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Russian FCPA: The Law Has Been Signed, Will The Culture Change Result?

Last month, Russian President Dimitri Medvedev signed legislation that criminalizes foreign bribery, with monetary sanctions for companies and individuals who bribe foreign public officials. Soon thereafter, the OECD formally invited Russia to join the OECD’s Working Group on Bribery and to accede to the OECD’s Anti-Bribery Convention (see here for the OECD release).

Max Chester (Senior Counsel at Foley & Lardner – see here) takes the stage today with this guest post. Chester, a native speaker of Russian with significant experience representing U.S. clients in commercial transactions in Russia, provides an overview and analysis of the new Russian “FCPA-like” law.


Russian FCPA: The Law Has Been Signed, Will The Culture Change As A Result?

On May 4, 2011, Russian President Dmitriy Medvedev signed into law a measure that significantly increases fines for bribery in Russia and now specifically applies to bribery of foreign government officials. The new federal law (here) is entitled “Federal Law dated May 4, 2011 No. 97-FZ On inclusion of changes to the Criminal Code of Russian Federation and to the Code of Administrative Offences in Connection with the Improvement of Government Administration in the Area of Fighting Corruption.” While the Russian title of the new law is not easy to understand even for a native Russian speaker, its objective is clear: it is intended to fight corruption in Russia, one of President Medvedev’s highest stated priorities, and to support Russia’s bid to accede to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Because the new law specifically prohibits offering or acceptance of a bribe by a foreign government official, we’ll refer to the new law as the “Russian FCPA.” Because the Russian FCPA prohibits commercial bribery and both receiving and offering corrupt payments to foreign government officials, the new law appears to resemble the UK Bribery Act and can be said to have even further reach than the US FCPA.

With respect to commercial bribery, the new law changes art. 46 of the Criminal Code and imposes the maximum fine for bribery in the amount of 100 times the amount of the bribe not to exceed 500 million rubles) (approximately $17.8 million). Prior to the amendment, the maximum monetary fine for acceptance of a bribe was 1 million rubles or an amount equaling salary/other income for the previous 5 year period and the maximum monetary fine for offering a bribe was 500,000 rubles or an amount equaling salary/other income for the previous 3 year period. The monetary fines for commercial grease payments (подкуп “podkup” in Russian) were even lower: the offeror could face a maximum fine of only 300,000 rubles or an amount equaling salary/other income for the previous 2 year period, and the acceptor could face a maximum fine of only 1 million rubles or an amount equaling salary/other income for a 5 year period.

While incarceration up to 12 years for bribery/grease payments was possible prior to the amendment, according Larisa Brycheva, the chair of the Office of Legal Affairs to the President of Russian Federation, only 26% of those convicted for bribery-related offenses were incarcerated. Furthermore, most of those convicted were offering/accepting small bribes (from 500 rubles to 10,000 rubles), making it difficult for Russian judges to impose sentences of up to 12 years in prison resulting from bribes equaling the cost of an average dinner for two at a Moscow restaurant.

Given this unimpressive to-date enforcement regime, the Russian lawmakers have decided that a significantly higher monetary fine would be more effective than a possibility of a lengthy prison sentence. While the anti-corruption professionals should welcome this change in the Russian law, a big question still remains exactly how aggressively Russian authorities will enforce the new law. It may not be palatable to impose a 500 million ruble fine on a Russian bureaucrat whose official government salary is 40,000 rubles and whose only official assets are his apartment (where his family lives and thus is not subject to forfeiture) and his dacha, the title to which is likely held by his relatives. The same can not be said of foreign businesses, however, on whom it would be much easier for Russian authorities to impose and collect fines equaling 100 times the bribe. There is no indication in the Russian FCPA that it would not apply to US companies doing business in Russia. In other words, if a US company or its constituents engage in commercial or foreign government official bribery in Russia, the offenders would be subject to fines and potential incarceration in Russia.

The Specific Provisions of the New Law

Acceptance of a Bribe

The Russian FCPA now specifically prohibits bribery involving foreign government officials. Thus, art. 290 of the Criminal Code (which prohibits acceptance of bribes directly or through intermediaries) as amended applies to government officials, foreign government officials or officials of public international organizations. The new law breaks down the fines into several categories depending on the conduct at issue and the amount of the bribe. In every case, however, in addition to the monetary penalty or a prison sentence with a monetary penalty, the offender may be restricted from occupying certain positions in government or commercial entities. For example, part 1 of art. 290 of the Criminal Code now imposes a penalty between 25-50 times the bribe amount or incarceration up to 3 years with a fine equaling 20 times the bribe amount if the bribe is under 25,000 rubles and was used to have an official perform an act (or refrain from performing an act) which falls within the official’s duties and responsibilities. Part 2 of article 290 states further that if the bribe amount is between 25,000 and 150,000 rubles, then the maximum penalty for a violation is a fine between 30-60 times the bribe amount or incarceration up to 6 years with a fine equaling 30 times the bribe.

