Checking In On The Carson Case
After Judge James Selna (C.D. Cal.) denied the “foreign official” motion to dismiss challenge in the Carson case in May 2011 (see here for the prior post) , the “foreign official” issue moved to the jury instructions – see here and here for prior posts. Last month, Judge Selna issued an order (here) regarding certain jury instructions. Not surprisingly, Judge Selna carried forward his previous “instrumentality” analysis into the “instrumentality” jury instruction.
As to the “knowledge of status of foreign official,” Judge Selna’s instruction states as follows.
[…..]
“(4) The defendant offered, paid, promised to pay, or authorized the payment of money, or offered, gave, promised to give, or authorized the giving of anything of value to a foreign official;
(5) The payment or gift at issue in element 4 was to (a) a person the defendant knew or believed was a foreign official or (b) any person and the defendant knew that all or a portion of such money or thing of value would be offered, given, or promised (directly or indirectly) to a person the defendant knew or believed to be a foreign official. Belief that an individual was a foreign official does not satisfy this element if the individual was not in fact a foreign official.
(6) The payment or gift at issue was intended for at least one of four purposes: a. To influence any act or decision of a foreign official in his or her official capacity; b. To induce a foreign official to do or omit to do any act in violation of that official’s lawful duty; c. To secure any improper advantage; or d. To induce a foreign official to use his or her influence with a foreign government or department, agency, or instrumentality thereof to affect or influence any act or decision of such government, department, agency, or instrumentality;
[…..]
In his order, Judge Selna stated as follows.
“The Government proposes to add the following paragraph to element 5:”
The government need not prove that the defendant knew the legal definition of “foreign official” under the FCPA or knew that the intended recipient of the payment or gift fell within the legal definition. The defendant need not know in what specific official capacity the intended recipient was acting, but the defendant must have known or believed that the intended recipient had authority to act in a certain manner as specified in element 6.”
The Court does not believe that this language is necessary, and it is potentially confusing.”
*****
As previously noted by the Federal Securities Law Blog (see here), earlier this week, the Carson defendants filed a motion to dismiss (here) and a motion to suppress (here).
In summary, the motion to dismiss states as follows.
“The basis for Defendants’ Motion is that the impact of the cumulative impediments – unique investigation tactics preventing Defendants access to millions of pages of evidence they would normally receive under Rule 16, the lack of a meaningful Brady review, CCI’s loss of crucial documents underlying many of the counts and transactions, the inability of Defendants to obtain foreign documents and subpoena foreign witnesses, CCI instructing its employees not to speak with the defense, many of which are pertinent to the counts and transactions, as well as opaque statutes applied in a novel fashion and failure to provide mandated public awareness – in combination, deprived Defendants’ of their Due Process and Sixth Amendment rights, including the right to present a complete defense, and have prejudiced Defendants to such a severe extent that dismissal is the only appropriate remedy.”
Of note, the motion argues that “from the outset of [Control Component Inc’s] CCI’s internal investigation in August 2007, CCI, through its counsel Steptoe & Johnson LLP (“Steptoe”), worked hand-in-hand with DOJ to investigate the matters at issue in this case.” The motion further argues as follows. “The DOJ and CCI essentially agreed to a private information-sharing arrangement between them. With this agreement in place, CCI selectively disclosed only information CCI believed inculpated Defendants and DOJ did not seek additional information.” According to the motion, “the collaborative nature of DOJ’s and CCI’s relationship provided both parties benefits, to the detriment of Defendants …”.
Under the heading “The FCPA and Congressional Efforts for Clarity” the motion states as follows.
“Portions of the FCPA are obscurely written and a key term at issue in this case is the meaning of “instrumentality,” which is not defined in the statute. This Court’s ruling, which involves a non-exclusive, multiple factor test to determine whether a state-owned-enterprise is an “instrumentality,” shows just how complex and unclear the FCPA is. The FCPA’s history reflects Congress’ recognition of the inherent lack of clarity. Eleven years after Congress enacted the FCPA, Congress adopted amendments via the 1988 Omnibus Trade and Competitiveness Act (“Trade Act”), reflecting an important policy decision: the federal government must make substantial efforts to inform the public about the FCPA. Congress, therefore, required the Attorney General (“AG”) to consult with various federal agencies and departments; obtain the views of interested persons through a public notice and comment procedure; determine based on this combined input “to what extent” FCPA compliance would be enhanced and the business community assisted by further clarification of the FCPA; and then, based on this determination, issue guidelines illustrating allowable and prohibited conduct, clarify Department of Justice’s (“DOJ’s”) enforcement policies and generate precautionary procedures to aide in compliance. The AG’s compliance with Congress’ directive has been minimal.” [For more on this issue, see this prior guest post].
