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Will Bistrong’s Plea Impact The Africa Sting Cases?

Last week Richard Bistrong’s plea agreement was made public.

Who is Richard Bistrong?

He is “Individual 1” – the person who worked with FBI agents as alleged in the Africa Sting indictments. (See here). (See here for the superseding indictment).

Bistrong was soon identified as Individual 1 and criminally charged.

Not in connection with the Africa Sting case, but a completely different matter. (See here). The criminal information (here) charges Bistrong with conspiracy to violate the Foreign Corrupt Practices Act’s antibribery provisions, books and records provisions, and the International Emergency Economic Powers Act and related Export Administration Regulations.

The conspiracy was broad in scope and included charges that Bistrong conspired with others: (i) to obtain for his employer [Armor Holdings, a former publicly-traded company, currently a subsidiary of BAE Systems] United Nations body armor contracts (valued at $6 million) by causing his employer to pay $200,000 in commissions to an agent while knowing that the agent would pass along a portion of that money to a United Nations procurement officer (a “foreign official” per the FCPA) to cause the officer to award the contracts; (ii) to obtain for his employer, a $2.4 million pepper spray contract with the National Police Services Agency of the Netherlands by paying a Dutch agent approximately $15,000 while knowing that the agent would pass along some of that money to a procurement officer with the Police Services Agency to influence the contract; and (iii) to obtain for his employer (although it was never obtained), a contract to sell fingerprint ink pads to the Independent National Elections Commission of Nigeria by making kickback payments to a commission official indirectly through an intermediary company.

Bistrong’s criminal information was filed on January 21, 2010.

It turns out that Bistrong agreed to plead guilty nearly a year before that – in February 2009, as indicated in the Bistrong plea agreement (see here).

So what did Bistrong agree to when he signed the plea agreement in February 2009?

To cooperate fully with with the government, including:

“whenever requested by the Government, working in an undercover role to record meetings and telephone calls under the supervision of United States law enforcement;” and

“attending all meetings at which the Government requests his presence.”

Per the Bistrong plea agreement, Bistrong “and the Department of Justice agree that the [Sentencing Guidelines] sentence is five years’ imprisonment.” Even so, the plea agreement states: “if in the sole and unreviewable judgment of the Government the defendant’s cooperation is of such quality and significance to the investigation or prosecution of other criminal matters as to warrant the Court’s downward departure from the sentence calculated by the Sentencing Guidelines, the Government may at or before sentencing make a motion pursuant to Section 5K1.1 of the Sentencing Guidelines reflecting that the defendant has provided substantial assistance and recommending a downward departure from the applicable guideline range.”

Brady Toensing (diGenova & Toensing, LLP) (see here) represents Bistrong.

What impact will Bistrong’s plea have in the Africa Sting case – particularly the defendants’ expected entrapment defense?

Per the superseding indictment, the earliest conduct forming the basis of the criminal charges against the Africa Sting defendants occurred in May 2009. In other words, Bistrong had already agreed to plead guilty to separate criminal charges prior to introducing the Africa Sting defendants to the undercover “foreign official” or the “foreign official’s” undercover representative.

Will this matter?

Unlikely says Dru Stevenson, a Professor of Law at South Texas College of Law (see here). Professor Stevenson previously offered his thoughts on the entrapment issue (here) and offered these thoughts in light of Bistrong’s plea.

“The incentives of the informant or undercover agent have never mattered in an entrapment defense, under either of the tests that courts use. For the subjective test (used in federal court), entrapment analysis focuses entirely on the defendant’s predisposition to commit the crime. The incentives of the agent provocateur are irrelevant. For the objective test (used in a minority of states, but never in the federal courts), entrapment analysis focuses on the actual conduct of the undercover agents – how outrageous it was – but not on the agent’s incentives or motives. It would be a completely novel approach if a court gives any weight to the fact that the agent provocateur had made a plea bargain. And it is not clear why this should matter any more than an undercover police officer who is paid to trick criminals into committing crimes as part of a sting operation.”

On Being An FCPA Associate … A Q&A With Rohan Virginkar

Meet Rohan Virginkar (here), a 2004 graduate of The George Washington University School of Law, and current associate at Foley & Lardner in Washington D.C.

