Top Menu

Paris Court of Appeals Rules That US FCPA Guilty Plea Deprives Accused of Rights Under European Convention and Bars Further Proceeding in France

Judicial Decision

Today’s post is from Frederick Davis (Debevoise & Plimpton – Paris).

A decision of the Paris Court adds a new element to the debate over “international double jeopardy:” in a striking ruling, it held that a person who had pleaded guilty in the United States to FCPA violations could not be prosecuted for the same offense in France because the US guilty plea – which the Court concluded had been forced upon him – deprived him of his right to self-defense protected by the European Convention on Human Rights.

Continue Reading

Friday Roundup

Roundup2

Scrutiny alert and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alert

In August 2012, the Israel-based Teva Pharmaceuticals first disclosed its FCPA scrutiny and in its most recent annual report the company disclosed as follows.

“For several years, we have been conducting a voluntary worldwide investigation into business practices that may have implications under the FCPA. We have engaged outside counsel to assist in the investigation, which was prompted by the receipt, beginning in 2012, of subpoenas and informal document requests from the SEC and the Department of Justice (“DOJ”) to produce documents with respect to compliance with the FCPA in certain countries. We have provided, and will continue to provide, documents and other information to the SEC and the DOJ, and are cooperating with these agencies in their investigations of these matters. In the course of our investigation, which is continuing, we have identified certain business practices and transactions in Russia, certain Eastern European countries, certain Latin American countries and other countries in which we conduct business, which likely constitute violations of the FCPA and/or local law. In connection with our investigation, we have also become aware that affiliates in certain countries under investigation provided to local authorities inaccurate or altered information relating to marketing or promotional practices. We have brought and continue to bring these issues to the attention of the SEC and the DOJ. Our internal investigation is not complete and additional issues or facts could become known to management as the investigation continues, which may expand the scope or severity of the potential violations and/or extend to additional jurisdictions. Our investigation is expected to continue through the end of 2015, and may continue beyond that date.”

Reading Stack

From Shearman & Sterling attorneys in the New York Law Journal “A Bribe Is a Bribe: FCPA’s Influence on International Arbitration.”

“Although bribery investigations conducted under the auspices of the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) may appear, at first glance, detached from the world of international arbitration, BSG Resources v. Guinea highlights an issue that practitioners should understand when advising their clients on the potential repercussions of FCPA liability. While practitioners are generally aware of the litigation risks associated with FCPA investigations in the U.S. courts, they would also be well advised in considering the implications that FCPA liability may have on their clients’ recourse to foreign investment protections and bilateral investment treaties, and related international arbitration.”

For additional information on this topic, see this prior guest post.

*****

The attorneys who represented Mark Jackson in SEC. v. Jackson (the SEC’s failed case against Noble executives in connection with Nigerian permits – see herehere, and here for prior posts) ask whether the SEC has written the facilitating payments exception out of the FCPA?  The article states:

“Last summer, a lawsuit brought by the Securities and Exchange Commission (SEC) alleging Foreign Corrupt Practices Act (FCPA) violations against two individuals related to Noble Corporation, a global oil and gas drilling services company, nearly went to trial in federal court in Texas. SEC v. Jackson and Ruehlen, No. 12-cv-563 (S.D. Tex.). […] As one of the only civil FCPA cases to proceed to that stage of litigation, the case provided unique insights into the SEC’s interpretation of key provisions of the FCPA. The case ultimately settled on very favorable terms for the individuals, but the SEC’s position on the facilitating payments exception to the FCPA was a notable departure from its own stated guidance and may herald a renewed attempt by the SEC to further narrow the exception to the point of irrelevance.”

[…]

“Due to the settlement [in the case], the court never had the opportunity to rule on the fate of the FCPA’s facilitating-payments exception under the SEC’s newfound interpretation. But the SEC’s position on this issue signals a shift in policy toward the practical elimination of the exception. If the SEC continues down the road established in this case, it will be interesting to examine whether courts accept the SEC’s position eliminating the exception. However, since most FCPA cases are not litigated, the SEC may seek to push its novel interpretation into law, without approval by the courts, by including it in settlement agreements going forward. Counsel should be aware of this effort and, where possible and appropriate, resist the SEC’s efforts to rewrite the law.”

My own two cents on the issue is consistent with other observations, and that is yes, the enforcement agencies have largely read facilitating payments out of the FCPA, along with the corrupt intent element in many cases.

*****

Much has been written about the recently leaked records from HSBC, including this piece regarding Jeffrey Tesler’s role in the Bonny Island, Nigeria bribery cases (4 out of 10 cases in the top ten in terms of FCPA settlements).  According to the article:

“Leaked records from HSBC, a huge global bank based in London, reveal new details about the bank’s role as a conduit for the bribes — and new details about how Tesler operated. The files, obtained by the French newspaper Le Monde and the International Consortium of Investigative Journalists, show ties between Tesler and high-ranking Nigerians not previously named publicly in connection with the scandal, raising the possibility of renewed questions about Nigeria’s handling of the affair.”

