Category: India

A Focus On Indian Pre-Contract Integrity Pacts

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

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The Government of India  unilaterally terminated a Euro 556 Million contract with the Anglo-Italian helicopter manufacturing company AgustaWestland on the 1^st of January 2014 for breach of the pre-contract integrity pact on the basis of allegations of bribery. Similarly in March 2012 the Ministry of Defence (which is incidentally the Ministry concerned in the AgustaWestland case as well) cashed a bank guarantee put forth by the Israeli Military Industries and blacklisted six companies amidst allegations of bribery and breach of the pre contract integrity pact.  A similar blacklisting was also imposed by the Ministry of Agriculture for a period of 5 years on M/s Dow Agro Sciences India Pvt. Ltd in the year 2011. The operative term in the above cases is the ‘allegation of bribery’ or rather the assumption of bribery after which consequences have ensued.

What is a Pre-Contract Integrity Pact?

‘Pre-Contract Integrity Pact’ or ‘Integrity Pact’ is a tool that was developed by Transparency International to help governments, businesses and civil society fight corruption in the field of public contracting where the scope of abuse is immense owing to the large value of contracts. The ‘Pre-Contract Integrity Pact’ establishes binding obligations on both parties, those being the State or its instrumentalities and the commercial organisation.

As the name suggests these obligations become effective from the stage of bidding itself that is prior to the contract and remain in force thereafter as well. The Central Vigilance Commission of India in a document explaining the nature of ‘Pre-Contract Integrity Pacts’ states that failure to implement the Pre-Contract Integrity Pacts’ , would result in public officials being subjected to penal action and bidders would face cancellation of contracts, forfeiture of bonds, liquidated damages and blacklisting. Such action does not require a criminal conviction but can be based on “no-contest” after the evidence is made available or there can be no material doubts. Pre-Contract Integrity Pacts are gradually being widely used by the State and its instrumentalities in all areas of public contracting.

The Ministry of Finance, Government of India in  a circular titled ‘Use of Integrity Pacts by Ministries / Departments – Implementation of Administrative Reforms Commission’ provided a draft of a Pre Integrity Contract.  A perusal of this draft puts forth the following salient points:

• Commitments to not engage in any form of bribery either directly or through any agents or third parties on the part of the bidder
• Commitments to not accept any form of bribes or demand any bribes and to treat all bidders fairly by the Buyer (Government)
• A declaration by the bidder that no previous transgression occurred in the last three years before the signing of the Pact with any other company in any country with respect to corrupt practices.
• Clause 6 of the Pact lays down sanctions for violation which include cancellation of the contract if awarded, confiscation of the security deposit, debarment, recovery of sums so illegally paid, applicable damages with interest, so on and so forth.
• The Buyer (Government) will appoint Independent Monitors in consultation with the Central Vigilance Commission to have an objective review of the implementation of the Pact.
• The Pact extends to a period of 5 years after complete execution of the contract.

Why should companies take Pre-Contract Integrity Pacts seriously?

The cases discussed above and a perusal of the text of the pact, puts forth a situation that companies must take stock of whereby companies have faced the consequences whether it be blacklisting or contract termination, without the investigation being completed or a trial commencing or an ensuing conviction from such trial. Why should companies engaging in public procurement with the Indian State be worried:

• Allegation of bribery: Firstly, as stated above the provisions of the pre-contract integrity pact become operative on the allegation of bribery. In AgustaWestland’s case, India began investigating the matter after proceedings commenced in Italy which the Indian media reported. Thus, news travels and there is no caution that a media house has to exercise in reporting an allegation of bribery as it technically still remains an allegation.
• Simple procedure:  No strict procedure per se is in place to invoke the provisions of the pre-contract integrity pact and nor is there any guidance in this regard as to what the State must follow. The procedure to be followed would merely be to ensure conformance with the principles of natural justice namely audi alteram partem i.e, to hear the other party, which in this case would take the form of a show cause notice. When the State considers the evidence is conclusive enough to invoke the provisions of the pre-contract integrity pact still remain unclear.
• Time frame of action: The time frame in which the action is taken against the company is considerably faster than the regular legal process in India. In AgustaWestland’s case, the allegations came forward in early 2012 and in less than 2 years action was taken. In the case of the blacklisting by the Ministry of Defence, the allegations emerged in May 2009 and by March 2012 the blacklisting was effectuated. This as compared to the time frame of investigations and trials in India which can go into over 10-15 years is something to take note of. Companies’ earlier taking advantage of the tortoise pace of the Indian legal system would come onto the receiving end of the same when they would challenge it in adverse action initiate against them in the courts.
• Checks foreign bribery: Through the Integrity Pact the State is also plugging the loophole of a prevention of a foreign bribery clause (Indian law does not prevent foreign bribery, though a bill is pending in Parliament) by stating  that no transgression viz a viz corruption has taken place in any country for a stipulated period before the signing of the pact.
• Plethora of remedies: If the State terminates a contract in furtherance of the pre-contract integrity pact, it would in no way be precluded from concurrently blacklisting the company or forfeiting deposits or cashing bank guarantees or claiming damages. The use of one remedy would not prevent another from being put into motion.
• Still open to criminal prosecution: While remedies the State has for an act of bribery by a company under the Pre-Contract Integrity Pact remain essentially contractual and administrative in nature, an action or invocation of  a clause from the pact (termination, penalty, blacklisting) would in no way preclude criminal prosecution for these offences. Such action would not constitute a plea bargain or settlement of any kind, but would be independent of the criminal law machinery of the Indian state.

This notwithstanding, a company would have grounds to challenge the State’s action when it invokes a breach of the pre-contract integrity pact before a higher court, but it’s definitely not going to be an easy battle nor will the result be immediate.

Conclusion:

In light of recent actions in India, companies engaged in public procurement / public contracting need to take Pre-Contract Integrity Pacts more seriously and not view them as a mere procedural requirement before signing the contract. Further, companies should also consider the impact that proceedings / investigations / disclosure in one jurisdiction may have in another and should address the risks of the same. With public pressure against corruption mounting and proactive media houses in India reporting instances of corruption, companies need to do a major re-think on the economic viability of bribing in India and the consequences that may follow.

Friday Roundup

Wal-Mart’s FCPA expenes continue to grow, scrutiny alerts and updates, in the blink of an eye, and for the reading stack.  It’s all here in the Friday roundup.