The motion also asserts that CCI “directed employees not to talk with defense counsel.” The motion states, in pertinent part, as follows. “Had the government directly instructed witnesses not to speak with the defense, or even to do so only in the prosecution’s presence, such conduct would violate Defendants’ constitutional right to present a defense.” […] The same constitutional principle should apply here, given CCI cooperated in the government’s investigation, including by sharing witness specific information. […] Steptoe’s actions against [a former Regional Sales Manager in Asia] and possibly others would constitute government intimidation of a witness if this Court finds CCI was an agent of the government, which clearly would violate Defendants’ Fifth and Sixth Amendment rights.”
Elsewhere, the motion states as follows. “Defendants were responsible for oversight of significant international business, yet IMI/CCI provided no FCPA training.”
In summary, the motion to suppress states as follows.
“The basis for this Motion is that CCI and its counsel were de facto public actors when they implicitly threatened to terminate Defendants’ employment if they did not cooperate and participate in interviews with CCI’s investigators. At the time of the interviews, CCI and IMI were not only in contact with law enforcement authorities regarding the investigation, but were collaborating with the Department of Justice (“DOJ”) in how to conduct the investigation and obtain relevant admissions from the Defendants. CCI compelled the Defendants’ statements with the government’s knowledge, certainly at a minimum with the government’s general encouragement, and with the intent to cooperate with the DOJ. As a matter of fact and law CCI was an agent of the government during the interviews. Thereafter and further to published DOJ memoranda, CCI spared no expense in cooperating with the government by identifying purported culprits and disclosing the fruits of its investigation, including interviews of the Defendants, to the DOJ. Thus, CCI’s actions are “fairly attributable to the government.” CCI compelled the Defendants’ statements under a classic “penalty situation” – CCI required them to answer all questions regardless of their Fifth Amendment right against self-incrimination or be fired. Because CCI was a state actor when it compelled the Defendants’ statements, it violated their Fifth Amendment rights and the statements must be suppressed.”
Next Up – Smith & Nephew
[A new job has been posted to the Jobs Board – see here. Both job seekers and organizations seeking to hire individuals with FCPA or related experience will benefit from a wide selection of job listings, so please spread the word and send the job link to your HR department and professional contacts]
When Johnson & Johnson resolved its $70 million FCPA enforcement action in April 2011 (see here for the prior post) focused on foreign health care providers as “foreign officials”, I said (here) stay tuned for more as several more health care providers as “foreign official” enforcement actions were likely in the pipeline.
On the heels of the DOJ’s likely worst week ever enforcing the FCPA in individual enforcement actions, the DOJ and SEC announced parallel enforcement actions against medical devices maker Smith & Nephew Inc. (“S&N”) and Smith & Nephew plc. (“PLC”). PLC is a U.K. company with ADR shares traded on the New York Stock Exchange and S&N is a wholly-owned subsidiary of PLC headquartered in Memphis, TN.
Total fines and penalties were approximately $22.2 million ($16.8 million against S&N via a DOJ deferred prosecution agreement, and $$5.4 million against PLC via a settled SEC civil complaint).
DOJ
The DOJ enforcement action involved a criminal information (here) against S&N resolved through a deferred prosecution agreement (here).
Criminal Information
The information begins as follows. “Greece has a national healthcare system wherein most Greek hospitals are publily owned and operated. Health care providers who work at publicly-owned hospitals (“HCPs”) are government employees, providing health care services in their officials capacities. Therefore, such HCPs in Greece are “foreign officials” as that term in defined in the FCPA …”.
The conduct at issue focuses on S&N’s and Smith & Nephew Orthopaedics GmbH’s (“GmbH”) (a German company “reporting to S&N) relationship with the entities of the Greek Distributor (an “agent and distributor for S&N and GmbH in Greece”). According to the information, S&N and GmbH sold products to the entities “at a discount to the ‘list’ price and the Greek Distributor would re-selll to Greek HCPs and government hospitals at a profit.” The information also alleges that S&N and GmbH “would cover marketing expenses for [the] Greek Distributor, up to ten percent of sales.”
