Category: Individual Enforcement Action

Like A Kid In The Candy Store

Like every year around this time, I feel like a kid in a candy store given the number of FCPA year in reviews hitting my inbox.  This post highlights various FCPA or related publications that caught my eye.

Reading the below publications is recommended and should find their way to your reading stack.

However, be warned.  The divergent enforcement statistics contained in them (a result of various creative counting methods) are likely to make you dizzy at times and as to certain issues. There will be more on this issue in the near future.

Shearman & Sterling

The firm’s Recent Trends and Patterns in FCPA Enforcement is among the best year-after-year.

Content that caught my eye:

“It is … noteworthy that the DOJ’s and SEC’s prioritization of individual prosecutions comes as enforcement agencies continue to struggle while pursuing FCPA charges against individual defendants. Setbacks in United States v. Sigelman and United States v. Firtash may cause the Department to rethink its strategy. Indeed, while the DOJ has had some success extracting plea agreements, when put to its burden of proof the DOJ (and the SEC for that matter) has experienced difficulty in securing convictions and judgments. Given these struggles, it is possible that future individual defendants may be emboldened to test their chances against the government in court, potentially requiring the DOJ to devote even more resources to trying these individuals. While the DOJ and SEC have made it a clear priority to prosecute individuals for violations of the FCPA, the risk-reward calculations that prosecutors must consider before bringing charges could be altered going forward.”

[For more on this general topic, see “What Percentage of DOJ FCPA Losses is Acceptable?“]

[…]

“[Regarding so-called declinations] we note however, in the cases of Eli Lilly, Goodyear, Mead Johnson Nutrition, Hyperdynamics, and Bristol-Myers, the DOJ’s declination decision might also be explained by a possible lack of jurisdiction. Specifically, in each of the cases above, where all of the illicit conduct was committed by subsidiaries of the parent company, the DOJ may have concluded it was too difficult to prove that the subsidiaries’ conduct should be imputed on the corporate parent—bearing in mind that the DOJ has a higher burden of proof to sustain criminal FCPA charges against a company.”

[…]

“The DOJ’s 2015 prosecution of Daren Condrey in United States v. Condrey raises some questions as to whether government prosecutors are remaining faithful to the government instrumentality test set out in the Eleventh Circuit’s 2014 decision in United States v. Esquenazi.”

[For more on this topic, see this prior post]

[…]

“[Regarding the 2015 BNY Mellon “internship” enforcement action] [T]he government’s approach is bad policy. For better or worse, some of the most educated and most qualified potential hires in many countries are the children of government officials—individuals who benefited from their parents’ privileges and had the opportunity to attend prestigious schools, learn foreign languages, etc. If the government infers an intent to apply corrupt influence from the potential hire’s relationship to government officials, it is likely to chill hiring of such individuals, resulting in a completely unnecessary disadvantage to U.S. and other companies covered by the FCPA.”

Debevoise & Plimpton

The firm’s FCPA Update is the best monthly read there is and the most recent edition states:

“Even adding in amounts agreed or ordered to be recovered from individuals in FCPA cases, last year was by any objective measure one of more muted FCPA enforcement. Various theories can be advanced to explain these figures.

One, and probably the most plausible, is that, in a system of FCPA enforcement against companies that almost never ends in a trial, corporate resolutions require companies’ consent. It was only a matter of time for there to be a dry spell of large corporate resolutions. Thus, there were no large settlements last year because of the mundane fact that none of the larger cases in the pipeline was ready to be settled. Because of potential negotiation delays of various kinds in cases in the pipeline, it is conceivable if not likely there will be large settlements in 2016, which may dampen urges to downplay enforcement risk.

Still, a theory warranting consideration is that more companies subject to the FCPA are “getting it,” the possibility being that after a decade of vigorous enforcement the number of big cases that could be brought is markedly decreased. That the number of FCPA-related investigations reported by public companies declined by about 20 percent, year over year, arguably supports this theory.

But negating this theory is the large number of new foreign corruption matters reported daily in the media, and the kinds of political upheaval and developments in technology, social media culture, whistle-blowing, and transparency movements that drive anti-bribery enforcement. Given the broad jurisdictional reach of the FCPA (particularly as construed by the DOJ and SEC), a large percentage of the new cases reported in the media could well subject companies and individuals alike to future FCPA enforcement risks. These risks are magnified by a growing level of cross-border cooperation among anti-bribery enforcement agencies.

And as the Obama Administration heads into its final year, with a new Attorney General and Assistant Attorney General for the Criminal Division now settled into their roles, the likelihood of increased enforcement seems relatively high.”

Gibson Dunn

The firm’s Year-End FCPA Update is also a quality read year after year.

