Items Of Interest From The Layne Christensen Company Enforcement Action
Yesterday’s post dived deep into the Layne Christensen Company SEC FCPA enforcement action.
This post continues the analysis by highlighting various issues associated with the enforcement action.
4 for 4
In 2014, there have been four SEC corporate FCPA enforcement actions (Layne Christensen, Smith & Wesson, Alcoa, and HP). All have been resolved via the SEC’s administrative process.
My recent article, “A Foreign Corrupt Practices Act Narrative,” (see pgs. 991-995) discusses this trend and how it is troubling as it places the SEC in the role of regulator, prosecutor, judge and jury all at the same time. As Judge Rakoff recently observed, “from where does the constitutional warrant for such unchecked and unbalanced administrative power derive?”
Another noticeable feature of the Layne Christensen action was that the company resolved the SEC’s action without admitting or denying the SEC’s findings. Smith & Wesson likewise resolved its FCPA enforcement action in this way.
$4
It is reasonable to assume that the SEC included findings in its order for a specific reason (and not just to practice its typing skills).
It is therefore noteworthy that the SEC’s order includes this finding:
“Layne Christensen made more than $10,000 in small payments to foreign officials through various customs and clearing agents that it used in Tanzania, Burkina Faso, Mali, Mauritania, and the DRC. These payments ranged from $4 to $1,700 and were characterized in invoices submitted by the agents as, among other things, “intervention,” “honoraires,” “commissions,” and “service fees.”
Stay tuned for (I predict) coming law firm client alerts and memos on this $4 payment.
As highlighted in this prior post, if the DOJ and SEC are genuine in their message that they are only “focused on bribes of consequence,” on payments of “real and substantial value” and in companies spending compliance dollars in the “most sensible way,” there is something very easy and practical for the enforcement agencies to do.
Only allege conduct that actually determines the ultimate outcome of the enforcement action.
Same Process, Different Results
Does voluntary disclosure and cooperation result in:
An SEC administrative cease and desist order? Yes, see Layne Christensen.
An SEC non-prosecution agreement? Yes, see Ralph Lauren.
An SEC deferred prosecution agreement? Yes, see Tenaris.
An SEC civil complaint? Yes, see Archer Daniels Midland Company.
Granted, the facts of each FCPA enforcement action are unique, but what drives FCPA practitioners and their clients crazy about the FCPA enforcement process is a lack of transparency and predictability of outcomes.
What Would Have Happened Had The SEC Been Put To Its Burden Of Proof?
Pardon me for being “that guy,” but what would have happened had the SEC been put to its burden of proof on its finding that Layne Christensen violated the FCPA’s anti-bribery provisions? The SEC’s allegations all concerned payments outside the context of government procurement but rather to allegedly secure favorable tax treatment, customs clearance, work permits, relief from regulatory inspections, etc.
It is a matter of fact, that the SEC has been put to its ultimate burden of proof only once concerning alleged payments outside the context of government procurement and it lost that case. (See here for the discussion of SEC v. Mattson and Harris). For a broader discussion of this issue, including DOJ actions, see this article.
Moreover, many of the SEC’s findings would seem to potentially implicate the FCPA’s facilitating payments exception. On that score, in SEC v. Jackson & Ruehlen, a court ruled that the SEC has the burden of negating this statutory exception, something the SEC was unable to do in that case (based on certain similar facts as alleged in the Layne Christensen action) which resulted in a defendant-friendly settlement on the eve of trial. (See here).
Finally, no doubt Layne Christensen as part of its cooperation likely agreed to toll statute of limitations or waive statute of limitations defenses altogether. Yet it is worth highlighting that the bulk of the SEC’s findings concern conduct that allegedly occurred between 2005 and July 2009; in other words, beyond the FCPA’s typical 5 year statute of limitations.
Timeline
As highlighted in this 2010 post, Layne Christensen initially disclosed its FCPA scrutiny in Fall 2010. The company’s first disclosure stated, in pertinent part:
“In connection with the Company updating its Foreign Corrupt Practices Act (“FCPA”) policy, questions were raised internally in late September 2010 about, among other things, the legality of certain payments to customs clearing agents in connection with importing equipment into the Democratic Republic of Congo (“DRC”) and other countries in Africa. […] Although the Company has had a long-standing published policy requiring compliance with the FCPA and broadly prohibiting any improper payments by the Company to foreign or U.S. officials, the Company has adopted additional policies and procedures to enhance compliance with the FCPA and related books and records requirements. Further measures may be required once the investigation is concluded.”
In short, Layne Christensen’s FCPA scrutiny – from point of first public disclosure to resolution – lasted approximately 4 years.
The “Three Buckets”
In my article, “Foreign Corrupt Practices Act Ripples,” I coin the term “three buckets” of FCPA financial exposure and demonstrate how settlement amounts in an actual FCPA enforcement action (“bucket #1) are often not the most expensive aspect of FCPA scrutiny and enforcement.
In nearly every case in which a comparison can be made, “bucket #1” (pre-enforcement action professional fees and expenses) is the most expensive aspect of FCPA scrutiny.
The numbers in Layne Christensen serve as another instructive reminder.
Bucket #1 = in excess of $10 million (based on the company’s disclosures)
Bucket #12 = $5.1 million
Bukcet #3 (post enforcement action professional fees and expenses) are to be determined. A noticeable aspect of the Layne Christensen action (one based on a voluntary disclosure and cooperation) is that the company has a reporting obligation imposed upon it. As stated in the SEC’s order, Layne Christensen shall “report to the Commission periodically, at no less than nine-month internals during a two-year term, the status of its FCPA and anti-corruption related remediation and implementation of compliance measures.”
Compliance Enhancements, Etc.
During its period of FCPA scrutiny, Layne Christensen previously disclosed the following compliance enhancements.
- contracted with a third party forensics accounting team to conduct an in-depth review of the operations in Africa and to make recommendations for improvement to the internal control systems;
- reviewing existing arrangements with third parties interacting with government officials in international locations in an effort to assure that contracts and agreements include anti-corruption terms and conditions;
- performing due diligence on third parties interacting with government officials in international locations and implementing a process to assess potential new third parties;
- terminated certain agency and business relationships;
- established a separate position of, and appointed, a chief compliance officer, effective March 30, 2011, under the supervision of our Senior Vice President, General Counsel and Secretary to facilitate implementation and maintenance of compliance policies, procedures, training, reporting and internal reviews, with indirect reporting responsibility to the audit committee;
- developed new procedures to improve the controls over cash handling and record retention;
- conducting a company-wide risk assessment, including an employee survey, to ascertain whether similar issues may exist elsewhere in the Company;
- initiated an enhanced company-wide, comprehensive training of Company personnel in the requirements of the FCPA, including training with respect to those areas of the Company’s operations that are most likely to raise FCPA compliance concerns; and
- continued to enhance our training of management, including our operations managers, to emphasize further the importance of setting the proper tone within their organization to instill an attitude of integrity and control awareness and the use of a thorough and proper analysis of proposed transactions.
