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By on November 17, 2011 in Africa Sting, Australia, Facilitating Payments, Foreign Official, Nexus Technologies, Nguyens

If you have any interest in the issue of facilitating payments or Australia’s “FCPA-like” law you will want to read this document recently released by the Australia Attorney-General’s Department, Criminal Justice Division.

The document states as follows.  “In September 2011, the Australian Government announced the commitment of $700,000 to develop and implement Australia’s first National Anti-Corruption Plan.  A key objective of the Plan is to strengthen Australia’s existing governance arrangements by developing a whole-of-government policy on anti-corruption.  The Plan will bring the relevant agencies together under a cohesive framework and strengthen the Government’s capacity to identify and address corruption risks.” 

Australia’s “FCPA-like” law (Division 70 of the Criminal Code Act 1995) currently states that a person is guilty of an offense of bribing a foreign public official if:  “the person provides a benefit to another person, offers or promises to provide a benefit to another person, or causes a benefit to be provided, offered or promised to another person AND the benefit is not legitimately due to the other person AND step 1 was carried out with the intention of influencing a foreign public official (who may or may not be the recipient of the benefit) in the exercise of the official’s duties, in order to obtain or retain business or obtain or retain a business advantage which is not legitimately due.”  Under the law, “two defenses are provided for the foreign bribery offense: (i) that the benefit was permitted or required by written law and (ii) that it was a ‘facilitating payment.'”

As relevant to the foreign bribery offense, the Australian government is reviewing “the treatment of facilitation payments under Australian law;” “the factors that influence whether a benefit is ‘legitimately due’ to the recipient;” and “the current requirement to identify a particular foreign public official in order to establish an offence.”

As to facilitating payments, the document states as follows under the heading “international approaches.”  “The United States’ Foreign Corrupt Practices Act, on which the Australian law was modelled, includes a similar exemption to the offense of foreign bribery for facilitation payments. The United States Government has stated that it does not condone facilitation payments. The OECD has recommended that the United States review its policy.  The United Kingdom’s Bribery Act, which came into force on 1 July 2011, prohibits facilitation payments.”  The document also states as follows.  “The international movement towards criminalizing facilitating payments is demonstrated by the recent amendments to both UK and US bribery legislation.”   This statement is clearly wrong, there have been no recent amendments to the FCPA, although I agree with what seems to be the implication that the current FCPA enforcement agencies do not recognize the facilitating payments exception Congress put into the law.

The document states that the “government is considering whether to remove the defense of facilitating payments by repealing” that relevant section of the law.

Another issue the Australian government is reviewing is whether a particular foreign official must be identified in order to establish a bribery offense.  This same issue was disputed in both the Nexus Technologies and Africa Sting enforcement actions. 

As to this issue, the document states as follows.  “Under subsection 70.2 of the Criminal Code it is an offense to offer or provide an undue benefit to a person with the intention of influencing a public official in the course of their duties, in order to obtain business or an undue business advantage.  In some circumstances, it will be possible to establish that a bribe has been offered or provided to a person to induce a Government agency to grant business or an undue business advantage but it may be difficult to identify the specific official who will be influenced. For example, it may be possible to prove a person offered or provided a bribe to an agency in charge of granting public infrastructure contracts, but not possible to identify whether the payment is destined for the official directly responsible for granting contracts or another official who will direct their staff to grant a certain contract.  The Government therefore is considering whether to amend legislation so that, when proving that a benefit was offered or provided with an intention to influence a foreign public official, it is not necessary to prove an intention to influence a particular foreign public official.”

The Australian government is inviting submissions as to the above (and other issues) by December 15th.

Judge (Again) Significantly Rejects DOJ’s Recommendations In Sentencing Nexus Defendants

By on September 20, 2010 in Bourke, FCPA Sentences, Greens, Jason Steph, Jim Bob Brown, Joseph Lukas, Nexus Technologies, Nguyens

As noted in this DOJ release, last week several defendants in the Nexus Technologies enforcement action (see here for prior posts) were sentenced. Because many media sources merely regurgitate DOJ releases in such instances, this post may be the first you’ll learn that the sentencing judge in the Nexus matter significantly rejected the DOJ’s sentencing recommendations.

For instance, and as described more fully below, the DOJ sought a 14-17 year sentence for lead defendant Nam Nguyen, but the judge sentenced him to 16 months (plus 2 years of supervised release).

Further, the DOJ sought multi-year sentences for two defendants, but the judge sentenced them to probation.

The DOJ’s sentencing memoranda (see here for the 79 pages of collective material) provide an interesting read and clearly demonstrate the growing divide between how the DOJ views FCPA defendants and how judges view such defendants at sentencing. For instance, Judge Shira Scheindin stated at Frederic Bourke’s sentencing (see here) “after years of supervising this case, it’s still not entirely clear to me whether Mr. Bourke is a victim or a crook or a little bit of both.”

