Top Menu

The Lack Of Criminal Charges Against PetroTiger Was Not Unique


The FCPA-related media has a troubling tendency to take things that are not unique and try to make them unique.

For instance, this recent Compliance Week article stated:

“Typically, when the Justice Department brings charges of FCPA violations against company executives, charges against the company itself aren’t far behind. […] The decision not to pursue charges of any kind [against PetroTiger] is a marked departure from most FCPA cases, in which the Justice Department will give companies credit for strong compliance programs, often entering into non-prosecution agreements or deferred prosecution agreements, which almost always come with strings attached.  It’s rare that companies get complete exoneration.”

Contrary to the above assertion, the lack of criminal charges against PetroTiger – even though there was an enforcement action against individuals associated with the company – was not unique.

This post highlights the 18 instances since 2000 of the DOJ bringing an enforcement action against an individual or individuals, but not an enforcement action against the business organization associated with the individual(s). (Note: excluded from the list is the manufactured Africa Sting enforcement action against 22 individuals employed by over a dozen companies).

Interesting fact, 16 of the 18 instances (89%) involved individuals associated with privately-held companies like PetroTiger.  The only two instances to involve individuals associated with publicly-traded companies are highlighted below with ***.

  • Dmitrij Harder (2015 – ongoing criminal prosecution of individual associated with  Chestnut Consulting Group Inc., no enforcement action against Chestnut Group).
  • Dmitry Firtash, Andras Knopp, Suren Gevorgyan, Gajendra Lal, Periyasamy Sunderalingam (2014 – ongoing criminal prosecutions of individuals associated with DF Group, no enforcement action against DF Group).
  • Ernesto Lujana, Tomas Clark, Alejandro Hurtado,Benito Chinea, Joseph DeMeneses  (2013-2014 – criminal prosecutions of individuals associated with Direct Access Partners, no enforcement action against Direct Access Partners).
  • Washington Cruz, Amadeus Richers and Cecilia Zurita (2011 – criminal prosecutions of individuals associated with Cinergy Telecommunications Inc., enforcement action against Cinergy Telecommunications was dropped).
  • Jean Fourcand (2010 – criminal prosecution of individual associated with Fourcand Enterprises, Inc., no enforcement action against Fourcand Enterprises).
  • Juan Diaz (2009 – criminal prosecution of individual associated with JD Locator Services Inc., no enforcement action against JD Locator Services).
  • Antonio Perez, Joel Esquenazi and Carlos Rodriguez (2009 – criminal prosecutions of individuals associated with Terra Telecommunications Corp., no enforcement action against Terra Telecommunications).
  • Marguerite Grandison (2009 – criminal prosecution of individual associated with Telecom Consulting Services Corp., no enforcement action against Telecom Consulting Services).
  • Charles Jumet, John Warwick (2009 – criminal prosecutions of individuals associated with Ports Engineering Consulting and Overman Associates- no enforcement action against Ports Engineering Consulting Corp or Overman Associates).
  • Shu Quan-Sheng (2008 – criminal prosecution of individual associated with AMAC International Inc. – no enforcement action against AMAC International Inc.)
  • Leo Smith and Martin Self (2007-2008 – criminal prosecutions of individuals associated with Pacific Consolidated Industries – no enforcement action against Pacific Consolidated Industries).
  • Gerald and Patricia Green (2008 – criminal prosecutions of individuals associated with Film Festival Management – no enforcement action against Film Festival Management).
  • *** Yaw Osei Amoako, Steven Ott, Roger Young (2006-2007  – criminal prosecutions of individuals associated with ITXC Corporation – no enforcement action against against ITXC Corp.)
  • Richard Novak (2006 – criminal prosecution of individual associated with “several internet businesses” – no enforcement action against the businesses).
  • *** David Kay, Douglas Murphy (2002 – criminal prosecutions of individuals associated with American Rice, Inc. – no enforcement action against American Rice).
  • Richard Pitchford (2002 – criminal prosecution of individual associated with the Central Asia American Enterprise Fund – no enforcement action against the Central Asia American Enterprise Fund).
  • Daniel Rothrock (2001 – criminal prosecution of individual associated with Allied Products Corp. – no enforcement action against Allied Products Corp.) ***
  • Richard Halford, Albert Reitz, Robert King, Pablo Hernandez (2001 – criminal prosecutions of individuals associated with Owl Securities and Investments, Limited – no enforcement action against Owl Securities).