Friday Roundup
GSK announces verdict in China, the silly season, interesting read, Alibaba, and get it right! It’s all here in the Friday roundup.
GSK Verdict in China
Earlier today, GlaxoSmithKline announced:
“[T]he Changsha Intermediate People’s Court in Hunan Province, China ruled that GSK China Investment Co. Ltd (GSKCI) has, according to Chinese law, offered money or property to non-government personnel in order to obtain improper commercial gains, and been found guilty of bribing non-government personnel. The verdict follows investigations initiated by China’s Ministry of Public Security in June 2013. As a result of the Court’s verdict, GSKCI will pay a fine of £297 million [approximately $490 million USD] to the Chinese government. […] The illegal activities of GSKCI are a clear breach of GSK’s governance and compliance procedures; and are wholly contrary to the values and standards expected from GSK employees. GSK has published a statement of apology to the Chinese government and its people on its website (www.gsk-china.com). GSK has co-operated fully with the authorities and has taken steps to comprehensively rectify the issues identified at the operations of GSKCI. This includes fundamentally changing the incentive program for its salesforces (decoupling sales targets from compensation); significantly reducing and changing engagement activities with healthcare professionals; and expanding processes for review and monitoring of invoicing and payments. GSK Chief Executive Officer, Sir Andrew Witty said: “Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK. We have and will continue to learn from this. GSK has been in China for close to a hundred years and we remain fully committed to the country and its people. We will continue to expand access to innovative medicines and vaccines to improve their health and well-being. We will also continue to invest directly in the country to support the government’s health care reform agenda and long-term plans for economic growth.”
For more, see here from the BBC.
“The court gave GSK’s former head of Chinese operations, Mark Reilly, a suspended three-year prison sentence and he is set to be deported. Other GSK executives have also been given suspended jail sentences. The guilty verdict was delivered after a one-day trial at a court in Changsha, according to the Xinhua news agency.”
The GSK penalty was described as the biggest fine in Chinese history. The $490 million fine is also believed to be one of the largest bribery/corruption fines ever. For instance, a $490 million settlement would rank third on the top ten list of FCPA settlements.
Perhaps the most interesting aspect of the GSK development is reference in the company’s release to the charges involving “non-government personnel.” In the U.S., it is a prominent enforcement theory that employees of various state-run health care systems – including in China – are “foreign officials” under the FCPA. (See here).
Another interesting aspect of the GSK development – and one foreshadowed in this 2013 post – is how the Chinese verdict will impact GSK’s scrutiny in its home country (United Kingdom). As highlighted in the post, the U.K. has a unique double jeopardy principle and, as explained by former SFO Director Richard Alderman, the U.K. “double jeopardy law looks at the facts in issue in the other jurisdiction and not the precise offense. Our law does not allow someone to be prosecuted here in relation to a set of facts if that person has been in jeopardy of a conviction in relation to those facts in another jurisdiction.”
GSK remains under investigation for conduct outside of China as well.
The U.S. does not have a similar double jeopardy principle, relevant to the extent GSK has shares listed on a U.S. exchange and its conduct in China and elsewhere has been under FCPA scrutiny.
As indicated in the prior post, GSK’s scrutiny – and now liability – in China makes for an interesting case study in enforcement competition.
The Silly Season
Offensive use of the FCPA to accomplish a business objective or advance a litigating position is an observable trend highlighted in my article “Foreign Corrupt Practices Act Ripples.” As noted here, the FCPA has also been used offensively to score (or at least attempt to score) political points.
The election season is upon us and during this “silly season” perhaps the silliest use of the FCPA ever is happening – not once – but twice.
As noted in this article:
“Michigan Democrat Gary Peters profited from a French oil company [Total S.A.] that admitted to bribing Iranian officials for access to their oil fields. […] The Peters campaign did not return requests for comment about whether he was aware of the bribery scandal. […] Republican Senate nominee Terri Lynn Land called on him to divest from the company, but the three-term congressman refused. […] “Gary Peters will do anything to make a dollar and say anything to win an election,” Land spokesman Heather Swift said in a statement. “The more Michigan voters learn about Gary Peters the more they know they can’t trust him to put Michigan first.”
Silly. And there is more.
As noted in this separate article from the same source:
“Sen. Jeanne Shaheen has invested tens of thousands of dollars in a French oil company that admitted to bribing Iranian officials. […] Shaheen’s family owns between $50,000 and $100,000 of stock in Total S.A., the fourth-largest oil company in the world, through a mutual fund.”
Two scoops of silly.
And now for some facts.
Per the DOJ/SEC’s own allegations in the 2013 Total FCPA enforcement action, the vast majority of the alleged improper conduct took place between 1995 and 1997 (that is 17 to 19 years ago). So old was the conduct giving rise to the Total enforcement action, that the DOJ made the unusual statement in the resolution document that “evidentiary challenges” were present for both parties given that “most of the underlying conduct occurred in the 1990s and early 2000s.”
Interesting Read
Speaking of those FCPA ripples, Hyperdynamics Corporation has been under FCPA scrutiny since 2013 and its recent annual report makes for an interesting read as to the wide-ranging business effects of FCPA scrutiny. Among other things, the company disclosed approximately $7.5 million in the prior FY for legal and other professional fees associated with its FCPA scrutiny. Not all issuers disclose pre-enforcement action professional fees and expenses, so when a company does, it provides an interesting data-point.
Chinese Issuers
I began writing about Chinese companies and the FCPA in this 2008 article at the beginning of the trend of Chinese companies listing shares on U.S. exchanges. This 2009 post returned to the issue and noted that with the IPO market showing signs of life again, and with foreign companies increasingly turning to U.S. capital markets, and with many of these companies doing business in FCPA high-risk countries, the number of FCPA enforcement actions against foreign issuers is likely to increase. That, of course, has turned out to be true.
Today, of course, is the IPO of Chinese company Alibaba, expected to be largest U.S. IPO ever. The company’s business model does not exactly rank high in terms of FCPA risk, but recall that the FCPA has always been a law much broader than its name suggests because of the books and records and internal control provisions.
