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No, We Don’t Need to Suspend the FCPA In Haiti or Any Other Country!

A topic in the blogosphere this week has been whether the FCPA needs to be suspended so that more U.S. companies will invest in Haiti.

The spark igniting this discussion was an opinion piece on Monday by Wall Street Journal editorial board member Mary Anastasia O’Grady titled “Democrats and Haiti Telecom” (see here).

[Although O’Grady’s article is titled “Democrats and Haiti Telecom” and although she focuses mostly on Josepth P. Kennedy II and former President Clinton, it should be noted that John Sununu (President Bush’s former Chief of Staff and Counselor) currently is the Chairman of Fusion’s advisory board (see here).]

The article focused on a 1999 contract between Fusion Telecommunications and Haiti Teleco – an entity in the news recently given that certain former employees have been connected to a wide-ranging FCPA enforcement action (see here for prior posts). The article discusses Joseph P. Kennedy II’s role at Fusion as a former member of the board “and the still-unanswered question about why Fusion had access to the Teleco network at a 75% discount to the official rate on file at the Federal Communications Commission.” Incidentally, the FCPA enforcement action involving Haiti Teleco that has been in the news since May 2009 includes allegations that the individuals and companies involved received “preferred telecommunications rates” based on improper payments made to Haiti Teleco officials (see here at pages 7-8). Indeed, O’Grady’s article notes that a civil action in a Florida federal court alleges that certain U.S. telecom carriers were granted “significantly reduced rates for services provided by Teleco in exchange for kickbacks” and that one of the companies that made payments “to certain off-shore companies” was Fusion.

O’Grady’s article concludes with this statement from “an American entrepreneur who does business in the Caribbean” who “recently explained the Haitian landscape” to O’Grady this way – “We did not bother with Haiti as the Foreign Corrupt Practices Act precludes legitimate U.S. entities from entering the Haitian market. Haiti is pure pay to play. The benefit of competitive submarine cables would be transformative for the Haitians. Instead, they were stuck with Clinton cronies taxing the poor.”

This unattributed statement by one person (a statement which exhibits misunderstanding of the FCPA) then prompted George Mason University Economics Professor Tyler Cowen to write at the Marginal Revolution Blog (see here) that “one of the best way to help Haiti” is to “pass a law stating that the Foreign Corrupt Practices Act does not apply to dealings in Haiti. As it stands right now, U.S. businesses are unwilling to take on this legal risk and the result is similar to an embargo. You can’t do business in Haiti without paying bribes.”

This then prompted Eric Lipman at the Legal Blog Watch (see here) to ask – “[i]t should not be necessary to suspend enforcement of an anti-corruption law to enable U.S. companies to participate, but, realistically speaking, is it justified in this case to look the other way for a time?”

This then prompted Ashby Jones at the Wall Street Journal’s Law Blog (see here) to ask:

“It’s an interesting question posed by Lipman, we think. Let’s assume, for now, that suspension of the FCPA would, in fact, lead to more badly needed U.S. investment in Haiti — a country in desperate need of every last dollar. Would it make sense to pull back on the law for the time being — say 1-2 years? Or would this send a counterproductive message from the Justice Department — that foreign bribery is okay in some countries but not in others? And is that any way to get a country like Haiti back on its feet — by perpetuating a culture of corruption?”


My initial reaction was something like this – gee if the FCPA can, in effect, be suspended for certain companies selling certain products to certain customers (i.e. BAE), why shouldn’t it be suspended to help an impoverished country recover from a natural disaster.

However, the misguided suspension suggestion / argument would seem to rest on certain false assumptions about the FCPA.

First, (Travel Act considerations aside) not all business dealings in Haiti are subject to the FCPA – only those with the Haitian government are (as well as, potentially, those with state-owned or state-controlled entities giving credence, just this once for purposes of this post, to the enforcement agencies’ dubious “foreign official” interpretation). In other words, even if suspension of the FCPA would “open up” a portion of the Haitian market, it remains the case that only a portion of the Haiti market is affected by the FCPA.

