Category: Guest Posts

World Cup Puts Focus on Complex Compliance Issues In Brazil

Today’s post is from Gregory Paw (Pepper Hamilton LLP).

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Tomorrow afternoon, Brazil begins what many hope will be a month-long showcase of “joga bonito” – the Brazilian passion for football summarized by Pelé as “play beautifully” – with the opening game of the 2014 World Cup pitting the host team against Croatia in São Paulo.  Yet the days leading to the opening have been filled with anxious scenes of subway strikes by groups of laborers, social advocates and students, and the accompanying snarls of traffic clogging the streets of the nation’s biggest city.  The protests are not as large as those of last spring, but nonetheless put into context the issues of the past year as Brazil adjusts to a post-boom economy and debates the public spending priorities that favored sports venues over other public works projects.  All of these events are of importance to compliance professionals watching the Brazilian business landscape for important anti-corruption trends and a better understanding of the current risk environment.

The past year has seen passage of landmark anti-corruption legislation, and the growing pains that can come with implementing a law that ushers important change.  Brazil currently lacks a centralized enforcement infrastructure for its powerful new anti-corruption law.  Brazil’s 27 states and its municipalities, as well as each branch of national government, all can launch investigations and render interpretations on open issues under the new law, such as the critical issue of whether any liability cap exists.  The inevitable inconsistencies will make compliance an ongoing challenge.

Equally important is the persistent culture of corruption that continues to dominate the Brazilian business news.  Many of the recent stories have focused on infrastructure projects in preparation for the World Cup and the 2016 Olympics.  Cost overruns for Brazil’s 12 World Cup host stadiums are soaring.  For example, an audit from the Court of Accounts of the Brazilian Federal District demonstrated a near-doubling from the $312 million 2012 estimated cost, with overpriced construction work alone accounting for $196 million of this overrun.  Political donations from connected companies “are making corruption in this country even worse and making it increasingly difficult to fight,” said an Audit Court arbiter in recent local press reports.  “These politicians are working for those who financed campaigns.”  At least a dozen other federal investigations are underway.

The problems are not limited to sports stadiums.  A scandal involving as many as 15 public transportation systems is said to have revealed corruption by several multi-national companies and inflated project costs in an area of vital public need.  The multi-nationals mentioned as part of the probe, Siemens, Alstom and Bombardier, have denied wrongdoing and pledged cooperation.  But in January 2014, a federal court banned Siemens from bidding on new government work, and a public prosecutor in São Paulo is said to have sought to cancel Alstom’s corporate registration.

Touching deeper to the core of the Brazilian economy are corruption investigations at Petrobras, the state-run oil and gas company.  Swimming under a mountain of debt and declining stock value, Petrobras has launched an internal review of alleged bribery by a Dutch company that serviced off-shore oil rigs.  The Brazilian Congress also has launched a probe into two deals that have turned very expensive – one involving the purchase of a refinery in Texas and the other involving a refinery in the northeastern Brazilian coastal town of Recife.  Both deals cost many times more than their expected prices.  Petrobras’ president recently met federal police personally to turn over company files pursuant to a court order.  Petrobras says the cost overruns come from insufficient infrastructure in Brazil’s poor-but-growing northeast, but critics focus on mismanagement and an alleged culture of graft as these issues play out in advance of a presidential election in October.  The arrest in March of the former head of the company’s refining and supply unit in a money laundering probe has added to the swirl of rumors.  For her part, President Dilma Rousseff – also the former chair of Petrobras – has defended the company, explaining in April 2014 local press reports that “Petrobras will never be stained with any wrongdoing.  Whatever needs to be investigated will be investigated with maximum rigor.”

Against this backdrop, Brazilian economic growth has slowed by more than half of its peak 2010 rate, and a March 2014 poll by a Brazilian news organization found that more than two-thirds of the population thought corruption was lower during Brazil’s time of dictatorship.  Perhaps part of that feeling comes from the current greater media transparency on corruption probes.  But companies operating in Brazil can expect that the focus on anti-corruption issues will only continue to remain a complicated compliance challenge.  Most important is a continuing focus on compliance fundamentals:

• Leadership setting clear expectations on ethics and compliance
• Risk awareness, coupled with controls designed to address those risks
• Due diligence and monitoring of business partners
• Nurturing the compliance commitment through training and communications
• Promptly follow up if potential issues arise

These fundamental steps will best protect companies operating in Brazil, where hope runs high that the attention from the World Cup will highlight the Brazilian spirit and creativity which has proven so resilient through past eras of change.