Virginkar has a wealth of FCPA experience and in this post he describes what it takes to succeed as an FCPA associate.

Develop fact investigation skills, pay attention to detail, be self-sufficient, and develop a firm grasp of the FCPA – all good pointers to students and young associates interested in a Foreign Corrupt Practices Act practice.

It also helps to have a valid passport and to embrace unpredictability because you may be sitting at your desk on Tuesday and be in Beijing on Saturday in the often fast-paced world of FCPA investigations.

Below is my Q&A with Virginkar.

What was your first FCPA related assignment?

My first FCPA case was within the first few months of starting as an associate. I traveled to Mumbai to investigate an allegation that an Indian subsidiary of our US-based client had paid money to a local government official in exchange for his agreeing not to disrupt their business. The allegations were true, and we discovered that a manager at the company had actually handed a duffel bag of currency to the official under the guise of a “donation” to the official’s favorite “charity”. It was a valuable introduction to the FCPA: shakedowns by foreign government officials, “charitable donations” to potentially suspect charities; it had many FCPA red flags all in one case.

What countries have you visited doing FCPA work?

In addition to India on that very first investigation, the matters I’ve had the good fortune of working on have taken me all over: Angola, China, Egypt, Indonesia, Kazakhstan, Kuwait, Lebanon, Nigeria, Qatar, Singapore, Thailand, the United Arab Emirates and Venezuela.

Of those countries, what has been your most memorable experience?

Each country I’ve visited on these matters has been memorable because the people, places and work have always defied expectations and offered nice surprises. That said, having a manager at a Chinese company who we instructed to stop paying kickbacks threaten us by saying that some of the payments were going to the Chinese Triads and that he would have to tell them that “the American lawyers” made him stop paying them is definitely one that sticks in mind.

As you learned more about the FCPA, what surprised you the most?

I’ve perhaps been most surprised by the genuine desire of most people around the world to follow the general goals of the FCPA, even if they don’t always understand the strictures and even when they occasionally get it wrong.

If you could change one thing about the FCPA or FCPA enforcement, what would it be?

I think the underlying goals of the FCPA are just, so there isn’t anything about the law that I would necessarily change. In terms of enforcement, I think the lack of clear judicial guidance on a number of gray areas of the FCPA sometimes makes it difficult to advise clients, who are forced to balance their business interests with a desire to comply with the law. I’d like to see more real case law develop, which is something I’m sure we’ll start to see as more individuals face stiff penalties for violations of the FCPA. The newly passed whistleblower provisions also give me some pause, because companies that have put in the resources to develop effective compliance programs with internal reporting mechanisms may now see that undermined because potential whistleblowers may see a financial incentive to make allegations, when such information may or may not be the basis of an FCPA allegation. However, it is too early at this point to know for sure what the practical effect on both enforcement and compliance will be.

What advice to you have to students or young associates interested in having an FCPA practice?

It’s important for young lawyers to hone their general litigation skills. Internal investigations (particularly when they have international elements) are a different beast from general commercial litigation, but the same skills that make someone a good litigator also form the foundation of being a good investigator. You have to be logical, methodical, with an eye for detail, because you never know what the smoking gun will look like. Being flexible and maintaining a good attitude helps too. You quickly learn that things will rarely go as you plan when working abroad, and many of the technological and other comforts we rely on in our legal practices here in the US are often unavailable when you’re overseas. Additionally, having to navigate the social and cultural norms of the people and places where you’re doing an investigation (and the fact that you’re often operating in an environment where the people you’re investigating may resent you and try to make your life more difficult), can make the mechanics of actually conducting the investigation as complex as the substantive issues you’re investigating. You also won’t regret developing a habit of over-preparing and over-thinking, so that when you and your group face an unexpected issue, you have already considered it, or at least have the foundation to think your way through it. Finally, learn the law backwards and forwards. When I started working in this area, one of the attorneys who mentored me told me that he always kept the statute handy and referred to it often, because the answers he was looking for were usually found inside. In practice, I’ve more often than not found this to be true. At a minimum, having a solid working knowledge of the law and its intricacies helps you communicate with your clients about why you may be offering certain advice or asking them to make certain changes to how they do business.