After Judge Asks DOJ’s Star Witness “Did You Have A Hallucination?” Sigelman Pleads Guilty To Substantially Reduced Charges


As recently highlighted, for the first time since its trial court debacles in 2011 and 2012, the DOJ was being put to its burden of proof in an individual Foreign Corrupt Practices Act enforcement action.

U.S. v. Joseph Sigelman (pictured at right) was in the early stages of trial when last Thursday the DOJ’s star witness Gregory Weisman (an individual who previously pleaded guilty to the same core conduct and was cooperating with the DOJ in the hopes of achieving a lower sentence) ran into some problems on the witness stand.

In short, Weisman acknowledged giving false testimony during the trial (see here for the transcript and here and here for additional media coverage) prompting federal court judge Joseph Irenas (D.N.J.) to ask Weisman “did you have a hallucination?”

The trial ended for the week as the DOJ contemplated what to do next.

The DOJ of course can control if it is ultimately put to its burden of proof and can effectively pull a case if it feels it will not prevail.

This is what the DOJ did in the so-called Carson cases (see here and here) after the trial court judge issued a pro-defense jury instruction concerning knowledge of status of foreign official. Last year, the SEC did something similar in an enforcement action against Mark Jackson and David Ruehlen – see here.

Yesterday the DOJ effectively pulled its case against Sigelman when it offered the defendant a plea agreement to substantially reduced charges.

In its superseding indictment, the DOJ charged Sigelman with six criminal charges (conspiracy, money laundering, and several substantive FCPA charges) as well as various forfeiture counts.  Sigelman, the father of young children, faced up to 20 years in prison if convicted on all counts.

As noted in this DOJ release, Sigelman pleaded guilty to a single count of conspiracy to violate the FCPA.  The release, which predictably does not mention the debacle that took place last Thursday, states:

“Sigelman admitted to conspiring with co-CEO Knut Hammarskjold, PetroTiger’s former general counsel Gregory Weisman, and others to make illegal payments of $333,500 to David Duran, an employee of the Colombian national oil company, Ecopetrol.  Sigelman admitted to making the payments in exchange for Duran’s assistance in securing a $45 million oil services contract for PetroTiger.”

In this plea agreement, the DOJ stated as follows.

“This Office and Joseph Sigelman agree that, pursuant to Federal Rule of Criminal Procedure l l(c)(l)(C), the sentence to be imposed on Joseph Sigelman, should be as follows: (1) a range from a non-custodial term of probation up to 12 months and one day of incarceration; (2) a fine to be determined by the Court; (3) a term of supervised release of not more than three years; (4) a special assessment of $100; and (5) agreed-upon payment in the amount of $239,015.54 pursuant to 18 U.S.C. § 3663(a)(3)” [which represents a restitution payment to PetroTiger].

UPDATE: Sigelman was sentenced today to probation and will not serve any jail time.

Was the DOJ’s prosecution of Sigelman a success?

Or did Sigelman, mindful of the significant adverse consequences under the Sentencing Guidelines for putting the DOJ to its burden of proof and potentially losing, do what most risk-adverse individuals would do?

I have my own conclusion and you can draw your own.

For additional media coverage of Sigelman’s plea see here from the Wall Street Journal.  As noted in the article:

“William Jacobson, a former federal FCPA prosecutor, said the plea agreement “sounds quite generous.” “It sounds like the government had proof problems at the end of the day,” said Mr. Jacobson, who is now an attorney at Orrick Herrington & Sutcliffe LLP.”