[…]

The files obtained by Le Monde and ICIJ show that nine people, including members of the Tesler family and Nigerian nationals, held a variety of roles with accounts  at HSBC Private Bank (Suisse) between 1990 and 2003 — months before the completion of the gas plant. Nine of the 12 accounts instructed HSBC to keep all correspondence under lock and key in a bank safe.

Despite Tesler being under investigation since 2003, HSBC continued to offer advice, services and cash withdrawals to Tesler and his family, whose accounts with the bank totaled tens of millions of dollars at one point in 2006/2007. HSBC advised the family even though its individual files for Tesler and those close to him include references to “criminal cases” and “the Tesler affair.”

*****

A good weekend to all.

Testing Innocence

By now you have probably heard that various Bonny Island bribery defendants were sentenced last week.  As noted in this DOJ release:

Albert Stanley (a former chairman and CEO of Kellogg, Brown & Root, Inc.) was sentenced to 30 months in prison, ordered to serve three years of supervised release and to pay $10.8 million in restitution to KBR, the victim of a separate kickback scheme Stanley engaged in;

Jeffrey Tesler (a U.K. citizen and agent of the TSKJ joint venture at the center of the bribery scheme) was sentenced to 21 months in prison, followed by two years of supervised release, and ordered to pay a $25,000 fine in addition to previously forfeiting approximately $149 million.

Wojciech Chodan (a U.K. citizen and former salesman at KBR’s U.K. subsidiary) was sentenced to 1 year of probation and ordered to pay a $20,000 fine in addition to previously forfeiting approximately $727,000.

The Bonny Island bribery conduct the defendants were charged in was massive in scope and involved a decade-long scheme to bribe Nigerian officials to obtain engineering, procurement and construction contracts at Bonny Island Nigeria valued at more than $6 billion.

As detailed in this previous post, the corporate Bonny Island bribery enforcement actions resulted in approximately $1.6 billion in DOJ/SEC fines and penalties.  The DOJ’s press release announcing the sentences states as follows.  “Today’s prison sentences for Mr. Stanley and Mr. Tesler mark another important step in our prosecution of those responsible for a massive bribery scheme involving engineering, procurement and construction contracts in Nigeria.  These sentences reflect not only the defendants’ illegal acts, but also their substantial cooperation with the government. As a result of this investigation, three individuals have been convicted of FCPA-related crimes, and five companies in four countries have paid substantial penalties and undertaken significant efforts to enhance their compliance programs.  This case shows the importance the department places on putting an end to foreign bribery.”

Two people that probably have not heard of last week’s Bonny Island bribery sentences are Joel Esquenazi and Carlos Rodriguez – two of the defendants in the Haiti Teleco enforcement action.  As noted in this prior post, in October 2011, Esquenazi was sentenced to 15 years in prison and Rodriguez was sentenced to 7 years in prison.

Was the conduct that Esquenazi and Rodriguez engaged in more egregious than the Bonny Island bribery conduct engaged in by Stanley, Tesler, and Chodan?

Not even close.  According to the DOJ, Esquenazi and Rodriguez participated in a scheme in which their employer, Terra Telecommunications Inc. paid $890,000 to shell companies to be used for bribes to Haiti Teleco officials to receive preferred telecommunications rates.

So what did Esquenazi and Rodriguez do to receive a significantly longer sentence than the defendants charged in connection with one of the largest bribery schemes ever under the FCPA?

Esquenazi and Rodriguez tested their innocence.  They exercised their constitutional right to a trial, put the DOJ to its burden of proof, and were convicted by a jury (their appeals are pending).

Professor Ellen Podgor notes in White Collar Innocence:  Irrelevant in the High Stakes Risk Game (here) as follows. “Our existing legal system places the risk of going to trial, and in some cases even being charged with a crime so high, that innocence and guilt no longer become the real considerations;” rather, “maneuvering the system to receive the least onerous consequences may ensure the best result for the accused party, regardless of innocence.”  In the article, Professor Podgor details several stories involving disparate criminal sanctions and states “the real moral of these stories is not whether the punishment was warranted, but rather the appropriateness of the level of risk that one has to take to proceed to trial, and the chilling effect of the high risk caused by the ―trial penalty.”  Podgor notes that “iinnocence becomes irrelevant as the real question becomes whether it is worth the risk of testing an innocence claim.”

Esquenazi and Rodriguez were found guilty by a jury.  However, the greatest factor in their sentences is likely that they tested their innocence.  In contrast, Stanley, Tesler, Chodan pleaded guilty and cooperated (although Tesler and Chodan did fight extradition for several years) and received substantially shorter sentences for engaging in much more egregious conduct.

Is this justice or is this merely knowing how to play a game?  Were Stanley, Tesler, and Chodan sentenced too lightly or were Esquenazi and Rodriguez sentenced too harshly?  What is the message sent to future FCPA individual defendants who might want to test their innocence?

Tesler Pleas to Bonny Island Bribery Charges

Last Friday, the DOJ announced (here) that Jeffrey Tesler, a U.K. citizen and licensed solicitor who was recently extradited to the U.S., pleaded guilty before U.S. District Judge Keith P. Ellison (S.D. of Texas) to one count of conspiracy to violate the FCPA and one count of violating the FCPA.

