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Potpourri

Potpourri

[To the best of my recollection, my first introduction to the word “potpourri” was in watching Jeopardy which I was very fond of as a teenager and young adult. Rest in peace Alex Trebek]

Lingo

Daniel Kahn (Acting Chief of the DOJ Fraud Section) was the guest on this recent episode of the Compliance Perspectives Podcast. During the podcast, Kahn talks about COVID’s impact on DOJ enforcement and certain recent enforcement actions such as Goldman Sachs and Beam.

In terms of the DOJ’s mid-2000 revision to its “Evaluation of Corporate Compliance Programs” policy document, Kahn stated that it certainly is by no means a “game changer.” Call me old-fashioned, but I want to hear the DOJ Fraud Section Chief talk about the law and legal requirements not lingo. Yet, the podcast dishes up plenty of lingo (tone at the top, conduct at the top, tone of upper and middle management, empowering compliance, walking the walk, direct line to the board, dotted line to the board, etc.).

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Friday Roundup

Roundup

FCPA sentence, scrutiny alerts and updates, flummoxed, lots of time to watch film, and for the reading stack. It’s all here in the Friday roundup.

FCPA Sentence

This December 2016 post highlighted the DOJ’s announcement of FCPA conspiracy charges and plea agreements against four individuals (Daniel Perez, Kamta Ramnarine, Victor Valdez, and Douglas Ray) associated with Hunt Pan Am Aviation in connection with a Mexican bribery scheme.

Perez and Ramnarine were both previously sentenced to three years probation and Valdez was sentenced to 1 year and a day in federal prison, 2 years of supervised release, and ordered to pay approximately $91,000 in restitution.

Yesterday, Ray was sentenced to 18 months in federal prison, 3 years of supervised release, and ordered to pay approximately $590,000 in restitution.

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Friday Roundup

Roundup2

The latest edition of the double standard, survey says, when the dust settles, and for the reading stack.  It’s all here in the Friday roundup.

Double Standard

An individual currently holds political office in one unit of government, yet is also a candidate for a higher unit of government.

Among the contributors to organizations supporting the individual’s campaign for higher office are companies that have secured millions in contracts from the lower unit of government run by the individual.  After all, the individual may not prevail in the higher office race and thus return to the lower unit.

A prudent FCPA practitioner would spot the “red flags” as the contributions could be viewed as a way to curry favor with the individual upon return to the lower unit of government.

However, the individual (more accurately individuals) are not “foreign officials” they are current governors Chris Christie, John Kasich, Bobby Jindal, and Scott Walker who are also running for President.

For the latest edition of the double standard, see this Wall Street Journal article.

Bribery?

Silly you for even mentioning the “b” word.  This is all about “First Amendment rights” according to a source in the article.

Why do business interactions with “foreign officials” seem to be subject to different standards than business interactions with U.S. officials? Why do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet generally turn a blind eye when it happens here at home or call it something different such as participation in the political process? Is the FCPA enforced too aggressively or is enforcement of the U.S. domestic bribery statute too lax? Ought not there be some consistently between enforcement of the FCPA and the domestic bribery statute?

For approximately 50 other post highlighting these double standards, see this subject matter tag.

Survey Says

According to this recent ASEAN (Association of Southeast Asian Nations) Business Outlook Survey:

“The risk of pressure to bribe officials for essential licenses and permits varies greatly depending on the country from which executives responded. Less than half of the respondents in Brunei, Malaysia, Myanmar, and Singapore foresee that this risk will hinder their long-term operations, while large percentages of respondents in Cambodia (89%), Laos (85%), and Vietnam (74%) foresee that it will.”

“In contrast, facilitation payments for routine government services are a more common part of international business. (Routine government services may include processing governmental papers, such as visas and work orders, or such services as police protection, power supply, phone service, etc.) In nearly all countries, the risk of pressure to bribe officials to speed up routine government services is slightly higher than the comparable risk for essential licenses and permits.”

In passing the FCPA, Congress recognized the inherent difficulties companies encounter in foreign markets and thus elected not to capture payments in connection with licenses, permits and the like in the anti-bribery provisions.  (To learn more, see “The Story of the FCPA“).  Congress also chose to exempt facilitation payments from the anti-bribery provisions.