Even as to the anti-bribery provisions, it is at least worth noting, as highlighted in this recent New York Times article:
“Alibaba’s [recent acquisition of a company] provides an example of how the rapid growth of the private sector is also benefiting the country’s political elite, the so-called princelings, or relatives of high-ranking officials. […] Although Alibaba declined to comment for this article, citing regulatory restrictions on public statements ahead of a public offering, the company has said it relies on the market — not political connections — to drive its business. “To those outsiders who stress companies’ various ‘backgrounds,’ we didn’t have them before, we don’t have them now, and in the future we won’t need them!” the company said in a statement in July after a report that several investment companies tied to the sons and grandsons of senior Communist Party leaders owned stakes in Alibaba, including New Horizon Capital, whose founders include the son of former Prime Minister Wen Jiabao.”
As noted in the article, over the past year JPMorgan and several other financial services companies have come under FCPA scrutiny for alleged relationships with princelings.
Get It Right!
It’s a basic issue.
If you are writing about the Foreign Corrupt Practices as a paid journalist you have an obligation to get it right and engage in due diligence before hitting the publish button.
This Corporate Counsel article states:
“It’s already been a big year for enforcement activity under the U.S. Foreign Corrupt Practices Act. In the first half of 2014 alone, the U.S. Department of Justice and the U.S. Securities and Exchange Commission initiated 15 actions against companies alleged to have violated the international corruption law.”
For the record, in the first half of 2014, there have been three corporate FCPA enforcement actions: HP, Alcoa and Marubeni.
*****
A good weekend to all.
Friday Roundup
The FCPA in the hallways, Super Bowl bribery, no FCPA charges, quotable, survey says, FCPA reform advocate nominated to the federal bench, interesting homework assignment, scrutiny alert, and for the reading stack. It’s all here in the Friday roundup.
FCPA in the Hallways
Avon’s FCPA scrutiny brought the FCPA to main street. News Corp.’s and Wal-Mart’s FCPA scrutiny generated world-wide media coverage. Will the FCPA next become the topic of discussion in middle school and high school hallways across America?
According to this TMZ report:
“A Canadian border official has been fired for allegedly accepting a $10,000 bribe in return for allowing members of Justin Bieber’s entourage with criminal records to enter Canada. Bieber’s camp reportedly gave a female officer at the Niagara Falls border thousands of dollars in backstage passes to get members of his posse into the country while he performed. Canada has a strict policy on not allowing people with certain types of criminal records to enter. It’s unclear when the alleged bribes went down … but Justin performed 2 shows in Toronto last year. The accusations surfaced after more of Bieber’s friends allegedly showed up at the border looking for the same special treatment — and the officers on duty blew the whistle. The Canada Border Services agency reportedly circulated an internal memo reminding officers not to take bribes … and to rat out anyone who does.”
In case you are wondering, there have been several FCPA enforcement actions in recent years concerning alleged payments to customs, immigration and other regulatory officials in connection with a business purpose broadly speaking.
Super Bowl Bribery?
Providing money or other things of value to a person or entity to influence the discretionary acts of that person or entity in connection with a business purpose is bribery … is it not?
Yet, according to this Wall Street Journal article, the above may determine which artist receives the coveted Super Bowl half-time performance slot. According to the article, the NFL “has asked artists under consideration for the high-profile gig to pay to play” including whether the artists “would be willing to contribute a portion of their post-Super Bowl tour income to the league, or if they would make some other type of financial contribution, in exchange for the halftime gig.”
According to the article, the NFL’s only goal is to “put on the best possible show.”
No FCPA Charges
It is sometimes perplexing why certain alleged conduct results in Foreign Corrupt Practices Act charges, whereas other alleged conduct – clearly implicating the FCPA – does not result in FCPA charges.
Case in point, the recent DOJ prosecution of Alisa Bivens, a U.S. citizen and former foreign program director of International Adoption Guides Inc. (IAG – a South Carolina company). (See here for the DOJ release). Bivens recently pleaded guilty to defrauding the U.S. in violation of 18 U.S.C. 317. As noted in the DOJ release:
“Bivens admitted as part of her plea that she and her co-conspirators submitted fraudulent documents to the State Department to facilitate adoptions of Ethiopian children by U.S. parents from 2006 until 2009. In support of U.S. visa applications for the Ethiopian children, Bivens and others submitted false documentation, including contracts of adoption signed by orphanages that could not properly give the children up for adoption because, for example, the child in question was never cared for or never resided at the orphanage.”
The DOJ release further states:
“In entering her guilty plea, Bivens also admitted that she and others paid bribes to two Ethiopian officials so that those officials would help with the fraudulent adoptions. The first of these two foreign officials, an audiologist and teacher at a government school, accepted money and other valuables in exchange for providing non-public medical information and social history information for potential adoptees to the conspirators. The second foreign official, the head of a regional ministry for women’s and children’s affairs, received money and all-expenses-paid travel in exchange for approving IAG’s applications for intercountry adoptions and for ignoring IAG’s failure to maintain a properly licensed adoption facility.”
Quotable
U.S. Ambassador to China Max Baucus recently delivered this speech to the APEC Network of Anti-Corruption Authorities and Law Enforcement Agencies. Ambassador Baucus stated:
“The Obama Administration takes a firm stand against American and foreign companies that engage in bribing foreign officials to obtain or retain business. Other economies here do this as well. In the United States, one of the most effective tools we use to combat corruption is enforcement of the Foreign Corrupt Practices Act. We pursue corruption at many levels:
- corporations, both big and small;
- everyone from sales agents to CEOs;
- U.S. and foreign companies;
- citizens and foreign nationals; and
- direct payers and intermediaries.
Since 2009, the U.S. Department of Justice has taken in $3.4 billion from criminal fines, penalties and forfeitures. And the U.S. Securities and Exchange Commission has seized another $1 billion of profits obtained by illegal or unethical acts over the last ten years. As a result, more American companies have changed the way they do business. Companies are now more willing to voluntarily disclose corrupt behavior and report on solicitations for bribes.”
The last sentence of course is debatable.
Even so, what is not debatable is the following from Ambassador Baucus – “we need to adopt international best practices of transparency and rule of law” in the fight against corruption.
U.S. officials preach this virtue abroad, yet the reality is we need to work on these virtues here at home as well.