Mounties Lay Corruption Charges

The U.S. is not the only country with an anti-bribery law on its books.

In this guest post, Mark Morrison (here) and Michael Dixon (here) of Blake, Cassels & Graydon LLP discuss a recent enforcement action brought under Canada’s Corruption of Foreign Public Officials Act.

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The Royal Canadian Mounted Police (“RCMP”) recently announced that they have laid charges under the Canadian equivalent of the FCPA, the Corruption of Foreign Public Officials Act (“CFPOA”), against a former employee of an Ottawa based technology company in relation to alleged overseas bribery. Few details have been released at this time, but it appears that the charges relate to alleged bribes paid to a foreign government official in an effort to secure a multi-million dollar contract. At this point in time, no charges have been laid against the company or other individuals, but comments by the RCMP suggest that further charges may be pending.

This is the second charge laid to date under CFPOA. The first related to the conduct of a United States Immigration Officer who was hired as a consultant by a Canadian corporation. In 2005, that corporation pled guilty and was sentenced to a fine of $25,000. A number of other bribery cases in Canada have also dealt with the corruption of domestic officials, but these have proceeded under the provisions of the Canadian Criminal Code.

What is interesting about this case to those of us who practice in the area is that we have been expecting something of this nature for some time as Canada has been under significant pressure from the OECD to meet its international anti-corruption enforcement obligations. In response to this pressure, the RCMP has established a special unit solely dedicated to investigating international bribery. The unit, with divisions in Ottawa and Calgary, has been actively engaged in several investigations, however, this is the first charge they have laid. Further charges are anticipated as other investigations progress.

Another interesting point raised by this case is the extent to which the Canadian courts are willing to apply the CFPOA to the extraterritorial actions of Canadian citizens. While the Canadian government previously introduced a Bill to amend the CFPOA to clarify its application to Canadians acting outside Canada, this Bill was not passed into law. In the absence of this Bill, the Canadian test for jurisdiction, as determined by the case law, is different than that employed in the US. Historically, only cases with a “real and substantial” link to Canada will be considered as falling within the jurisdiction of the Canadian courts. Accordingly, the Canadian test requires that a portion of the illegal activity occur within Canada or a real connection to Canada. While we do not know to what extent the alleged corrupt activity occurred in Canada, this case appears to represent the first opportunity for the Canadian courts to clarify the reach of the CFPOA to Canadian citizens acting abroad.

DOJ Guidance and the FCPA

That is the issue addressed by James Parkinson (Mayer Brown – see here) in the below guest post.

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As followers of this blog know well, the UK’s newly-enacted Bribery Act (here) calls for the UK government to “publish guidance about procedures that relevant commercial organisations can put into place to prevent persons associated with them from bribing…” Seeing this provision in the Bribery Act suggests the question whether similar guidance issued by the US government would be helpful.

As it turns out, the US government considered this very question over 20 years ago but declined to offer guidance to companies affected by the FCPA. In the 1988 amendments to the FCPA, Congress added provisions entitled “Guidelines by Attorney General,” which required the following:

“Not later than one year after August 23, 1988, the Attorney General, after consultation with the Commission, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtaining the views of all interested persons through public notice and comment procedures, shall determine to what extent compliance with this section would be enhanced and the business community would be assisted by further clarification of the preceding provisions of this section and may, based on such determination and to the extent necessary and appropriate, issue–

(1) guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice’s present enforcement policy, the Attorney General determines would be in conformance with the preceding provisions of this section; and

(2) general precautionary procedures which issuers may use on a voluntary basis to conform their conduct to the Department of Justice’s present enforcement policy regarding the preceding provisions of this section.

The Attorney General shall issue the guidelines and procedures referred to in the preceding sentence in accordance with the provisions of subchapter II of chapter 5 of Title 5 and those guidelines and procedures shall be subject to the provisions of chapter 7 of that title.”