Misconceptions About India’s Anti-Corruption Framework

This post is from Sherbir Panag (MZM Legal Advocates & Legal Consultants in Mumbai, India).

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In April 2014, the Department of Justice indicted six defendants’ in an alleged conspiracy to bribe government officials in India to mine titanium minerals. A sitting member of the Indian Parliament, Mr. K.V.P. Ramachandra Rao, was one of the six defendants charged with one count of racketeering conspiracy and money laundering conspiracy, and two counts of interstate travel in aid of racketeering.  While Mr. Rao is currently battling the FBI’s request to provisionally arrest him before the Andhra Pradesh High Court, the recent events highlight just one of several instances of bribery allegations in India that see foreign companies at the forefront.

In some cases, if not all, a lack of understanding of the Indian anti corruption framework clearly exists.  This post highlights various misconceptions of Indian anti corruption legislation and discusses the direction of several proposed bills pending in Parliament.[1]

India’s anti corruption law does not target the bribe giver

It is often misconstrued that India’s principal anti-corruption legislation – the Prevention of Corruption Act, 1988 (PCA)-  does not create an offence of bribery on the part of the bribe giver but merely attacks the demand side i.e., the bribe taker.

This is an incorrect position as under the PCA (Chapter III: Offences and Penalties) the offence of bribe giving is created as one of abetment of bribe taking by the public servant. Therefore, while the substantive text establishes the offence for a “Public servant accepting illegal gratification other than legal remuneration for an official act” or “Public servant obtaining valuable thing, without consideration from person concerned in proceeding or business transacted by such public servant” – the bribe giver comes under the ambit of the law by way of abetting this offence (Section 12 – Punishment for abetment of offences defined in section 7 or 11). Thus, the punishment for bribe giving is attune to that which a public servant convicted of accepting bribes would receive, which is imprisonment for a minimum term of 6 months extending to five years and would also be liable to pay a fine.

However, a direct offence is created for bribe giving in instances where individuals accept payments / gratification from others in order to influence a public servant by corrupt or illegal means or to exercise personal influence over a public servant (Section 8 and 9). Hence, third party agents who accept bribes from commercial organisations to be passed on to public servants or consultants who offer to exercise personal influence over public servants to win contracts – would fall within the ambit of these offences.

The above position of law will undergo a major change with the Prevention of Corruption (Amendment) Bill, 2013. The Bill which has been introduced in the Indian Parliament in August 2013, seeks to establish a substantive offence for bribe giving which is to includes not just constructively paying a bribe but the mere offer or promise to bribe a public servant as well. The punishment has been enhanced as well taking the minimum imprisonment to 3 years extendable up to 7 years along with a fine. The Bill further establishes a substantive offence for bribery by commercial organisation, which also provides that when a commercial organisation is found guilty of the offence of bribery, all such persons who at the time at which the offence was committed were responsible or in charge of conducting the business of the organisation will also be guilty of the offence – and liable to a minimum imprisonment of three years – extendable to seven years, as well as a fine. Similarly, where the offence has been committed due to the consent or connivance or neglect of any director, manager, secretary or officer of the company, such person will also be held guilty of the offence.

India does not recognise corporate criminal liability

It is amply clear from the proposed amendment in the Prevention of Corruption (Amendment) Bill, 2013 that India is on its way to expressly recognising corporate criminal liability in the substantive law.

It is to be noted that this is already an admitted position in Indian law.  The Supreme Court of India in the ‘Standard Chartered vs. Directorate of Enforcement’ and the ‘Iridium India Telecom Ltd vs. Motorola Inc’  has taken the view that companies can be prosecuted for criminal acts and the criminal liability of a corporation arises when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs.

Gifts are a cultural requirement hence acceptable

Gifts are again a commonly misconstrued area, wherein threshold values of gifts that public servants are entitled to receive are rarely adhered to. This is a complex problem as even gifts at levels that corporate compliance programs envisage of USD. 50-100 may at times not correspond to the laid down threshold values.

In this regard, it would be imperative to understand that the PCA’s ambit for bribes is extremely wide and includes any gratification that a public servant receives other than legal remuneration. The PCA further prevents public servants from obtaining anything of value without consideration from persons such public servant is likely to engage in business with.

Broadly speaking with regards to gifts two classes of public servants emerge:

• Public servants governed by the Central Civil Services (Conduct) Rules, 1964.
• Public servants (Ministers) governed by the ‘Code of Conduct for Ministers’ by the Ministry of Home Affairs.