As to the rule of law, and as noted in this speech by former Federal Reserve Chairman Paul Volcker who was the keynote speaker at the International Bar Association’s annual conference:
“There is frank recognition that the combination of a weak rule of law and corruption is not only economically debilitating, but threatening the political health of both new and old democracies. I do not exclude the United States. We think of ourselves as exemplars of the rule of law. We are certainly world champions in the extent of legislation and regulation governing bribery, conflicts of interest, procurement procedures, campaign financing, protection of human rights and most of all, transparency. All of these are ingredients of what some think of as the rule of law. But we still face the sad fact that in the United States itself, only a quarter of Americans believe that corruption is not widespread in our country. My feeling is that the impression of serious corruption has increased further, a reflection largely of the concern that campaign financing has come to gravely distort the political process. Should we be satisfied that we live with a really effective rule of law, when the perceived need for heavy campaign spending has come to dominate our political process? We let those financing practices infringe in a very basic way upon the rule of law, with its sense of even-handedness and openness. Does it not breed behaviour that is accomplished by any reasonable definition of corruption?”
Survey Says
PwC’s 2014 State of Compliance Survey asked: “Please select your top 3 areas in terms of current perceived level of risk to your business.” The most popular responses from survey participants were:
- Industry-specific regulations – 31%
- Privacy and confidentiality – 25%
- Bribery/corruption – 22%
FCPA Reform Advocate Nominated to the Federal Bench
Earlier this week, President Obama announced his intent to nominate Haywood Stirling Gilliam, Jr. (Vice-Chair of Covington & Burling’s White Collar Defense and Investigations practice group) to serve on the United States District Court for the Northern District of California.
As noted in this previous post, in a 2013 Law360 Q&A Gilliam was asked “what aspects of your practice area are in need of reform and why?” and he stated:
“Foreign Corrupt Practices Act enforcement stands out as an area in need of further reform. Over the past several years, FCPA enforcement has been characterized by the U.S. Department of Justice and U.S. Securities and Exchange Commission advancing aggressive enforcement theories, but there have been limited opportunities for courts to scrutinize those theories. Most FCPA enforcement cases end in negotiated resolutions such as deferred prosecution or nonprosecution agreements. In that context, regulators often insist that the settling company or individual accept the government’s expansive theories as a condition of resolving the case. For example, the DOJ has extracted penalties from non-U.S. based, non-U.S. traded companies not covered under the four corners of the statute by asserting broad theories such as aiding and abetting or conspiracy — even when the foreign entity has not taken any action in the U.S. As a practical matter, that could be a hard case to prove at trial — but the government almost never has to. The result of this trend has been to enshrine the government’s aggressive enforcement positions as quasi-precedent: The law means what the DOJ and SEC say it means, and defendants (especially publicly traded companies) seldom have a realistic opportunity to push back in court, given the financial and practical costs of fighting a contested enforcement action. Relatively recently, district courts have begun to weigh in on these theories, which is a positive development, but there still is a dearth of FCPA case law as compared to other areas of criminal law. This absence of settled law makes it challenging for companies to decide how to handle thorny FCPA compliance issues. For example, companies routinely face a difficult choice in deciding whether to self-report potential violations to the government, as opposed to thoroughly investigating and remediating the issues internally. While regulators insist that they will give “meaningful credit” to companies that self-report, the tangible benefits of doing so are far from clear. The recent FCPA resource guide issued by the DOJ and SEC says that the agencies place a “high premium” on self-reporting, but does not give concrete guidance as to how the government weighs self-reporting in deciding whether to charge a case, as opposed to offering a deferred prosecution or nonprosecution agreement, or declining the case outright. While the resource guide is a start, companies and their counsel would benefit from more specific guidance when they are weighing the potential, but uncertain, benefits of disclosure against the cost and distraction that can result from voluntarily handing the government a case that otherwise might not have come to its attention.”
Interesting Homework Assignment
Professors are supposed to give homework, not receive homework.
Yet, as highlighted in this Corporate Crime Reporter article, Professor Brandon Garrett (UVA) recently received a homework assignment from a federal court judge.
The assignment: “to appear in [a] case as an amicus curiae for the limited purpose of providing the Court with advocacy on questions regarding the scope of the Court’s authority, if any, to consider the fairness and reasonableness of a deferred prosecution in deciding whether to accept or reject such an agreement.”
As noted in the Corporate Crime Reporter article, the DPA is between the DOJ and Saena Tech, a defense contractor and grew out of a domestic bribery investigation.
To say the least, I look forward to reviewing Professor Garrett’s homework and so should you.
Scrutiny Alerts
Och-Ziff
Bloomberg goes in-depth in this article “The Hedge Fund and the Despot” concerning Och-Ziff’s relationships in Zimbabwe and the company’s overall scrutiny.
Barclays
Previous posts (here) have detailed Barclay’s scrutiny on both sides of the Atlantic regarding its business relationships with various Middle Eastern investors.
Reuters reports
“Britain’s fraud prosecutor could decide as soon as next month whether to charge former Barclays executives over undisclosed payments the bank made to Qatari investors in 2008.”
According to the article, “U.S. authorities are also investigating the same Barclays’ Qatari commercial agreements and whether third-party relationships breached anti-bribery rules.”
Reading Stack
From Bloomberg, an in-depth look at the Libyan Investment Authority (LIA) and its relationships with various companies in the financial services industry which has resulted in FCPA scrutiny.
Informative article here titled “Land of Confusion: Insurance Coverage for Pre-Suit FCPA Investigation Costs Under D&O Liability Policies.”
An interesting front-page read here from the Wall Street Journal regarding China’s anti-corruption crackdown.
*****
A good weekend to all.
This And That
What Others Are Saying About the “Foreign Official” Cert Petition
From this Law360 article.
Rita Glavin, a partner at Seward & Kissel who previously served as head of the DOJ’s criminal division, called [the cert petition] “tremendously significant.” “The definition of what constitutes a foreign official has been expanding into the abyss,” Glavin said. “That’s a real problem for companies. Instrumentality pretty much becomes whatever the DOJ says it is.” Glavin compared the expansion of the foreign official provision to that of the “honest services fraud” statute — a provision that served for years as a blunt legal instrument in public corruption cases but was curtailed in the Supreme Court’s 2010 decision in Skilling v. United States. “The government was pushing that statute in cases where people could not have comfort as to where the line was drawn and conduct crossed into criminality,” Glavin said. “The Supreme Court finally put a stop to it.”