Wal-Mart’s FCPA Expenses

As highlighted in this previous post, last FY Wal-Mart’s FCPA professional fees and expenses were approximately $604,000 per working day.  As highlighted in this previous post, for Q1 of this FY Wal-Mart’s FCPA professional fees and expenses were approximately $1.16 million per working day.

Yesterday, in a Q2 earnings conference call, Wal-Mart executives stated:

“Expenses related to FCPA and compliance matters were approximately $82 million, which was above our forecasted range of $65 to $70 million. Approximately $48 million of these expenses represented costs incurred for the ongoing inquiries and investigations. Approximately $34 million is related to global compliance programs and organizational enhancements.”

Doing the math, Wal-Mart’s second quarter FCPA-related professional fees and expenses equal approximately $1.26 million per working day.

In this release, Wal-Mart stated:

“We believe expenses for FCPA matters and compliance programs will be between $75 and $80 million for both the third and fourth quarters.”

The question again ought to be asked – does it really need to cost this much or has FCPA scrutiny turned into a boondoggle for many involved?  For more on this issue, see my article “Big, Bold, and Bizarre: The Foreign Corrupt Practices Act Enters a New Era.

Scrutiny Alerts and Updates

BHP Billiton

The company issued the following release.

Novartis

Add Novartis to the list of pharma companies under scrutiny by Chinese law enforcement for business practices in China.  This Wall Street Journal article states:

“Novartis AG has opened an investigation into possible misconduct at its Chinese operations after a former employee filed a complaint about the Swiss pharmaceutical company’s business practices with labor authorities in China.  Basel-Switzerland based Novartis said … its Business Practices Office, which looks into reported misconduct, is in charge of the investigation. The company said the former employee had asked for 5 million yuan (approximately $800,000) in compensation after resigning but declined to comment further.”

Allied Defense Group

Allied Defense Group (“ADG”) employed Mark Frederick Morales, one of the individuals charged in the failed Africa Sting enforcement action.  As noted in this previous post, in August 2012, the ADG disclosed:

“In February and March, 2012, the DOJ dismissed charges against all individuals indicted in the FCPA sting operation, including the former employee of MECAR USA [an operating business of ADG]. Since this time, the Company’s FCPA counsel has had several discussions with the DOJ and SEC regarding the agencies’ respective inquiries. Based upon these discussions, it appears likely that resolution of these inquiries will involve a payment by the Company to at least one of these government agencies in connection with at least one transaction involving the former employee of Mecar USA. At this point, the amount of this payment is undeterminable.”

ADG recently disclosed:

“In late 2012, the SEC advised that it will not pursue an enforcement action against the Company and in early August 2013, the DOJ advised that it has decided to close its inquiry into this matter.”

In The Blink Of An Eye

As highlighted last week in the Friday Roundup, last week Juniper Networks disclosed:

“The U.S. Securities and Exchange Commission and the U.S. Department of Justice are conducting investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act. The Company is cooperating with these agencies regarding these matters. The Company is unable to predict the duration, scope or outcome of these investigations.”

Whether because of three sentences or other information in the company’s quarterly filing, the company’s stock dropped approximately 5.5% last Friday.

72 hours later?

Why of course a securities fraud class action complaint.

This beats the 100 hour threshold highlighted in this previous blink of an eye post.

Reading Stack

A revealing Op-Ed from a member of the Indian Administrative Services in the Times of India which “looks at the games lower bureaucracy plays — sometimes on its own, at other times in collusion with the top — which kill  entrepreneurship and capitalism in India” and which also provide breeding grounds in which harassment bribery flourishes.

An FCPA Mid-Year Update from BakerHostetler.

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A good  weekend to all.

Friday Roundup

In the classroom, survey says, a candid statement, on-point, an informative read, patience and a prediction.  It’s all here in the Friday roundup.

In The Classroom

I was pleased to learn that my recent article “Foreign Corrupt Practices Act Enforcement As Seen Through Wal-Mart’s Potential Exposure” (here) was required reading for the MBA students in Jeffrey Klink’s FCPA-related class at the University of Pittsburgh Joseph S. Katz Graduate School of Business. (See here for a recent profile of the class.)  Klink (a former AUSA and current CEO of Klink & Co., a global risk management firm – here) shared the following.

“During our class we discussed your recent article regarding the Wal Mart case at length.   Many students opined that it was likely that many of the payments were in fact facilitation payments and especially where permits would definitely be issued.  The majority of students, however, believed that probably many payments were not clerical or ministerial, noting that according to the NY Times article, payments caused zoning maps to be changed, and environmental permits were obtained likely without proper process.   Students believed that these kinds of payments were not grease or skid payments, but were in fact bribes designed to allow Wal Mart to open new stores without competition, thus gaining new business.  All but one of the 41 students (a bright law student held out) present believed that Wal Mart had successfully obtained new business by paying  bribes through the $24 million in payments to gestores.  We also discussed the significance of an organization’s compliance culture.   Wal Mart was viewed very negatively by the students, having been subject to successful discrimination suits regarding gender bias, its poor treatment of vendors, locking its own injured employees inside stores, and the facts of the Mexico bribery case, where, if the NY Times article is correct, it was clear that top officials buried facts, did not pursue an investigation, and promoted corrupt executives to high ranking positions.   As geography under the FCPA can also be destiny, I also noted that Mexico is rated #100 by TI, and it doesn’t appear that Wal Mart had a risk plan in place to address its growth in places where corruption and bribery are extremely common and not unexpected.  Many students believed that Wal Mart, like other large organizations, likely engaged in, and continues to engage in, cost – benefit thinking where executives conclude that the cost of bribery is not significant compared to the benefits that accrue to the organization through growth and profits.”

Staying on campus and referring to “THE” New York Times article (see here for the prior post) readers may enjoy this webcast of the recent Wal-Mart focused Milbank Tweed Forum at the NYU School of Law.  Moderated by Professor Kevin Davis (the author of recent FCPA scholarship – here and here), the panel included David Barstow, the investigative reporter at the New York Times who broke the Wal-Mart story.

Survey Says

Speaking of the significance of the FCPA, a recent boardroom survey conducted by BDO USA (an accounting and consulting firm) reveals as follows.  “One-third (33%) of directors cite corruption/bribery as the greatest fraud risk facing their company, compared to approximately one-fifth that identify either revenue recognition (20%) or earnings management (18%).  Two-thirds (68%) of directors indicate their companies conduct business in foreign locations or with foreign customers or suppliers. Of those conducting international business, a majority (57%) say they deal with foreign officials and almost one-third (32%) of those believe compliance risks related to bribery of government officials has increased over the past two years, compared to just four percent reporting a decrease.”