The Central Civil Services (Conduct) Rules apply to four classes of officials and the individual threshold value of the gifts each class of officials can accept is clearly laid down. Rule 13 of the same does not allow any Government servant to accept, or permit any member of his family or any other person acting on his behalf to accept, any gift. The expression “gift” shall include free transport, boarding, lodging or other service or any other pecuniary advantage when provided by any person other than a near relative or personal friend having no official dealings with the Government servant.  With regards to foreign firms the scrutiny is higher and the Rules provide that a Government servant shall not accept any gifts from any foreign firm which is either contracting with the Government of India or is one with which the Government servant had, has or is likely to have official dealings.

The Code of Conduct for Ministers lays down that Ministers of both the Union and the State should not accept valuable gifts except from close relatives, and that members of their families should not accept any gifts at all from any person with whom such Minister may have official dealings. When Indian Ministers are travelling abroad they are entitled to receive symbolic gifts and gifts beyond Rs. 5000 (USD. 85) may not be retained by the Minister.

Facilitation payments are acceptable

The PCA does not recognise facilitation payments or any exception to the gratification other than legal remuneration concept. The gratification which if not legal remuneration is deemed illegal whether given for a lawful or unlawful purpose. Hence any speed, grease or facilitation payments would be considered to be bribes under the PCA.

Private Sector Bribery is not punishable in India

There exists no offence for private sector bribery as the PCA is focussed on the bribery of public servants. The Ministry of Home Affairs is at this juncture working on amending the Indian Penal Code to introduce two sections that deal with private sector bribery.

The lack of legislation however would not stop a company whose employee has accepted a bribe in the course of business, from bringing an action of cheating or breach of trust along with other penal provisions against the said employee. This would essentially be a criminal proceeding as both cheating and breach of trust are penal provisions. A similar action of cheating could be also be instituted by the aggrieved company against the individual / company that bribed its employee – as a dishonest intention clearly appears.

India does not criminalise bribery of foreign public officials

At present the bribery of foreign public official or officials of public international organisations is not an offence. A Bill titled the ‘The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations Bill, 2011’ has been introduced in the Indian Parliament. The Bill penalises the offer or promise to bribe foreign public officials and will also allow the Government of India to enter into agreements with other countries for enforcing this law and for exchange of investigative information.  Further, extradition treaties that India has with other countries who have signed and ratified the United Nations Convention against Corruption will be deemed to stand amended to include the offences envisaged under this Bill when it is passed by Parliament. The punishment under this Bill is imprisonment for a minimum term of 6 months extendable to 7 years and a fine.

On the flip side India has entered into Mutual Legal Assistance Treaties in Criminal Matters with 34 countries, is a member of the Interpol, has Extradition Treaties with 37 countries and Extradition Arrangements with 8 countries. Hence with growing cooperation between investigative and prosecution authorities, it is to be noted that the legal framework in India is provisionally competent to offer assistance if the need so arises.

Administrative action will not be taken in case of bribery

The FCPA Professor’s post in January 2014 highlighted pre-contract integrity pacts that have become a mandatory requirement for public sector contracts and the ensuing action that could be taken against a company for the failure to comply with the pact or engage in bribery. Administrative action in the form of contract termination, forfeiture of bid amounts, encashing bank guarantees, and blacklisting have proven to be swifter attacking the commercial viability of bribery by putting the stipulated business on hold. Examples of administrative action which has impacted commercial organisations can be seen with the  Ministry of Defence unilaterally terminating  a Euro 556 Million contract with the Anglo-Italian helicopter manufacturing company AgustaWestland on the 1st of January 2014 for breach of the pre-contract integrity pact and earlier in 2012 blacklisting six companies from doing business in India for ten years.

A Bill titled the ‘Public Procurement Bill, 2012’ has also been introduced in the Indian Parliament that further seeks to regulate public sector procurement and provides for a debarment from all public procurements for a period of three years if a bidder has been convicted for an offence under the Indian Penal Code or the IPC. The Bill also creates an offence for interfering or influencing with the debarment process in an unlawful manner.

Conclusion

The last 5 years have seen various efforts being made to reform the Indian anti corruption legal framework and various examples of these proposed legislations that have been introduced in the Indian Parliament have been touched upon above. The Indian legal framework most definitely has various gaps just like every other legal system does, but where India takes a beating is on the execution of its legislative intent and enforcement actions.