Morgan Lewis & Bockius partner George Terwilliger, who served as a top Justice Department official under presidents Ronald Reagan and George H.W. Bush, noted that companies have spent large sums of money policing activities that fall into a legal gray area under the FCPA. He said a ruling on the instrumentality language would provide helpful guidance. “To have a statute of this scope and geographical reach, where some of the key terms remain subject to legitimate debate among legal experts, is unconscionable,” said Terwilliger, who co-chairs Morgan Lewis’ white collar litigation and government investigations practice. “It’s not an appropriate way to administer the law.”
Larry Urgenson, a partner at Mayer Brown, … called [last week’s] petition “a useful landmark” for FCPA attorneys. He previously served in several leadership positions at the DOJ, including as acting deputy assistant attorney general and chief of the FCPA unit. “It is very important in terms of whether the government is properly executing its prosecutorial powers to the right subjects and the right targets,” Urgenson said.
From this Global Investigations Review article:
Steven Michaels at Debevoise & Plimpton in New York said the petition involves issues which the current Supreme Court Justices are potentially keen to examine. “The Justices may find this case attractive, as they would hear arguments about statutory interpretation and whether the standard set forth by the Eleventh Circuit improperly encourage over-reaching by the government,” he said. “The Supreme Court likes to see criminal liability based on precision and clarity, and given the uncertainty in the law governing FCPA enforcement they may be willing to hear this case.” FCPA cases are also rarely litigated, Michaels said. This may encourage the court to grant the petition, as the court may have to wait a long time before the issue is litigated again in a court of appeals. The Supreme Court typically expects to see a split between US appeals courts before it hears a case, but such a split is also unlikely to occur soon.
John Chesley at Gibson Dunn & Crutcher in Washington, DC said the lack of a circuit split is “the main uphill battle” the petitioners will have to fight. “The lack of clarity in the FCPA’s definition of instrumentality could get the justices interested, especially Justice Antonin Scalia who has written extensively in this area, but the petitioners will nevertheless have a hard time overcoming the court’s preference for only acting when there is a split.” Chesley said the Esquenazi decision was controversial, as the Eleventh Circuit’s complex, multi-factored test for determining whether a company is a government instrumentality makes it difficult to determine whether the recipient of an alleged bribe is a foreign official. “There’s certainly a lot of concern about vagueness,” he said. “For example, one of the factors in the Esquenazi test revolves around whether companies are perceived as government entities in their home jurisdiction. How do you advise a client on that?”
Jessie Liu at Jenner & Block in Washington, DC, said Supreme Court guidance on instrumentality would be “fantastic”, but also said such guidance is unlikely in the near future. “The Eleventh Circuit’s reasoning was pretty robust,” she said. “We would probably need to see another appeals court go the opposite way for the Supreme Court to get involved, but there’s a good chance the Eleventh Circuit’s reasoning will dissuade future litigants from fighting the issue.”
Wal-Mart’s Pre-Enforcement Action Professional Fees and Expenses
In its August 14th second quarter earnings call, Wal-Mart disclosed:
“FCPA and compliance-related costs were approximately $43 million, which represented approximately $31 million for the ongoing inquires and investigations and roughly $12 million related to our global compliance program and organizational enhancements.”
Doing the math, that is approximately $662,000 in FCPA-related expenses per working day.
Over the past approximate two years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses. While some pundits have ridiculed me for doing so, such figures are notable because, as has been noted in prior posts and in my article “Foreign Corrupt Practices Act Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny. Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.
While $662,000 per working day remains eye-popping, Wal-Mart’s recent figure suggests that the company’s pre-enforcement action professional fees and expenses have crested as the figures for the past three quarters were approximately $855,000, $1.1 million and $1.3 million per working day.
In the aggregate, Wal-Mart’s disclosed pre-enforcement professional fees and expenses are as follows.
FY 2013 = $157 million.
FY 2014 = $282 million.
FY 2015 (first two quarters) = $96 million.
Scrutiny Alerts and Updates
Layne Christensen Company
Layne Christensen Company has been under FCPA scrutiny since 2010 concerning conduct in Africa (see here for the prior post). As noted in this November 2013 post, the company disclosed that it was “engaged in discussions with the DOJ and the SEC regarding a potential negotiated resolution” of the matter.
However, last week the company issued this release stating:
“The DOJ has decided to not file any charges against the Company in connection with the previously disclosed investigation into potential violations of the FCPA. The DOJ has notified Layne that it considers the matter closed.
As previously reported by Layne, in connection with updating its FCPA policy, questions were raised internally in September 2010 about, among other things, the legality of certain payments by Layne to agents and other third parties interacting with government officials in certain countries in Africa. The audit committee of the board of directors engaged outside counsel to conduct an internal investigation to review these payments with assistance from outside accounting firms. Layne has been consistent and forthcoming in providing voluntary disclosure to the DOJ and the SEC regarding the results of the investigation, and has cooperated fully with those agencies in connection with their review of the matter. The parallel investigation by the SEC remains open and the Company is actively engaged in settlement discussions with the SEC to resolve this matter.
Layne had previously accrued a reserve of $10.4 million for the settlement of the investigations. Based on the decision by the DOJ, the Company will reduce the accrual related to this investigation by approximately $5.3 million, which will be reflected in Layne’s results of operations for the second fiscal quarter ended July 31, 2014.
David A.B. Brown, President & CEO, commented, “We are very pleased to conclude the DOJ investigation without any charges being brought against Layne and we hope to settle the SEC investigation in the near future. From the very beginning, we have maintained a position of full disclosure and complete cooperation with the authorities and have worked diligently to implement remedial measures to enhance our internal controls and compliance efforts. Based on conversations with the DOJ, we understand that our voluntary disclosure, cooperation and remediation efforts have been recognized and appreciated by the staff of the DOJ and that the resolution of the investigation reflects these matters.”
Qualcomm
As noted in this previous post, in April 2014 Qualcomm disclosed:
“As previously disclosed, the Company discovered, and as a part of its cooperation with these investigations informed the SEC and the DOJ of, instances in which special hiring consideration, gifts or other benefits (collectively, benefits) were provided to several individuals associated with Chinese state-owned companies or agencies. Based on the facts currently known, the Company believes the aggregate monetary value of the benefits in question to be less than $250,000, excluding employment compensation.
On March 13, 2014, the Company received a Wells Notice from the SEC’s Los Angeles Regional Office indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company for violations of the anti-bribery, books and records and internal control provisions of the FCPA. The bribery allegations relate to benefits offered or provided to individuals associated with Chinese state-owned companies or agencies.