When The Dust Settles

FCPA enforcement actions only focus on alleged bribe payers.  However, when an FCPA enforcement action concludes, there is still an alleged “foreign official” who allegedly received the bribe payments.  When the dust settles, what happens to the “foreign official”?

For years, guest contributor Mike Dearington followed the DOJ’s 2011 enforcement action against Juthamas Siriwan, the former government officer of the Tourism Authority of Thailand, and Jittisopa Siriwan, the daughter of the alleged “foreign official” who was also alleged to be an “employee of Thailand Privilege Card Co. Ltd.” an entity controlled by TAT and an alleged “instrumentality of the Thai government.”  The Siriwan’s allegedly received improper payments from Gerald and Patricia Green who were convicted of FCPA and related offenses in 2009 and served time in federal prison. (See prior posts at this subject matter tag).

In short, the federal court judge overseeing the DOJ’s money laundering case against Siriwan stayed the case pending expected legal proceedings in Thailand against Siriwan.

Earlier this week, the Bangkok Post reported:

“The Criminal Court has indicted former Tourism Authority of Thailand (TAT) governor Juthamas Siriwan and her daughter in a film festival bribery case, the Office of the Attorney-General spokesman said Wednesday.  Prosecutors indicted Mrs Juthamas, 68, and her daugther Jittisopha, 41, in the Criminal Court on Tuesday on charges of taking bribes, corruption and bid-rigging, plus breaching Section 6 of the law dealing with state employees’ offences and Section 12 of the law governing submitting tenders to state agencies, which carries a maximum jail term of 20 years.”

This development is expected to functionally end the U.S. prosecution.

In other news relevant to the above enforcement action, the Hollywood Reporter reports that Gerald Green recently died.  He was 83.

Reading Stack

The most recent edition of the always informative FCPA Update by Debevoise & Plimpton has a nice write-up of the recent BNY Mellon enforcement action (see here and here for prior posts).  In pertinent part, the Update states:

In the SEC’s View, a Thing of Value Can Be Purely Psychological

[T]he government’s investigations in this area face a key threshold legal issue under the FCPA: can providing a job or internship to an official’s relative constitute a thing of value to the official him/herself? Can offering the purely psychological benefit of helping a child or relative land a job give rise to an actionable attempt at bribery? The official does not stand to see any personal financial gain from the internship, except in the arguable circumstance of reducing the official’s financial obligations to a dependent. But the SEC seems to have purposely disclaimed – or at least strained – that theory here, given that one of the internships at issue was unpaid. The SEC addressed this thorny issue in a single sentence in the Order, asserting that “[t]he internships were valuable work experience, and the requesting officials derived significant personal value in being able to confer this benefit on their family members.”

The SEC has previously suggested that an intangible benefit can be a “thing of value” under the FCPA, having faulted Schering-Plough for providing a requested donation to a legitimate charity with which a foreign official and his spouse were closely involved, in an alleged attempt to influence the official. The BNYM Order, however, seems to represent a significant expansion of that thinking. Notably, in Schering-Plough the SEC charged only a “books and records” violation, not a violation of the FCPA’s anti-bribery provisions. Moreover, even assuming intangible prestige or listing an internship on a resumé can be a thing of value, Schering-Plough at least involved a transfer of funds at the official’s request, which arguably allowed the official himself to reap the prestige of the donation. Here, the prestigious and valuable work experiences – one of which was entirely unpaid – went not to the official but to the official’s family member, and thus only indirectly benefited the official.

Evidentiary Issues: Quid Pro Quo or Internal Speculation?

The BNYM case and others like it also raise difficult evidentiary issues for FCPA enforcement authorities. How can one draw the line between a genuine quid pro quo – an actual exchange of a personal benefit to an official for a business assignment – from mere internal speculation and anxiety about potentially damaging an important relationship? Here, the BNYM Order is notable for what it does not say: the Order does not place the internship hiring requests in the context of any specific business opportunity, or any review or re-evaluation of whether the Sovereign Wealth Fund should maintain its existing business relationship with BNYM. Rather, the cited internal communications reflect a generalized desire to gather additional business in the future or to a perception that existing business could be diminished relative to competitors.