Gibson Dunn also released (here) its always informative “Year-End Update on Corporate Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs).”

It begins as follows.

“2015 was a blockbuster year in corporate non-prosecution agreements (“NPA”) and deferred prosecution agreements (“DPA”), by sheer numbers alone.  Skyrocketing to 100 [87 NPAs and 13 DPAs], in 2015 the number of agreements more than doubled the numbers in every prior year since 2000 , when Gibson Dunn first began tracking NPA and DPA data.”

Davis Polk

The firm’s Trends in Anti-Corruption Enforcement is here. A visual FCPA Resolution Tracker is here.

Jenner Block

The firm’s Business Guide to Anti-Corruption Laws 2016 is here.

Hogan Lovells

The firm’s Global Bribery and Corruption Review is here.

Arnold & Porter

The firms Global Anti-Corruption Insights is here.

DOJ Individual Actions: The Strange Public – Private Divide

This recent post highlighted certain facts and figures regarding the DOJ’s prosecution of individuals for FCPA offenses in 2015 and historically.

As highlighted in the prior post, DOJ FCPA individual enforcement actions are significantly skewed by a small handful of enforcement actions and the reality is, despite the DOJ’s rhetoric, that 72% of DOJ corporate enforcement actions since 2008 have not (at least yet) resulted in any DOJ charges against company employees.

Another very interesting and significant picture emerges when analyzing DOJ individual FCPA prosecutions based on whether the individual charged was employed by or otherwise associated with a publicly traded corporation or a private business organization.

Of the 107 individuals charged by the DOJ with FCPA criminal offenses since 2008, 82 of the individuals (77%) were employees or otherwise affiliated with private business organizations.  This is a striking statistic given that 53 of the 69 corporate DOJ FCPA enforcement actions since 2008 (79%) were against publicly traded corporations.

In the 16 private business organization DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 9 of those actions (56%).  In contrast, in the 53 publicly traded corporation DOJ FCPA enforcement actions since 2008, individuals were charged in connection with 10 of those cases (19%). Indeed, since 2012 there have been only three instances of an individual associated with a publicly traded company being criminally charged with FCPA violations (Garth Peterson, Alain Riedo and Vicente Garcia).

In short, a DOJ FCPA enforcement against a private business organization is approximately three times more likely to have a related DOJ FCPA criminal prosecution of an individual than a DOJ FCPA enforcement action against a publicly traded corporation.

The below information highlights all individuals criminally charged with FCPA violations since 2008 and whether they were associated with a publicly traded company or private business organization.

Individuals Charged With FCPA Criminal Offenses Since 2008 (Employer / Affiliation)

Bold = employed or affiliated with a private business entity

Gerald Green, Patricia Green (owners / operators of several private companies)

Martin Eric Self (employees of Pacific Consolidated Industries LP – a private business entity)

Shu Quan Sheng (owner of AMAC International Inc., but acting on behalf of French Company A – a publicly traded corporation)

Misao Hioki (employee of Bridgestone Corporation – a publicly traded corporation)

Nam Nguyen, Joseph Lukas, Kim Nguyen, An Nguyen (employees / agents of Nexus Technologies – a private business entity)

James Tillery and Paul Novak (employee / agent of Willbros Group)

Albert Jack Stanley, Jeffrey Tesler, Wojciech Chodan (employees / agents of KBR Inc., – a publicly traded corporation and/or other publicly traded corporations)

Richard Morlock, Stuart Carson, Hong Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, Han Yong Kim, Mario Covino (employees of Control Components Inc. – a private business entity)

Ousama Naaman (agent of Innospec – a publicly traded corporation)

John Jospeh O’Shea, Fernando Maya Basurto (employee / agent of ABB Ltd. – a publicly traded corporation)

Charles Paul Edward Jumet, John Warwick (employees of Ports Engineering Consultants Corporation – a private business entity)

Jorge Granados, Manuel Caceres, Juan Pablo Vasquez, Manuel Salvoch (employees of Latin Node Inc. – a private business entity)

Juan Diaz, Antonio Perez, Joel Esquenazi, Carlos Rodriguez, Marguerite Grandison, Jean Fourcand, Washington Vasconez Cruz, Amadeus Richers, Cecilia Zurita (employees / agents of Terra Telecommunications Corp., Telecom Consulting Services Corp., JD Locator Services, Inc. or Cinergy Telecommunications – all private business entities)

Enrique Faustino Aguilar, Angela Maria Gomez Aguilar, Keith Lindsey, Steve Lee (employees / agents of Lindsey Manufacturing Corp. – a private business entity)

Richard Bistrong (employee of Armor Holdings Inc. – a publicly traded corporation)