[…]
On April 4, 2014, the Company made a Wells submission to the staff of the Los Angeles Regional Office explaining why the Company believes it has not violated the FCPA and therefore enforcement action is not warranted.”
Is this recent New York Times article the reason for Qualcomm’s FCPA scrutiny? The article states that “an adviser to a Chinese government antitrust committee has been dismissed, accused of accepting payments from Qualcomm, an American technology company under investigation in China on suspicion of antitrust violations.” According to the article, Qualcomm “had made ‘large payments’ to Zhang Xinzhu, an economist at the Chinese Academy of Social Sciences, while he also was an adviser on an antimonopoly committee under the State Council, China’s cabinet.” As noted in this Reuters article, Qualcomm said “it had no direct financial links with an antitrust expert sacked from a government advisory post after state media reported he had received payments from the firm.”
Derwick Associates / ProEnergy Services
This August 2013 post predicted FCPA scrutiny for Derwick Associates based on a civil RICO lawsuit filed alleging conduct in Venezuela.
Sure enough. This recent Wall Street Journal article reports:
“The U.S. Department of Justice and the Manhattan district attorney’s office are probing Derwick Associates … a company awarded hundreds of millions of dollars in contracts in little more than a year to build power plants in Venezuela, shortly after the country’s power grid began to sputter in 2009. […] ProEnergy Services, a Sedalia, Mo.-based engineering, procurement and construction company that sold dozens of turbines to Derwick and helped build the plants, is also under investigation …”.
Cubist Pharmaceuticals
This previous post highlighted the FCPA scrutiny of Optimer Pharmaceuticals. The company has since been acquired by Cubist Pharmaceutical which recently disclosed as follows.
Optimer U.S. Governmental Investigations
We are continuing to cooperate with the investigations by the SEC and the U.S. Department of Justice in their review of potential violations by Optimer of certain applicable laws, which occurred prior to our acquisition of Optimer. The investigations relate to an attempted share grant by Optimer and certain related matters in 2011, including a potentially improper payment to a research laboratory involving an individual associated with the share grant, that may have violated certain applicable laws, including the Foreign Corrupt Practices Act (FCPA). Optimer had already taken remedial steps in response to its internal investigation of these matters; nonetheless, these events could result in lawsuits being filed against us or Optimer and certain of Optimer’s former employees and directors, or certain of our employees. Such persons could also be the subject of criminal or civil enforcement proceedings and we may be required to indemnify such persons for any costs or losses incurred in connection with such proceedings. We cannot predict the ultimate resolution of these matters, whether we or such persons will be charged with violations of applicable civil or criminal laws, or whether the scope of the investigations will be extended to new issues. We also cannot predict what potential penalties or other remedies, if any, the authorities may seek against us, any of our employees, or any of Optimer’s former employees and directors, or what the collateral consequences may be of any such government actions. We do not have any amounts accrued related to potential penalties or other remedies related to these matters as of June 30, 2014, and cannot estimate a reasonably possible range of loss. In the event any such lawsuit is filed or enforcement proceeding is initiated, we could be subject to a variety of risks and uncertainties that could have material adverse effects on our business, results of operations and financial condition.”
Quotable
Returning to a theme previously explored in the “The Bribery Racket” (Forbes) and “FCPA Inc. and the Business of Bribery” (Wall Street Journal), not to mention my own article “The Facade of FCPA Enforcement,” Robert Amsterdam writes in this Forbes piece titled “When Anti-Corruption Becomes Corrupted,” as follows.
“Like many laws born out of politics, anti-corruption has become alarmingly mired in ambiguity, abuse, and misapplication. In the United Kingdom, the introduction of the Bribery Act, in conjunction with the U.S. Foreign Corrupt Practices Act (FCPA), means that now essentially the globe is covered with a bundle of vague principles and unfettered prosecutorial discretions that leaves multinational businesses dangerously exposed. Not only are the laws vague, but they are accompanied by incredible powers on behalf of prosecutors, who can issue orders to freeze assets, cripple business operations, harass employees, and destroy reputations, all before you’ve even had a chance to defend yourself in court. This ambiguity is heightened by the outsourcing of prosecutorial responsibilities to white collar criminal “defense” lawyers, who have embraced emerging regimes of “self reporting,” placing the onus on corporate decisions to avoid the stigma of criminal charges, requiring them to inform on themselves or their own senior employees, often in the absence of any substance.
[…]
[P]art of the problem is the proliferation of Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs), which entail the company surrendering its rights to defense and admitting to a series of accusations that are not subjected to exhaustive judicial scrutiny.
[…]
Many big law firms now feature celebrity prosecutors who formerly worked in enforcement, so they see their new job as a continuation of their old job, specializing in negotiating NDAs and DPAs.
In several cases that we are familiar with, the self-reporting doctrine has ended up causing much more damage than benefit. Particularly with respect to non-public companies, a better strategy would be to fight against any untrue or exaggerated accusation, uphold basic rights to defense, take internal measures to address any issues, but above all else, refuse to be bullied into a position of confessing to actions that the company has not committed or destroying the careers and personal lives of a handful of executives to serve as the sacrifice to save the company.
We do fear that if this trend of prosecutorial hubris is not checked, we may face a very dangerous future. The potential consequences of these laws, which include lengthy periods of incarceration, could morph beyond big business and impact other areas of society, where the accused are always guilty, where rights to defense do not exist, and dirty deals replace due process.
The philosophy of self reporting, impacting as it does the lives and reputations of executives in major corporations, requires a dramatic rethink. We must carefully examine the incentives driving prosecutors and how they choose their targets, review sentencing guidelines in both the United States and United Kingdom, and reinforce the core values of the presumption of innocence and due process in order to effectively address genuine issues of corruption practices abroad while sparing compliant businesses from the burden of unnecessary harassment.”
In-House Position
Avon Products, Inc., is looking for an attorney to join the Ethics & Compliance team.
The Regional Legal & Compliance Counsel (RLCC), Latam, reports to the Regional Ethics & Compliance Director for compliance matters and V.P. & General Counsel, Legal, Ethics & Compliance, Latam for legal matters. The position resides in Miami. The RLCC plays an active role in the execution of the Global Ethics & Compliance program and provides legal support to the region. The Company’s Ethics & Compliance program seeks to minimize exposure of corporate and regulatory risks through company guidance and controls. Working with Legal Department colleagues, especially the legal leadership and Compliance Counsels in the markets and the Regional Compliance Director, the RLCC counsels on compliance-related questions, implementation and execution of policies and procedures, with a particular focus on the anti-corruption policy, as well as assists with the design and implementation of compliance enhancements, as necessary. The RLCC may spend appreciable time implementing anti-corruption policy controls, such as those concerning third party engagements, gift giving, and donations, thereby facilitating legitimate commercial activities while mitigating risk exposure.