The inherently weak enforcement mechanism coupled with compromised political will – is reluctantly faced with reform in the face of a strong public sentiment against corruption and proactive media houses. The business of bribery has been hit as media reporting and public awareness has mandated that demonstrable action is taken, which has resulted in more matters being investigated and finally prosecuted. This notwithstanding, bribery is unfortunately treated as an opportunity cost in India and the number of corruption scandals and global watchdog reports would only go on to re-affirm this point.

The Indian legal system is provisionally sound enough to deal with corruption when the will to implement the same exists. The risk for companies therefore lies in when the system works and thus the only question that companies doing business in India have to ask themselves is whether in the cross winds of whistleblowers, enhanced public scrutiny and media trials they would like to be the rare or growing subjects of this system working.

Navigating The Arcane World of Mutual Legal Assistance Treaties, Letters Rogatory and Evidence-Gathering From Abroad

A Q&A today with T. Markus Funk (a partner at Perkins Coie) regarding his recent work “Mutual Legal Assistance Treaties and Letters Rogatory:  A Guide for Judges” published by the Federal Judicial Center (the education and research agency of the federal courts – copies of the Guide go to all federal judges in the US).  As pertinent to his work, prior to entering private practice, Funk was a federal prosecutor in Chicago for ten years and for two years led the efforts of the U.S. Department of Justice (DOJ) and U.S. State Department to establish the rule of law in post-conflict Kosovo.

Among other things, what sparked my interest in Funk’s work is that the FCPA’s legislative history evidences a genuine concern by many that individual defendants in FCPA enforcement actions would be disadvantaged in mounting a defense because of the inability or difficulty of obtaining evidence abroad.  Indeed, in the FCPA enforcement action against various individuals associated with Control Components Inc. (the so-called Carson enforcement action) there were pre-trial defense motions concerning the disparity between the DOJ’s ability to gather evidence abroad vs the defendants’ ability to do the same.

In short, navigating the arcane process of collecting evidence abroad is an important skill set for FCPA practitioners.

Q:  Collection of evidence abroad – whether done by prosecutors or defense counsel – is increasingly a hallmark of FCPA and US Travel Act cases.  Your publication discusses in detail the real-world do’s and don’ts for civil and criminal litigants seeking evidence and assistance from foreign jurisdictions.  While one audience for the publication is obviously federal judges, the publication also has value to prosecutors, defense counsel and other attorneys. How and why did the government approach you about writing this guide?

A:  I was not part of the FJC’s internal decision-making, but my understanding is that they consider – accurately, in my view – transnational evidence gathering a central challenge in today’s criminal and civil litigation environment.

True, Mutual Legal Assistance Treaties (MLATs) and letters rogatory (also known as “letters of request” when presented by a nonparty “interested person”) have been around for a long time and are the two primary vehicles for obtaining this evidence.   And while most lawyers and judges, including those handling multi-national bribery and corruption cases, have certainly heard about these two primary vehicles for foreign evidence-gathering, the nuances and practical realities of their use are still a mystery to many.  This publication, therefore, is intended to be a practical, how-to desk reference that anyone can consult to find immediate answers and to otherwise remove the red tape often associated with the process.

By the time the FJC sought to publish a guide for judges on this topic, I was already in private practice with Perkins Coie.  But a former AUSA and DOJ colleague of mine generously proposed me as an author because of my first-hand experience as a prosecutor handling incoming and outbound requests for transnational evidence gathering assistance, and my time abroad assisting courts overseas in their efforts to facilitate US requests.  When the FJC staff extended me an invitation to “write the book” on this subject, I was of course flattered and quickly accepted.

Q: How does a litigant go about obtaining evidence from overseas?

A: There are two primary means of obtaining evidence located in, or assistance from, a foreign jurisdiction: MLATs and letters rogatory.

MLATs are treaty-based mechanisms for seeking foreign law enforcement cooperation and assistance in support of an ongoing criminal investigation or proceeding.  Governments intentionally restrict access to assistance through MLATs to prosecutors, government agencies that investigate criminal conduct, and government agencies that are responsible for matters ancillary to criminal conduct, including civil forfeiture.

Letters rogatory, in contrast, have a considerably broader reach than MLATs:  They can be issued by U.S. federal and state courts as part of criminal, civil, and administrative proceedings, can be requested by anyone, and can be sent to U.S. federal and state courts by any foreign or international tribunal or “interested person.”  One major drawback, however, is that letters rogatory are only available once formal proceedings have commenced; they, therefore, typically cannot issue during the investigative, pre-charging stage of criminal proceedings.