If the actions (inactions) of government officials, foreign government officials or officials of public international organizations for which they accept a bribe are considered illegal, Part 3 of art. 290 of the Criminal Code now imposes a penalty equaling 40-70 times the bribe amount or incarceration for a period of 3-7 years with a fine equaling 40 times the bribe amount.

Even stiffer penalties (60-80 times the bribe amount or incarceration for a period of 5-10 years with a fine equaling 50 times the bribe amount) apply if the bribe is accepted by a federal Russian government official or an official of an equivalent body of local government administration. Art. 290, Part 4.

If the actions prohibited by parts 1-3 above involve a conspiracy, or a threat or the amount at issue is over 150,000 rubles, the penalty is 70-90 times the bribe or incarceration for a period of 7-12 years. Art. 290, Part 5

If the actions prohibited by parts 1-4 involve an amount greater than 1 million rubles, then the penalty is 80-100 times the bribe amount or incarceration for a period of 8-15 years with a penalty equaling 70 times the bribe amount.

Giving of a Bribe

The Russian FCPA similarly amends art. 291 of the Criminal Code, which now prohibits giving of a bribe (directly or through an intermediary) to a government official, foreign government official or an official of a public international organization. The giving of a bribe in the amount less than 25,000 rubles is punishable by a fine equaling 15-30 times the bribe amount or incarceration of up to 2 years with a fine equaling 10 times the bribe amount. Art. 291, Part 1.

The giving of a bribe in the amount between 25,000 rubles and 150,000 rubles is punishable by a fine equaling 20-40 times the bribe amount or incarceration of up to 3 years with a fine equaling 15 times the bribe amount. Art. 291, Part. 2.

If the actions prohibited by parts 1-3 above involve a conspiracy or the amount at issue is over 150,000 rubles, the penalty is 60-80 times the bribe or incarceration for a period of 5-8 years with a fine equaling 30 times the bribe amount. Art. 291, Part 4.

The giving of a bribe in the amount exceeding 1 million rubles is punishable by a fine equaling 70-90 times the bribe amount or incarceration for a period between 7 and 12 years with a fine equaling 70 times the bribe amount. Art. 291, Part. 2.

Giving of a bribe to a government official, foreign government official or an official of a public international organization to secure an action/inaction which is itself deemed illegal is punishable by a fine equaling 30-60 times the bribe amount or incarceration of up to 8 years with a fine equaling 30 times the bribe amount. Art. 291, Part 3.

Aiding and Abetting Bribery

The Russian FCPA also introduces new article 2911 to the Criminal Code, which prohibits aiding and abetting bribery if the amount of the bribe exceeds 25,000 rubles. In such circumstances, the Russian FCPA imposes a fine equaling 20-40 times the bribe or incarceration for a period of up to 5 years with a fine equaling 20 times the bribe amount.

If an aider assists with a bribery for an official’s act that itself is considered illegal or if an aider uses his official position in aiding the bribery, the penalty is 30-60 times the bribe or incarceration for a period of time between 3-7 years with a fine equaling 30 times the bribe amount.

If the aiding is committed by an organized group or pursuant to a conspiracy, or the amount of the bribe exceeds 150,000 rubles, the penalty is 60-80 times the bribe amount or incarceration for a period of time between 7-12 years with a fine equaling 60 times the bribe amount.

The penalty for aiding bribery in the amount exceeding 1 million rubles is 70-90 times the bribe amount or incarceration for a period of time between 7-12 years with a fine equaling 70 times the bribe amount.

A promise or an offer to aid in the bribery is also punishable by a penalty equaling 15-70 times the bribe or incarceration for a period of up to 7 years with a fine equaling 10-60 times the bribe amount.