Here, the lack of any tie to a concrete business opportunity could simply be a function of the asset management business, in which funds for investment are (in general terms) fungible. Time will tell whether, in other contexts, courts or enforcement authorities will focus more on an attempt to win a specific business opportunity rather than simply an effort to create or maintain good relations that may (or may not) bear fruit over time. For now, the SEC appears to have followed the controversial “quid pro quo lite” theory that has garnered some success in DOJ criminal domestic bribery prosecutions; in that sense, the reach of the Order may not be that surprising – although its theoretical underpinnings in the FCPA arena remain largely untested.

The SEC’s justification for the imposition of a disgorgement remedy is also difficult to locate within its factual recitation. The disgorgement amount of $8.3 million cannot be explained by the relatively minor new investment with BNYM (of less than $1 million). It stands to reason, then, that the disgorgement amount is based, at least in part, on BNYM’s retention of its existing business with the Sovereign Wealth Fund. The causation analysis on that point is not transparent, as the facts stated do not suggest any meaningful way to assess the degree to which the intern hires arguably contributed to maintaining the existing relationship. The result may be the product of any number of unstated factors that went into the settlement, highlighting once again, why settlements should not make law.

[…]

Overall, the BNYM Order highlights two areas of frequent criticism of FCPA enforcement. First, the activity under scrutiny bears a strong similarity to what are perceived as common practices in the private sector in which firms seek to accommodate client representative requests in order to maintain good relations with key decision makers. In this way, enforcement authorities risk criticism that they are using the FCPA to excise business practices affecting relationships with foreign officials abroad that are routinely tolerated in the private sector in the United States – and that are not unprecedented or even rare in the context of companies’ relationships with officials employed by the United States federal, state, and local governments.

Second, the SEC’s choice of a consented-to cease-and-desist order to announce a new and expansive interpretation of the FCPA leaves its interpretations of the law entirely untested by judicial scrutiny and adversarial process. Given that BNYM did not admit the allegations in the Order, BNYM had very little incentive to challenge the SEC’s view of the facts and law, yet as with Schering-Plough’s resolution (referenced above), the SEC’s debatable interpretive position may go years (or decades) without judicial scrutiny.

As noted at the outset, the BNYM Order is just the first resolution of a case of this kind. Others may follow, including in DOJ matters, which will likely shed additional light on the landscape in this area.”

*****

A good weekend to all.

Friday Roundup

A sign-off, no surprise, scrutiny alert, for the reading stack, spot-on, and the $10 million man.

Judge Leon Signs-Off On IBM Action

As highlighted in this prior post, in March 2011 the SEC announced an FCPA enforcement action against IBM concerning alleged conduct in South Korea and China.  The settlement terms contained a permanent injunction as to future FCPA violations and thus required judicial approval.  Similar to the Tyco FCPA enforcement action, the case sat on Judge Leon’s docket.  Last month, Judge Leon approved the Tyco settlement (see here) and yesterday Judge Leon approved the IBM settlement.

The common thread between the two enforcement actions would seem to be that both companies were repeat FCPA offenders.

Like Judge Leon’s final order in Tyco, the final order in IBM action states:

“[For a two year period IBM is required to submit annual reports] to the Commission and this Court describing its efforts to comply with the Foreign Corrupt Practices Act (“FCPA”), and to report to the Commission and this Court immediately upon learning it is reasonably likely that IBM has violated the FCPA in connection with either improper payments to foreign officials to obtain or retain business or any fraudulent books and records entries …””

For additional coverage of yesterday’s hearing, see here from Bloomberg.  The article quotes Judge Leon as follows.  IBM “has learned its lesson and is moving in the right direction to ensure this never happens again.” If there’s another violation over the next two years, “it won’t be a happy day.”

However, as noted in this previous post, IBM recently disclosed additional FCPA scrutiny.

No Surprise

This recent post highlighted the 9th Circuit’s restitution ruling in the Green FCPA enforcement action and was titled “Green Restitution Order Stands … For Now.”  As noted in the prior post, the decision practically invited the Greens to petition for an en banc hearing.

No surprise, the Greens did just that earlier this week – see here for the petition.

Scrutiny Alert

This February 2012 post detailed how Wynn Resorts $135 million donation to the University of Macau became the subject of an SEC inquiry.