The DOJ stated in Nam Nguyen’s sentencing memo that its recommendation (168-210 months) should be accepted “to promote general deterrence” and that conduct such as Nguyen’s “will hardly be deterred by sending the message that the consequences of such conduct is at worst several months of imprisonment.”

Yet, the judge still sentenced Nam Nguyen to 16 months (plus 2 years of supervised release).

Also of note is that the DOJ criticized Nam Nguyen for “subjectively” looking at the “history of FCPA sentencing, focusing on the statistical outlier of the case U.S. v. Green … but ignoring the more common cases of significant prison time” such as “Charles Jumet, who paid less than 1/3 of what Nguyen paid in bribes, but received 87 months’ imprisonment.”

Let me assert that it is the DOJ who is “subjectively” looking at the “history of FCPA sentencing” and that Jumet is the “statistical outlier” – not sentences such as of the Greens.

Indeed, it is very common for FCPA defendants to be sentenced to prison terms measured in days and months, not years.

Consider the following recent sentences:

Greens – 6 months (August 2010)

Frederic Bourke – 366 days (November 2009)

Jim Bob Brown – 366 days (January 2010)

Jason Edward Steph – 15 months (January 2010)

The below post provides an overview of the Nexus sentences as well as the DOJ’s sentencing memos.

Nam Nguyen

Sentence: 16 months, 2 years of supervised release

DOJ Recommendation: 168-210 months

In its sentencing memorandum, the DOJ stated that Nguyen “paid bribes to multiple Vietnamese government officials in exchange for contracts for his business” and that “Nguyen literally offered a bribe on every single contract bid over a period of more than nine years …”.

DOJ sought a four-level sentencing enhancement “because the offense involved a public official in a high-level decision-making or sensitive position.” Specifically, the DOJ asserted that Nguyen paid bribes to “Nguyen Van Tan, who was the Managing Director of T&T Co. Ltd. … the procurement arm of Vietnam’s Ministry of Public Safety.”

Other items of interest from the DOJ’s sentencing memorandum.

In a footnote, the DOJ asserts that “the court has ruled in favor of the government” on the “foreign official” issue briefed in the case. However, as noted in this prior post, the DOJ specifically argued throughout its brief that a court decision as to this issue was premature. What actually happened is that the judge denied the defendants’ motion to dismiss without comment or analysis. The DOJ stated in the same footnote that because Nguyen’s counsel discussed the “foreign official” issue in his sentencing memorandum, that this “raises serious questions as to whether or not he has actually accepted responsibility for his crimes.”

The DOJ memo contains “Exhibit A” – a chart detailing the “Sentences of Natural Persons Who Pleaded Guilty to FCPA Violations Since 2001.”

The chart is misleading.

Nowhere in the chart does it indicate, nor in the brief referencing the chart is it noted, that the sentences are not just for FCPA violations, but, in many cases, sentences based on other violations of law as well.

For instance, in the longest sentence on the DOJ’s chart – Charles Jumet (87 months) nowhere is it noted that the “FCPA” portion of the sentence was actually lower. Jumet pleaded guilty to two counts – conspiracy to violate the FCPA and making false statements to federal agents. The false statements portion of his sentence was 20 months. Thus, Jumet’s “FCPA” sentence was 60 months – not 87 months as suggested by the DOJ’s chart.

An Nguyen

Sentence: 9 months, 3 years of supervised release (notwithstanding that, per the DOJ’s sentencing memorandum, Nguyen was on probation at the time of his offense)

DOJ Recommendation: 87-108 months

In its sentencing memorandum the DOJ stated that Nguyen “paid bribes to multiple Vietnamese government officials in exchange for contracts for his family’s business.” Elsewhere in the memo, the DOJ states that “Nguyen’s bribery was particularly egregious.” In connection with its decision not to seek a sentencing enhancement for an offense involving a public official in a high-level decision-making or sensitive position, the DOJ noted that “Nguyen was unaware of the nature, position, or role of the specific officials who received the bribe payments.”

Kim Nguyen

Sentence: 2 years probation

DOJ Recommendation: 70-87 months (even after the DOJ’s downward departure recommendation)

The DOJ requested a Section 5K1.1 downward departure. The DOJ noted that “even though Kim Nguyen did not begin providing information to the government until shortly before trial” this information nevertheless “appeared to play a role in her siblings’ decisions to plead guilty.” The DOJ noted that “Nguyen met with the government on approximately two occasions to explain the business practices and financial records of Nexus Technologies” and “explained various entries in the Nexus books which allowed the government accurately to calculate the total amount of bribes paid by the defendants …”

In its sentencing memo, the DOJ stated that “Nguyen played a critical role in this conspiracy, as she was the person responsible for handling the finances and maintaining the books and records of Nexus.” The DOJ stated that Nguyen “funneled the bribe payments to an off-shore company controlled by Nexus, which then forwarded the bribe payments to the Vietnamese officers, and it was Kim Nguyen who falsified the associated wire-transfer documents to cover their tracks.” The DOJ further asserted that e-mail correspondence “makes it very clear that Kim Nguyen knew exactly what she was doing, and why.” As with An Nguyen, the DOJ did not seek a sentencing enhancement for Kim Nguyen and noted that “Kim Nguyen was unaware of the nature, position, or role of the specific officials who received the bribe payments.”