Definition of Foreign Government Official

The Russian FCPA defines a “foreign government official” as any appointed or elected official who has a position in any legislative, executive, administrative, or judicial branch of a foreign country or an individual who serves any public function for a foreign country or a public agency or a public enterprise. This definition seems to suggest that Russian lawmakers embrace the position taken by the DOJ that employees of government owned enterprises are “foreign government officials” for purposes of the FCPA. It would be interesting to see if Russian authorities deem employees of General Motors, AIG or other large US companies where the US government has a substantial equity position, “foreign government officials” for purposes of the Russian FCPA.

Amendments to the Code of Administrative Offences of Russian Federation

The Russian FCPA also amends several provisions of the Code of Administrative Offences of Russian Federation. Among those is amendment to article 19.28, which imposes penalties on legal entities for commercial bribery or bribery of foreign government officials if a payment of a bribe or an offer of a bribe was made on a legal entity’s behalf. In such circumstances, the penalty is 3 times the amount of the bribe but not less than 1 million rubles. If the amount of the bribe at issue is greater than 1 million rubles, then the penalty is up to 30 times the bribe amount but not less than 20 million rubles. If the amount of the bribe at issue is over 20 million rubles, then the penalty is up to 100 times the bribe amount but not less than 100 million rubles.

In addition, the Russian FCPA introduces several new protocols for Russian authorities to seek information from their foreign counterparts in connection with the investigation by Russian authorities of violations set forth above as well as protocols for Russian authorities to respond to inquiries from foreign law enforcement agencies in connection with foreign law enforcement agencies’ investigation of crimes. These provisions will undoubtedly strengthen the level of cooperation between Russian and foreign law enforcement agencies in implementing anti-corruption measures. Such efforts are already underway, as evidenced by the recent meetings between Alexander Yakovenko, the Russian Ambassador to the United Kingdom in London, with Richard Alderman, Director of the Serious Fraud Office.


No law by itself can change overnight or even within a short period of time the “threatening” level of corruption that exists in Russia, as acknowledged by the Russian President himself. The current state of affairs in Russia is a product of 70+ years of socialist dictatorship and the resulting mindset of many government officials. This state of affairs will change, undoubtedly, and the passing of the Russian FCPA is the step in the right direction for Russia. It is up to the Russian authorities to follow through on the provisions of the new law.

Siemens Related News

Today is the two year anniversary of the Siemens FCPA enforcement action, the largest ever in terms of fines and penalties – $800 million in the U.S. For last year’s post on the one year anniversary see here.

This post discusses recent Siemens related news.

First, a recent Spiegel Online article about continued U.S. interest in individual prosecutions.

Second, and on a much different topic, Siemens’ recent funding of various anti-corruption programs and initiatives pursuant to its World Bank settlement.

Individual Prosecutions

It probably is not the best time to be a former Siemens employee or executive somehow connected with the conduct at issue in 2008 FCPA enforcement action – the largest ever in terms of fines and penalties. Among other things, a November 30th Congressional hearing (here) was devoted (at least in part) to the issue of why no Siemens employees or executives have been charged in connection with the FCPA enforcement action (see here and here),

On this issue, Spiegel Online (here) is reporting that “US authorities are now investigating” former Siemens CEO Heinrich von Pierer, and “other top managers” in connection with the bribery scandal.

The December 9th article states that “a few weeks ago, officials with the U.S. Justice Department and the Securities and Exchange Commission questioned the current supervisory board chairman, Gerhard Cromme, as well as former auditors from the era of large-scale corruption.” According to the article, U.S. investigators “were due to return to Germany this week.”

Spiegel reports that U.S. investigators are specifically interested in “Pierer and Uriel Sharef, the former head of the power plant division, who was also in charge of the company’s South American business” and “Siemens projects in Argentina, Venezuela and Colombia.”

The Siemens enforcement action did include related enforcement actions against Siemens S.A. (Argentina) and Siemens S.A. (Venezuela).

In the Argentina matter (here), the DOJ alleged that Siemens entities made over $31 million in corrupt payments in exchange for favorable business treatment in connection with various government infrastructure projects, including a national identity card project, in Argentina.

In the Venezuela matter (here), the DOJ alleged that Siemens entities made over $18 million in corrupt payments in exchange for favorable business treatment in connection with two major mass transit projects in Venezuela.

The Spiegel article documents Senator Arlen Specter’s May 2010 exchange with Assistant Attorney General Lanny Breuer about the Siemens matter (see here), but does not mention the above referenced Congressional chaired by Senator Specter.