15 U.S.C. §§ 78dd-1(d), 78dd-2(e).

Following the 1988 mandate, the DOJ issued a formal notice inviting all interested persons “to submit their views concerning the extent to which compliance with 15 U.S.C. 78dd-1 and 78dd-2 would be enhanced and the business community assisted by further clarification of the provisions of the anti-bribery provisions through the issuance of guidelines.” Department of Justice, Anti-Bribery Provisions of the Foreign Corrupt Practices Act, 54 Fed. Reg. 40,918 (Oct. 4, 1989).

What happened?

On July 12, 1990, the DOJ declined to issue guidelines on the anti-corruption provisions of the FCPA, stating:

“After consideration of the comments received, and after consultation with the appropriate agencies, the Attorney General has determined that no guidelines are necessary…. [C]ompliance with the [anti-bribery provisions] would not be enhanced nor would the business community be assisted by further clarification of these provisions through the issuance of guidelines.”

Department of Justice, Anti-Bribery Provisions, 55 Fed. Reg. 28,694 (July 12, 1990).

How many responses did the DOJ receive?

According to the OECD’s Phase I Report on the US implementation of the Convention (at 15), “[o]nly 5 responses were received, and 3 of the responses were to the effect that guidelines were unnecessary.”

This suggests another question: what would the commentary landscape look like today if the DOJ published a new Federal Register notice soliciting “views concerning the extent to which compliance with 15 U.S.C. 78dd-1 and 78dd-2 would be enhanced and the business community assisted by further clarification of the provisions of the anti-bribery provisions through the issuance of guidelines”?

Given the rise in enforcement activity and the focus companies now bring to compliance, it seems very likely that far more than five people would submit comments.

Friday Roundup

A “foreign official” headed to prison, more on monitors, the language of bribery, more pre-enforcement action news, and perspectives from the field.

It’s all here in the Friday roundup.

Haitian “Foreign Official” Headed to U.S. Prison

Numerous prior posts (see here, here, and here) have covered the FCPA and FCPA-related enforcement action involving Telecommunications D’Haiti (“Haiti Teleco”).

The action was noteworthy because it involved “foreign officials.” Because the Foreign Corrupt Practices Act only applies to bribe givers and not bribe recipients, the charges were not FCPA charges, but rather a money laundering conspiracy charge.

Earlier this week, Robert Antoine (a former Director of International Relations of Haiti Teleco responsible for negotiating contracts with international telecommunications companies on behalf of Haiti Teleco), was sentenced to four years in prison. In addition, Antoine was ordered to serve three years of supervised release following his prison term, ordered to pay $1,852,209 in restitution, and ordered to forfeit $1,580,771. (See here for the DOJ release).

Certain of the indicted defendants, including “foreign official” Jean Rene Duperval, have not pleaded and the DOJ release notes that “trial for these remaining defendants is scheduled to begin July 19, 2010, in U.S. District Court in Miami.”

Additional Guidance on the Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements

Most corporate FCPA enforcement actions involve deferred prosecution or non-prosecution agreements. Many of these agreements require the appointment of a compliance monitor.

Thus, most FCPA aficionados are familiar with the “Morford Memo” – the March 2008 DOJ guidance “relating to the use of independent corporate monitors in connection with deferred prosecution agreements and non-prosecution agreements with corporations.” The Morford Memo (see here) sets forth nine basic principles for
drafting monitor-related provisions in such agreements.

Recently Acting Deputy Attorney General Gary Grindler issued a memo (see here) “to supplement the guidance in the Morford Memorandum by adding a tenth basic principle to guide prosecutors in drafting agreements: namely, that an agreement should explain what role the Department could play in resolving any disputes between the monitor and the corporation, given the facts and circumstances of the case.”

The Language of Bribery

The FCPA is a serious topic.

But that doesn’t mean an FCPA article can’t be informative and entertaining at the same time.

Case in point, “A Bribe By Any Other Name” by James Tillen and Sonia Delman (Miller & Chevalier) (see here).

Don’t understand the significance of “moon cakes,” “rice cake expenses” or “black mist?”

You probably should.

As the authors note, “[w]hen an expatriate manager does not recognize that a subordinate is seeking reimbursement for a bribe disguised by a code word or when auditors miss a suspect transaction concealed behind a local idiom, the employees themselves and the company as a whole are at serious risk of running afoul of anti-bribery laws.”