Joseph Lukas

Sentence: 2 years probation

DOJ Recommendation: 37-46 months (even after the DOJ’s downward departure recommendation)

The DOJ requested a Section 5K1.1 downward departure. The DOJ noted that Lukas “met with the government on approximately seven separate occasions over the course of approximately 1.5 years and explained everything he knew about his co-defendants, their criminal conduct, their personal histories, and their business records.” According to the DOJ, “Lukas also created spreadsheets of information for the government, voluntarily turned over his computer for government analysis, and spent hours upon hours poring through documents in order to explain the business practices of Nexus Technologies and the Nguyen siblings.”

In its sentencing memorandum, the DOJ stated that “Lukas helped Nexus Technologies pay bribes to multiple Vietnamese government officials in exchange for contracts.” According to the DOJ, “Lukas was responsible for vendor relations and negotiations in the United States (which included identifying vendors who could supply the requested goods at low enough prices to allow the bribe payments.)”.

*****

As to the Greens’ sentence, the DOJ noted in footnote 8 of Nam Nguyen’s sentencing memo that the “DOJ is considering appealing the sentence in that case.”

Nexus Technologies Inc. et al. – Part I

By on March 17, 2010 in FCPA Jurisprudence, Foreign Official, Joseph Lukas, Nexus Technologies, Nguyens, Travel Act, Vietnam

Unfortunately, the FCPA enforcement action against Nexus Technologies Inc., a Philadelphia-based export company (“Nexus”), Nam Nguyen (Nexus’s President and Owner), and his siblings and fellow Nexus employees, Kim Nguyen and An Nguyen came to an end yesterday.

As noted in this DOJ release, Nexus pleaded guilty to “a conspiracy to bribe officials of the Vietnamese government in exchange for lucrative contracts to supply equipment and technology to Vietnamese government agencies in violation of the FCPA.” The release also notes that Nam and An Nguyen “pleaded guilty to conspiracy, a substantive FCPA violation, a violation of the Travel Act and money laundering” and that Kim Nguyen “pleaded guilty to conspiracy, a substantive FCPA violation and money laundering.” In June 2009, Joseph Lukas (a former Nexus partner) pleaded guilty to conspiracy and to violating the FCPA (see here).

The DOJ release notes that “in connection with the guilty pleas, Nexus and the Nguyens admitted that from 1999 to 2008 they agreed to pay, and knowingly paid, bribes in excess of $250,000 to Vietnamese government officials in exchange for contracts with the agencies and companies for which the bribe recipients worked” and that the defendants “admitted that the bribes were falsely described as ‘commissions’ in the company’s records.”

The DOJ release further notes that in pleading guilty, “Nexus also acknowledged that, as a company, it operated primarily through criminal means and agreed to cease operations as a condition of the guilty plea.”

Why did this post start with “unfortunately?”

Because, unlike most FCPA defendants (corporate or individual) Nexus and the Nguyens actually mounted a legal defense based on FCPA’s elements, including the key “foreign official” element.

You wouldn’t know it just by reading the above DOJ release, but this enforcement action centered on payments to employees of various commerical arms of Vietnam’s Ministry of Transport, Ministry of Industry, and Ministry of Public Safety.

While the case may not have been the strongest “test case,” Nexus and the Nguyens, in what is believed to be an FCPA first, challenged the DOJ’s interpretation that employees of state-owned or state-controlled enterprises (“SOES”) are “foreign official” under the FCPA. As readers likely know, this issue is a frequent topic of discussion on this blog (see here for prior “foreign official” posts).

The “foreign official” issue was fully briefed and I will explore in a future post (Nexus Technologies Inc. et al. – Part II) the issues raised by the briefs, including the DOJ’s surprising argument that it does not even need to identify specific “foreign officials” to charge an FCPA antibribery violation as well as the DOJ’s thin and misguided justification for its legal theory that employees of SOEs are “foreign officials” under the FCPA.

For the record, the judge in the case, without any comment or analysis, denied the motion to dismiss. Thus, DOJ may claim victory on its “foreign official” interpretation; however, in its brief DOJ specifically argued that a decision on the “foreign official” element was premature and ultimately a jury issue.

For all the talk, including on this blog, about the Africa Sting Case, BAE, Siemens, etc., this little noticed FCPA enforcement action in Philadelphia had the potential to shape the future of FCPA enforcement like no other – considering that over 50% of recent FCPA enforcement actions involve “foreign officials” only under DOJ’s dubious legal interpretation – which still, notwithstanding this resolution, has no judicial support.

Stay tuned for more.

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