Interested candidates may send their CV directly to Gregory Bates (Director, Ethics & Compliance, Latam) (gregory.bates@avon.com) and should also apply via the http://www.avoncompany.com/
Friday Roundup
The U.K. SFO flexes its pre-Bribery Act muscle in criminally charging an Alstom subsidiary, other scrutiny alerts and updates, nominate, double standard, quotable, and for the reading stack. It’s all here in the Friday roundup.
Alstom
As has been widely reported (see here and here for instance), the U.K. Serious Fraud Office announced:
“Alstom Network UK Ltd, formerly called Alstom International Ltd, a UK subsidiary of Alstom, has been charged with three offences of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as three offences of Conspiracy to Corrupt contrary to section 1 of the Criminal Law Act 1977. The alleged offences are said to have taken place between 1 June 2000 and 30 November 2006 and concern large transport projects in India, Poland and Tunisia.”
According to the release, “the SFO investigation commenced as a result of information provided to the SFO by the Office of the Attorney General in Switzerland concerning the Alstom Group, in particular Alstom Network UK Ltd.”
I inquired with the SFO press office regarding any original source charging documents and was informed as follows. “Beyond our press release today, the nearest date for documents likely to be made available would be the charge sheet at the first court hearing – presently arranged for 9 September, at Westminster Magistrates’ Court.”
As readers likely know, since April 2013 the DOJ has charged four individuals associated with Alstom Power Inc., a subsidiary of Alstom, in connection with an alleged bribery scheme involving the Tarahan coal-fired steam power plant project in Indonesia. (See more below for a recent guilty plea).
As was the case in the U.S. – U.K. enforcement action against BAE (see here for the prior post) there may have been and/or currently is turf war issues between the agencies as to which agency is going to prosecute alleged conduct occurring in various countries.
Speaking of the DOJ action against various individuals associated with Alstom Power, last week, the DOJ announced that William Pomponi, a former vice president of regional sales at Alstom Power, pleaded guilty to a criminal information charging him with conspiracy to violate the FCPA in connection with the awarding of the Tarahan power project in Indonesia.
Assistant Attorney General Leslie R. Caldwell stated:
“The Criminal Division of the Department of Justice will follow evidence of corruption wherever it leads, including into corporate boardrooms and corner offices. As this case demonstrates, we will hold both companies and their executives responsible for criminal conduct.”
As noted in the DOJ release:
“Pomponi is the fourth defendant to plead guilty to charges stemming from this investigation. Frederic Pierucci, the vice president of global boiler sales at Alstom, pleaded guilty on July 29, 2013, to one count of conspiracy to violate the FCPA and one count of violating the FCPA; and, David Rothschild, a former vice president of regional sales at Alstom Power Inc., pleaded guilty to conspiring to violate the FCPA on Nov. 2, 2012. Marubeni Corporation, Alstom’s consortium partner on the Tarahan project, pleaded guilty on March 19, 2014, to one count of conspiracy to violate the FCPA and seven counts of violating the FCPA, and was sentenced to pay a criminal fine of $88 million. FCPA and money laundering charges remain pending against Lawrence Hoskins, the former senior vice president for the Asia region for Alstom, and trial is scheduled for June 2, 2015.”
See here for the original post highlighting the enforcement action against the individuals associated with Alstom and here for the original post regarding the Marubeni enforcement action.
Scrutiny Alerts and Updates
SEC Enforcement Action Against Former Magyar Telekom Executives
From Law360:
“The SEC has slimmed down its FCPA case against three former Magyar Telekom PLC executives, dropping claims they bribed government officials in Montenegro, according to a new complaint … The amended complaint alleged former Magyar CEO Elek Straub and two other former executives, Andras Balogh and Tamas Morvai, authorized bribe payments to government officials in the Republic of Macedonia in exchange for regulations designed to hurt a competitor. The SEC, in its initial complaint in December 2011, had also alleged the defendants engaged in a second bribery scheme in Montenegro. The agency said in a July 14 court filing that it would “continue to pursue the same legal causes of action alleged in its original complaint,” but without the claims related to Montenegro. The SEC previously advised the court and defense attorneys in January 2014 of its intention to narrow the suit.”
Interesting, isn’t it, what happens when the SEC is put to its burden of proof.
Kowalewski Pleads Guilty
The DOJ announced:
“Bernd Kowalewski, the former President and CEO of BizJet, pleaded guilty … to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and a substantive violation of the FCPA in connection with a scheme to pay bribes to officials in Mexico and Panama in exchange for those officials’ assistance in securing contracts for BizJet to perform aircraft maintenance, repair and overhaul services.”
Assistant Attorney General Leslie Caldwell stated:
“The former CEO of BizJet, Bernd Kowalewski, has become the third and most senior Bizjet executive to plead guilty to bribing officials in Mexico and Panama to get contracts for aircraft services. While Kowalewski and his fellow executives referred to the corrupt payments as ‘commissions’ and ‘incentives,’ they were bribes, plain and simple. Though he was living abroad when the charges were unsealed, the reach of the law extends beyond U.S. borders, resulting in Kowalewski’s arrest in Amsterdam and his appearance in court today in the United States. Today’s guilty plea is an example of our continued determination to hold corporate executives responsible for criminal wrongdoing whenever the evidence allows.”
U.S. Attorney Danny Williams (N.D. Okla.) stated:
“I commend the investigators and prosecutors who worked together across borders and jurisdictions to vigorously enforce the Foreign Corrupt Practices Act. Partnership is a necessity in all investigations. By forging and strengthening international partnerships to combat bribery, the Department of Justice is advancing its efforts to prevent crime and to protect citizens.”
See here and here for posts regarding the 2012 DOJ enforcement action against BizJet and here and here for the 2013 DOJ enforcement action against Kowalewski and others associated with BizJet.
Cilins Sentenced
As noted in this prior post, in April 2013 the DOJ announced (here) that “Frederic Cilins a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.” The Criminal Complaint charged Cilins with one count of tampering with a witness, victim, or informant; one count of obstruction of a criminal investigation; and one count of destruction, alteration, and falsification of records in a federal investigation. Cilins was linked to Guernsey-based BSG Resources Ltd and in March 2014 the DOJ announced that Cilins pleaded guilty “to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.” (See this prior post).