The survey, conducted in late August and early September 2012, examined the opinions of 72 corporate directors of public company boards, with revenues ranging from $250 million to $750 million, regarding financial reporting and corporate governance issues. For more, see this BDO release.

Candid Statement

Hank Walther (a former Assistant Chief in the DOJ’s FCPA unit and currently at Jones Day – see here), stated in this recent interview in the Metropolitan Corporate Counsel as follows.

“Most government attorneys realize that a company can take every reasonable step to prevent wrongdoing but ultimately is powerless if somebody really wants to break the law.”

Makes you wonder why the DOJ is steadfast in its opposition to an FCPA compliance defense.  But then again the current enforcement environment provides the DOJ maximum leverage.  However, for the reasons I articulate in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here), the DOJ should be in favor of a compliance defense.

On-Point

This previous post, “Testing Innocence,” noted that the longest individual FCPA sentences (Joel Esquenazi and Carlos Rodriguez) were issued in enforcement actions where the defendants exercised their constitutional rights to a jury trial.  The conduct Esquenazi and Rodriguez allegedly engaged in (and the jury found, although their appeals are pending) paled in comparison to some other FCPA individual prosecutions – such as the individual prosecutions in the Bonny Island Nigeria cases.  What did Esquenazi and Rodriguez do that warranted such a long sentence?  They tested their innocence.

The FCPA community once again saw the high cost of testing innocence this past spring and summer when the individual defendants in the so-called Carson enforcement action pleaded guilty on the eve of trial.  (See here, here, here).  The guilty pleas came after the trial court judge issued a pro-defendant jury instruction relating to knowledge of foreign official.  (See here).  On the brink of the DOJ being put to its ultimate burden of proof on “foreign official” and other elements as well, the DOJ offered plea agreements to substantially reduced charges and the defendants, likely mindful of the high costs of testing their innocence, did what most rationale, risk averse actors in their position would do – agreed to plead guilty.

The Wall Street Journal ran a feature story this week “Federal Guilty Pleas Soar As Bargains Trump Trial” (here) which documented the trend of a “growing number of federal defendants who [plead guilty] often to avoid the lengthy prison sentences that can come with losing at trial.”  Among other things, the article noted that “federal [sentencing] guidelines not only toughened punishments but also formalized a system to reward defendants who plead guilty by reducing sentences if they accept responsibility or cooperate with prosecutors, among other things.  As part of plea deals, federal prosecutors often drop additional charges that could add years, or decades, to a sentence.  Going to trial brings none of those benefits for the accused.”

The WSJ article included research (here) co-authored by my Southern Illinois University School of Law colleague Lucian Dervan (here) which found that 55% of students who were innocent in a control group study pleaded “guilty.”  The study showed “a strong compulsion to have the matter resolved even if it meant confessing to something that they really didn’t do.”

Informative Read

Breon Peace and Ryan Becker (Cleary Gottlieb Steen & Hamilton – here and here) recent authored this informative article in Bloomberg Law that touches upon just about everything you would want to know about the FCPA and statute of limitations.  The article, written in the context of Wal-Mart’s potential FCPA scrutiny discusses black letter law and judicial decisions, but rightly notes in connection with Wal-Mart as follows.

“Given the facts as reported by the New York Times, Wal-Mart, and individuals involved in the bribery scheme, would have a plausible statute of limitations defense to any FCPA actions—even a potential conspiracy charge. As a practical matter, companies, especially publicly held companies like Wal-Mart, typically make a strategic decision to fully cooperate with a DOJ investigation. Despite the potential success of a statute of limitations defense, a company will often make the judgment that the negative press of a protracted investigation and the uncertainty of the outcome at trial make cooperation the more prudent business judgment. The company’s hope is that it will be given credit for the cooperation and it will achieve a better outcome than if it went to trial (i.e., avoid charges, a deferred prosecution agreement, or a reduced fine).”

Patience

Before Wal-Mart’s potential FCPA scrutiny dominated the headlines, there was News Corp.  In July 2011, world-wide media attention focused on the company, not just the phone hacking aspects of the scandal, but the potential FCPA implications as well.  See here for the prior post.  In the prior Q&A style post, I addressed the issue of how long the FCPA gray cloud will likely hang over News Corp. and said that it would likely be between 2-4 years if the case followed the typical pattern.  In February of this year, I noted (here) that the FCPA aspect of News Corp.’s scrutiny was following a typical path.

Eliot Spitzer (former New York Governor, former New York Attorney General and current TV personality) apparently is not aware of the typical path.  In this recent Slate article titled “Why Hasn’t Eric Holder Charged News Corp. With Foreign Corrupt Practices?” Spitzer writes as follows.

“[W]here is the inept U.S. Department of Justice in all this? The DOJ has brought many irrelevant and tiny cases against companies for violating the Foreign Corrupt Practices Act, which makes it illegal to bribe either individuals or government officials, even in a company’s overseas operations. The DOJ loves to use the statute to show just how tough it is. Yet now they have the most important case sitting right there in front of them. It’s easy. Even a rookie could field this one. But what are they doing? It’s not clear. If they fail to make this case against News Corp., Eric Holder is a failure as attorney general.”

Patience.  And while Sptizer is waiting, he may want to brush up on the FCPA – not sure what he means when he says that the FCPA “makes it illegal to bribe either individuals or government officials.”

Prediction

No, I am not going to predict that the DOJ’s FCPA guidance will be released next week.  OK, maybe I will, see here from Compliance Week.

Rather my prediction concerns FCPA risk in India.

The Indian Commerce Ministry recently eased (see here) foreign investment restrictions giving multi-brand retailers greater access to the growing Indian market.  Per the new policy, it will be the “prerogative of the states to allow a multi brand store” and “local and state-level regulations which govern shops and establishment are the prerogative of the respective state governments.”

I predict that India’s new FDI policy will be an FCPA compliance headache for relevant companies seeking to expand in India as the new policy facilitates points of contact between a company and state and local officials in regards to license, permit, and land issues.  In “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (see here), I highlight how companies subject to the FCPA are often funneled into an arbitrary world of low-paying civil servants who frequently supplement their meager salaries through payments condoned in the host country.  I argue that such barriers create the conditions in which harassment bribes flourish and I predict India’s new FDI policy will do just that.

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A good weekend to all.