See also here from Bloomberg:

“The Justice Department claimed victory on Monday in the abruptly concluded foreign-bribery trial of Miami businessman Joseph Sigelman. But a close look at Sigelman’s guilty plea reveals a prosecution in disarray and a defendant who will walk away with minimal punishment.

Sigelman, the founder and former chief executive of a Colombian oil field-services provider called PetroTiger, pleaded guilty in federal court in Camden, N.J., to conspiring to pay bribes to an official of the Colombian national oil company in violation of the Foreign Corrupt Practices Act (FCPA). Or that’s what the Justice Department emphasized in a triumphant-sounding press announcement listing no fewer than seven federal prosecutors, including the assistant U.S. attorney general in charge of the department’s criminal division.

In fact, with its case rapidly deteriorating, the government agreed to let Sigelman plead to a single count of failing to supervise his employees adequately—a felony akin to criminal negligence. At his sentencing Tuesday, Sigelman faces a sentence of up to a year and a day in prison but is more likely to get probation for a period of one to several years.

That’s a striking victory for the defense, given that Sigelman, 43, originally faced a prison sentence of 20 years. Just before the trial began on June 1, the Justice Department offered him a deal that would have included a 10-year prison sentence; Sigelman refused that deal. If he receives a term of probation, he would have to check in regularly with federal authorities but otherwise could return to his international business activities with few if any restrictions.”

Yesterday’s DOJ release further stated:

“The case was brought to the attention of the department through a voluntary disclosure by PetroTiger, which fully cooperated with the department’s investigation.  Based on PetroTiger’s voluntary disclosure, cooperation, and remediation, among other factors, the department declined to prosecute PetroTiger.”

The Coming Battle Over The Status Of Ecopetrol


As recently highlighted here by the Wall Street Journal, the Foreign Corrupt Practices Act criminal trial of former PetroTiger CEO Joseph Sigelman, originally scheduled to begin this week, was “pushed back for two months to allow him assistance from an unlikely ally: the former Colombian official he is accused of bribing.”  As noted in the article, “Mr. Sigelman is accused of paying David Duran, a former official at Colombia’s Ecopetrol SA to win business for his oil services company, PetroTiger.”

This November 2014 post highlighted how Sigelman is challenging various aspects of the DOJ’s case, including its interpretation and application of the “foreign official” element to Ecopetrol. Similar to previous “foreign official” challenges, the DOJ argued that the dispute is an issue of fact inappropriate for pre-trial disposition.  Accordingly, as in the previous “foreign official” challenges, the “foreign official” issue is moving to other phases of the case.

Recently the DOJ and Sigelman filed motions foreshadowing the evidence the parties intend to offer to prove or disprove whether Ecopetrol is an “instrumentality” of the Colombian government and thus whether Duran is a “foreign official” under the FCPA.

Although not binding in the Sigelman case pending in federal court in New Jersey, approximately one year ago in U.S. v. Esquenazi, the 11th Circuit concluded, in a case of first impression at the appellate level, that “an ‘instrumentality’ [under the FCPA] is an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.” (emphasis added).

In this letter the DOJ provides notice that it may call (1) Alejandro Linares Cantillo and (2) Carlos Mantilla McCormick to provide expert testimony.  In pertinent part, the letter states:

Alejandro Linares Cantillo

Mr. Linares is the Vice President for Legal Affairs and General Counsel of Ecopetrol S.A., and he has been in this position since October 2014. Mr. Linares’s testimony is based on his training, education, and experience as described in his curriculum vitae, including his experience at Ecopetrol S.A. (“Ecopetrol”), as well as his review of relevant material including, but not limited to, Ecopetrol’s Forms 20-F filed with the U.S. Securities and Exchange Commission, Colombian laws and regulations, scholarly articles and books, and Ecopetrol company materials. If called as a witness, Mr. Linares would generally testify about the history, business, and structure of Ecopetrol over time. Mr. Linares would also testify about the Colombian government’s control of Ecopetrol and the company’s functions as a government-controlled entity, particularly as it relates to the Mansarovar contract at issue in this case. More specifically, if called as a witness, we anticipate Mr. Linares would testify to the following:

In Colombia, the state owns all hydrocarbon reserves. To ensure proper management and supply of hydrocarbon resources to the nation, the Colombian government has adopted laws, regulations, and policies to ensure an appropriate supply of energy to the nation while responsibly maintaining the nation’s hydrocarbon resources. It effectuates these goals through various agencies and state-controlled entities, including Ecopetrol.

Ecopetrol was originally incorporated by the Colombian government on August 25, 1951, as the Empresa Colombiana de Petróleos S.A. It functioned as a governmental industrial and commercial company responsible for administering Colombia’s hydrocarbon resources.

The company’s legal form has evolved since its inception. For example, in 1970, the company adopted its first by-laws, ratifying its nature as a stateowned industrial and commercial company linked to the Ministry of Mines and Energy and fiscally supervised by the Office of the General Controllership.

In 2003 the government restructured Empresa Colombiana de Petróleos into a 100% state-owned corporation by shares linked to the Ministry of Mines and Energy and renamed the company Ecopetrol S.A. (hereinafter referred to as “Ecopetrol” regardless of time period).

In 2006 the legal nature of Ecopetrol was changed to one of a mixed economy corporation, linked with the Ministry of Mines and Energy and funded by Colombian government and private capital.

The Republic of Colombia is required by law to own at least 80% of the outstanding voting shares of Ecopetrol. In 2009 and 2010 the government owned roughly 90% of the outstanding voting shares, and it currently owns roughly 88.5% of Ecopetrol’s outstanding voting shares. Ecopetrol has had American Depository Shares trading on the New York Stock Exchange since 2008.

In 2003 the Colombia government created the National Hydrocarbons Agency (NHA), and the government granted the NHA authority over, among other things, the design, promotion, negotiation, conclusion, tracking, and management of new exploration and exploitation of Colombian hydrocarbon resources. The Ministry of Mines and Energy continues to administer the overall oil policy and planning coordination, and together with the Oil and Gas Regulation Commission it also regulates the downstream sector.

Prior to December 31, 2003, Ecopetrol exercised administrative, industrial, and commercial powers over Colombian hydrocarbon resources owned by the Republic of Colombia.

After December 31, 2003, as a mixed economy company, Ecopetrol retained authority to engage in industrial and commercial activities, under the indirect control of the Colombian government, with respect to, among other things, the exploration, exploitation, transportation, and supply and marketing of Colombian hydrocarbon resources, as well as related concessions, assets, and real estate. It does so as an association contracts administrator in the commercial sphere on behalf of the Colombian government.

Ecopetrol has also retained certain administrative functions with regard to association contracts it entered into prior to December 31, 2003, including the Mansarovar contract at issue in this case. Administrative functions retained by Ecopetrol after December 31, 2003, with respect to association contracts include, but are not limited to, the following:  management, development, and negotiation of exploration and exploitation rights in connection with hydrocarbon resources; overseeing the advancement of programs that benefit the communities in the areas of influence of the contracts; managing the Colombian government’s share of moneys and in-kind resources obtained from the exploitation of hydrocarbon resources; and managing and disposing of the assets and real estate associated with exploration and exploitation of hydrocarbon resources at the end of the Association contracts.

Ecopetrol may extend association contracts, at its sole discretion, which is an administrative function. If Ecopetrol refuses to extend an association contract, the right to exploit the hydrocarbon reserves that are the subject of the contract would revert to Ecopetrol, and Ecopetrol would have the right to exploit those reserves for an indefinite period at no additional cost to it.