Doing Good, After Doing Bad

In July 2009, after resolution of the U.S. FCPA enforcement action, Siemens and the World Bank agreed to a settlement (see here) in connection with “corruption in a project in Russia involving a Siemens subsidiary.” The settlement included “a commitment by Siemens to pay $100 million over the next 15 years to support anti-corruption work.”

Last week, Siemens announced (here) the first wave of funding. As noted in the release, $40 million will be distributed to more than 30 initiatives in over 20 countries. (For a list of projects see here).

The release states as follows:

“Projects that will be supported by this initial tranche include assisting the Brazilian organization Instituto Ethos in ensuring the transparent award of the infrastructure contracts for the Football World Cup 2014 and the Olympic Games 2016 in Brazil. In Europe, the newly founded International Anti-Corruption Academy is receiving funding for research and teaching. This Vienna-based international organization was set up to train anti-corruption experts from all over the world.

Other initiatives will be supported in the following countries: Angola, Brazil, China, Egypt, Hungary, India, Indonesia, Italy, Mexico, Nigeria, the Philippines, Russia, the Slovak Republic, South Africa, the Czech Republic, the U.S. and Vietnam and various Middle Eastern states.”

Lots Of Talk … But What Is It?

With the International Corruption Hunters Alliance meetings in Washington, D.C. and with International Anti-Corruption Day, there has been lots of talk this week about “bribery” and “corruption” and seeking ways to eliminate it.

Sounds good.

The problem is – how to eliminate something on which there is little agreement – just what is meant by “bribery” and “corruption.”

All would agree that providing a suitcase full of cash to government leaders to get government contracts is “bribery” and “corruption” – yet, perhaps at the risk of oversimplification, that is where the consensus seems to stop.

Are expediting or facilitating payments (so-called grease payments) to get things done that should be done anyway “bribery” and “corruption”?

The FCPA says no (whether the DOJ and SEC agree with that is subject to dispute). The U.K. Bribery Act says yes.

A company does business in Kyrgyzstan. Pursuant to local law, the “Tax Inspection Police” conduct periodic audits. During such an audit, a corrupt tax official threatens to assess penalties and shut down the company’s office unless it makes cash payments to the official. The company acquiesces and makes a payment so that it can continue to do business in the foreign jurisdiction. Has the company engaged in “corruption” and “bribery”? Apparently so (see here) – do you agree?

A company seeking business with a state-owned enterprise in China arranges and pays for employees of the enterprise to travel to popular tourist destinations in the U.S., including Hawaii, Las Vegas, and New York City. Did the company engage in “corruption” and “bribery”? Apparently so (see here). However, if the same company was seeking business with a private enterprise, not an alleged state-owned enterprise, some would call this effective sales and marketing. Can the same payment be legal if given to person x, yet “corruption” and “bribery” if given to person y?

A company does business in Venezuela with a government owned entity pursuant to a bona fide contract. The company provided legitimate, value added services to the government entity pursuant to the contract, but is having difficulty collecting outstanding receivables. A mid-level employee at the government entity is holding up payment, but indicates that for a cash payment, he will release funds due. The company makes the payment. Did the company engage in “corruption” and “bribery”? Apparently so (see here).

Talking about “corruption” and “bribery” is easy.

Addressing it, tackling it, hunting it down is the difficult part, particularly since reasonable minds reasonably differ on what “corruption” and “bribery” even means.

One of the best quotes I’ve seen on this topic is from the late Theodore Sorensen (see here for the prior post). He noted that “there will be countless situations in which a fair-minded investigator or judge will be hard-put to determine whether a particular payment or practice is a legitimate and permissible business activity or a means of improper influence.” He then listed numerous examples, and concluded as follows: “reasonable men and even angels will differ on the answers to these and similar questions – at the very least such distinctions should make us less sweeping in our judgments and less confident of our solutions.”

For a sampling of this week’s speeches about “bribery” and “corruption” see the following.

Assistant Attorney General Lanny Breuer (here) at International Anti-Corruption Day. Speaking to the private sector, Breuer stated as follows. “To lead the world’s anti-corruption efforts by example. I have been told that some companies complain that they do not understand what it means to violate the FCPA. This may be an acceptable legal argument to make or litigation position to advance. But I am asking you, my friends, to do more than try and test the edges of the law. I am asking you to conduct business responsibly across the globe, and to fulfill your commitment to work against corruption in all its forms. Indeed, you are on the front lines of this fight.”