The information charges one count of conspiracy to violate the FCPA’s anti-bribery provisions and alleges that “the purpose of the conspiracy was to secure lucrative business with hospitals in the Greek public health care system by making and promising to make corrupt payments of money and things of value to publicly-employeed Greek HCPs.” According to the information, “S&N, certain of its executives, employees, and affiliates agreed to sell to [the] Greek Distributor at full list price, then pay the amount of the distributor discount – between 25 and 40 percent of the sales made by [the] Greek Distributor – to an off-shore shell company controlled by [the] Greek Distributor, in order to provide off-the-books funds for [the] Greek Distributor to pay cash incentives and other things of value to publicly-employed Greek HCPs to induce the purchase of S&N products, while concealing the payments.” According to the information, S&N “falsely recorded or otherwise accounted for the payments to the shell companies on its books and records as ‘marketing services’ in order to conceal the true nature of the payments in the consolidated books and records of S&N and GmbH.”
According to the information, “[i]n total, from 1998 to 2008, S&N, and its affiliates and employees, authorized the payment, directly or indirectly, of approximately $9.4 million to [the] Greek Distributor’s shell companies, some or all of which was used to pay cash incentives to publicly-employeed Greek HCPs to induce the purchase of S&N products.”
According to the information, in 1999 “the S&N Chief Financial Officer raised with S&N Legal questions from internal auditors about the payments to the Greek Distributor’s shell companies.” The information states that the Greece Sales Manager (a U.S. citizen based in Memphis who oversaw S&N sales in Greece) met with Legal Advisor (a U.S. citizen based in Memphis who was Senior Corporate Counsel for S&N) “to discuss issues with GmbH’s relationship with [the] Greek Distributor, during which the fact that surgeons in Greece were being paid to use medical devices products was discussed …”. The information states that thereafter, the Legal Advisor “briefed a more senior S&N lawyer on the issue …”.
Based on the allegations in the information and the SEC complaint discussed below, the Greek Distributor seems to be the same distributor/agent at issue in the previous Johnson & Johnson enforcement action.
The S&N information alleges that the “Greek Distributor traveled to Memphis, Tennessee and met with VP International (a U.S. citizen based in Memphis who served as Vice President for International Sales for S&N) and others regarding reductions in Greek government reimbursement rates for S&N products sold by [the] Greek Distributor” and that “during the meeting, [the] Greek Distributor proposed that the discount to [the] Greek Distributor be increased to account for the reimbursement reduction, without any reduction in the ‘marketing’ payments to the Shell Company.” According to the information, the Greek Distributor communicated with VP International and the Greece Sales Manager that his commission could not be reduced because he was “paying cash incentives right after each surgery.” According to the information, “S&N terminated all relationships with [the] Greek Distributor and related entities in June 2008.”
Based on the same core set of conduct, the information also charges one count of FCPA anti-bribery violations and one count of FCPA books and records violations.
DPA
The DOJ’s charges against S&N were resolved via a deferred prosecution agreement. Pursuant to the DPA, S&N admitted, accepted and acknowledged “that it is responsible for the acts of its officers, employees and agent, and wholly-owned subsidiaries.”
The term of the DPA is three years and it states that the DOJ entered into the agreement based on the following factors: (a) S&N investigated and disclosed to the DOJ and SEC the misconduct at issue; (b) S&N reported its findings to the DOJ and SEC; (c) S&N cooperated fully with the DOJ’s and SEC’s investigation; (d) S&N undertook remedial measures, including the implementation of an enhanced compliance program and agreed to undertake further remedial measures; (e)-(f) S&N agreed to continue to cooperate with the DOJ, and with foreign authorities, in any investigation of its directors, officers, employees, agents, consultants, subsidiaries, contractors and subcontractors relating to violations of the FCPA or other corrupt payments; (g) S&N “has cooperated and agreed to continue to cooperate with the DOJ in the DOJ’s investigations of other companies and individuals in connection with business practices overseas in various markets;” and (h) “were the DOJ to initiate a prosecution of S&N and obtain a conviction, instead of entering into this Agreement to defer prosecution, S&N would potentially be subject to exclusion from participation in federal health care programs pursuant to 42 USC 1320a-7(a).”