So if you are counsel representing a company or individual in an FCPA case, the ability to use an MLAT is a non-starter.  You are (1) restricted to using letters rogatory to gather evidence from a foreign jurisdiction, and those letters rogatory (2) can only be issued after charges have been filed.

In the chart below I have tried to sketch out some of the key differences between MLATs and letters rogatory:

Q: Are MLATs and letters rogatory the only way to obtain foreign evidence?

A: No.  Experienced practitioners know that diplomacy, executive agreements, and information exchange through informal communications also play an important role in transnational criminal investigations and civil litigation.  Nevertheless, MLATs and letters rogatory do most of the heavy lifting.

Remember also that, in order for federal prosecutors to introduce evidence in court at trial, typically the foreign evidence must have been obtained through a formal MLAT.  As a practical matter, that means that, when the option is available, prosecutors will often first request and receive foreign evidence informally.  Only if and when the prosecutor determines the evidence or assistance is needed for a formal court proceeding (that is, once the prosecutor has determined that the evidence is “the good stuff”), will the prosecutor typically follow up with a formal MLAT request.

Q: As a practical matter, what is the biggest problem with letters rogatory?

A: The process for letters rogatory is without question more time-consuming and less predictable than the process for seeking action through MLATs. The reason for this significant difference is that the enforcement of letters rogatory is a matter of comity between courts, rather than treaty-based.  In other words, when a foreign court receives an MLAT request that request has been vetted and is being presented by US law enforcement because the two countries entered into a formal and binding treaty.  In contrast, when a court receives a letter rogatory the court knows that this is simply an informal request that relies on the good will of the receiving court and law enforcement authorities for its proper execution.  It, therefore, should come as no surprise that MLATs are typically given priority and are handled in a manner that reflects the understanding that the US government will review performance, whereas efforts are in the main more lax when it comes to acting on a letter rogatory request.

Q: How do MLATs differ from extradition treaties?

A: First, MLATs are broader in scope than extradition treaties, in that they can seek any number of types of assistance from abroad – not just the extradition of an individual.

In addition, unlike extradition treaties enforced in U.S. courts, MLATs for efficiency reasons do not require “dual criminality” – that is, they do not require that the offense for which the US seeks assistance also constitute a crime in the requested state.  The net result is that US authorities can use an MLAT request to receive assistance from County A in the investigation of a certain type of bribery that may not even be a crime in Country A.

Q: Do prosecutors ever use letters rogatory?

A: Prosecutors understandably consider letters rogatory an option of last resort for accessing evidence abroad.  They use them only when MLATs are not available, because, as we already discussed, foreign action on MLATs is almost always the most predictable and quickest way to go.

On the flip side, defense counsel and civil litigants are left to rely on the more slow-moving and erratic letters rogatory process when it comes to their efforts to gather evidence located abroad.

Q: Is there a reason that MLATs are not available to the defense?

A: Here is a little-known fact:  The first three MLATs signed by the United States – those with Switzerland, Turkey, and the Netherlands – included explicit provisions granting defense counsel permission to access evidence pursuant to an MLAT.  Subsequent MLATs, however, do not include such provisions.

In fact, the vast majority of MLATs signed by the United States explicitly exclude non-government access to U.S. processes.

Q: Is it fair that the more efficient MLAT process is reserved only for the prosecution?  Doesn’t this raise due process issues?

A: I would say that there can be no real dispute that the defense’s more limited access to evidence frequently results in an uneven playing field and delayed proceedings –  in fact, experience teaches that defense requests are on occasion completely ignored by the foreign authorities, or are only partially complied with.  The net result is that the letters rogatory process can result in very real due process/ access to justice issues for defendants seeking what they hope will be exculpatory evidence from abroad.

That said, the unwritten reality is that, in certain instances, and particularly when the defense team and prosecutors have a sound working relationship with each other, prosecutors might be willing to issue an MLAT on behalf of a defense request.  In these instances, where the prosecutor believes that defense claims of exculpatory evidence aboard is legitimate and not exaggerated, prosecutors might be willing to invoke the MLAT process in the interests of justice.

Of course, you won’t see this on-the-ground reality included in any treatise on the topic or enshrined as part of quasi-enforceable DOJ guidance or treaty.  And remember also that the defense cannot force prosecutors to issue MLATs if they do not want to.  If the government refuses to play ball, defense counsel can always complain to the court in an attempt to recruit the court as an ally in the defense’s effort to persuade the prosecutor to change course – but, again, this is not something the court can formally force the prosecution to do.