Acting Deputy Attorney General Gary Grindler (here) at the International Corruption Hunters Alliance meeting. (In case you have not yet heard that: (i) the DOJ has recently charged more than 50 individuals and collected nearly $2 billion in fines and penalties; (ii) the DOJ is using every available investigative technique to pursue FCPA cases; and (iii) the DOJ rewards self-disclosure and cooperation).

Senator Patrick Leahy (here) at the International Corruption Hunters Alliance meeting. Among other things, Senator Leahy notes that the U.S. is not immune from “corruption” and that the U.S. has “not always” lead by example.

Will Dodd-Frank’s Whistleblower Provisions Be Exported?

Meet Markus Funk (here). He is a former DOJ attorney and now a partner at Perkins Coie.

He recently wrote a piece (here) that caught my eye.

It’s about Dodd-Frank’s whistleblower provisions.

You might ask, what isn’t these days!

Funk’s piece however is a bit different because it uses Dodd-Frank’s whistleblower provisions to ask the question – will signatory nations of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (here) incorporate similar provisions into their domestic law to demonstrate commitment to combating bribery?

Interesting question – and more on this below.

First a quick summary of Funk’s piece.

In it, Funk states that “the passage of [Dodd-Frank] signals a significant acceleration of the U.S. government’s already intensified Foreign Corrupt Practices Act enforcement efforts.” He states that by “unveiling” Dodd-Frank’s whistleblower provisions “to the world” “the United States heralds a new phase in its increasingly global anti-bribery enforcement efforts.”

Funk then writes, “as U.S.-led political pressures to enhance national anti-bribery efforts continue to grow, the Dodd-Frank Act’s novel enforcement mechanisms have the potential to attract international imitators.” He further states: “with mounting global pressure (not the least of which originates from the United States) on signatory states to comply with the Anti-Bribery Convention’s requirements, currently under-performing countries will likely be looking for efficient and effective ways to demonstrate their earnest intent to live up to their commitments.” “Given this backdrop,” Funk writes, “the Dodd-Frank’s Act’s new whistleblower provisions may well stand out as an ideal template for others (who are not culturally or otherwise averse to such rewards) to emulate.”

As noted in a prior post (here) Dodd-Frank’s whistleblower provisions are buried deep in the 2,000+ pages of the Dodd-Frank Act. The provisions apply to all securities law violations. It is an open question whether anyone in Congress had the FCPA on their mind when voting for Dodd-Frank, including its whistleblower provisions.

Yet, perhaps because the FCPA bar is such an active group of writers, Dodd-Frank’s whistleblower provisions have come to be reported in some circles as the FCPA whistleblower provisions. After all, the FCPA is indeed part of the Securities and Exchange Act of 1934 so the generic whistleblower provisions are indeed FCPA relevant.

In any event, I wondered why Funk wrote that “the passage of [Dodd-Frank] signals a significant acceleration of the U.S. government’s already intensified Foreign Corrupt Practices Act enforcement efforts” and why he wrote that Dodd-Frank’s generic whistleblower provisions “symbolize the government’s accelerating fight against foreign corruption.”

So I went to the source and posed Funk the following question.

“Why do you believe that a generic securities law provision in a 2,000+ page financial regulatory reform bill is going to prompt other countries to adopt bribery/corruption specific whistleblower provisions?”

Below is Funk’s response, posted with his express permission.


‘My answer to your question comes in parts.

Let me start out with an observation directed towards your question’s basic premise. I do not see why the raw page-count of the Dodd-Frank Act should have any meaningful bearing on whether its whistle blower provisions are (1) generally known and understood, or (2) likely to generate domestic success or foreign imitators.

Pundits, the media, and legal observers have certainly succeeded in swiftly digging through the bill’s 2,000+ pages of text and zeroing in on the tip-generating provisions we are talking about. Their very public analysis, moreover, strips away from the whistleblower bounty provisions any obscurity they may at one point have enjoyed (and, as the widespread attention to the Act signals, most observers do not categorize the novel provisions as unexceptionally “generic”).

Evidence of the recently-enacted whistleblower provisions’ emergent renown is, indeed, plentiful. Do a simple Google search for “Dodd-Frank” and “whistleblower,” and watch the thousands of hits come pouring in. Most foreign-based white collar websites, whether run by governments or lawyers, moreover, contain extensive and nuanced analysis of the Act’s whistleblower provisions. Hardly the reception accorded to an enactment that got lost in the shuffle.