Jonathan Spiller John Mushriqui, Jeanna Mushriqui, David Painter, Lee Wares, Pankesh Patel, Ofer Paz, Israel Weisler, Michael Sacks, John Benson Wier, Haim Geri, Yochanan Choan, Saul Mishkin, R. Patrick Caldwell, Stephen Giordanella, Andrew Bigelow, Helmie Ashiblie, Daniel Alvirez, Lee Allen Tolleson, John Gregory Godsey (all employees of private business entities), Mark Morales (employee of Allied Defense Group – a publicly traded corporation), Amaro Goncalves (employee of Smith & Wesson – a publicly traded corporation)

Bobby Elkin (employee of Alliance One International – a publicly traded corporation)

Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Stephan Signer, Eberhard Reichert, Carlos Sergi and Miguel Czysch (employees / agents of Siemens – a publicly traded corporation)

Garth Peterson (employee of Morgan Stanley, a publicly traded corporation

Peter DuBois, Neah Uhl, Bernd Kowalewski, Jald Jenson (associated with BizJet Int’l – a private business entity)

William Pomponi, Lawrence Hoskins, David Rotschild, Frederic Pierucci (associated with Alstom Power – a private business entity [note the individuals were charged under the dd-2 prong of the FCPA even though Alstom (the parent company) was a publicly traded company]

Joseph Sigelman, Knut Hammarskjold, Gregory Weisman (associated with Petro Tiger Ltd – a private business entity)

Dmitry Firtash, Andras Knopp, Suren Gevorgyan, Gajendra Lal, Periyasamy Sunderalingam (associated with DF Group – a private business entity)

Benito Chinea, Joseph DeMeneses, Tomas Clark, Alejandro Hurtardo, Ernesto Lujana (associated with Direct Access Partners – a private business entity)

Alain Riedo (associated with Maxwell Technologies – a publicly traded corporation)

Dmitrij Harder (associated with Chestnut Consulting Group – a private business entity)

James Rama (associated with IAP Worldwide – a private business entity)

Richard Hirsch, James McClung (associated with Louis Berger Int’l – a private business entity)

Vicente Garcia (associated with SAP – a publicly traded corporation)

Daren Condrey (associated with Transport Logistics International – a private business entity)

Roberto Rincon, Abraham Shiera (associated with private business entities)

A Focus On DOJ Individual Actions

Yesterday’s post focused on SEC individual FCPA actions and this post highlights certain facts and figures concerning the DOJ’s prosecution of individuals for Foreign Corrupt Practices Act offenses in 2015 and historically.

As highlighted numerous times on FCPA Professor over the past several years, the DOJ frequently talks about the importance of individual FCPA prosecutions. Assistant Attorney General Leslie Caldwell has stated that “certainly…there has been an increased emphasis on, let’s get some individuals” and that it is “very important for [the DOJ] to hold accountable individuals who engage in criminal misconduct in white-collar (cases), as we do in every other kind of crime.”

DOJ FCPA Unit Chief Patrick Stokes has said that the DOJ is “very focused” on prosecuting individuals as well as companies and that “going after one or the other is not sufficient for deterrence purposes.”

Most recently, Deputy Assistant Attorney General Sung-Hee Suh stated:

“[T]he prosecution of individuals for corporate wrongdoing has been and continues to be a high priority for the Criminal Division and for the Justice Department as a whole.”

Against this backdrop, what do the facts actually show?

A Focus On SEC Individual Actions

This previous post highlighted various facts and figures from 2015 SEC FCPA enforcement (both corporate and individual).

As highlighted in the prior post, of the 9 corporate SEC FCPA enforcement actions from 2015, 2 (22%) (PBSJ and FLIR Systems) have involved, at present, related SEC charges against company employees.

As further highlighted in the prior post, the SEC brought two individual enforcement actions in 2015 (Vicente Garcia – associated with SAP and Walid Hatoum – associated with PBSJ).

This post focuses on SEC FCPA individual actions historically.

Further Details Regarding The DOJ’s Recent Individual FCPA Enforcement Action In Connection With PDVSA Procurement

This previous post briefly mentioned the DOJ’s recent Foreign Corrupt Practices Act enforcement action against Roberto Rincon and Abraham Shiera for alleged improper business practices with officials at Petroleos de Venezuela S.A. (PDVSA), Venezuela’s alleged state-owned and state-controlled oil company.

This post goes in-depth regarding this recently unsealed criminal indictment.

In the indictment, Rincon is described as a U.S. lawful permanent resident and a resident of Texas who controlled, together with others, a number of closely held companies, including several U.S. companies, that he used to secure contracts with PDVSA.

Shiera is described as a Venezuelan national who resided in Florida who controlled, together with others, a number of closely held companies, including several U.S. companies, that he used to secure contracts with PDVSA.

