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Friday Roundup


Harder pleads guilty, scrutiny alerts and updates, when the dust settles, visual proof, and golf. It’s all here in the Friday roundup.

Harder Pleads Guilty

As highlighted in this post, in January 2015 the DOJ announced a Foreign Corrupt Practices Act enforcement action against Dmitrij Harder for allegedly bribing an official with the European Bank for Reconstruction and Development. Harder is a Russian national, naturalized German citizen and permanent resident of the U.S. and the former owner and President of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co. both based in Pennsylvania.

The enforcement action was notable in that it invoked the rarely used “public international organization” prong of the FCPA’s “foreign official” definition.

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Friday Roundup


Not something you see everyday, Yates Memo related, quotable, scrutiny alerts and updates, and for the reading stack. It’s all here in the Friday roundup.

Not Something You See Everyday

It’s not everyday that you see a director of a publicly-traded company publicly resign because the director thinks the company is engaged in improper conduct including FCPA violations.

But that is just what Michael Moss, until recently a director of Malvern Bancorp, did.

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Friday Roundup


Scrutiny alerts, noisy exit, double standard, quotable and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts


As predicted in this May post about the FIFA-related enforcement action, while the enforcement action was not an FCPA enforcement action it was likely to lead to scrutiny of various companies concerning books and records and internal controls issues.

Sure enough.

Various reports (see here and here for instance) suggest that the SEC is :examining the behavior of several companies with links to FIFA or other soccer bodies caught up in a major corruption scandal to see if there were possible violations of U.S. federal bribery laws, a person with knowledge of the matter said.”  According to the article:

“The civil probe, which is in its early stages and may not lead to any findings of wrongdoing or enforcement action, is being conducted by the U.S. Securities and Exchange Commission.” […] The SEC probe centers on publicly-traded companies who have been involved in soccer contracts, such as athletic shoes and sportswear company Nike Inc, said the source, who asked not to be named because of the non-public nature of the investigation. The exact scope of the probe and the names of other companies being scrutinized could not be learned. An SEC spokeswoman declined to comment.”


Reuters reports:

“Drugmaker GlaxoSmithKline, which was fined a record 3 billion yuan ($483 million) for corruption in China last year and is examining possible staff misconduct elsewhere, faces new allegations of bribery in Romania. GSK confirmed it was looking into the latest claims of improper payments set out in a whistleblower’s email sent to its top management on Monday. A copy of the email was seen by Reuters. The company is already probing alleged bribery in Poland, the United Arab Emirates, Lebanon, Jordan, Syria and Iraq. The latest allegations say GSK paid Romanian doctors hundreds, and in one cases thousands, of euros between 2009 and 2012 for prescribing its medicines, including prostate treatments Avodart and Duodart and Parkinson’s disease drug Requip. According to the email, the doctors were notionally paid for speaking engagements, but in three out of six cases, including the most highly paid one, they did not give any speech. The other three medics gave only one speech each, despite receiving multiple payments. GSK also provided doctors with many international trips and made payments to them under the guise of participation in advisory boards, the email said. […] The sender of the Romania email said its contents would be passed on to the U.S. Department of Justice and the Securities and Exchange Commission (SEC), which are investigating GSK for possible breaches of the Foreign Corrupt Practices Act.”

Noisy Exit

My article “Foreign Corrupt Practices Act Ripples” chronicles, among other things, how the FCPA is increasingly being used offensively by litigants.  One such example is a “noisy exit” a term coined by FCPA Professor in 2010 to describe an employee alleging unfair employment practices in connection with some aspect of FCPA scrutiny or enforcement.

The latest example is this civil complaint recently filed by Keisha Hall (a certified public accountant, certified fraud examiner and former director of finance for the Latin America region of Teva Pharmaceutical USA, INC.’s (“Teva”).

According to the complaint,  Teva allegedly fired Hall after she “began cooperating in a Securities and Exchange Commission/Department of Justice investigation into potential violations of the Foreign Corrupt Practices Act (“FCPA”) and the Sarbanes-Oxley Act (“SOX”), stemming from, among other things, allegations of bribery of government officials in the region.”