And the whistleblower provisions’ renown is not the only thing that has confounded critics’ expectations; within a few short months, the Act has begun to yield actual real-world results. As recently reported by the Wall Street Journal, the new whistleblower incentives have generated an average of one tip a day (though the quality of the tips, and the country of origin of the tipsters, is admittedly still unknown).

These newly-generated/motivated tipsters, as well as the steady drumbeat of domestic and international corporate clients expressing concern about, and wanting more information on, this particular aspect of the Dodd-Frank Act, at a minimum place significant doubt on the position that the Act’s whistleblower provisions are so deeply buried within the rest of the Act that their effectiveness is nil because nobody knows about them.

Having addressed your foundational criticism of the Dodd-Frank whistleblower provisions, we can now move on to a companion challenge facing our ramped-up transnational anti-bribery efforts (and, for that matter, facing transnational law enforcement efforts generally).

Skeptics of global anti-bribery efforts now point to the much-cited International Bar Association’s recent survey of 642 legal professionals in 95 jurisdictions for proof that even lawyers don’t know about the world’s leading anti-bribery conventions and instruments. The IBA survey revealed that roughly half of the world’s lawyers have never heard of the FCPA. Some 70 percent of those questioned, moreover, knew nothing about the U.K. Bribery Act, and 40 percent are entirely unfamiliar with the Organization for Economic Cooperation and Development (“OECD”) and United Nations anti-corruption conventions. Four in 10 respondents in developed countries such as Denmark, Germany, Canada, and Japan likewise knew of none of these anti-bribery instruments; the result was bumped up to 7 in 10 for New Zealand and Hong Kong lawyers.

Observers hold these results up as conclusive, damning proof that few in the world’s legal community know, or much care, about these internationally celebrated/hyped anti-bribery enactments.

It would be pointless for me to argue against the existence of an unfortunate, long-standing dissonance between international diplomatic proclamations, on the one hand, and tangible results on the ground, on the other. Indeed, I have personally experienced this frustrating phenomenon while working in post-conflict countries for the U.S. State Department, and have also written a book on the International Criminal Court which takes aim at the international community’s “much talk, little action” habit.

But, in the present context, I remain unmoved by the IBA’s headline-grabbing findings. For one, these survey results smack of a high-minded variant of Jay Leno’s “Jaywalking,” in which Leno probes the proverbial “man on the street’s” basic knowledge of topics such as history, politics, and world affairs. The hapless respondents are inevitably revealed to be, or at least portrayed as being, ignorant dolts.

Similarly, the IBA’s survey results stand for little more than the rather unremarkable proposition that the “average” attorney (the survey omits any indication of specialization or areas of the survey-takers’ expertise) is not particularly well-versed on the topic of international anti-bribery instruments. Wish it weren’t so, but does it really matter?

Surveys of similar type could undoubtedly be constructed to reveal lawyers worldwide as wholly unfamiliar with wide swaths of accumulated substantive legal knowledge (anyone interested in taking a pop quiz surveying the examinee’s understanding of patent, human rights, or regulatory law?).

Are the IBA survey takers’ low scores to be read as meaning that global anti-bribery efforts are under-appreciated by lawyers to such an extent that they are rendered irrelevant? Hardly. What actually matters, of course, is whether the key decision-makers active in the anti-bribery fight know about these provisions. They clearly do.

But even if these survey results are meaningful, the “so what?” question remains: do the low scores represent (1) a call to action, or (2) a call to throw in the towel? Even assuming purely for the purpose of argument that throwing in the towel is the more sensible course, this clearly is not what the U.S. Government has in mind. Quite to the contrary.

In one public pronouncement after another, high-ranking Department of Justice, State Department, and Administration officials reaffirm the U.S. Government’s commitment to remain fully engaged in – and, indeed, to significantly ramp up – the global fight against public corruption.

During his May 31, 2010, address to the Organization for Economic Cooperation and Development (OECD) in Paris, for example, Attorney General Eric Holder publicly announced the U.S. Government’s continued support for the Anti-Bribery Convention: “As Attorney General, I have made combating [global] corruption one of the highest priorities of the Department of Justice.” Holder additionally announced the Government’s intent to strengthen global anti-bribery efforts through enhanced transnational collaboration and the sharing of “best practices.” Not coincidentally, in the month following the Attorney General’s speech, the U.S. House passed the Dodd-Frank Act’s conference report of the bill.

Whether through high-minded moral leadership, innovative new initiatives, or more pedestrian, self-interested incentives connected with financial-based trade, aid, and protection, the U.S. has a way of ensuring that its message is heard – heard loud and clear, actually – and acted on. And there is no need to even walk down the increasingly lonely road of American exceptionalism to make this point. Realpolitik will suffice.

