses to the US extradition request indicate that “Thailand has not asserted sole jurisdiction” over the Siriwans.
To recap, the Siriwan case has garnered significant attention because of the government’s novel prosecution tactic: In 2009, prosecutors charged Juthamas Siriwan, ex-Governor of Tourism Authority of Thailand, as well as her daughter Jittisopa, with money laundering in connection with alleged bribe receipts remitted by Gerald and Patricia Green (see here for the prior FCPA Professor post). The FCPA cannot reach Juthamas Siriwan because she is a foreign official, a limitation pronounced in United States v. Castle. Thus, prosecutors charged Siriwan with money laundering in promotion of bribery in hopes of avoiding the FCPA’s shortcoming—a tactic the defense deemed a “novel and untested . . . theory.”
But prosecutors face a hurdle in what Judge Wu has called “a very important case in an area which is very, very difficult.” Indeed, in a January 2012 hearing on the defendants’ motion to dismiss, Judge Wu expressed reluctance with “the government’s position that [it] can somehow get around” the FCPA by charging defendants under the Money Laundering Control Act (MLCA). But an additional hurdle stands in the way of the court even reaching this money-laundering issue.
That hurdle is the United States’ treaty with Thailand. In the January 2012 hearing, Judge Wu stated:
“I would not feel comfortable reaching final conclusions until I figure out or unless I am informed how the government of Thailand is viewing the situation . . . . [I]f Thailand says it’s not going to extradite, I will find that Thailand has a dominant interest . . . because they will have expressed it to me in no uncertain terms. If they agree to the extradition, then all of the issues are open and that means I’ll have to decide them all.”
In sum, the court suggested it might not reach a decision on whether prosecutors can proceed under an MLCA theory until the court first decides whether Thailand has a dominant interest or not.
To complicate matters, Thailand has neither agreed to, nor rejected, the government’s extradition request. By July 2012, Thailand had made no response to US overtures. Finally, in November 2012, the Acting Thai Attorney General notified prosecutors that it was gathering evidence to charge the Siriwans and “must postpone the extradition process” pursuant to the treaty. And in December 2012, Thailand’s Ministry of Foreign Affairs informed the US Embassy that a “criminal case will be filed” against Siriwan and therefore extradition proceedings “must be postponed . . . .”
Thus, the determinative question at this stage is how the court will interpret Thailand’s response. On one hand, based on the court’s statements in January 2012, if the court views Thailand’s response and postponement of extradition proceedings as an expression of sole jurisdiction and a refusal to extradite, it will probably dismiss the indictment finding that Thailand has a dominant interest. In support of dismissal, the defense argued in January that Thailand has expressed “sovereign interest,” and that Thailand’s position and “official[]” postponement “suggest[] the Thai government feels that extradition and prosecution here ‘may affect the international relation.’”
On the other hand, if the court views Thailand’s response not as a refusal, but as a mere delay, the case will likely remain on the court’s docket at least until the Thai Attorney General’s Office concludes its investigation and prosecution. In the government’s filing last week, prosecutors argued that Thailand has “not made any . . . notification . . . nor has it otherwise signaled that international relations may be impaired . . . by the government’s prosecution.” Of Thailand’s position, prosecutors stated “Thailand asserts no definitive position on any aspect of the government’s extradition request. . . . Thailand’s only affirmative statement is that it is postponing review of the request for the time being.” Prosecutors accused the defense of “tr[ying] again and again to invent and interject into this case a conflict with Thailand that, in fact, does not exist,” and also of “inappropriately asserting self-serving and unfounded claims on behalf of Thailand.”
The court will need to first decide the jurisdiction question before even reaching, if at all, the legitimacy of prosecutors’ MLCA theory. Even if the court ultimately approves the theory, however, the Siriwan proceeding portends the delays and difficulties treaties might pose for the government in seeking to prosecute foreign officials in the future. A hearing on these issues is scheduled for February 21.
Prosecutors Stymied By Thai Attorney General’s Office In Siriwan Case
This post is from Mike Dearington (a third-year law student at Vanderbilt University Law School) who discusses the DOJ’s FCPA-related enforcement action against the “foreign officials” in the Gerald and Patricia Green enforcement action. Dearington previously authored this guest post on the action and provides an update below.