As highlighted in this prior post, Teva has been under FCPA scrutiny since July 2012.

Double Standard

A few weeks after an official is sworn in to a high-ranking government position, the official asserts herself into a pending government investigation against a corporation and brokers a settlement (an unusual task given the official’s position).

From that point forward, the corporation significantly increases its contributions to a charitable organization set up by the official’s family and pays the official’s spouse $1.5 million to participate in a series of question and answer sessions with the corporation’s CEO.

A prudent FCPA practitioner would immediately see numerous red flags and recommend an internal investigation.

But wait, the official is not a foreign official, it’s a U.S. official and once again it is Hillary Clinton.  (See here for the Wall Street Journal’s recent article “Clinton’s Complicated UBS Ties.”)


On the other side of the Presidential ticket is Donald Trump.  Regardless of what you think of “The Donald” he is blunt.  In this recent Wall Street Journal article, Trump explains why he previously donated to Hillary Clinton’s 2008 presidential campaign and other political campaigns.

“As a businessman, [Trump] needed to curry favor with an influential senator from his home state. In turn, he said, [Clinton] had incentive to court him as a campaign donor. “As a businessman and a very substantial donor to very important people, when you give, they do whatever the hell you want them to do,” Mr. Trump said. “As a businessman, I need that.”


In this recent Law360 article “FCPA Challenges Make for Spotty Trial Record for DOJ,” Michael Levy (Paul Hastings) states:

“We’ve seen several trials in which the judges have been skeptical, if not outwardly hostile, to some of the government’s more aggressive interpretations of the FCPA. While those trials may have fallen apart for other reasons, that skepticism still played, I believe, a substantial role.”

“Without the development of the law through judicial decisions, it’s very unclear what judges believe the FCPA means compared to what the DOJ think the FCPA means.”

(See here for Levy’s FCPA Professor guest post titled “Prosecutorial Common Law”).

In the same article, George Terwilliger (McGuireWoods and a former high-ranking DOJ official) states:

“It is fundamental to due process that a person of ordinary intelligence should be able to read a law and understand what is required or prohibited, as the case may be. Many people of great intelligence on both sides of an FCPA question debate just such issues.”

“That does not produce the fair warning that those subject to the law deserve to have.”

For the Reading Stack

An informative article here by Jon N. Eisenberg (K&L Gates) titled “Are Public Companies Required to Disclose Government Investigations.”  While not FCPA-specific, the article is FCPA relevant and begins as follows.

“For many public companies, the first issue they have to confront after they receive a government subpoena or Civil Investigative Demand (“CID”) is whether to disclose publicly that they are under investigation. Curiously, the standards for disclosure of investigations are more muddled than one would expect. As a result, disclosure practices vary—investigations are sometimes disclosed upon receipt of a subpoena or CID, sometimes when the staff advises a company that it has tentatively decided to recommend an enforcement action, sometimes not until the end of the process, and sometimes at other intermediate stages along the way. In many cases, differences in the timing of disclosure may reflect different approaches to disclosure. We discuss below the standards that govern the disclosure decision and practical considerations. We then provide five representative examples of language that companies used when they disclosed investigations at an early stage.”

The FIFA-Related Action Is Not An FCPA Enforcement Action – But Could Potentially Lead To Exposure For Certain Companies


Unless you were on another planet last week, you know that the U.S. Department of Justice announced a wide-ranging criminal action against nine FIFA officials and five corporate executives.  (See here for the various criminal informations and the 164-page criminal indictment).

Perhaps because the criminal actions – largely against foreign nationals – alleged corruption the FIFA-related action was widely reported in the media as a Foreign Corrupt Practices Act enforcement action.  For instance, this Washington Post sought to explain how Watergate (a historical event which in part lay the groundwork for the FCPA) explains how the U.S. can prosecute FIFA officials and implied that the FCPA was somewhat relevant to the criminal charges last week.

However, the FIFA-related action is NOT an FCPA enforcement action.  Rather the individuals were charged with racketeering conspiracy, wire fraud, money laundering and certain defendants were also charged with tax evasion and obstruction of justice.