In Depth On The Tyco Enforcement Action

Earlier this week, the DOJ and SEC announced a Foreign Corrupt Practices Act enforcement action against Tyco International Ltd. (“Tyco”) and a subsidiary company.  Total fines and penalties in the enforcement action were approximately $26.8 million (approximately $13.7 million in the DOJ enforcement action and approximately $13.1 million in the SEC enforcement action).

This post goes long and deep as to the DOJ’s and SEC’s allegations and resolution documents (approximately 85 pages in total).  Tomorrow’s post will discuss various items of note from the enforcement actions.

DOJ

The DOJ enforcement action involved a criminal information (here) against Tyco Valves & Controls Middle East Inc., (an indirect subsidiary of Tyco) resolved through a plea agreement (here) and a non-prosecution agreement (here) entered into between the DOJ and Tyco.

Criminal Information

The criminal information begins by identifying Tyco Valves & Controls Middle East Inc. (TVC ME) as a Delaware company headquartered in Dubai that “sells and markets valves and actuators manufactured by other entities throughout the Middle East for the oil, gas, petrochemical, commercial construction, water treatment,and desalination industries.”

According to the information, Tyco Flow Control Inc. (“TFC) was TVC ME’s direct parent company and TFC was a wholly-owned indirect subsidiary of Tyco.  According to the information, “TVC ME’s financials were consolidated into the books and records of TFC for the purposes of preparing TFC’s year-end financial statements, and in turn, TFC’s financials were consolidated into the books and records of Tyco for the purposes of preparing Tyco’s year-end financial results.”

The information alleges a conspiracy as follows.

Between 2003 and 2006 TVC ME conspired with others to “obtain and retain business from foreign government customers, including Aramco, ENOC, Vopak, NIGC, and other customers by paying bribes to foreign officials employed by such customers.”

The information alleges: that Saudi Aramco (“Aramco”) was a Saudi Arabian oil and gas company that was wholly-owned, controlled, and managed by the government, and an “agency” and “instrumentality” of a foreign government; that Emirates National Oil Company (“ENOC”) was a state-owned entity in Dubai and an “agency” and “instrumentality” of a foreign government; that Vopak Horizon Fujairah (“Vopak”) was a subsidiary of ENOC based in the U.A.E. and an “agency” and “instrumentality” of a foreign government; and that the National Iranian Gas Company (“NIGC”) was a state-owned entity in Iran and an “agency” and “instrumentality” of a foreign government.

Under the heading “manner and means of the conspiracy” the information alleges in pertinent part as follows.

“TVC ME, together with others, decided to pay bribes to employees of end-customers in Saudi Arabia, the U.A.E., and Iran, including to employees at Aramco, ENOC, Vopak, and NIGC, in order to obtain or retain business.  TVE ME, together with others, found ways to obtain cash in order to make the bribe payments.  TVE ME, together with others, made payments through Local Sponsor [a company in Saudi Arabia that acted as a distributor for TVC ME in Saudi Arabia].  Local Sponsor provided TVC ME with false documentation, such as fictitious invoices for consultancy costs, bills for fictitious commissions, or ‘unanticipated costs for equipment,’ to justify the payments to Local Sponsor that were intended to be used for bribes.  TVE ME, together with others, approved and made payments to Local Sponsor for the purpose of paying bribes.  TVC ME, together with others, paid bribes to employees of foreign government customers in order to remove TVC manufacturing plans from various Aramco ‘blacklists’ or ‘holds’; win specific bids; and/or obtain specific product approval.  TVC ME, together with others, improperly recorded the bribe payments in TVC ME’s books, records, and accounts, and instead falsely described the payments, including as consultancy costs, commissions, or equipment costs.  TVC ME earned approximately $1.153,500 in gross margin as a result of the bribe payments.”

Based on the above conduct, the information charges conspiracy to violate the FCPA’s anti-bribery provisions.

Plea Agreement

The plea agreements sets forth a Sentencing Guidelines range of $2.1 million – $4.2 million.  In the plea agreement, the parties agreed that $2.1 million was “appropriate.”  Pursuant to the plea agreement, TVC ME agreed “to work with its parent company in fulfilling the obligations” described in Corporate Compliance Program attached to the plea agreement.

NPA

The DOJ also entered into an NPA with Tyco in which the DOJ agreed “not to criminally prosecute [Tyco] related to violations of the books and records provisions of the FCPA … arising from and related to the knowing and willful falsification of books, records, and accounts by a number of the Company’s subsidiaries and affiliates …”.

The NPA contains a Statement of Facts.

Under the heading, “details of the illegal conduct” the NPA states as follows.

“[From 1999 through 2009] certain Tyco subsidiaries falsified books, records, and accounts in connection with transactions involving customers of Tyco’s subsidiaries, including government customers, in order to secure business in various countries, including China, India, Thailand, Laos, Indonesia, Bosnia, Croatia, Serbia, Slovenia, Slovakia, Iran, Saudia Arabia, Libya, Syria, the United Arab Emirates, Mauritania, Congo, Niger, Madagascar, and Turkey.  During that time period, certain Tyco subsidiaries made payments, both directly and indirectly, to government officials and falsely described the payments to government officials in Tyco’s corporate books, records, and accounts as legitimate charges, including as ‘consulting fees,’ ‘commissions,’ ‘unanticipated costs for equipment,’ ‘technical consultation and marketing promotion expenses,’ ‘conveyance expenses,’ ‘cost of goods sold,’ ‘promotional expenses,’ and ‘sales development’ expenses.  As early as 2004, Tyco alerted the Securities and Exchange Commission to payments at certain of Tyco’s subsidiaries that could violate the FCPA.  In 2006, Tyco acknowledged that ‘prior to 2003 Tyco did not have a uniform, company-wide FCPA compliance program in place or a system of internal controls sufficient to detect and prevent FCPA misconduct at is globally dispersed business units’ and that ’employees at two Tyco subsidiaries in Brazil and South Korea did not receive adequate instruction regarding compliance with the FCPA, despite Tyco’s knowledge and awareness that illicit payments to government officials were a common practice in the Brazilian and South Korean construction and contracting industries.’  However, despite Tyco’s knowing of a high probability of the existence of improper payments and false books, records, and accounts, the improper payments and falsification of books, records, and accounts continued until 2009.”

As to Thailand, the Statement of Facts states a follows.

“[Between 2004 and 2005] ET Thailand [Earth Tech (Thailand) Ltd. – a Thai corporation that was approximately 49% indirectly owned by Tyco] made payments in the amount of approximately $292,286 to a consultant and recorded those amounts as fictitious disbursements related to the NBIA project [New Bangkok International Airport].  In connection with these improper payments, ET Thailand earned approximately $879,258 in gross profit.”