Last week, the DOJ announced that Cilins was sentenced to 24 months in prison. In the DOJ release, U.S. Attorney Preet Bharara said:
“Frederic Cilins went to great lengths to thwart a Manhattan federal grand jury’s investigation into an alleged bribery scheme in the Republic of Guinea. In an effort to prevent the federal authorities from learning the truth, Cilins paid a witness for her silence and to destroy key documents. Today, Cilins learned that no one can manipulate justice.”
Assistant Attorney General Leslie Caldwell said:
“Cilins offered to bribe a witness in an FCPA investigation to stop the witness from talking to the FBI. Today’s sentence holds Cilins accountable for his effort to undermine the integrity of our justice system, and sends a message that those who interfere with federal investigations will be prosecuted and sent to prison.”
FBI Assistant Director-in-Charge George Venizelos said:
“Cilins obstructed the efforts of the FBI during the course of this investigation. His guilty plea and sentence demonstrate our shared commitment with the U.S. Attorney’s Office to hold accountable those who seek to interfere with the administration of justice. This case should be a reminder to all those who try to circumvent the efforts of a law enforcement investigation: the original crime and the cover-up both lend themselves to prosecution.”
According to the release, Cilins was also ordered to pay a fine of $75,000 and to forfeit $20,000.
GSK
From Reuters:
“GlaxoSmithKline faces new allegations of corruption, this time in Syria, where the drugmaker and its distributor have been accused of paying bribes to secure business, according to a whistleblower’s email reviewed by Reuters. Britain’s biggest drugmaker said on Thursday it was investigating the latest claims dating back to 2010, which were laid out in the email received by the company on July 18. The allegations relate to its former consumer healthcare operations in Syria, which were closed down in 2012 due to the worsening civil war in the country. […] GSK has been rocked by corruption allegations since last July, when Chinese authorities accused it of funneling up to 3 billion yuan ($480 million) to doctors and officials to encourage them to use its medicines. The former British boss of the drugmaker’s China business was accused in May of being behind those bribes. Since then, smaller-scale bribery claims have surfaced in other countries and GSK is now investigating possible staff misconduct in Poland, Iraq, Jordan and Lebanon. Syria is the sixth country to be added to the list. The allegations there center on the company’s consumer business, including its popular painkiller Panadol and oral care products. Although rules governing the promotion of non-prescription products are not as strict as for prescription medicines, the email from a person familiar with GSK’s Syrian operations said alleged bribes in the form of cash, speakers’ fees, trips and free samples were in breach of corruption laws. The detailed 5,000-word document, addressed to Chief Executive Andrew Witty and Judy Lewent, chair of GSK’s audit committee, said incentives were paid to doctors, dentists, pharmacists and government officials to win tenders and to obtain improper business advantages.”
Separately, this Reuters article states that the U.K. SFO “is working with authorities in China in a first for such Anglo-Chinese cooperation as it carries out its own investigation into alleged corruption at GSK.” The article quotes SFO Director David Green as follows: “Certainly, so far as I am aware it is the first time we have had cooperation with the Chinese on an SFO case.”
Separately, in the U.S. this Wall Street Journal article states:
“Federal Bureau of Investigation agents have been interviewing current and former GSK employees in connection with bribery allegations made against the drug maker in China, according to a person familiar with the matter, as fresh claims of corruption surfaced against Glaxo’s operations in Syria. The interviews have taken place in Washington, D.C., in the past few months and are part of a Justice Department investigation into GSK’s activities in China, the person added. The U.S. Securities and Exchange Commission also is investigating the company’s business in China, according to people familiar with the matter.”
Key Energy Services
The company stated as follows in its Second Quarter 2014 Update and Earnings Release.
“Pre-tax expenses of approximately $5 million were incurred in connection with the previously disclosed Foreign Corrupt Practices Act investigations.”
Nominate
If FCPA Professor adds value to your practice or business or otherwise enlightens your day and causes you to contemplate the issues in a more sophisticated way, please consider nominating FCPA Professor for the ABA Journal’s Blawg 100 list (see here).
Double Standard
Beginning in 2009, I began writing about the “double standard” and how – despite the similarities between the FCPA and 18 USC 201 (the domestic bribery statute) – a U.S. company’s interaction with a “foreign official” is subject to more scrutiny and different standards than interaction with a U.S. official. Since 2009, approximately 30 posts have appeared under the “double standard” subject matter tag.
Against this backdrop, I was happy to see another individual tackle the same general topic. See here from the Global AntiCorruption Blog – “Is U.S. Campaign Finance Law More Permissive of Corruption Than the FCPA?”
Quotable
In this Corporate Crime Reporter interview, former U.S. Attorney Neil MacBride (E.D. Va.) says the following regarding the use of non-prosecution and deferred prosecution agreements: “The Department now has the ability to reach more ambiguous conduct where it might be more difficult to prove a criminal conviction in court.”
Wait a minute!
If the conduct is ambiguous and the DOJ would have a difficult time to prove a criminal conviction in court, there should be no non-prosecution or deferred prosecution agreement. Period. End of story. The rule of law commands such a result.
Reading Stack
Over at the FCPA Compliance & Ethics blog, Tom Fox recently published a three-part series on M&A issues and the FCPA. See Part I, Part II, and Part III.
Sherman & Sterling’s mid-year FCPA Digest, including its “Trends and Patterns” is here. Among the trends and patterns:
“Recent paper victories by the SEC could be perceived as setbacks in the Commission’s actions against
individual defendants; andThe SEC has continued its practice of pursuing its theory of strict liability against a parent corporation
for the acts of its corporate subsidiaries.”
Kudos to Sherman & Sterling for adopting the “core” approach to keeping FCPA statistics. (See here for the prior post regarding my suggested “core” approach). The Digest states:
“We count all actions against a corporate “family” as one action. Thus, if the DOJ charges a subsidiary and the SEC charges a parent issuer, that counts as one action. In addition, we count as a “case” both filed enforcement actions (pleas, deferred prosecution agreements, and complaints) and other resolutions such as non-prosecution agreements that include enforcement-type aspects, such as financial penalties, tolling of the statute of limitations, and compliance requirements.”
The most recent edition of Miller & Chevalier’s FCPA Update is here. Debevoise & Plimpton’s always informative FCPA Update is here and Mayer Brown’s FCPA mid-year update is here.
Warning, the enforcement statistics cited in certain of the above updates will cause confusion because they do not adopt the “core” approach.
*****
A good weekend to all.