*****
Prosecutors Stymied by Thai Attorney General’s Office in Siriwan Case
Mike Dearington
Take a break from digesting the recently released FCPA guidance to read about happenings in a more remote region of the FCPA world. For the second time since July, the court in United States v. Siriwan has asked the DOJ to show its cards with respect to its extradition request to Thailand.
Siriwan involves charges that Juthamas Siriwan, ex-governor of Tourism Authority of Thailand, and her daughter, Jittisopa, accepted bribes from Hollywood movie executives Gerald and Patricia Green in exchange for contracts. Prosecutors face a substantial hurdle in convincing the court that their novel use of the money‑laundering statute (MLCA) to prosecute the Siriwans is permissible even when the defendants are foreign officials otherwise outside the reach of the FCPA. But based on a November 15 filing (here), prosecutors apparently face a separate hurdle in convincing the court to even reach the merits. This is because, despite the government’s request, Thailand appears unprepared to extradite the Siriwans.
In July, the government reluctantly revealed that it had “not yet received a response from Thailand regarding extradition.” The government has finally received its response. Prosecutors filed a status report this past Thursday updating the court about the government’s struggle to obtain extradition from the Kingdom of Thailand. Appended to the government’s status report is a translated letter from Thavorn Panichpant, Acting Thai Attorney General, stating that Thailand is “in the process of gathering further evidences [sic] before completing the investigation in order to bring both offenders to court to be formally charged. Hence, we must postpone the extradition of both [defendants] as requested by the U.S. Government, according to the Extradition Act . . . .”
The government has interpreted “postpone” as an indication that Thailand may be willing to ultimately extradite the Siriwans. Prosecutors appended a letter from the US Office of Law Enforcement and Intelligence, a unit of the Department of State’s Office of the Legal Adviser, interpreting the Thai Acting Attorney General’s letter, “not as a rejection, nor an assertion of jurisdiction over this matter . . . .” And in its brief, the prosecution argued that Thailand’s response “does not constitute a denial of the government’s extradition request.” Nonetheless, it appears that Thailand’s response poses serious problems for prosecutors.
First, after reading the letter, the court may decline to exercise jurisdiction over the Siriwans in consideration of “the comity of nations.” In Hilton v. Guyot, the Supreme Court in 1895 described comity, not as “a matter of absolute obligation . . . nor of mere courtesy and good will,” but rather as a “recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation . . . .”
Second, the court may decline to exercise jurisdiction based on the international-law principle of “reasonableness.” Section 403 of The Restatement (Third) of Foreign Relations suggests, “[A] state may not exercise jurisdiction to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable.” One of The Restatement’s reasonableness factors is “the extent to which another state may have an interest in regulating the activity,” a factor that weighs heavily in the Siriwans’ favor since the Thai Attorney General’s Office has expressed an interest in prosecuting the Siriwans domestically.
If the court decides to dismiss the action, it will probably operate as a dismissal with prejudice, even if dismissed without prejudice. The statute of limitations for money laundering under § 1956 is five years, and the most recent act of money laundering allegedly occurred in March 2006. Although the Ninth Circuit has yet to rule on the issue, courts in the Central District of California have typically held that, absent a savings clause, a statute of limitations continues to run despite a dismissal without prejudice, as if the original complaint had never been filed. See, e.g., Sperling v. White (C.D. Cal. 1998).
The letter from the Thai Attorney General’s Office could have a substantial impact on the DOJ’s efforts to curb foreign bribery. If the court decides to dismiss the action, not only will prosecutors lose the opportunity to prosecute the Siriwans, but the DOJ will also lose the opportunity to test its novel prosecution theory that would allow it to hold foreign officials accountable for bribery via the money-laundering statute. If the court dismisses the action, we can expect prosecutors to appeal such a dismissal as a final order.
A Purpose Or Parasitic?
Today’s post concerns FCPA-related civil litigation.
Courts have held – the leading case is Lamb v. Phillip Morris Inc., 915 F.2d 1024 (6th Cir. 1990) – that the FCPA does not contain a private right of action. Yet in recent years plaintiffs attorneys have attempted to play a role in this new era of FCPA enforcement by bringing derivative claims against officers and directors, securities class action suits, unfair competition claims, and RICO claims.
If a company resolves an FCPA enforcement action or is the subject of FCPA scrutiny, it is likely that multiple plaintiffs firms will soon thereafter issue press releases announcing an “investigation.”