Both Rincon and Shiera, along with their respective unnamed Texas or Florida-based companies, are alleged to be “domestic concerns.”

The “foreign officials” are described as follows.

Official A – employed by PDVSA, including as a buyer at PDVSA and a supervisor of other PDVSA buyers. Official A’s job responsibilities including assigning bidding panels to PDVSA buyers, including Official C and Official D, who would then be responsible for selecting companies for the bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

Officials B – employed by PDVSA, including as a purchase analyst for PDVSA. Official B’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

Official C – employed by PDVSA, including as a purchasing manager and superintendent of purchasing at PDVSA. Official C’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects, and selecting which companies would win the economic portion of the bid process.

Official D – employed by PDVSA, including as a buyer for PDVSA. Official D’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

Official E – employed by PDVSA, including as a purchasing manager.  Official E’s job responsibilities included selecting companies for bidding panels, which allowed those companies to submit bids on individual PDVSA projects.

The indictment refers to various PDVSA entities collectively as PDVSA including PDVSA Services Inc. (a U.S. based affiliate of PDVSA located in Houston, Texas that was, at various times, responsible for international purchasing on behalf of PDVSA) and Bariven S.A. (a PDVSA procurement subsidiary responsible for equipment purchases).

The indictment alleges that Rincon and Shiera “referred to the PDVSA officials who were assisting them in obtaining and retaining contracts with PDVSA in exchange for the bribes as ‘aliados,’ which translates into English as ‘allies’ or “allieds.”

The indictment alleges a conspiracy between 2009 and 2014 in which Rincon, Shiera and others enriched themselves “by obtaining and retaining lucrative energy contacts with PDVSA through corrupt and fraudulent means, including by paying bribes to PDVSA officials.” The alleged bribes to PDVSA officials were to “influence acts and decisions of the PDVSA officials in their official capacities and to induce the PDVSA officials to do and omit to do certain acts, including, but not limited to:

• assisting Rincon’s and Shiera’s companies in winning PDVSA contracts;
• providing Rincon and Shiera with inside information concerning the PDVSA bidding process;
• placing one or more of Rincon’s and Shiera’s companies on certain bidding panels for PDVSA projects;
• helping to conceal the fact that Rincon and Shiera controlled more than one of the companies on certain bidding panels for PDVSA projects;
• supporting Rincon’s and Shiera’s companies before an internal PDVSA purchasing committee;
• preventing interference with the selection of Rincon’s and Shiera’s companies for PDVSA contracts;
• updating and modifying contract documents, including change orders to PDVSA contracts awarded to Rincon’s and Shiera’s companies;
• assisting Rincon’s and Shiera’s companies in receiving payment for previously awarded PDVSA contracts, including by requesting payment priority for projects involving Rincon’s and Shiera’s companies.

The indictment alleges that “in addition to monetary bribes, Rincon and Shiera, together with others, bribed PDVSA officials by providing things of value, including recreational travel (including stays at the Fontaineblue Hotel in Miami Beach), meals (including whiskey), and entertainment, in order to obtain and retain business on behalf of Rincon’s and Shiera’s companies.”

The indictment also alleges that money was transferred from a bank account in the name of one of Rincon’s companies “to pay off the balance of a mortgage loan in Official E’s name for a residence in the Southern District of Texas, in exchange for Official E’s assistance in connection with PDVSA contracts” as well as money to “a close personal associate of Official E, but over which Official E held power of attorney.”

According to the indictment, Rincon and Shiera “provided to certain PDVSA officials who were receiving bribes proposed bidding panel lists that would include more than one company controlled by Rincon or Shiera to create the false appearance that the bidding process was competitive.” The indictment also alleges that Rincon and Shiera “attempted to conceal the bribes to certain PDVSA officials, which they referred to as ‘commissions,’ by creating false justifications for the bribes, including requesting or receiving invoices for equipment that was not provided and services that were never rendered in order to disguise the bribe payments to PDVSA officials.”

In addition to the conspiracy charge, the indictment also charges: (i) Rincon with four substantive violations of the FCPA’s anti-bribery provisions; (ii) Shiera with five substantive violations of the anti-bribery provisions; and (iii) Rincon and Shiera with money laundering conspiracy as well as seven substantive money laundering offenses.

An Order of Detention Pending Trial against Rincon states that the DOJ’s investigation “covered 730 bank accounts; of those 108 were related to Rincon, his family and his companies.” According to the filing, “the indictment seeks forfeiture of three Swiss bank accounts” that the Government has “traced $100 million from the scheme.” The filing further states that “from 2009 to 2014, over one billion dollars was traced to this conspiracy.”

In response to the U.S. allegations, PDVSA released the below statement.