“[Between 2000 to 2006] ADT Thailand [ADT Sensormatic Thailand an indirect wholly owned subsidiary of Tyco] recorded payments in the amount of approximately $78,000 to one of its subcontractors as payments for site surveys for a government traffic project in Laos, but the payments instead were channeled to other recipients in connection with ADT Thailand’s business in Laos.  During the same time period, ADT Thailand made payments to one of its consultants related to a contract for the installation of a CCTV system in the Thai Parliament House, and ADT Thailand and the consultant created invoices that stated that the payments were for ‘renovation work’ when no renovation work was actually performed.  During that same time period, ADT Thailand made three payments in connection with a design and traffic survey that ADT Thailand provided from the city of Pattaya, in Southern Thailand, but the payments were issued pursuant to falsified invoices without any evidence that work was ever performed.  In connection with these improper transactions, ADT Thailand earned approximately $473,262 in gross profit.”

As to China, the Statement of Facts state as follows.

“[Between 2003 and 2005] TTC Huzhou [Tyco Thermal Controls (Shanghai) Co. Ltd. an indirect wholly owned subsidiary of Tyco] authorized approximately 112 payments in the amount of $196,267 to designers at design institutes owned or controlled by the Chinese government, and falsely described the payments in company books, records, and accounts as ‘technical consultation’ or ‘marketing promotion’ expenses.  In 2005, in connection with a contract with China’s Ministry of Public Security, TTC Huzhou paid a commission to one of its sales agents that was used, in part, to pay the ‘site project team’ of a state-owned corporation, and that was improperly recorded in the company’s books and records.  In connection with these improper transactions, TTC Huzhou earned approximately $3,470,180 in gross profit.”

“TFCT Shanghai [Tyco Flow Control Trading (Shanghai) Ltd. an indirect wholly owned subsidiary of Tyco] made approximately eleven payments in the amount of approximately $24,000 to employees of design institutes, engineering companies, subcontractors and distributors which were inaccurately described in its books and records.  In connection with these improper transaction, TFCT Shanghai earned approximately $59,412 in gross profit.”

“[Between 2005 and 2006] TFC HK  [Tyco Flow Control Hong Kong Limited] and Keystone [Beijing Valve Co. Ltd.] [both indirect wholly owned subsidiaries of Tyco] made payments in the amount of approximately $137,000 to agencies owned by approximately eight Keystone employees, who in turn gave cash or gifts to employees of design institutes or commercial customers, and then improperly recorded these payments.  [From 2005 to 2006] Keystone made payments to one of its sales agents in connection with sales to Sinopec, for which no legitimate services were actually provided, and then improperly recorded the payments as ‘commissions.’  In connection with these improper transactions, Keystone earned approximately $378,088 in gross profits.”

“[Between 2001 to 2002] THC China [Tyco Healthcare International Trading (Shanghai) Co. Ltd. an indirect wholly owned subsidiary of Tyco] gave publicly-employed healthcare professionals (HCPs) approximately $250,00o in meals, entertainment, domestic travel, gifts and sponsorships.  [Between 2004 to 2007] employees of THC China submitted expenses claims related to entertaining HCPs that were supported by fictitious receipts, including references to a non-existent company, in order to circumvent Tyco’s internal guidelines.  In connection with medical conferences involving HCPs, THC China employees submitted false itineraries and other documentation that did not properly identify trip expenses in order to circumvent internal controls and policies.  Approximately $353,800 in expenses was improperly recorded as a result of the false documentation relating to these improper expenditures.”

As to Slovakia, the Statement of Facts state as follows.

“[Between 2004 to 2006] Tatra [a Slovakian joint venture that was approximately 90 percent indirectly owned by Tyco] made payments in the amount of approximately $96,000 to one of its sales agents in exchange for the sale agent’s attempt to have Tatra products included in the specifications for tenders to a government customer, while at the same time the sales agent was getting paid by the government customer to draw up the technical specifications for the tenders.  Tatra improperly recorded the payments to the sales agent as ‘commissions’ in Tatra’s books and records.  In connection with these improper transactions, Tatra earned approximately $226,863 in gross profit.”

As to Indonesia, the Statement of Facts state as follows.

“[Between 2003 and 2005] Eurapipe [Tyco Eurapipe Indonesia Pt. an indirect wholly owned subsidiary of Tyco] made approximately eleven payments in the amount of approximately $358,000 to a former employee of Banjarmasin provincial level public water company (PDAM) and two payments to the project manager for PDAM Banjarmasin in connection with the Banjarmasin Project.  During the same time period, Eurapipe made payments in the amount of approximately $23,000 to sales agents who then passed some or all of the payments on to employees of government entities in connection withe projects other than the Banjarmasin Project.  Eurapipe improperly recorded the payments as ‘commissions payable’ in Eurapipe’s books and records. In connection with these improper transactions, Eurapipe earned approximately $1,298,453 in gross profit.”

“[Between 2002 and 2005] PT Dulmision Indonesia [an Indonesia corporation 99% indirectly owned by Tyco] made payments to third parties, a portion of which went to employees of PLN [a state-owned electricity company in Indonesia], including approximately seven payments one of PT Dulmison’s sales agents, who in turn passed money on to the PLN employees.  PT Dulmison Indonesia improperly recorded the payments in PT Dulmison Indonesia’s books, records and accounts.  In addition, PT Dulmison Indonesia improperly recorded travel expenses in company books and records, including payments for non-business entertainment in connection with visits by PLN employees to TE Dulmision Thailand’s factory and paid hotel costs incurred as part of a social trip to Paris for PLN employees following a factory visit to Germany, as ‘cost of goods sold’ in PT Dulmison Indonesia’s and TE Dulmison Thailand’s records.  In connection with these improper transactions, PT Dulmision Indonesia and TE Dulmison Thailand earned approximately $109,259 in gross profit.”

As to Vietnam, the Statement of Facts state as follows.

“[Between 2001 and 2005] TE Dulmison Thailand [a Thai corporation approximately 66% indirectly owned by Tyco] made nine payments in the amount of approximately $68,426, either directly or through intermediaries, to employees of a public utility owned by the Government of Vietnam and recorded these payments in the books and records of the relevant subsidiaries as ‘cost of goods sold.'”

As to Mauritania, Congo, Niger and Madagascar, the Statement of Facts state as follows.