For instance.
In December 2011 (see here for the prior post) Aon Corporation (“Aon”), one of the largest insurance brokerage firms in the world, agreed to resolve an FCPA enforcement action. Via a DOJ non-prosecution agreement and a settled SEC civil complaint in which the company was not required to admit or deny the SEC’s allegations, Aon agreed to pay approximately $16.3 million. As noted in the prior post, and in this subsequent post, the conduct at issue involved Aon Limited (a subsidiary of Aon based in and organized under the laws of the U.K.) and focused on Costa Rica. There was no fact, suggestion or implication in the resolution documents that anyone at Aon knew of, participated in, or authorized the conduct at issue. The only factual mention of Aon in the resolution documents is that Aon Limited “reported financially through a series of intermediary entities into its U.S.-based issuer parent, Aon Corporation” and elsewhere that “the books and records of Aon Limited were consolidated into those of Aon Corporation.”
Further relevant to the question posed in this post, in resolving the enforcement action, the DOJ acknowledged Aon’s: “extraordinary cooperation” in its investigation; “timely and complete disclosure of facts” relating to the conduct at issue; and “early and extensive remedial efforts” including the “substantial improvements the company has made to its anti-corruption compliance procedures.” Furthermore, in resolving the enforcement action, Aon agreed to a host of FCPA related compliance enhancements.
Nevertheless, along comes this release from a securities class actions firm announcing that it “is investigating the Board of Directors of Aon” and that “the investigation focuses on possible breaches of fiduciary duties by the Board of Directors in relation to allegations that the company violated the Foreign Corrupt Practices Act.”
The release ends of course, as they all do, with the following. “If you own common stock in Aon and wish to obtain additional information, please visit us at [name of securities class action firm]. [Name of firm securities class action firm] also encourages anyone with information regarding Aon’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.”
When a company’s FCPA violations are found to be condoned or encouraged by the board or executive officers, such plaintiff causes of action would seem to be warranted. But these situations are rare in FCPA enforcement actions and from the DOJ and SEC resolution documents in the Aon enforcement action, these circumstances were not present in the Aon matter.
As noted in this prior post, the Chamber of Commerce (in addition to supporting FCPA reform) has blasted FCPA-related civil litigation. And with good reason.
The question needs to be asked – do the vast majority of these plaintiff FCPA related civil suits or “investigations” serve a purpose or are they merely parasitic?
Friday Roundup
From the dockets, an FCPA compliance defense – yes or no, hiring a woman closely associated with a foreign official, and a focus on the FCPA’s “red-haired stepchild” – it’s all here in the Friday Roundup.
From the Dockets
Last month when Judge Lynn Hughes dismissed, at the close of the DOJ’s case, the FCPA charges against John Joseph O’Shea (see here for the prior post), it was only a partial victory as O’Shea still faced non-FCPA charges. Complete victory is imminent as yesterday the DOJ filed a motion to dismiss (here) the remaining charges (conspiracy, money laundering and obstruction) against O’Shea.
In July 2011, Patrick Joseph (a former general director for telecommunications at Haiti Teleco and thus a “foreign official” according to the DOJ) was added to the extensive Haiti Teleco case. (See here for the prior post). Because the FCPA does not apply to bribe recipients, the DOJ charged Joseph with a non-FCPA offense: one count of conspiracy to commit money laundering. Earlier this week, Joseph pleaded guilty to the charges (see here). Pursuant to the plea agreement, Joseph agreed to forfeit approximately $956,000. It is clear from the plea agreement that Joseph was likely an early cooperator in the Haiti Teleco case as the plea agreement refers to a June 2009 proffer agreement with the DOJ. Many of the other individual defendants in the Haiti Teleco case were charged in December 2009 (see here). The plea agreement requires Joseph’s continued cooperation and later this month a trial is to begin as to other defendants in the wide-ranging Haiti Teleco case.
FCPA Compliance Defense – Yes or No?
That is the title of a free webcast on February 21st to be hosted by Bruce Carton’s Securities Docket (see here to sign up and for more information). I will be discussing my paper “Revisiting a Foreign Corrupt Practices Act Compliance Defense”and will argue in favor of Congress creating an FCPA compliance defense. On the other side of the issue, Howard Sklar (Senior Counsel, Recommind and a frequent commentator on FCPA issues at, among other places, his Open Air Blog) will argue that Congress should not include a compliance defense to violations of the FCPA.