Few would dispute that, despite some recent setbacks, the U.S. Government continues on as the dominant force in world affairs. When the U.S. takes action, foreign governments and global businesses take notice.

Well-publicized, enormous fines/disgorgements of corporate wrongdoers collected not only in the U.S., but increasingly also abroad, only further raise awareness, underscoring that the “old way” of doing business is coming to an abrupt end. Even on the enforcement side, good news for corporate criminals is hard to come by.

The proliferation of Mutual Legal Assistance Treaties (MLATs) between the U.S. and other countries, moreover, make extradition and public trial a reality. As USDOJ Criminal Division Assistant Attorney General Lanny Breuer put it during a May 2010 speech: “We are actively working with our foreign counterparts in various areas to ensure that country borders won’t limit our ability to fight fraud . . . . As recently as February, new U.S.- E.U. agreements on mutual legal assistance and extradition went into effect. These agreements offer significant new tools that will streamline cross-border investigations and allow for even greater cooperation with our counterparts abroad.”

The world is clearly growing uncomfortably smaller for corporate criminals. Viewed from this perspective, we are currently experiencing a race to the top, not a race to the bottom.

Available international numbers in fact lend support for the argument that mounting U.S. diplomatic pressure aimed at increasing global anti-corruption efforts is, to some extent at least, achieving its desired result. Transparency International (TI) recently released its “July Progress Report 2010: Enforcement of the OECD Convention on Combating Bribery of Foreign Public Officials.” TI notes that, between 2009 and 2010, the number of signatory countries actively enforcing the Anti-Bribery Convention increased from four to seven (those countries representing some 30 percent of world exports). Furthermore, since the mid-2000s, the number of moderately enforcing countries doubled from 8 to 16.

Although these statistics demonstrate that most signatory countries still have considerable room for improvement towards living up to their anti-bribery commitments, the recent uptick in enforcement signals that domestic and international pressures have not gone unnoticed. The Dodd-Frank Act’s novel way of incentivizing individuals with knowledge to step forth and blow the whistle is readily-understood, and provides a simple way to increase OECD Anti-Bribery Convention compliance. Considering that the U.S. Government is giving every available signal that these pressures will, if anything, only increase, it is reasonable to expect global anti-corruption initiatives and cooperation to trend in the same direction.

To the extent that the innovative Dodd-Frank whistleblower bounty provisions continue to generate substantive tips, and that foreign whistleblowers are appropriately protected, there is no reason to think that other countries will not imitate the provisions in the same way as other effective U.S.-born legal provisions have found new second homes throughout the world.”

A Favor … Plus The Friday Roundup

A Favor

Each year, LexisNexis honors a select group of blogs that set the online standard for a given industry.

I am pleased to share that FCPA Professor is one of the nominated blogs for the LexisNexis Top 25 Business Law Blogs of 2010.

LexisNexis invites the business law community to comment on the list of nominees so that it can narrow the field to the Top 25.

The link to submit comments is here.

To submit a comment, you must register, but registration is free and does not result in sales contacts. The comment box is at the very bottom of the page and the comment period ends on October 8, 2010.

Many of the other blogs nominated are the work of multiple bloggers and/or for-profit entities. Thus, as a single blogger, I am honored to be included on this list. My mission remains the same since I launched FCPA Professor in July 2009. That is to inject a much needed scholarly voice into FCPA and related issues, to explore the more analytical “why” questions increasingly present in this current era of aggressive enforcement, and to foster a forum for critical analysis and discussion of the FCPA and related topics among FCPA practitioners, business and compliance professionals, scholars and students, and other interested persons.

I hope you value the content delivered to you each day on FCPA Professor and I thank you for your consideration.

Friday Roundup

HP speaks, checking in with the Africa Sting case, Smith & Wesson’s reduced international shipments, BAE news, The Bribery Centre, and the International Anti-Corruption Academy … it’s all here in the Friday roundup.