Nevertheless, the conduct alleged could potentially result in FCPA scrutiny for certain companies.

As the FCPA Guidance rightly notes: “the FCPA does not cover every type of bribe paid around the world for every purpose …”.

Indeed, the FCPA’s anti-bribery provisions only apply to bribe payors and not bribe recipients and the various FIFA officials are generally alleged to be bribe recipients.  Further, for there to be a violation of the FCPA’s anti-bribery provisions a “foreign official” must be an actual or intended recipient of a payment scheme.

Under the FCPA, “foreign official”:

“means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.

The term “public international organization” means– (i) an organization that is designated by Executive Order pursuant to section 1 of the International Organizations Immunities Act (22 U.S.C. § 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register.

To see the list of public international organizations, see here and here.

In short, FIFA officials are not “foreign officials” under the FCPA and because they are not “foreign officials” the FCPA’s anti-bribery provisions are not implicated.

Nevertheless, the conduct alleged in the FIFA-related charging documents could potentially result in FCPA scrutiny for certain companies.

Indeed, the FIFA-related charging documents refer to a multinational sportswear company headquartered in the U.S. (“Sportswear Company A”) and how this company paid the Brazilian soccer federation (“CBF”) $160 million over 10 years for the right to be one·of CBF’s co-sponsors and to be CBF’s exclusive footwear, apparel, accessories, and equipment supplier.  According to the indictment, CBF remitted a percentage of the value of the payments it received under the agreement to Traffic Brazil, an intermediate entity at the core of the FIFA-related allegations.

The indictment alleges:

“Additional financial terms were not reflected in the Agreement. Sportswear Company A agreed to pay a Traffic affiliate with a Swiss bank account an additional $40 million in. base compensation on top of the $160 million it was obligated to pay to CBF pursuant to the Agreement. On July 14, 1996, three days after the Agreement was signed, a representative of Sportswear Company A and a representative of Traffic Brazil … signed a one-page letter agreement acknowledging as follows: “CBF has authorized Traffic, or its designated banking agent, to invoice [Sportswear Company A] directly for marketing fees earned upon successful negotiation and performance of the . . . [Agreement].” Between 1996 and 1999, Traffic invoiced Sportswear Company A directly for $30 million in payments.

[Traffic Brazil] agreed to pay and did pay [a high-ranking CBF official] half of the money he made from the sponsorship deal, totaling in the millions of dollars, as a bribe and kickback.”

Given the above definition of “foreign official,” the CBF official is unlikely to qualify.

However, the Wall Street Journal reported that Nike is believed to be “Sportswear Company A” and Nike is an issuer subject to the FCPA’s books and records and internal controls provisions, provisions which are more generic than the anti-bribery provisions and operate independently of the anti-bribery provisions.

At the very least, the above allegations as to Nike could potentially implicate the FCPA’s books and records and internal controls provisions.  Even though the alleged conduct occurred in the late 1990’s, FCPA enforcement actions are commonly based on old conduct given that cooperation – not legal principles such as statue of limitations – is often the name of the game in FCPA enforcement actions.  Nevertheless, an enforcement action based on conduct that allegedly occurred 15 years ago would seem to press this common enforcement tactic to the extreme.

In response to the FIFA-related actions, Nike released as statement indicating that the company has “been cooperating, and will continue to cooperate, with the authorities.”


Many are describing the FIFA-related actions as yet another example of extraterritorial application of U.S. law.

Before jumping to this conclusion, consider the following.

  • As to the core alleged bribery scheme, three of the defendants are U.S. citizens; various of the regional soccer associations implicated have offices in the U.S.; several of the intermediate sports marketing companies have headquarters, offices or affiliates in the U.S.; and the indictment contains several allegations concerning use of U.S.-based bank accounts, phone calls from the U.S.; and in-person meetings in the U.S. in furtherance of the alleged bribery scheme.

While such U.S. allegations may be overshadowed by non-U.S. allegations in the charging documents, the FIFA-related enforcement action certainly does not break any new ground concerning expansive jurisdictional theories – theories often alleged in FCPA enforcement actions against foreign actors.

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