Former Employee Alleges FCPA Issues at GE
As previously reported by Chris Matthews at Wall Street Journal Corruption Currents (see here) Khaled Asadi (a dual U.S. and Iraqi citizen) who was previously employed by G.E. Energy (USA) LLC (“GE Energy”) as its Country Executive for Iraq, located in Amman, Jordan, has filed a civil complaint (here) in the Southern District of Texas against G.E. Energy. GE Energy is a wholly-owned subsidiary of General Electric Company (“GE”).
The complaint alleges that G.E. harassed, pressured Asadi to vacate his position, and ultimately terminated him after he informed his supervisor and G.E.’s Ombudsperson “regarding potential violations of the Foreign Corrupt Practices Act committed by G.E. during negotiations for a lucractive, multi-year deal with the Iraqi Ministry of Electricity.” The substance of Asadi’s complaint is that “on or about June of 2010 Mr. Asadi was alerted by a source in the Iraqi Government that GE had hired a woman closely associated with the Senior Deputy Minister of Electricty (Iraq) to curry favor with the Ministry while in negotiation for a Sole Source Joint Venture Contract with the Ministry of Electricity. (According to the complaint, the Joint Venture Agreement between GE and the Ministry of Electricity was signed in Baghdad on December 30, 2010 and that the exclusive materials and repairs provision is estimated to be valued at $250,000,000 for the seven year agreement.)
Hiring friends, family members, etc. of a “foreign official” at the request of the ‘foreign official” has been the basis, in part, for previous FCPA enforcement actions – particularly if the hired individual was not qualified for the position, did not engage in any meaningful work, or was paid an unreasonably high salary. For instance, the 2011 FCPA enforcement action against Tyson Foods (see here for the prior post) involved, in part, allegations that a company subsidiary placed the wives of Mexican “foreign officials” on its payroll and provided them with “a salary and benefits, knowing that the wives did not actually perform any
services” for the company.
In the WSJ Corruption Currents article, a GE spokesman stated as follows. “Mr. Asadi’s termination had absolutely nothing to do with any allegations he is making. Regarding our contracts in Iraq, GE followed all requirements and his allegations are false.”
Travel Act Readings
A few informative Travel Act readings to pass along.
In this article from Thomson Reuters News & Insight, Mike Emmick (Sheppard Mullin Richter & Hampton) calls the Travel Act the “FCPA’s red-haired stepchild” and says that in conducting an internal investigation “there are some additional rocks to flip over” before celebrating findings of no payments to “foreign officials.”
In this article from Bloomberg Law Reports, John Rupp and David Fink (Covington & Burling) note that a “move by U.S. authorities to target commercial bribery robustly is a distinct possibility.” The piece discusses the laws that could be used by U.S. authorities to prosecute foreign commercial bribery.”
*****
A good weekend to all.
Bridgestone Corporation Resolves FCPA (and Antitrust) Enforcement Action
The DOJ announced yesterday (here) that “Bridgestone Corporation [a Japanese company that is the world’s largest manufacturer of tires and rubber products] has agreed to plead guilty and to pay a $28 million criminal fine for its role in conspiracies to rig bids and to make corrupt payments to foreign government officials in Latin America related to the sale of marine hose and other industrial products manufactured by the company.”
Part conspiracy to violate the Sherman Act and part conspiracy to violate the FCPA, the FCPA portion of the criminal information (see here) alleges that Bridgestone conspired with others to “obtain and retain for Bridgestone’s IEPD [International Engineered Products Department] business million of dollars of sales of marine hose and other industrial products by making corrupt payments to foreign government officials in Latin America and elsewhere.” Among other things, the DOJ alleged that Bridgestone: (i) “contracted with local sales agents in many of the Latin American countries where Bridgestone sought IEPD sales;” (ii) developed relationships with employees of the state-owned entities [PEMEX in Mexico is specifically mentioned] with which Bridgestone sought to do business;” (iii) “negotiated with employees of state-owned entities who were ‘foreign officials’ under the FCPA, in Mexico and other Lartin American countries, to make corrupt payments to those foreign officials to secure business for Bridgestone and BIPA [Bridgestone Industrial Products of America Inc. – Bridgestone’s U.S. subsidiary];” (iv) “approved the making of corrupt payments to the foreign officials through the local sales agents to secure business for Bridgestone and BIPA;” (v) paid local sales agents commissions within which BIPA included corrupt payments to be paid to the foreign officials; (vi) “coordinated these corrupt payments in Latin America through Bridgestone’s agents in the United States located in BIPA’s offices, including in Houston, Texas; and (vii) “took steps to conceal these payments, including, in some instances writing ‘Read and Destroy’ on facsimiles that contained information related to the corrupt payments and, in other instances using verbal communication rather than written communication to avoid creating written record.”