Pursuant to the DPA, the advisory Sentencing Guidelines range for the conduct at issue was $21 – $42 million. The DPA states as follows. “S&N agrees to pay a monetary penalty in the amount of $16.8 million, a 20 percent reduction off the bottom of the fine range. S&N and the DOJ agree that this fine is appropriate given S&N’s internal investigation, the nature and extent of S&N’s cooperation in this matter, and S&N’s extensive remediation.”
Pursuant to the DPA, S&N agreed to engage an independent compliance monitor “for a period of not less than 18 months” and to provide periodic reports to the DOJ regarding remediation and implementation of the enhanced compliance measures set forth by the monitor as described in an attachment to the DPA. As is customary in FCPA DPA’s, S&N agreed that it shall not make any public statement contradicting its acceptance of responsibility.
See here for the DOJ’s release. The DOJ release states as follows. “The matter is part of an investigation into bribery by medical device companies of physicians employed by government institutions.”
SEC
The SEC’s settled civil complaint (here) against PLC is based on the same core conduct as described above and “concerns violations of the [FCPA] by PLC through its subsidiaries to obtain sales for their medical device business.” In summary fashion, the SEC complaint alleges as follows. “From 1997 to June 2008, two of PLC’s subsidiaries engaged in a scheme with a distributor who made illicit payments to public doctors employed by government hospitals or agencies in Greece.” The complaint further alleges that PLC failed to “have an adequate internal control system in place to detect and prevent the illicit payments” and that PLC “improperly recorded these payments in its accounting books and records.” The complaint specifically alleges that PLC “failed to act on numerous red flags of bribery.” The complaint states as follows. “Among other things, even though PLC was aware that S&N and GmbH were conducting business in Greece and was aware of the heightened risks of the Greek market, PLC did not require proof of services rendered by Company A and B [entities associated with the Greek Distributor]. PLC failed to question the reasons for paying the Greek Distributor for Greek sales to accounts in the names of entities located outside of Greece. PLC failed to conduct due diligence on Company A and Company B. PLC also failed to conduct any audits of the transactions.”
Based on the above allegations, the SEC complaint charges FCPA anti-bribery, books and records and internal controls violations.
As stated in the SEC’s release (here), without admitting or denying the SEC’s allegations, PLC consented to entry of a court order permanently enjoining it from future FCPA violations and ordering it to pay $4,028,000 in disgorgement and $1,398,799 in prejudgment interest.
The SEC’s release states as follows. “The SEC’s investigation into the medical device industry is continuing.” In the release, Kara Brockmeyer (Chief of the SEC’s FCPA Unit) stated as follows. “Smith & Nephew’s subsidiaries chose a path of corruption rather than fair and honest competition. The SEC will continue to hold companies liable as we investigate the medical device industry for this type of illegal behavior.”
In this release, Smith & Nephew stated as follows. “Smith & Nephew and other medical device companies were asked by the SEC and DOJ in late 2007 to look into possible improper payments to government-employed doctors and voluntarily report any issues. Smith & Nephew found and reported evidence of improper payments by a distributor in Greece that had been appointed by Smith & Nephew subsidiaries and was terminated in 2008. The individuals implicated are no longer associated with the Group. In the release, Olivier Bohuon (CEO of Smith & Nephew) states as follows. “We have what I believe to be a world-class compliance programme, having enhanced it significantly since this investigation began in 2007. These legacy issues do not reflect Smith & Nephew today. But they underscore that we must remain vigilant every place we do business and let nothing compromise our
commitment to integrity.”
Paul Gerlach (here – Sidley & Austin, the former Associate Director of the SEC’s Enforcement Division) and Angela Burgess (here – Davis Polk & Wardwell) represented Smith & Nephew.
Healthcare Providers, Telecom (And Other SOE) Employees, Veterinarians, And Liquor Store Employees – The “Foreign Officials” Of 2011
A “foreign official.” Without one, there can be no FCPA anti-bribery violation (civil or criminal). Who were the “foreign officials” of 2011 (at least from an enforcement perspective – recognizing of course that the meaning of this key FCPA element is the subject of much on-going dispute).
This post, describes the “foreign officials” from 2011 corporate FCPA enforcement actions. There were 16 core corporate enforcement actions in 2011. Of the 16 enforcement actions, 13 (81%) involved, in whole or in part, employees of alleged state-owned or state-controlled enterprises or entities (“SOEs”). These enterprises and entities ranged from manufacturing companies, oil and gas companies, telecommunications companies, health-care entities, engineering firms / design institutes, liquor stores, and insurance companies.