Q: Is this evidence-gathering imbalance of power a particular issue in FCPA cases?  What is the real-world impact?

A: As you know, federal prosecutors these days are more and more relying on extraterritoriality provisions in federal law (that is, provisions granting the government the ability to exercise authority beyond its normal jurisdictional boundaries), such as those incorporated into the FCPA.  They, as a consequence, are bringing cases in which much of the physical evidence and most potential witnesses are located overseas.  Because the MLAT process is only available to the prosecution, the defendant’s ability to efficiently collect and present countervailing, exculpatory evidence is sharply limited.

In addition, and as we discussed, even when properly executed, the letter rogatory process may take as long as a year, if not more, presenting courts and litigants with very real case management challenges.  Although delays can be mitigated by transmitting a copy of the request through INTERPOL or some other more direct route, even in urgent cases, such requests almost always take months to execute.  And such delays are of course a particular problem when defendants are detained, or when time is at a premium because the case is set for trial.

Q: Going back to my earlier question, and taking into consideration what you just said, is this lack of parity fair?

A: On balance, the defense almost always gets the short end of the fairness stick.  The lack of compulsion parity between prosecutors and the defense in obtaining foreign evidence without question has very real due process implications.  In most cases, foreign courts honor defense requests issued pursuant to letters rogatory.  However, as we have discussed, international judicial assistance is discretionary, based upon principles of comity rather than treaty, and is also subject to legal procedures in the requested country.  Compliance with a letter rogatory request, therefore, is left to the discretion of the court or tribunal in the “requested” jurisdiction (that is, the court or tribunal to which the letter rogatory is addressed), and is consequently often slow and left to the whim of the particular foreign personnel providing the assistance.

This process is complicated all the more when FCPA charges are involved.  After all, in those cases the underlying allegations involve foreign officials accepting or demanding bribes – allegations that, if true, may well prove quite embarrassing to the host nation that is the recipient of the letter rogatory request.  So don’t be too surprised if the typical heel-dragging phenomenon is even more exaggerated when official bribery and corruption in Country X are driving the requests for assistance from County X.

But this is the way the system is set up – and, as practitioners will confirm, it creates an undeniable power imbalance favoring the government.

Q: So what are defense counsel’s options to get the government to “assist” in gathering potentially exculpatory evidence?

A: As we discussed, defense counsel may argue to the government or the court that a vital piece of exculpatory evidence is located overseas, and that the MLAT process is the only realistic way of obtaining it.  This is why having a solid and mutually respectful working relationship with the prosecution can be helpful to the defense; no ethical prosecutor, after all, will want to employ procedural barriers and attendant delays as a tool to hide or prevent the admission of legitimate exculpatory evidence.

Counsel, in short, should always consider asking the government to voluntarily provide assistance with accessing potentially exculpatory evidence through the MLAT process.  And if the prosecution refuses, counsel is certainly free to petition the court for relief.   However, few, if any, courts have been receptive to such petitions in the absence of language in the MLAT that provides for defense access to evidence abroad (and, as we already determined, only the first three MLATs the US government executed contain such provisions).

Despite the formal prohibition on defense MLAT requests when a client’s liberty hangs in the balance competent defense counsel will do their best to use whatever means they can to explore and secure exculpatory evidence.  This is particularly true  in front of a sympathetic court that is able and willing to put pressure on the prosecution to “do the right thing,” even if the MLAT in question does not compel assistance to the defense.

Q: When evaluating a defendant’s request for letters rogatory to secure evidence located abroad, are there particular factors courts consider most important?

A: In my experience, the three core questions courts wants answers for are:  Exactly how and why is the sought-after evidence exculpatory?  Is the evidence sought abroad cumulative of evidence more readily available in the United States? Was the request for evidence made in a timely manner?

Q: How does having this MLAT and letter rogatory expertise assist your clients?

A:  Frequently, our firm’s individual and company clients face government investigations or civil disputes implicating numerous jurisdictions.  Knowing the procedure and practical challenges involved in collecting potentially game-changing evidence from abroad is a major litigation advantage.

What is more, the formal rules governing this evidence-gathering, as we discussed, do not displace the unwritten reality that credibility and experience can go a long way in persuading prosecutors, US courts, adverse parties, or foreign tribunals to act in a responsive and professional manner.  Having dealt with these issues as a federal prosecutor, as a lawyer serving overseas in post-conflict Kosovo for the State Department, and as private-practice counsel to companies, I believe clients benefit from the experience we gained and the personal insights we can provide.  These insights, in turn, translate into opportunities to protect clients’ rights, gain a more equal playing field, have a client’s charges dropped or reduced, reach a fair negotiated resolution, or at a minimum maintain litigation parity.  