As to jurisdiction against Bridgestone, the DOJ asserts 78dd-3 and merely alleges that e-mails or faxes were sent to or from Japan to the U.S. in connection with bribery scheme. Interestingly, in the Africa Sting case, Judge Leon – in the first judicial test of 78dd-3 jurisdiction – seemed to reject the notion that such conduct, in and of itself, satisfied 78dd-3’s “while in the territory of the U.S.” requirement. See here for the prior post.
According to this filing, it would appear that approximately 80% of the $28 million fine is for the FCPA conduct. The guidelines range for the antitrust conduct was $6.7 million – $13.4 million. The guidelines range for the FCPA conduct was $40 million – $80 million.
In other respects, the DOJ release states as follows. “Under the plea agreement, the department recognized Bridgestone’s cooperation with the investigations, including conducting a worldwide internal investigation, voluntarily making employees available for interviews, and collecting, analyzing and providing to the department voluminous evidence and information. In addition, the plea agreement acknowledges Bridgestone’s extensive remediation, including restructuring the relevant part of its business, terminating many of its third-party agents and taking remedial actions with respect to employees responsible for many of the corrupt payments. Under the terms of the plea agreement, Bridgestone has committed to continuing to enhance its compliance program and internal controls. As a result of these mitigating factors, the department agreed to recommend a substantially reduced fine.”
In a press release (here), Bridgestone [BSJ] noted as follows. “Since May 2007, the DOJ has been investigating BSJ’s involvement in international cartel activities relating to the sale of marine hose. The DOJ has also investigated improper payments to government officials through local sales agents focusing primarily on Latin America in connection with certain industrial products. BSJ has cooperated fully in this matter. The DOJ has agreed that BSJ’s cooperation has been ‘extraordinary’. The DOJ has also acknowledged that BSJ has engaged in extensive remediation including dismantling the International Engineered Products Department, closing its Houston office of Bridgestone Industrial Products of America, Inc., terminating many of its third party agents, and taking remedial actions with respect to its employees. BSJ has also decided to withdraw from the marine hose business.” The release further notes that the $28 million fine is a “significant reduction from the applicable sentencing guidelines due to BSJ’s cooperation and remediation efforts.”
Ordinarily, extraordinary cooperation, remediation, etc. allow a company to settle an FCPA enforcement action via a non-prosecution or deferred prosecution agreement. Yet, the two-crime nature of the Bridgestone enforcement action may have prompted the DOJ to insist on a plea agreement to actual criminal charges.
As noted in the DOJ release, in 2008 Misao Hioki, the former general manager of Bridgestone’s international engineered products department, pleaded guilty to antitrust and FCPA conspiracy charges. See here for that prior enforcement action.
Since April, Japanese companies have contributed approximately $248 million to the U.S. Treasury for violating the FCPA (recognizing that the Bridgestone action also contains an antitrust component). See here for the prior JGC Corporation enforcement action. Another Japanese company, Sojitz Corporation, is also reportedly the subject of an FCPA investigation in relation to conduct in Bahrain. See here for the prior post.
You ask, doesn’t Japan have its own “FCPA-like” law? Yes, it does; however there is no criminal liability for corporations under the law. To learn more see here.
Finally, the FCPA Blog reports (here) that Bridgestone has ADRs traded in the U.S. over the counter in the pink sheets. In the past, the SEC has asserted FCPA books and records and internal controls jurisdiction over a company based on such a listing. Given that DOJ and SEC enforcement actions are typically announced on the same day, and given nothing was announced yesterday by the SEC, it is further interesting that the SEC has apparently chosen to sit out the Bridgestone matter.