In 2010, 60% of corporate FCPA enforcement actions involved, in whole or in part, employees of alleged SOEs (see here at pages 108-119). In 2009, 66% of corporate FCPA enforcement actions involved, in whole or in part, employees of alleged SOEs (see here at pages 410-44).
As to whether Congress intended employees of SOEs to be “foreign officials” under the FCPA, see here for my “foreign official” declaration in the Carson case and this prior post which includes links to all judicial decisions on this key FCPA element.
Not only did SOE employees comprise the bulk of “foreign officials” in 2011, but so too did individuals with apparent ministerial or clerical duties (see Tyson Foods, IBM, Ball Corp., and Diageo).
As noted in the 2010 “foreign official” post (here), this is noteworthy for the following reason.
The FCPA’s original definition of “foreign official” was as follows. “… any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of such government or department, agency or instrumentality. Such terms do not include any employee of a foreign government or any department, agency, or instrumentality thereof whose duties are essentially ministerial or clerical.”
This last sentence was the FCPA’s original (albeit indirect) facilitating payment or grease exception. The relevant House Report states in pertinent part as follows: “… a gratuity paid to a customs official to speed the processing of a customs document would not be reached by this bill. Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must be performed in any event.”
When Congress amended the FCPA in 1988 it, among other things, amended the definition of foreign official by removing this indirect facilitating payment exception from the “foreign official” definition by creating a stand-alone facilitating payment exception currently found in the statute.
The relevant House Report indicates that Congress did not seek to disturb Congress’s original intent. “The policy adopted by Congress in 1977 remains valid, in terms of both U.S. law enforcement and foreign relations considerations. Any prohibition under U.S. law against this type of petty corruption would be exceedingly difficult to enforce, not only by U.S. prosecutors but by company officials themselves. Thus while such payments should not be condoned, they may appropriately be excluded from the reach of the FCPA. U.S. enforcement resources should be devoted to activities have much greater impact on foreign policy.”
In sum, of the 16 corporate FCPA enforcement actions from 1011, 15 (94%) involved, in whole or in part, SOE employees and/or “foreign officials” with apparent ministerial or clerical duties. The one exception is Armor Holdings which involved payments to a United Nations procurement official, an employee of a “public international organization” a term inserted into the FCPA’s “foreign official” definition by way of the 1998 amendments.
The remainder of this post describes (as per DOJ/SEC allegations) the “foreign officials” of 2011. As is apparent from the specific descriptions below, in certain instances the enforcement agencies describe the “foreign official” with reasonable specificity; in other instances with virtually no specificity.
[Note: certain of the enforcement actions below technically only involved FCPA books and records and internal control charges. As most readers know, actual charges in most FCPA enforcement actions hinge on voluntary disclosure, cooperation, collateral consequences, and other non-legal issues. Thus, even if an FCPA enforcement action is resolved without FCPA anti-bribery charges, the actions remain very much about the “foreign officials” involved. As I’ve said before, if an employee of a U.S. company consistently entertains his brother-in-law in the corporate suite and seeks reimbursement for “client entertainment” you will not be reading about this FCPA books and records and internal controls enforcement action]
Maxwell Technologies
DOJ
“Pinggao Group Co. Ltd. (formerly Pingdingshan High Voltage Switchgear Works (“Pinggao Group”) was a state-owned manufacturer of electric-utility infrastructure in Henan Province China.”
“New Northeast Electric Shenygan HV Switchgear Co. Ltd. (“Shenygang HV”) was a state-owned manufacturer of electric-utility infrastructure in Liaoning Province China.”
“Xi-an XD High Voltage Apparatus Co., Ltd. a/k/a Xi-an Shinky High Voltage Electric Co. Ltd. (“Xi-an XD”) was a state-owned manufacturer of electric utility infrastructure in Shaanxi Province China.”
“… payments conveyed to officials of foreign governments employed by state-owned entities, including Pinggao Group, Shenyang HV, and Xi-an XD …”
SEC
Presumably the same as above, although the SEC complaint merely refers to “officials at state-owned entities in China.”