Second, the misguided suspenson suggestion / argument assumes empirical evidence suggesting that businesses shun markets with high FCPA risk. I remain suspect to such claims, notwithstanding the prevalence of such claims by others including my friend Andy Spalding (see here). For instance, Venezuela, Angola, Russia, Philippines, Nigeria, Vietnam, Indonesia, Jamaica, Brazil, China, India, Thailand, and Mexico all fare (although not as poorly as Haiti) poor in Transparency International’s Corruption Perceptions Index (see here) (the index is far from perfect, but it is commonly viewed as a leading barometer). Yet foreign investment in these countries is generally vibrant and generally continues to grow notwithstanding the corruption perceptions. Why? Because these are lucrative markets for companies and when a market is lucrative companies will gravitate to those markets, notwithstanding the FCPA risks involved. Haiti has a rather small population and the purchasing power of its citizens is among the lowest in the world. FCPA risks aside, it is perfectly rational for companies to avoid a country like Haiti in favor of doing business in other more populated, lucrative markets. In other words, suspending the FCPA in Haiti is not likely to change this dynamic.

Further, despite my frequent criticism of HOW the FCPA is ENFORCED by the enforcement agencies, I firmly believe that the FCPA, if enforced consistent with its statutory terms and consistent with legislative intent, is a fundamentally sound statute. Suspending enforcement of a necessary and fundamentally sound statute based on false and misguided assumptions is irresponsible and not sound public policy.

What can be done about Haiti?

For starters, how about removing economically inefficient U.S. import quotas that negatively affect Haitian businesses (see here for the recent broadcast from National Public Radio)? An economist like Cowen, as well as others, should pursue this solution rather than advocating suspension of a fundamentally sound and important law.

“It’s Not Easy Being Under Investigation for Two Years …”

Panalpina is dealing with some FCPA issues (see here for the prior post).

Now, the company’s shareholders are getting a bit testy.

According to this report, during the company’s annual meeting last week, a shareholder demanded that someone “step up and take responsibility” for the company’s poor performance over the last two years.

According to the report, CEO Monika Ribar said, “[i]t is not easy being under investigation for two years, and [the FCPA investigation] is not making the situation any easier.”

According to the report, COO Karl Weyeneth added: “You can say the whole FCPA and Nigeria situation reflects badly on the management, but the fact is that as long as we are still involved in the investigation we will continue to lose market share, because our customers have internal regulations which prevent them from doing business with companies which are under investigation by the DoJ.” “As soon as this investigation is over, we will win some of this business back. Customers have told us ‘as soon as you have settled the FCPA, we will do business with you again’.”

Time will no doubt tell whether the FCPA investigation is a convenient excuse for company management for poor performance or whether this instance demonstrates the difficulty of running a company and maintaining customer relationships during the lifespan (often times several years) of an FCPA investigation / enforcement action.


The seemingly minor case involving Telecommunications D’Haiti (“Haiti Teleco”) (see here) keeps on giving.

Last Friday, the DOJ announced (here) that Robert Antoine, one of the “foreign officials” (at least according to the DOJ given that Antoine served as the “Director of International Relations of Haiti Teleco” – an alleged state-owned entity), in the far-reaching case pleaded guilty to a money laundering conspiracy charge.

U.S. Attorney Jeffrey Solman (S.D. of Florida) is quoted as saying, “[t]oday’s conviction should be a warning to corrupt government officials everywhere that neither they nor their money will find any safe haven in the United States.”

Such get-tough language is difficult to reconcile with the BAE bribery, yet not bribery circus in which an identifiable Saudi official was widely alleged to have received from BAE over a billion dollars in a U.S. bank account (see here) and in light of this situation.

A Wide Net

The seemingly minor case involving Telecommunications D’Haiti (“Haiti Teleco”) keeps on giving.

The DOJ recently announced (here) that Jean Fourcand pleaded guilty “to engaging in monetary transactions involving property derived from a scheme to bribe former Haitian government officials.” According to the criminal information (here) Fourcand “received funds ($18,500) originating from U.S. international telecommunications companies for the benefit of Robert Antoine from in or around November 2001, until in or around August 2002.” The information charges that the “funds Fourcand received were bribery payments” to Antoine (an alleged “foreign official” in the eyes of the DOJ because he worked for state-owned Haiti Teleco) and that the “funds were later used by Fourcand in a real estate transaction that benefited Antoine.”

The Fourcand plea is the most recent news in a case in which the DOJ has cast a wide net.