“[Between 2002 to 2007] Isogard [a branch of Tyco Fire & Integrated Solutions France (TFIS France0, an indrect wholly owned subsidiary of Tyco] made payments to a security officer employed by a government-owned mining company in Mauritania involved in the technical aspects of sales projects for the purpose of introducing Isogard to local buyers in Africa.  Isogard made the payments to the security officer’s personal bank account in France without any written contract or invoice and improperly recorded the payments in Isogard’s books and records.  Isogard paid sham ‘commissions’ to approximately twelve other intermediaries in Mauritania, Congo, Niger and Madagascar, half of which were to employees, or family members of employees, of Isogard customers.  In total, TFIS France made paments in the amount of approximately $363,839 since 2005.”

As to Saudi Arabia, in addition to the conduct at issue in TVC ME’s criminal information, the Statement of Facts state as follows.

“[Between 2004 through 2006] Saudi Distributor maintained a ‘control account’ from which a number of payments were made at THC Saudi Arabia’s [an operational entity within Tyco Healthcare AG, a indirect wholly owned subsidiary of Tyco] direction to Saudi hospitals and doctors, some of whom were publicly employed HCPs.  Several expenses from the control account were booked improperly as ‘promotional expenses’ and ‘sales development’ expenses.  In connection with these improper transactions, THC Saudi earned approximately $1,960,000 in gross profit.”

As to Turkey, the Statement of Facts state as follows.

“[Between 2001 and 2006] SigInt [a division of M/A-Com, an indirect, wholly owned subsidiary of Tyco] products were sold through a sales representative to government entities in Turkey.  The sales representatives sold the SigInt equipment in Turkey at an approximately twelve to forty percent mark-up over the price at which he purchased the equipment from M/A-Com and also received a commission on one of the sales.  The sales representative transferred part of his commission and part of his mark-up to a government official in Turkey to obtain orders.  In connection with these improper transactions, M/A-Com earned approximately $71,770 in gross proft.”

The Statement of Facts also states as follows.

“[Between 2004 and 2009] Erhard [a subsidiary of Tyco Waterworks Deutschland GmBH (TWW Germany), an indirect wholly owned subsidiary of Tyco] made payments in the amount of approximately $2,371,094 to at least thirteen of its sales agents in China, Croatia, India, Libya, Saudi Arabia, Serbia, Syria, and the United Arab Emirates for the purpose of making payments to employees of government customers, and improperly booked the payments as ‘commissions.’  In connection with these improper transactions, TWW Germany earned approximately $4,684,966 in gross profits.”

In the NPA, Tyco admitted, accepted and acknowledged responsiblity for the above conduct and agreed not to make any public statement contradicting the above conduct.

The NPA has a term of three years and states as follows.

“The Department enters into this Non-Prosecution Agreement based, in part, on the following factors:  (a) the Company’s timely, voluntary, and complete disclosure of the conduct; (b) the Company’s global internal investigation concerning bribery and related misconduct; (c) the Company’s extensive remediation, including the implementation of an enhanced compliance program, the termination of employees responsible for the improper payments and falsification of books and records, severing contracts with the responsible third-party agents, the closing of subsidiaries due to compliance failures, and the agreement to undertake further compliance enhancements ….; and (d) the Company’s agreement to provide annual, written reports to the Department on its progress and experience in monitoring and enhancing its compliance policies and procedures …”.

Pursuant to the NPA, the company agreed to pay a penalty of $13.68 million (the $2.1 million TVC ME agreed to pay pursuant to the plea agreement is included in this figure).  Pursuant to the NPA, Tyco also agreed to a host of compliance undertakings and agreed to report to the DOJ (at no less than 12 month intervals) during the three year term of the NPA regarding “remediation and implementation of the compliance program and internal controls, policies, and procedures” required pursuant to the NPA.

In this DOJ release, Assistant Attorney General Lanny Breuer stated as follows.  “Together with the SEC, we are leading a fight against corruption around the globe.”

SEC

In a related enforcement action, the SEC brought a civil complaint (here) against Tyco.

The introductory paragraph of the complaint states as follows.  “This matter concerns violations by Tyco of the books and records, internal controls, and anti-bribery provisions of the FCPA.”

The complaint then states as follows.

“In April 2006, the Commission filed a settled accounting fraud, disclosure, and FCPA injunctive action against Tyco, pursuant to which the company consented to entry of a final judgment enjoining it from violations of the anti-fraud, periodic reporting, books and records, internal controls, proxy disclosure, and anti-bribery provisions of the federal securities laws and ordering it to pay $1 in disgorgement and a $50 million civil penalty. The U.S. District Court for the Southern District of New York entered the settled Final Judgment against Tyco on May 1, 2006. At the time of settlement, Tyco had already committed to and commenced a review of its FCPA compliance and a global, comprehensive internal investigation of possible additional FCPA violations. As a result of that review and investigation, certain FCPA violations have come to light for which the misconduct occurred, or the benefit to Tyco continued, after the 2006 injunction. Those are the violations that are alleged in this Complaint.  […]  The FCPA misconduct reported by Tyco showed that Tyco’s books and records were misstated as a result of at least twelve different, post-injunction illicit payment schemes occurring at Tyco subsidiaries across the globe. The schemes frequently entailed illicit payments to foreign officials that were inaccurately recorded so as to conceal the nature of the payments. Those inaccurate entries were incorporated into Tyco’ s books and records.   Tyco also failed to devise and maintain internal controls sufficient to provide reasonable assurances that all transactions were properly recorded in the company’s books, records, and accounts. […] As reflected in this Complaint, numerous Tyco subsidiaries engaged in violative conduct, the conduct was carried out by several different methods, and the conduct occurred over a lengthy period of time and continued even after the 2006 injunction.  Through one of the illicit payment schemes, Tyco violated the FCPA anti-bribery provisions. Specifically, through the acts of its then-subsidiary and agent, TE M/A-Com, Inc. Tyco violated [the FCPA’s anti-bribery provisions] by corruptly making illicit payments to foreign government officials to obtain or retain business.”