Checking In Down Under

Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery).  Wyld is the Australia Expert for FCPA Professor.

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This update covers a range of important developments in Australia and overseas in the area of foreign bribery policy, investigations and regulation in the first quarter of 2014.

The key issues that are covered in this Update include:

• Australia’s address to the G20 Anti-Corruption Roundtable
• The Australian Securities and Investment Commission (ASIC) and whistleblower protections
• ASIC and civil penalties
• Australian foreign bribery investigations and prosecutions – media updates
• Asia Pacific developments

Australia and the G20 Anti-Corruption Roundtable

The Australian Government has been remarkably quiet in the foreign bribery space. A Consultation Paper into whether facilitation payments should be abolished (published in November 2011) appears to have died an unfortunate death by inertia.

It was refreshing to read that the Attorney General, George Brandis QC, in delivering his opening address to the G20 Anti-Corruption Roundtable, made it clear that corruption is and remains one of the greatest barriers to global growth and that all governments must address the systemic problems flowing from corruption.

The Attorney General highlighted three specific issues that warranted close attention by the Roundtable group – judicial integrity, foreign bribery and the transparency of legal structures, and the identity of beneficial owners. While little was said on the detail, it is encouraging to see the topic of foreign bribery (whatever that entails) is firmly on the agenda while Australia chairs the G20 in 2014.

ASIC and Whistleblower Protections

On 18 February 2014, ASIC published its Information Sheet No. 52 entitled ‘Whistleblowers and whistleblower protection’. ASIC’s responsibilities are to regulate companies acting in contravention of the Corporations Act 2001 (Cth) (Act). ASIC’s focus is on conduct which is disclosed to it which involves a potential contravention of the Act. The Act provides a statutory framework to protect whistleblowers (see Pt9.4AAA, sections 1317AA to 1317AE).

The key elements under the statutory whistleblower protection regime that must be satisfied are:

• the whistleblower must be an officer or an employee of the company or a contractor or employee of a contractor which has a current contract to supply goods or services to the company the disclosure is about;
• the disclosure must be to the company’s auditor, a director, secretary or senior manager within the company, a person authorised by the company to receive whistleblower disclosures or ASIC;
• the whistleblower must identify himself when making the disclosure;
• the whistleblower must have reasonable grounds to suspect that the information disclosed indicates the company or company officers may have breached the Act (or ASIC’s Act); and
• the whistleblower must make the disclosure in good faith.

The tenor of ASIC’s approach is that it still has limited resources, it prefers to focus on the disclosed conduct and it keeps emphasising that a whistleblower should seek independent legal advice. ASIC has been criticised in the past for responding very slowly at times to significant complaints. ASIC will now appoint a dedicated Liaison Officer to be in regular contact with the whistleblower. While a whistleblower may have protection from victimisation, any complaint about how a whistleblower is treated is a private matter between the whistleblower and the company.

In an Ethics Conversation hosted by the St James Ethics Centre in Sydney on 8 April 2014, the ASIC Chairman, Greg Medcraft indicated that while the protection of whistleblowers was important, he appeared less enamoured of the US whistleblower bounty scheme established under the US Securities Exchange Act. Mr Medcraft felt that such a scheme sat uncomfortably with the Australian culture of “not dobbing in a mate”. At the same event, Rod Sims, the Chairman of the Australian Competition & Consumer Commission, was concerned about how Australian courts might treat an individual who had a financial interest in a prosecution and the impact that might have on a whistleblower’s overall credibility. Perhaps the pioneering research work of Prof AJ Brown at Griffith University might help to debunk the myth of not dobbing in a mate – and encourage regulators to realise that the vast majority of Australians consider that whistleblowers who report serious misconduct should be both praised and protected. It remains to be seen how ASIC will act in the future towards whistleblowers.

ASIC and Civil Penalties

In March 2014, ASIC published its Report No. 387 entitled ‘Penalties for corporate wrongdoing’ which considered the penalties available to ASIC and whether they were proportionate and consistent with those for comparable wrongdoing in selected overseas jurisdictions. The key findings of the Report were as follows:

• ASIC rated effective enforcement as critical to achieving its strategic priorities of fair and efficient financial markets with a range of penalties designed to deter contravention and promote greater compliance;
• in relation to imprisonment and fines open to ASIC to seek through litigation: the maximum fines are broadly consistent with other comparable jurisdictions save for the US; other jurisdictions have greater flexibility to impose higher non-criminal fines; other jurisdictions can seek the disgorgement of profit generated by the wrongdoing,
• within Australian legislation, there are examples where non-criminal fines can be imposed at a much higher amount than those available to ASIC.