In February 2009, Tesler (a former consultant to Kellogg, Brown & Root Inc. and its joint venture partners – Technip, Snamprogetti and JGC Corporation of Japan – in in the Bonny Island, Nigeria project) was charged via an 11 count indictment (1 count conspiracy to violate the FCPA and 10 counts of substantive FCPA violations) (see here) for his role in the massive Bonny Island, Nigeria bribery scheme.

According to the DOJ release announcing Tesler’s plea:

“Tesler admitted that from approximately 1994 through June 2004, he and his co-conspirators agreed to pay bribes to Nigerian government officials, including top-level executive branch officials, in order to obtain and retain the EPC contracts. The joint venture hired Tesler as a consultant to pay bribes to high-level Nigerian government officials and hired a Japanese trading company to pay bribes to lower-level Nigerian government officials. During the course of the bribery scheme, the joint venture paid approximately $132 million in consulting fees to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company. Tesler admitted that he used the consulting fees he received from the joint venture, in part, to pay bribes to Nigerian government officials.”

As part of his plea agreement (here), Tesler agreed to forfeit $148,964,568 to the U.S. – an amount which “represents proceeds traceable” to the charges Tesler pleaded guilty. The forfeiture amount is the largest individual forfeiture in the FCPA’s history. Tesler is to be sentenced on June 22, 2011.

In December 2009, Tesler’s co-defendant Wojciech Chodan pleaded guilty to conspiracy to violate the FCPA (see here for the prior post). Chodan faces a maximum penalty of 60 months in prison and as part of his plea agreement he agreed to forfeit $726,885. Chodan is to be sentenced on April 27, 2011.

Both Tesler and Chodan reported to KBR’s former CEO Albert Jack Stanley who pleaded guilty in September 2008 to conspiracy to violate the FCPA and conspiracy to commit mail and wire fraud (see here). Stanley’s plea agreement (here) contemplates a $10.8 million restitution payment and a sentence of 84 months.

For a summary of the corporate entities previously settling Bonny Island bribery charges see here. In January 2011, JGC (the remaining joint venture partner that has not yet settled) disclosed that it was in discussions with the DOJ to resolve its exposure via an agreement that would require it to pay approximately $218 million.

For additional coverage of Tesler’s plea see here from Bloomberg and here for certain questions raised by the FCPA Blog as to the forfeiture amount.

Tesler Pleas to Bonny Island Bribery Charges

Last Friday, the DOJ announced (here) that Jeffrey Tesler, a U.K. citizen and licensed solicitor who was recently extradited to the U.S., pleaded guilty before U.S. District Judge Keith P. Ellison (S.D. of Texas) to one count of conspiracy to violate the FCPA and one count of violating the FCPA.

In February 2009, Tesler (a former consultant to Kellogg, Brown & Root Inc. and its joint venture partners – Technip, Snamprogetti and JGC Corporation of Japan – in in the Bonny Island, Nigeria project) was charged via an 11 count indictment (1 count conspiracy to violate the FCPA and 10 counts of substantive FCPA violations) (see here) for his role in the massive Bonny Island, Nigeria bribery scheme.

According to the DOJ release announcing Tesler’s plea:

“Tesler admitted that from approximately 1994 through June 2004, he and his co-conspirators agreed to pay bribes to Nigerian government officials, including top-level executive branch officials, in order to obtain and retain the EPC contracts. The joint venture hired Tesler as a consultant to pay bribes to high-level Nigerian government officials and hired a Japanese trading company to pay bribes to lower-level Nigerian government officials. During the course of the bribery scheme, the joint venture paid approximately $132 million in consulting fees to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company. Tesler admitted that he used the consulting fees he received from the joint venture, in part, to pay bribes to Nigerian government officials.”

As part of his plea agreement (here), Tesler agreed to forfeit $148,964,568 to the U.S. – an amount which “represents proceeds traceable” to the charges Tesler pleaded guilty. The forfeiture amount is the largest individual forfeiture in the FCPA’s history. Tesler is to be sentenced on June 22, 2011.

In December 2009, Tesler’s co-defendant Wojciech Chodan pleaded guilty to conspiracy to violate the FCPA (see here for the prior post). Chodan faces a maximum penalty of 60 months in prison and as part of his plea agreement he agreed to forfeit $726,885. Chodan is to be sentenced on April 27, 2011.

Both Tesler and Chodan reported to KBR’s former CEO Albert Jack Stanley who pleaded guilty in September 2008 to conspiracy to violate the FCPA and conspiracy to commit mail and wire fraud (see here). Stanley’s plea agreement (here) contemplates a $10.8 million restitution payment and a sentence of 84 months.

For a summary of the corporate entities previously settling Bonny Island bribery charges see here. In January 2011, JGC (the remaining joint venture partner that has not yet settled) disclosed that it was in discussions with the DOJ to resolve its exposure via an agreement that would require it to pay approximately $218 million.

For additional coverage of Tesler’s plea see here from Bloomberg and here for certain questions raised by the FCPA Blog as to the forfeiture amount.

Powered by WordPress. Designed by WooThemes