Earlier this month, Wynn disclosed in an SEC filing as follows:

“On February 13, 2012, Wynn Resorts, Limited (the “Company”) filed a Report on Form 8-K disclosing that it had received a letter from the Salt Lake Regional Office (the “Office”) of the Securities and Exchange Commission (the “SEC”) advising the Company that the Office had commenced an informal inquiry with respect to certain matters, including a donation by Wynn Macau, Limited, an affiliate of the Company, to the University of Macau Development Foundation. On July 2, 2013, the Company received a letter from the Office stating that the investigation had been completed with the Office not intending to recommend any enforcement action against the Company by the SEC.”

According to this report:

“Speaking to The Associated Press from his boat on the Spanish island of Ibiza … CEO Steve Wynn said he never had any doubt federal investigators would clear the company.  ‘We were so sanguine that we never paid any attention to it; we had no exposure. It was a nonevent except for the damn newspapers.'”

For the Reading Stack

The always informative Gibson Dunn Mid-Year FCPA Update and Mid-Year DPA and NPA Update (through July 8th, approximately 30% of all DPAs/NPAs have been used to resolve FCPA enforcement actions).

Sound insight from Robertson Park and Timothy Peterson in this Inside Counsel column:

“Without putting too fine a spin on the matter, the discussion of the potential consequences faced by a company with potential anti-bribery exposure was fundamentally U.S.-centric. The dispositive question was often whether or not the potential misconduct was likely to fall under the umbrella of FCPA enforcement. Would U.S. authorities be interested in pursuing this matter? Would they find out about this matter? There were not many other concerns that mattered. Whether the site of the potential misconduct was in the European, Asian, South American or African sector, the substantial likelihood was that home authorities would have little interest in the matter, and even if they did it was likely an interest that would often frustrate and impede efforts by the Department of Justice or the Securities and Exchange Commission to investigate the matter. Cooperative enforcement was unlikely. This has changed. […]  For companies that learn of a potential international corruption issue, the impact of this emerging global enforcement market means that the headache associated with scoping an internal investigation is now a migraine with diverse and complex symptoms. Companies investigating potential bribery have always faced the question of how, if at all, they plan to disclose any subsequent findings to government authorities. Now, initial assessments of investigative plans in anti-bribery matters must consider a broader array of potentially interested enforcement authorities. Companies must design their anti-bribery investigations at the outset to consider not only the FCPA enforcement regime in the U.S., but also a newly energized U.K. anti-bribery law, along with a growing list of ant-bribery measures in almost all of the important jurisdictions with business growth opportunities.”

Six ways to improve in-house compliance training from Ryan McConnell and Gérard Sonnier.

The reality of facilitation payments from Matt Kelly.

“… Facilitation payments are a fact of life in global business. Nobody likes them, and no compliance officer wants to pay a bribe disguised as a facilitation payment. But when the transaction truly fits the definition of a facilitation payment—money paid to a government official, to speed up some job duty he would normally perform anyway—there shouldn’t be any ethical or legal crisis in paying it. After all, we have facilitation payments domestically in the United States. If you want a passport from the State Department, you pay $165 in fees. If you want an expedited passport, you pay an extra $60 fee and get your passport in half the usual time. That’s a facilitation payment, pure and simple. Other countries have all sorts of facilitation payments as well, say, to get a visa processed quickly or to clear goods through customs rather than let them rot on the docks. Urgent needs happen in business, and facilitation payments get you through them. That’s life.”

The language of corruption from the BBC.

Spot-On

Regardless of what you think of former New York Attorney General Eliot Spitzer, he is spot-on with his observation that the so-called Arthur Anderson effect (i.e. if a business organization is criminally charged it will go out of business) is “overrated.”  As noted in this Corporate Crime Reporter piece, in a new book titled “Protecting Capitalism Case by Case” Spitzer writes:

“Almost all entities have the capacity to regenerate — even if under a new name, with new ownership and new leadership — and forcing them to do so will have the deterrent effect we desire.”

“Most companies would have no trouble continuing in operation once charged. They might suffer reputational harm, perhaps lose contracts, have certain loans be declared to be in default, and lose some personnel and public support. But that would probably be the proper price to be paid in the context of the violations of the law they committed.”

As noted in previous posts, the Arthur Anderson effect was effectively debunked (see here) and even Denis McInerney (DOJ, Deputy Assistant Attorney General) recently acknowledged (see here) that there is a very small chance that a company would be put out of business as a result of actual DOJ criminal charges.