HP Speaks

In April (see here) it was reported that German and Russian authorities were investigating whether Hewlett-Packard Co. (HP) executives paid millions of dollars in bribes to win a contract in Russia with the office of the prosecutor general of the Russian Federation. U.S. authorities then launched an investigation, something HP publicly acknowledged (see here). Yesterday, for the first time, HP “talked” about the investigation(s) in an SEC filing. In its 10-Q filing (see here) the company disclosed as follows:

“Russia GPO and Related Investigations

The German Public Prosecutor’s Office (“German PPO”) has been conducting an investigation into allegations that current and former employees of HP engaged in bribery, embezzlement and tax evasion relating to a transaction between Hewlett−Packard ISE GmbH in Germany, a former subsidiary of HP, and the Chief Public Prosecutor’s Office of the Russian Federation. The €35 million transaction, which was referred to as the Russia GPO deal, spanned 2001 to 2006 and was for the delivery and installation of an IT network. The German PPO has recently requested information on several non−public sector transactions entered into by HP and its subsidiaries on or around 2006 involving one or more persons also involved in the Russia GPO deal.

The U.S. Department of Justice and the SEC have also been conducting an investigation into the Russia GPO deal and potential violations of the Foreign Corrupt Practices Act (“FCPA”). Under the FCPA, a person or an entity could be subject to fines, civil penalties of up to $500,000 per violation and equitable remedies, including disgorgement and other injunctive relief. In addition, criminal penalties could range from the greater of $2 million per violation or twice the gross pecuniary gain or loss from the violation. The U.S. enforcement authorities have recently requested information from HP relating to certain governmental and quasi−governmental transactions in Russia and in the Commonwealth of Independent States subregion dating back to 2000.

HP is cooperating with these investigating agencies.”

Africa Sting

It’s been a while since I posted on the Africa Sting case (see here for numerous prior posts). You’ll recall that the 20+ defendants were snared in an undercover operation in which FBI agents posed as a Gabon “foreign official.” Entrapment is sure to be a legal issue the defendants will formally raise – and indeed it has been an issue defense lawyers have already publicly stated. As noted in this Blog of Legal Times post, during a hearing earlier this week, defense counsel “are demanding access to internal Justice Department and FBI manuals that govern the planning and execution of undercover operations.” According to the post, defense counsel have already claimed violations of DOJ/FBI policy in connection with the sting operation.

Smith & Wesson’s Reduced Shipments

Speaking of the Africa Sting case, one of the company’s indirectly, at least at this point, implicated in the matter is Smith & Wesson, the employer of Amaro Goncalves – one of the indicted individuals. In July (see here), the company disclosed the existence of a DOJ/SEC investigation and yesterday’s 10-Q filing (see here) does not seem to add much from the previous filing. However, this sentence from pg. 26 of the filing caught my eye: “Pistol sales decreased 25.3%, driven by the reduction in consumer demand as well as reduced international shipments related to our investigation of the FCPA matter.”

BAE News

The BAE bribery, yet no bribery enforcement action (see here) may be over in the U.S. and the U.K. Serious Fraud Office – BAE plea agreement may be waiting judicial approval in the U.K. (see here), but that does not mean that BAE’s potential exposure in other jurisdictions is over. For instance, this recent Businessweek article suggests that South African authorities remain interested in corruption allegations concerning the purchase of fighter jets from BAE. In addition, according to this recent story in The Prague Post “the Czech Republic has asked the United States for help in its inquiry into alleged corruption in a 2002 deal to buy 24 fighter jets from … BAE Systems.” The DOJ’s non-FCPA criminal information against BAE (see here) included allegations regarding the sale of fighter jets to the Czech Republic.

The Bribery Centre

The U.S. is not the only country with a vibrant and aggressively marketed anti-bribery sector. With implementation of the U.K. Bribery Act expected in April 2011, an industry is developing on the other side of the Atlantic as well. The Bribery Centre (here) seeks to provide a “unique resource to manage compliance to the Bribery Act 2010.” Described as a “collaboration between Ten Alps plc and Venalitas Ltd” the Centre “aims to become the predominant online resource for those companies who need assistance to become compliant with this new landmark piece of legislation.” Contributors include Clifford Chance and KPMG. As noted near the top of the site, you only have “29 weeks to implement adequate procedures.”

International Anti-Corruption Academy

The IAAC as it is known (see here) recently had its coming out party. As described on its website, the IAAC is “a joint initiative by the United Nations Office on Drugs and Crime, the Republic of Austria, the European Anti-Fraud Office, and other stakeholders” and it “is a pioneering institution that aims to overcome current shortcomings in knowledge and practice in the field of anti-corruption.”

Located near Vienna, Austria, the academy “will function as an independent centre of excellence in the field of anti-corruption education, training, networking and cooperation, as well as academic research.”


A good weekend to all.

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