Tyson Foods
DOJ
“The Government of Mexico administers an inspection program, Tipo Inspeccion Federal (“TIF”), for meat-processing facilities. […]. The inspection program at each facility is supervised by an on-site veterinarian who is a government employee (“TIF veterinarian”) paid by the state, who ensures that all exports are in conformity with Mexican health and safety laws. Therefore, TIF veterinarians are foreign officials as defined by the FCPA …”.
“Wives of the TIF veterinarians.”
SEC
Same as above.
IBM
SEC
“government officials in South Korea and China”
“the foreign government officials involved worked for sixteen South Korean government entities (“SKGE”)”; “Chief Operations for the Electronic Operations Division of SKGE 1”; “manager of the government controlled SKGE 2”; “SKGE 3’s Director of Planning”; “SKGE 4 was a state-owned agency of the South Korea government – an employee of SKGE 4 responsible for reviewing personal computer procurement bids”; “Director of SKGE 5’s information technology department”; “government officials of SKGE 6”; “key decision makers at ten other SKGE’s;”
“Chinese government officials”; employees of “government-owned or controlled customers in China”
Ball Corp.
SEC
“employees of the Argentine government to secure the importation of prohibited use machinery and the exportation of raw materials at reduced tariffs” “government customs officials”
JGC Corp.
DOJ
“The Nigerian National Petroleum Corporation (“NNPC”) was a Nigerian government-owned company charged with development of Nigeria’s oil and gas wealth and regulation of the country’s oil and gas industry. NNPC was a shareholder in certain joint ventures with multinational oil companies. NNPC was an entity and instrumentality of the Government of Nigeria and its officers and employees were ‘foreign officials’ within the meaning of the FCPA.”
“Nigeria LNG Limited (“NLNG”) was created by the Nigerian government to develop the Bonny Island Project and was the entity that awarded the related […] contracts. The largest shareholder of NLNG was NNPC, which owned 40% of NLNG. The other owners of NLNG were multinational oil companies. Through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the ability to block the award of […] contracts. NLNG was an entity and instrumentality of the Government of Nigeria and its officers and employees were ‘foreign officials’ within the meaning of the FCPA.”
Bribes to “officials of the executive branch of the Government of Nigeria, officials of NNPC, officials of NLNG, and others.”
Comverse Technologies
DOJ
“Individuals connected to OTE, including employees of OTE’s subsidiaries Cosmote, Cosmofon, and Cosmorom, in order to obtain purchase orders from those companies for Comverse Ltd. products and services, resulting in approximately $1.25 million in adjusted operating income;” OTE is “Hellenic Telecommunications Organization S.A. – a telecommunications provider controlled and partially owned by the Greek Government – the Greek Government was OTE’s largest single shareholder and maintained an interest in over one-third of OTE’s issued share capital.”
As detailed in this prior post, during the relevant time period, the Greek Government owned between 33-38% of OTE, thus establishing a new foreign official “limbo low.”
SEC
Same as above
Johnson & Johnson
DOJ
“Greece has a national healthcare system wherein most Greek hospitals are publicly owned and operated. Health care providers who work at publicly-owned hospitals (“HCPs”) are government employees, providing health care services in their official capacities. Therefore, such HCPs in Greece are “foreign officials” as that term is defined in the FCPA.”
“Poland has a national healthcare system. Most Polish hospitals are owned and operated by the government and most Polish HCPs [health care providers] are government employees providing health care services in their official capacities. Therefore, most HCPs in Poland are “foreign officials” as defined by the FCPA.”
“The national healthcare system in Romania is almost entirely state-run. The healthcare system is funded by the National Health Care Insurance Fund (“CNAS”), to which employers and employees make mandatory contributions. Most Romanian hospitals are owned and operated by the government and most HCPs in Romania are government employees. Therefore, most HCPs in Romania are “foreign officials” as defined by the FCPA.”
SEC
Same as above.
Tenaris
DOJ
Employees of OJSC O’ztashqineftgaz (“OAO”) “a wholly owned subsidiary of Uzbekneftegaz, the state holding company of Uzbekistan’s oil and gas industry.”
Employees of Uzbekekspertiza JSC, “an Uzbekistani government agency.”
SEC
Same as above.
Rockwell Automation
SEC
Employees of Chinese Design Institutes “which were typically state-owned enterprises that provided design engineering and technical integration services that can influence contract awards by end-user state-owned customers” and employees of “other state-owned companies.”