In his new book Spitzer also writes as follows concerning the SEC’s neither admit nor deny settlement policy.

“I hope that the new leadership at the Securities and Exchange Commission will mandate that an admission of guilt is a necessary part of future settlements in cases of this stature or magnitude. The law and justice require such an acknowledgement — or else nothing has been accomplished.”

Speaking of neither admit nor deny, part of the SEC’s talking points defense of this policy is that the SEC is not the only federal agency that makes use of such a settlement policy.

On this score, it is notable – as detailed in this Law360 article – that Bart Chilton, a top official at the U.S. Commodity Futures Trading Commission, “said the commission should rethink its policy of allowing defendants to settle claims without admitting or denying the allegations.”  According to the article, Chilton stated:

“I understand there are certain circumstances where we might not want to require [admissions], but I think we at the CFTC should change our modus operandi.  The default position should be that people who violate the law should admit wrongdoing.”

$10 Million Man

Continuing with neither admit nor deny, one of the defenders of this settlement policy was Robert Khuzami while he was at the SEC as the Director of Enforcement.   As noted in this Kirkland & Ellis release, Khuzami joined the firm as a partner in the global Government, Regulatory and Internal Investigations Practice Group.  According to this New York Times article, Khuzami’s new position “pays more than $5 million per year” and is guaranteed for two years.  In joining Kirkland, the New York Times stated that Khuzami “is following quintessential Washington script: an influential government insider becoming a paid advocate for industries he once policed.”

Khuzami and former Assistant Attorney General Lanny Breuer were the voice and face of the SEC and DOJ last November upon release of the FCPA Guidance.  As detailed in this prior post, Breuer is currently at Covington & Burling making approximately $4 million per year.

*****

A good weekend to all.

Green Restitution Order Stands … For Now

Given the general lack of FCPA caselaw, anytime a court – let alone an appellate court – issues a decision that contains the words “Foreign Corrupt Practices Act,” it is a notable event even if the decision does not directly deal with FCPA issues.

As highlighted in this previous post, in September 2009 Gerald and Patricia Green were found guilty by a federal jury  of substantive FCPA violations, conspiracy to violate the FCPA, and other  charges in connection with a bribery scheme involving film festival contracts in Thailand.  As noted here, the judge rejected the DOJ’s 10 year sentencing recommendation and sentenced the Greens to six months in prison, three years’ supervised release and $250,000 in restitution.

On appeal to the Ninth Circuit, the Greens argued that the trial court violated the Supreme Court’s holding in Apprendi (that the Sixth Amendment reserves to juries the determination of any fact, other than the fact of a prior conviction, that increases a criminal defendant’s maximum potential sentence  ) “when it ordered them to pay restitution without a jury’s finding that there was ‘an identifiable victim or victims’ who suffered a ‘pecuniary loss.'”

This recent 9th Circuit opinion concerned the Greens’ appeal of the restitution order.

In a colorful, seemingly apologetic, opinion authored by Judge Alex Kozinski, the court acknowledged that the Supreme Court has “yet to hold whether Apprendi applies to restitution.”

On the other hand, the opinion states that the Ninth Circuit “has categorically held that Apprendi and it progeny don’t apply to restitution.”

On the other hand, the opinion states that the Supreme Court’s 2012 decision in Southern Union provides reason to believe that Apprendi might apply to restitution.  (As noted in this previous post, Southern Union held that Apprendi applies to the imposition of criminal fines).

One the other hand, the opinion states that Southern Union’s “strong signals aren’t enough” for a “three-judge panel to overrule circuit precedent.”

In conclusion, the court held as follows.

“Our precedents are clear that Apprendi doesn’t apply to restitution, but that doesn’t mean our caselaw’s well-harmonized with Southern Union.  Had Southern Union come down before our cases, those cases might have come out differently.  Nonetheless, our panel can’t base its decision on what the law might have been.  Such rewriting of doctrine is the sole province of the court sitting en banc.  Faced with the question whether Southern Union has ‘undercut the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable,’ we can answer only:  No.”

Given the above language, the next step on this issue would seem to be obvious.

*****

An interesting topic of late is whether FCPA violations result in victims.  On this issue, the Ninth Circuit stated that FCPA convictions do not “necessarily imply a victim or a loss.”

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