As to the SEC’s anti-bribery charge based on the conduct of TE M/A-Com, Inc. the complaint alleges that M/A Com retained a New York sales agent who made illicit payments in connection with a 2006 sale of microwave equipment to an instrumentality of the Turkish government.  The complaint alleges that “employees of M/A-Com were aware that the agent was paying foreign government customers to obtain orders” and cites an internal e-mail which states as follows – “hell, everyone knows you have to bribe somebody to do business in Turkey.”  The complaint then alleges as follows.  “Tyco exerted control over M/A-COM in part by utilizing dual roles for its officers. At the time of the September 2006 transaction, four high-level Tyco officers were also officers of M/A-COM, including one who was M/A-COM’s president. Additionally, one of those Tyco officers served as one of five members of M/A-COM’s board of directors. While there is no indication that any of these individuals knew of the illegal conduct described herein, through the corporate structure used to hold M/ A-COM and through the dual roles of these officers, Tyco controlled M/A-COM. As a result, M/A-COM was Tyco’s agent for purposes of the September 2006 transaction, and the transaction was squarely within the scope of M/ACOM’s agency.  The benefit obtained by Tyco as a result of the September 2006 deal was $44,513.”

The SEC’s complaint contains substantially similar allegations compared to the NPA Statement of Facts.  In addition, the SEC complaint alleges additional improper conduct in Malaysia, Egypt, and Poland.

As to Malaysia, the complaint alleges as follows.

“[Between 2000 to 2007] TFS Malaysia [an indirect wholly owned subsidiary of Tyco] used intermediaries to pay the employees of its customers when bidding on contracts.  Payments were made to approximately twenty-six employees of customers, and one of those payees was an employee of a government-controlled entity.  TFS Malaysia inaccurately described these expenses as ‘commissions’ and failed to maintain policies sufficient to prohibit such payments.  As a result, Tyco’s books and records were misstated.  Tyco’s benefit as a result of these illicit payments was $45,972.”

As to Egypt, the complaint alleges as follows.

“[Between 2004 to 2008] an Egyptian agent of TFIS UK [a indirect wholly owned subsidiary] wired approximately $282,022 to a former employee’s personal bank account with the understanding that the money would be used in connection with entertainment expenses for representatives of a company majority-owned by the Egyptian government.  A portion of the funds was used to pay for lodging, meals, transportation, spending money, and entertainment expenses for that company’s officials on two trips to the United Kingdom and two trips to the U.S.  TFIS UK made payments pursuant to inflated invoices submitted by the company’s Egyptian agent, who wired funds to the former employees to be used to entertain foreign officials.  TFIS U.K. books and records did not accurately reflect TFIS’s U.K.’s understanding that the funds would be used for entertainment of government officials, and TFIS UK did not maintain sufficient internal controls over its payments to agents.  As a result, Tyco’s books and records were misstated.  Tyco’s benefits as a result of these illicit payments was $1,589,374.”

As to Poland, the complaint alleges as follows.

“[Between 2005 to 2007] THC Polska [an indirect wholly owned subsidiary] used ‘service contracts’ to hire public healthcare professionals in Poland for various purposes, including conducting training sessions, performing clinical studies, and distributing marketing materials.  Approximately five such service contracts involved falsified records and approximately twenty-six other service contracts involved incomplete and inaccurate records, including some related expenses paid by THC Polska to family members of healthcare professionals.  As a result, Tyco’s books and records were misstated.  In connection with the transactions related to these inaccurate books and records, Tyco’s benefit was approximately $14,673.

As to the SEC’s internal controls charge, the complaint contains the following allegation.  “Tyco failed to devise and maintain … a system of internal controls and was therefore unable to detect the violations …  Numerous Tyco subsidiaries engaged in violative conduct, the conduct was carried out by several different methods, and the conduct occurred over a lengthy period of time, and it continued even after the 2006 injunction.”

The SEC complaint contains the following paragraph.

“As its global review and investigation progressed, Tyco voluntarily disclosed this conduct to the Commission and took significant, broad-spectrum remedial measures. Those remedial measures include: the initial FCPA review of every Tyco legal operating entity ultimately including 454 entities in 50 separate countries; active monitoring and evaluation of all of Tyco’s agents and other relevant third-party relationships; quarterly ethics and compliance training by over 4,000 middle-managers; FCPA-focused on-site reviews of higher risk entities; creation of a corporate Ombudsman’s office and numerous segment-specific compliance counsel positions; exit from several business operations in high-risk areas; and the termination of over 90 employees, including supervisors, because of FCPA compliance concerns.”

As noted in this SEC release, Tyco consented to a final judgment that orders the company to pay approximately $10.5 million in disgorgement and approximately $2.6 million in prejudgment interest.  Tyco also agreed to be permanently enjoined from violating the FCPA.

In this release, SEC Associate Director of Enforcement Scott Friestad stated as follows.  “Tyco’s subsidiaries operating in Asia and the Middle East saw illicit payment schemes as a typical way of doing business in some countries, and the company illictly reaped substantial financial benefits as a result.”

Martin Weinstin (Willkie Farr & Gallagher – here) represented the Tyco entities.

Friday Roundup

Strange things tend to happen on Halloween, does your foreign local counsel present FCPA risk, insights from the boardroom, checking in on the Wynn-Okada battle royale, tobacco companies in the Middle East, a hat tip, and unmasked.  It’s all here in the Friday roundup.

Halloween Hearing Date

Strange things tend to happen on Halloween.  Thus, it is fitting that U.S. District Court Judge Keith Ellison (S.D. Tex.)  has set October 31st as the hearing date for the motion to dismiss in the SECs FCPA enforcement action against Mark Jackson and James Ruehlen.  See here for a prior post linking to the briefs and arguments.  How strange is this?  It is believed that the last time the SEC stood before a federal court judge to defend its FCPA enforcement theories was in 2002.  As noted in this previous post, the SEC lost that case.

Foreign Counsel Risk

A company engages foreign local counsel to help it accomplish a business objective.  The company pays thousands of dollars in legal bills  to the counsel without probably giving much thought to Foreign Corrupt Practices Act risk. 

In this recent article in the Duquesne Business Law Journal, Zachary Cregar (Liberty Mutual Insurance Group, Senior Litigation Auditor) sets forth the need to include foreign legal counsel due diligence and audits within an FCPA compliance program. 

Cregar concludes the article as follows.  “Foreign outside counsel supervision and legal bill auditing is not only a successful method of detecting corrupt payments, but it pays dividends beyond the realm of FCPA compliance. Cost savings from discovered billing irregularities will likely justify the cost of the program itself. While companies’ bottom lines are impacted by over-billing or fraudulent legal invoices, the financial stakes grow ever higher within the purview of the FCPA. Corporate anti-corruption and due diligence policies may be helpful in reducing hefty FCPA violation penalties after the fact. However, only vigorous, real-time auditing and detection of corrupt payments at the onset will avoid foreign corruption from even occurring.”