Armor Holdings
DOJ
“Procurement official of the United Nations”
SEC
Same as above.
Cinergy Telecommunications
DOJ
“Telecommunications D’Haiti (“Haiti Teleco”) was the Republic of Haiti’s state-owned national telecommunications company. Haiti Teleco was the only provider of non-celluar telephone service to and from Haiti. […] Patrick Joseph was the Director General of Haiti Teleco. […] During his tenure at Haiti Teleco, Patrick Joseph was a ‘foreign official’ as that term is defined in the FCPA.” “Jean Rene Duperval was the Director of International Relations of Haiti Teleco. […] During his tenure at Haiti Teleco, Duperval was a ‘foreign official’ as that term is defined in the FCPA.” “Official VJ was the Governor of the Banque de la Republique d’Haiti (“Bank of Haiti”), the state-owned and state-controlled central bank of Haiti. […] During his tenure at the Bank of Haiti, Official VJ was a ‘foreign official’ as that term is defined in the FCPA.”
For previous posts on Haiti Teleco, see here, here and here.
Bridgestone Corp.
DOJ
“Foreign government officials in Latin America and elsewhere;” “employees of state-owned entities in Mexico and other Latin American countries;” employee at Petroleos Mexicanos (“PEMEX”).
Diageo
SEC
“Various government officials in India, Thailand, and South Korea”
“Hundreds of Indian officials responsible for purchasing or authorizing the sale of beverages”; “employees of government liquor stores in and around New Delhi”; “government employees of the Indian military’s Canteen Stores Department”; “government officials in the North Region of India and in the State of Assam for the purpose of securing label registrations”; “Excise officials to secure import permits and other administrative approvals.”
A “Thai government and political party official”; “At various times the Thai Official served as Deputy Secretary to the Prime Minister, Advisor to the Deputy Prime Minister, and Advisor to the Ministry of Agriculture and Cooperatives. The Thai Official also served on a committee of the ruling Thai Rak Thai political party, and as a member and/or advisor to several state-owned or state-controlled industrial and utility boards.”
South Korean “customs official”; “other South Korean government officials”; “South Korean military officials”
Watts Water Technologies
SEC
Employees of certain Chinese state-owned design institutes.
Aon
DOJ
“government officials in Costa Rica”; employees of “Instituto Nacional De Deguros (“INS”), Costa Rica’s state-owned insurance company”
SEC
Same as above. In addition, officials from an “Egyptian government-owned company, the Egyptian Armament Authority (“EAA”), and its U.S. arm, the Egyptian Procurement Office (“EPO”); “Vietnam Airlines, a Vietnamese government-owned entity”; “BP Migas and Pertamina, two Indonesia state-owned entities in the oil and gas industry”; “Myanmar Airways and Myanmar Insurance, two government-owned entities”; “Biman Bangladesh Airways and Sudharan Bima Corporation, two government-owned entities”; “the son of a former high-ranking government official in Bangladesh with several important political connections”
Magyar Telekom / Deutsche Telekom
DOJ
“Telekom Crne Gore A.D., n/k/a “Crnogorski Telekom,” (“TCG”) and its mobile company subsidiary were, respectively, the Montenegrin state-owned fixed line and cellular telecommunications companies. […] Before Magyar Telekom acquired TCG, it was controlled by the Government of Montenegro. Accordingly, employees of TCG were ‘foreign officials’ within the meaning of the FCPA.”
“Macedonian Political Party A and Macedonian Political Party B were political parties in the Macedonian governing coalition during 2005, among other times. Each party represented a traditional ethic group in Macedonia. As such, Macedonian Political Party A and Macedonian Political Party B were each a “foreign political party” within the meaning of the FCPA.” “Macedonian Official #1 was a high-ranking government official with responsibility related to telecommunications laws and regulations […] and a leader of Macedonian Political Party A. As such, Macedonian Official #1 was a “foreign official” and an official of a foreign political party within the meaning of the FCPA.” “Macedonian Official #2 was a high-ranking government official with responsibility for telecommunications laws and regulations […] and a leader of Macedonian Political Party B. As such, Macedonian Official #2 was a “foreign official” and an official of a foreign political party within the meaning of the FCPA.”
SEC
Same as above.
