In connection with the recent MTS Foreign Corrupt Practices Act enforcement action (see here for the prior post), the DOJ also announced FCPA and related criminal charges against Bekhzod Akhmedov (a citizen of Uzbekistan and former executive of an MTS entity) as well as money laundering charges against Gulnara Karimova (pictured – the former Uzbek official at the center of the telecom bribery scheme who allegedly had influence over the Uzbek governmental body that regulated the telecom industry).
First it was Netherlands-based VimpelCom which resolved a net $398 million FCPA enforcement action in February 2016 for bribing an alleged Uzbekistan telecom official (see here and here for prior posts).
Recently, the SEC and DOJ announced (see here and here) that Russia-based Mobile TeleSystems PJSC (MTS) agreed to resolve an $850 million DOJ/SEC FCPA enforcement action based on the same alleged core conduct. This is the largest settlement amount in an FCPA enforcement action in history. (See here for a list of the top ten corporate enforcement actions).
This post two weeks ago addressed the same topic as today’s post and quite frankly I am growing tired of writing this same general post for what seems like the umpteenth time. However, until things change I will keep writing it which means I will probably keep writing this same general post long into the future.
The proposal is this: when a company voluntarily discloses an FCPA internal investigation to the DOJ and/or SEC and when one or both of the enforcement agencies do not bring an enforcement action, have the “declining” enforcement agency publicly state, in a thorough and transparent manner, the facts the company disclosed and why the “declining” agency did not bring an enforcement action based on those facts.
As highlighted in this March 2012 post, Minnesota-based MTS Systems Corp., a global supplier of test systems and industrial position sensors, disclosed:
This week’s disclosure, Jefferson’s non-FCPA appeal, statistics of note, and an update on Brazil’s “FCPA”. It’s all here in the Friday roundup.
MTS Systems Corp. Disclosure
“MTS Systems Corporation (the “Company”) is investigating certain gift, travel, entertainment and other expenses that may have been improperly incurred in connection with some of the Company’s operations in the Asia Pacific region. The investigation has focused on possible violations of Company policy, corresponding internal control issues and any possible violations of applicable law, including the Foreign Corrupt Practices Act. Though the investigation is not complete, the Company has taken remedial actions, including changes to internal control procedures and removing certain persons formerly employed in its Korea office. The Company believes, however, that the amount of the expenses in question is not material to its reported consolidated financial statements. The Company has voluntarily disclosed this matter to the U.S. Department of Justice and the U.S. Securities and Exchange Commission. Additionally, the Company has disclosed this matter to the U.S. Air Force pursuant to its Administrative Agreement. The Company cannot predict the outcome of this matter at this time or whether it will have a materially adverse impact on its business prospects, financial condition, operating results or cash flows.”
MTS’s FCPA disclosure marks the fourth time in the last five weeks that a company has newly disclosed FCPA scrutiny. See here for the prior post “The Sun Rose, a Dog Barked, and a Company Disclosed FCPA Scrutiny.”
Jefferson’s Non-FCPA Appeal
I respectfully disagree with others who have recently stated that the 4th Circuit upheld former Congressman William Jefferson’s FCPA conspiracy conviction. Yes, the 4th Circuit did affirm Jefferson’s conviction of Count 1, as well as other charges. Count 1 was a conspiracy charge to solicit bribes, commit honest services wire fraud, and violate the FCPA in violation of 18 USC 371; however, as even the 4th Circuit noted in its opinion – here, this count charged a conspiracy with multiple objects and the jury was instructed that it only had to find that Jefferson conspired to commit one of the substantive offenses identified. In announcing the jury verdict the court did not specify which object of the conspiracy the jury agreed on and in fact the jury found Jefferson not guilty of a substantive FCPA charge, a charge principally based on allegations that Jefferson attempted to bribe Nigerian officials (including the former Nigerian Vice President) to assist himself and others obtain or retain business for a Nigerian telecommunications joint venture.
As stated in the 4th Circuit’s opinion, Jefferson appealed his convictions on the following grounds: “(1) that an erroneous instruction was given to the jury with respect to the bribery statute’s definition of an ‘official act’; (2) that another erroneous instruction was given with respect to the ‘quid pro quo’ element of the bribery-related offenses; (3) that Jefferson’s schemes to deprive citizens of honest services do not constitute federal crimes; and (4) that venue was improper on one of his wire fraud offenses.” [Reference to the “bribery statute” is to 18 USC 201 – the domestic bribery statute, not the FCPA]. In short, Jefferson’s 4th Circuit appeal had nothing to do with the FCPA.
Statistics of Note
In “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (see here), I argue that a compliance defense will better incentivize corporate compliance, reduce improper conduct, and thereby advance the FCPA’s objective of preventing bribery of foreign officials. Sure, business organizations at present have at least two incentives (the DOJ’s Principles of Prosecution of Business Organizations and the U.S. Sentencing Guidelines) to implement FCPA compliance policies and procedures. I argue that these incentives are not well known by a meaningful segment of the business community and, even if they were, despite these incentives (incentives which merely lessen the impact of legal exposure vs. reduce legal exposure), few business organizations operating in a world of finite resources are sufficiently implementing comprehensive FCPA policies and procedures. Various survey data is cited in support.
Add Deloitte’s recent third-party business relationships poll (see here) to the list. Despite the fact that a significant majority of corporate FCPA enforcement actions are based on the conduct of foreign third parties (such as agents, representatives, distributors, joint venture partners) the poll found the following.
On what percentage of your organization’s third-party business partners do you estimate it performs due diligence and risk assessments?
Votes Received: 1,339
|Up to 25%||23.4%|
An FCPA compliance defense surely will not cause 100% of business organizations to perform due diligence and risk assessment of all foreign third parties, but it is reasonable to conclude that an FCPA compliance defense will better incentivize more robust FCPA compliance policies and procedures, including as to third-parties.
Another statistic of note. A recent Global Anti-Corruption Survey by AlixPartners found that 95% of survey participants believe their industry is exposed to business practices that may constitute corruption. Southeast Asia and Africa presented the most significant risk according to survey participants. Survey participants were in-house legal counsel or compliance officers at North American multinational companies with annual revenues of $250 million or greater (with 90% of respondents working for companies with annual revenues exceeding $1 billion).
In this prior post, Matteson Ellis (founder and Principal of Matteson Ellis Law, PLLC, who also writes the FCPAmericas Blog), provided an overview of a draft bill making its way through the Brazilian Congress that would strengthen its “FCPA-like” law. In this recent post on his FCPAmericas Blog, Ellis provides an update on the draft bill. Ellis reports as follows. “A Special Committee created by the Brazilian Congress to analyze [the draft bill] has recently presented a revised draft that bolsters certain key provisions and keeps other significant ones the same. The House aims to vote on the legislation before July 2012.” In his post, Ellis provides various highlights of the revised draft bill as to corporate liability, sanctions, voluntary disclosure, and compliance programs.
A good weekend to all.