ASIC has called for greater penalties to be available to it for corporate wrongdoing. While ASIC made it clear that it will pursue the sanctions and remedies best suited to each case on its merits, Mr Medcraft made it clear at the St James Ethic Centre Conversation that he wanted to target individuals as it was only through “scaring the hell out of people” faced with imprisonment, that he believed commercial behaviour might, in fact, change.

Australian Foreign Bribery Investigations and Prosecutions – Media Updates

The Securency banknote printing corruption prosecution continues to roll on slowly in Victoria. While the whole process is subject to suppression orders in Victoria, it is hoped significant public progress in the case occurs during 2014.

The Australian media has continued to follow the saga of an AFP investigation into the Middle East business activities of Leighton Holdings, its various entities and senior officers. While no criminal prosecution has occurred, the opening salvos in a securities class action in Victoria concerning non-disclosure to the market between aggrieved Leighton shareholders and the company suggests the case will continue to affect the company, currently under new Spanish management.

Asia Pacific Developments

The Asia Pacific region is home to both many of the world’s most active economies and to those where the perception of systemic corruption is the greatest.

Developments in China, as one of Australia’s most significant trading partners, must be followed. From mid-2013, the Chinese Government started to target multinational companies in the pharmaceutical sector, in the “supply side” of corruption rather than its traditional focus on the “demand side” of corruption, being the local Chinese public official. This must ring warnings to all Australian business that they are not immune from Chinese Government investigation.

In addition, the role of the US – China Joint Liaison Group on Law Enforcement, may yet see an increase in parallel US and China investigations, although human rights issues may see such investigations undertaken only in limited cases.

In the Asia-Pacific Economic Cooperation (APEC) Bali Declaration in late 2013, APEC called for greater regional cooperation on corruption and collaboration between regulators. A new regional authority is to be established, called the APEC Network of Anti-Corruption Authorities & Law Enforcement Agencies (ACT-NET). The goal of this agency is to, in part, “encouraging private sector stakeholders to implement APEC’s high standard principles for codes of business ethics”.

At the meeting of the APEC Anti-Corruption and Transparency Working Group held in Ningbo in China in February 2014, members agreed to further discuss ACT-NET’s development and implementation during 2014. The goal of the ACT-NET was said to advance greater collaboration among law enforcement authorities in combating corruption, bribery, money laundering, and illicit trade.. Future meetings of ACT-NET will take place during 2014.

Richard Bistrong … In His Own Words

Richard Bistrong.

Most people likely associate his name with the manufactured Africa Sting FCPA enforcement action. The Africa Sting action involved a purported deal to purchase equipment for the presidential guard of an African Government with FBI agents posing as African Government officials and Bistrong working as an undercover informant.

The Africa Sting enforcement action resulted in criminal charges against 22 individuals.  After extensive motions practice and two trials, all charges against all defendants were ultimately dismissed by the DOJ and the action ended with Judge Richard Leon (D.D.C.) calling the entire case a “long and sad chapter in the annals of white collar criminal enforcement.” (See here).

Bistrong was not charged in the Africa Sting case, but previously pleaded guilty to “real-world” Foreign Corrupt Practices Act conduct, including conspiring with others to bribe United Nations officials, Dutch officials, and Nigeria officials.  (See here and here). This charge stemmed from Bistrong’s work as the international sales vice president for a large, successful and publicly traded multi-national corporation.  Bistrong started to cooperate with the DOJ in June 2007 and Judge Leon ultimately credited Bistrong’s extensive cooperation at sentencing.  (See here).

FCPA Professor seeks to highlight a wide range of voices on FCPA issues.  With this goal in mind, I requested to communicate with Bistrong with the permission of his attorney.  Bistrong’s attorney, Brady Toensing (diGenova & Toensing) would not allow his client to discuss questions about the Africa Sting case.

At present, Bistrong is out of prison but still serving the supervised release portion of his sentence.

In this detailed Q&A, Bistrong describes: the circumstances that put him in a position to violate the FCPA; what made him think he could get away with it; his thought process when he realized he was caught; and how he spent his time in federal prison. In the Q&A Bistrong not only looks back, but forward as well and shares what he learned from his experience and what he hopes to accomplish in the future, including through his recently launched blog.