The article concludes with a “few simple steps” companies can take to incorporate the language of bribery into compliance training and policies.

The Flood of Pre-Enforcement Action News Continues

One of these days, the FCPA dam is going to burst because the surge of pre-enforcement action news continues.

Among others in the “stay-tuned” category are: Alcatel-Lucent, Technip, Panalpina, Pfizer and Johnson & Johnson.

Add to the list Universal Corporation, “the world’s leading leaf tobacco merchant and processor.” (see here).

The company’s recent 10-K (see here) notes as follows:

“As a result of a posting to our Ethics Complaint hotline alleging improper activities that involved or related to certain of our tobacco subsidiaries, the Audit Committee of our Board of Directors engaged an outside law firm to conduct an investigation of the alleged activities. That investigation revealed that there have been payments that may have violated the U.S. Foreign Corrupt Practices Act. The payments approximated $2 million over a seven-year period. In addition, the investigation revealed activities in foreign jurisdictions that may have violated the competition laws of such jurisdictions, but we believe those activities did not violate U.S. antitrust laws. We voluntarily reported these activities to the Department of Justice (“DOJ”) and the SEC in March 2006. On June 6, 2006, the SEC notified us that a formal order of investigation had been issued.

Since voluntarily reporting, we have cooperated with and assisted the DOJ and SEC in their investigations, and for the past year we have engaged in settlement discussions with both authorities to resolve the matter. Those negotiations have resulted in agreements in principle being reached with representatives of the DOJ and the staff of the SEC. The final resolution of this matter remains subject to the completion of definitive agreements and the approval and execution of those agreements by the DOJ and the SEC. In addition, each settlement is subject to the approval of a federal district court with jurisdiction over the matter. We have been given no assurance that the settlements will be approved by the DOJ, SEC, or federal district courts. Based on the agreements in principle that have been reached to date, the resolution of this matter with the DOJ and the SEC is expected to include injunctive relief, disgorgement and prejudgment interest, fines, penalties, and the retention of an independent compliance monitor. Based in part on the progress of the matter and consultation with outside counsel, we have recorded accruals from time to time since the matter arose that are adequate to satisfy the estimated financial settlement we expect with the resolution of the matter. The financial settlement is not expected to have a material effect on our financial condition or results of operations.”

Incidentally, on the same day, Universal issued a press release announcing record annual earnings (see here).

U.K. Bribery Bill – Perspectives from the Conference Circuit

Michael Osajda (see here) is an attorney and business ethics consultant. He frequently writes and speaks on FCPA issues, including for World-Check (see here).

In the below guest post, Osajda offers perspectives from recent presentations in Singapore and Hong Kong attended by over 120 business professionals and attorneys.

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“My presentation compared and contrasted the FCPA and the U.K. Bribery Act. I spoke of the different bases for the two statutes, the FCPA being a product of a unique post Watergate cloture and a significant Cold War foreign policy element and the Bribery Act, a product of legislative efficiency and the need for the UK to comply with the OECD convention. The new offenses of foreign private bribery and failure to prevent bribery were stressed.

Like many commentators, the attendees were nervous about the SFO’s stated use of prosecutorial discretion to address issues such as facilitation payments and the appropriateness of business expenses. Attendees were concerned that SFO statements that it does not intend to shut down business and that it will look reasonably at facilitation payments, especially in circumstances that appear to be coercion that can be given to the field. These issues may be a mine filed until some pattern of prosecution or abstention is established. Another concern of attendees was the new strict liability offense of failure to prevent bribery. The attendees were interested as to the elements of “adequate procedures.” While the Sentencing Guidelines, the Woolf Report and OECD guidance are good starts, we will all wait for the guidance to come from the UK Secretary of State on the components of “adequate procedures”.

All in all this Asia trip underscores the world-wide interest of multinationals, whatever their home jurisdictions, to the issue of corruption. All understand that the landscape is changing and are interested in doing the right thing.”

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Also, Trace recently conducted a symposium in London “attended by over 60 company representatives and featuring speakers from government, the private bar and in-house legal and compliance departments.” For insight into what was on the minds of program participants see here.

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