Current instances of FCPA scrutiny which involve, at least in part, questions regarding foreign legal counsel include Wal-Mart’s conduct in Mexico and Las Vegas Sands conduct in Macau.

Insights From the Boardroom

PwC’s Annual Corporate Director Survey, “Insights from the Boardroom 2012,” is available for download here.  It contains a few FCPA / bribery / corruption related statistics.

Which of the following has your company done in response to the 2011 SEC whistleblower rules?   43% of respondents indicated that their companies have expanded the role of internal audit for bribery and corruption compliance and 11% of respondents indicated that their companies scheduled more board discussions regarding bribery and corruption.

I argue in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” here that, among other reasons, the FCPA should be amended to include a compliance defense because such a defense will better incentivize corporate compliance and thus reduce improper conduct.  I state that organizations with existing FCPA compliance policies and procedures will be incentivized to make existing programs better and that organizations currently without stand-alone FCPA policies and procedures (and statistics indicate there are many) will be incentivized to spend finite resources to implement compliance policies and procedures.

Imagine the FCPA is amended in 2012 to include a compliance defense. What would the numbers in PwC’s 2013 survey look like if respondents asked “which of the following has your company done in response to the FCPA compliance defense amendment.”  I can only speculate as to the exact numbers, but I am confident in saying that more than 43% of respondents would indicate that their companies expanded the role of internal audit for bribery and corruption compliance and that more than 11% of respondents would indicate that their companies scheduled more board discussions regarding bribery and corruption.

Another question in the survey was the following.  Indicate if you would like your board to devote more time in the upcoming year to considering the following matters?  As to bribery and corruption concerns, 2% said yes, much more time and focus than in the past; 20% said yes, but not a great increase from the past; 75% said no, a change is unnecessary; and 3% said no, decrease our time and focus— we spend too much time on this.

The PwC survery occurred this past summer and was based on responses of 860 public company directors (70% of whom serve on the board of companies with more than $1 billion in annual revenue).

Wynn-Okada

As noted in this previous summary post, it is one of the strangest instances of FCPA scrutiny one can imagine.  A corporate board member accuses the company of conduct that could implicate the FCPA, which then causes the SEC to open an inquiry, which then results in the company accusing the board member of separate and distinct conduct that could implicate the FCPA.

Its the Wynn-Okada battle royale.

Earlier this week Kazuo Okada (President of Aruze USA, Inc. – Aruze is the largest stockholder of Wynn Resorts with current ownership of approximately 20% of the outstanding shares) released this letter to Wynn’s shareholders concerning various corporate governance changes.

The letter states, under the heading “Suspicious $135 million donation to the University of Macau Development Foundation” as follows.

“In April 2011, the Board met, discussed, and approved a pledge by Wynn Macau, Limited (“Wynn Macau”), a subsidiary of the Company, to donate HK$1 billion (roughly $135 million) to the University of Macau Development Foundation, at a time when Wynn Macau was seeking local government approval to develop a third casino.  This donation is suspicious for a number of reasons, including its enormous size, the fact that the 10-year term of the pledge matches precisely the length of the casino license Wynn Resorts was seeking, and the fact that the lead trustee of the University of Macau Development Foundation also has a position in the Macau government which enables him to influence the issuance of gaming licenses. Mr. Okada questioned and objected to the donation and was ultimately the sole director to vote against it.  Mr. Okada has noted that “I am at a complete loss as to the business justification for the donation, other than that it was an attempt to curry favor with those that have ultimate authority for issuing gaming licenses.”  Following the April 2011 board meeting, pursuant to his rights as a director of the Company and in furtherance of his fiduciary duties to stockholders of the Company, Mr. Okada, sought to further investigate the Wynn Macau donation and requested additional information from Wynn Resorts concerning the donation and related matters.  When the Company refused to provide the information, Mr. Okada took legal action and was vindicated by a court order requiring Wynn Resorts to comply with Mr. Okada’s reasonable requests.  As Mr. Okada feared, the questionable Wynn Macau donation has already spawned at least four stockholder lawsuits against the Company and investigations by both the United States Securities and Exchange Commission (for possible violations of law including the Foreign Corrupt Practices Act) and the Nevada Gaming Board.  Not only is this enormous financial commitment a drain on the Company’s coffers, but now Wynn Resorts stockholders will be saddled with the added costs associated with responding to the regulatory investigations and lawsuits.  If the results of these investigations and lawsuits include the development of facts regarding legally questionable practices by the Company, stockholders will be at still further risk.”

In response, Wynn Resorts issued this statement which states as follows.  ““Aruze has not been a stockholder of Wynn Resorts, Limited since February 18, 2012 when its shares were redeemed by the Wynn Board after a lengthy, third-party investigation uncovered prima facie evidence of improper conduct under the Foreign Corrupt Practices Act by Mr. Okada, Universal Entertainment and Aruze in their dealings with Philippine officials.  This most recent filing is a regrettable attempt to divert attention from the issues facing Mr. Okada and Aruze. Given the fact that Aruze was ejected seven months ago as a Wynn shareholder based on conduct unacceptable for a gaming licensee, it has absolutely no rights as a shareholder to nominate directors and its invalid nominations have been rejected on this basis.”

Tobacco Companies in the Middle East

An interesting article (here) from the Saudi Gazette.

The article states as follows.  “In most countries, public smoking is banned. Taxes on the sale of cigarettes and other tobacco related products are high, and labeling on cigarette packs is often very graphic and clear: Smoking kills!  From the United States to Australia, governments are clamping down on tobacco companies with regulations to throttle consumption and it seems to be working. And so, tobacco companies have to seek other markets. The Middle East is fertile ground as anti-smoking legislation is weak at best, and a fast growing birthrate means a higher number of potential smokers. As a result, big tobacco companies quickly established regional headquarters for the GCC market in the UAE and set to work.”  The article then describes how a source tells of companies reaching out to “area [government] officials to lessen any impact on tobacco sales.”

As noted in this prior post,  in August 2010, U.S. tobacco companies Alliance One International and Universal Corporation resolved FCPA enforcement actions.

Hat Tip

A hat tip to Christopher Matthews, Samuel Rubenfeld and others associated with the Wall Street Journal’s Corruption Currents page on their two-year anniversary.  Corruption Currents (here) is a daily read for me and should be for anyone interested in FCPA and related topics. 

Who is that Masked Man?

A small town Midwesterner who saw the world and became interested in a law is who.  Thanks to Tom Fox (FCPA Compliance and Ethics Blog) for the opportunity to tell my story.  See here for the Q&A.

*****

A good weekend to all.