DOJ Opposes Rodriguez’s Release Pending Appeal
As detailed in this prior post, Carlos Rodriguez (one of the defendants in the Haiti Teleco case currently serving a seven year sentence) is seeking release pending appeal of his conviction and sentence. Among other things, Rodriguez’s appeal will relate to ‘foreign official” issues and will be the first time in the FCPA’s history that “foreign official” will be squarely before a Circuit Court.
Yesterday, the DOJ filed (here) an opposition brief. In pertinent part, the DOJ stated as follows. “In order to justify bond pending appeal, Rodriguez must raise a substantial question as to “all counts on which imprisonment was imposed.” […] Because Counts 1 and 9-21 all involve independent wire fraud allegations, and because he was sentenced on all of these counts, Rodriguez’s FCPA-related allegations have no bearing on his convictions on these counts. Similarly, Rodriguez’s arguments regarding his money laundering convictions […] have no bearing on his conviction in Count 1 for conspiring to violate the FCPA and the wire fraud statute. In short, even assuming arguendo that this Court eventually accepts Rodriguez’s FCPA and money laundering arguments, this will have no effect on his conviction for conspiring to commit wire fraud, which the jury specially found Rodriguez had done and for which he was sentenced. Accordingly, Rodriguez cannot meet the standard for bond pending appeal, and his motion should be denied.” (emphasis in original).
As to “foreign official” the DOJ stated that the trial court’s jury instruction was “consistent with, albeit not verbatim to, decisions handed down by other courts that have considered the meaning of ‘instrumentality’ under the FCPA” (citing to the Carson and Lindsey decisions). The DOJ further stated that “the government presented overwhelming proof at trial that Teleco was an instrumentality of the Haitian government.”
Friday Roundup
Another “foreign official” challenge is denied, the DOJ’s FCPA door continues to revolve, and one DOJ official is probably glad he is off the hot seat … it’s all here in the Friday roundup.
O’Shea “Foreign Official” Challenge Denied
The remaining “foreign official” challenge of 2011 (brought by John Joseph O’Shea in his case pending in the Southern District of Texas) has been denied. (See here for the previous post including links to the briefing on the issue). Without issuing a written decision, Judge Lynn Hughes (S.D. Tex.) denied O’Shea’s motion to dismiss the indictment based on O’Shea’s argument that employees of Comision Federal de Electricidad (“CFE”), a Mexican utility and the same entity that was at issue in the Lindsey Manufacturing “foreign official” challenge, are not “foreign officials” under the FCPA.
O’Shea’s “foreign official” challenge was the fifth such challenge in FCPA history and the second (Nguyen / Nexus Technologies being the other) to end without a written decision. The other three challenges Haiti Teleco related case (here), Lindsey Manufacturing (here) and Carson et al. (here) resulted in written decisions.
Revolving Door
Hank Walther, the former Assistant Chief of the DOJ’s FCPA Unit (and most recently the former Deputy Chief of the DOJ’s Health Care Fraud Unit) recently joined the law firm Jones Day as a partner. Walther joins a long-list of former DOJ FCPA enforcement attorneys who will now be providing FCPA defense and compliance services in the private sector. In a release (here) Greg Shumaker (Partner-In-Charge of Jones Day’s Washington office) said as follows. “Hank Walther brings a wealth of experience and insight from his years in government. The unique perspective he has gained from prosecuting hundreds of health care fraud and FCPA cases on behalf of the federal government will add tremendously to our Corporate Criminal Investigations Practice. We’re delighted he’s chosen Jones Day for his return to the private sector.”
I agree that Walther likely has unique insight and perspectives from his years of enforcing the FCPA. I also believe that DOJ enforcement attorneys who aggressively enforce a niche law have the potential ability to increase private-sector demand for their post-government services. That is why I continue to believe it is in the public interest (recognizing the niched nature of both the DOJ and SEC FCPA units) that all FCPA enforcement attorneys should be prohibited when leaving the government from providing FCPA defense or compliance services for a five-year time period. For additional reading see this piece I co-authored.
Off The Hot Seat
Lisa Brennan (Main Justice) reports (here) that Greg Andres (a former Deputy Assistant Attorney General in the Fraud Section) is returning to the U.S. Attorneys Office – Eastern District of New York. In certain respects, during the past year, Andres was the DOJ’s voice on FCPA enforcement and reform issues. Andres testified on behalf of the DOJ at the November 2010 Senate FCPA hearing (see here and here for more) as well as the June 2011 House Hearing (see here for more).
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A good weekend to all.