In May 2009, the DOJ announced (here) that Juan Diaz and Antonio Perez pleaded guilty to a one-count criminal information charging conspiracy to violate the FCPA’s antibribery provisions and money laundering laws for their roles in the same improper payment scheme involving the same Haiti Teleco employees. According to the Diaz criminal information (here), Diaz served as an intermediary for various companies in their business dealings with Haiti Teleco and knowingly conspired and agreed with others to make improper payments to the Haiti Teleco officials. According to the Perez criminal information (here), Perez, a controller for one of the companies seeking business with Haiti Teleco, also knowingly conspired and agreed with others to make improper payments to the Haiti Teleco officials.

In December 2009, the DOJ announced (here) the unsealing of an indictment (here) against Joel Esquenazi, Carlos Rodriguez and Marguerite Grandison charging (among other things) conspiracy to violate the FCPA and substantive FCPA violations for their roles in the same scheme to bribe the same Haiti Teleco employees. As noted in a prior post on this case (here), Esquenazi and Rodriguez are former executives of a privately owned telecommunications company and Grandison served as an intermediary for various companies in their business dealings with Haiti Teleco.

As also noted in the prior post, the same indictment also accomplished what is believed to be an “FCPA” first in that the alleged “foreign officials” Robert Antoine and Jean Rene Duperval were also charged. Because the FCPA only covers “bribe-payers” not “bribe-takers” Antoine and Duperval were charged with money laundering conspiracy and/or substantive money laundering.

The DOJ has clearly cast a wide net in this case and eight individuals, including company employees, intermediaries, and “foreign officials,” have been caught in the net.

Another point to consider is that this case involves a whole lot of fishing based on an untested legal theory that has never been accepted by a court – that being employees of state-owned or state-controlled enterprises are “foreign officials” under the FCPA. For numerous prior posts on this issue (see here and here and here).

If you are new to the FCPA you might be wondering why the DOJ comes out with guns-a-blazing in a case like this, yet in a case that involves seemingly clear-cut instances of corporate bribery and corruption (per the government’s own evidence) the DOJ agrees to resolve such a case without FCPA antibribery charges. See here.

Well, don’t feel bad, even those of us who have followed the FCPA for years wonder the same thing from time to time.

Indicting a “Foreign Official”

Yesterday, the DOJ announced (see here) the unsealing of an indictment (see here) against Joel Esquenazi, Carlos Rodriguez, and Marguerite Grandison which charges (among other things) conspiracy to violate the FCPA and substantive FCPA violations for an alleged scheme to bribe two former employees of Haiti Teleco, the alleged “state-owned national telecommunications company.”

Esquenazi and Rodriguez are former executives of a privately owned, Florida-based telecommunications company and Grandison was the President of Telecom Consulting Services Corp., a Florida based company which served as an intermediary.

The unsealed indictment is the latest chapter in this matter; in May 2009, the DOJ announced (see here) the guilty pleas of Juan Diaz and Antonio Perez in connection with the same scheme.

This matter is also yet another example of an FCPA enforcement action in which the “foreign official” is an employee of an alleged state-owned or state-controlled entity.

That, however, is not why this enforcement action is noteworthy.

It is noteworthy because DOJ also indicted Robert Antoine and Jean Rene Duperval – the alleged “foreign officials.” According to the indictment, Antoine and Duperval both served as the “Director of International Relations of Haiti Teleco” and were responsible for negotiating contracts with international telecommunications companies on behalf of Haiti Teleco.

Of course, the charges were not FCPA charges, because the FCPA only covers “bribe-payers” not “bribe-takers” (see here, here, for prior posts on this subject).

Rather the charges against Antoine and Duperval were money laundering conspiracy and/or substantive money laundering charges.

According to the DOJ release, Antoine is from “Miami and Haiti” and Duperval is from “Miramar, Fla. and Haiti.” Further, according to the indictment, both individuals had bank accounts in the U.S. and these accounts were used in connection with the bribery scheme. (I wonder if Washington Mutual, Wachovia, or Miami Federal Credit Union were aware that Haitian “foreign officials” were among its customers!)

To my knowledge this is the first time “foreign officials” have been specifically charged as defendants in connection with an FCPA enforcement action. This indictment of “foreign officials” comes on the heels of AG Holder’s recent speech (see here) in which he stated that the U.S. government was committed to recovering funds obtained by “foreign officials” through bribery.

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