Ecopetrol is the largest company in Colombia as measured by revenue, assets, and shareholder’s equity. It is also the main producer and supplier of fuel and refined products in Colombia. In recent years it has contributed approximately 15% of the Colombian government’s annual revenues through royalties, taxes and dividends, and it remains the single largest source of revenue for the government. Oil production and exports account for a significant part of Colombia’s economy. Ecopetrol accounts for a significant percentage of Colombia’s oil production, exports of crude oil, imports of refined oil products, and refining capacity.

Ecopetrol owns outright 42% of the total crude oil pipeline shipping capacity in Colombia, and in conjunction with partners 99% of the total product pipeline shipping capacity in Colombia. The Colombian government controls and regulates the pipelines through the Ministry of Mines and Energy by establishing hydrocarbon transportation tariffs and transportation regulations.

Ecopetrol is the only producer of asphalt in the country and accounts for nearly all domestic consumption.

Ecopetrol owns and manages nearly all oil refining capacity in Colombia. Because domestic demand outstrips domestic refining capacity, Ecopetrol also imports refined oil products, including gasoline. The Colombian government, by means of The Oil Prices Stabilization Fund, may control the price of gasoline and other fuels by setting prices for them domestically through the Ministry of Mines and Energy below prices in the international market. The government makes payments to refiners and importers, principally Ecopetrol, to account for any fuel price differential, in favor of Ecopetrol, caused by these domestic fuel price subsidies. The government controls the timing of such payouts to Ecopetrol and other refiners and importers.

While the Colombian government enjoys the advantages of a natural monopoly over many aspects of the management, development, and supply of hydrocarbon resources in Colombia through its control of Ecopetrol, it also restricts Ecopetrol’s market share in other areas. For example, the government prohibits Ecopetrol from owning more than 25% of any natural gas transportation company.

The Colombian government’s budget is set in part based on expected revenues from Ecopetrol. As a result of falling world prices of crude oil, it is anticipated that Ecopetrol’s revenues and profits will decline in 2015, and the Colombian government has had to cut its budget for 2015.

In addition to exerting control over Ecopetrol through law, regulation, and policy, Colombia controls Ecopetrol through its majority shareholding position, through which it directly appoints a majority of the board of directors and indirectly the chief executive officer. The board consists of nine members. As the majority shareholder, the Colombian government has the right to elect the majority of the directors. Ecopetrol’s by-laws establish that three of its directors will be the Minister of Mines and Energy, the Minister of Finance, and the Director of the National Planning Agency. The board also has the authority to hire and fire the chief executive officer of the company.

As the majority shareholder in Ecopetrol, the Colombian government may propose and approve decisions that are in furtherance of its own economic and political interests that do not necessarily benefit minority shareholders and may not be in the interest of Ecopetrol. It may also approve dividends at the ordinary general shareholders’ meeting, notwithstanding the interest of minority shareholders, in an amount that results in Ecopetrol having to reduce its capital expenditures, thereby negatively affecting Ecopetrol’s prospects, results of operations and financial condition.

In order for Ecopetrol to issue debt in international or Colombian markets with a tenor greater than one year, or incur any other form of indebtedness, the Ministry of Finance and Public Credit must first authorize the issuance of such debt and register any external debt with the Colombian Central Bank. The Colombian government has the authority to refuse to approve such issuances. These restrictions do not apply to private companies.

Ecopetrol reserves the right to plead sovereign immunity under the U.S. Foreign Sovereign Immunities Act of 1976 with respect to actions brought against it under U.S. or state securities laws.

The Office of the Controller General (“OCG”) is a government institution that acts as the highest form of fiscal control in Colombia. It is charged with ensuring the proper management of public resources and funds. The OCG has oversight responsibility for various public entities in Colombia, including Ecopetrol. As a state-controlled entity, Ecopetrol is subject to review by the OCG and has reporting requirements to it regarding the management of public funds or resources. OCG may bring actions against Ecopetrol’s employees for mismanagement of public funds or resources.

The Office of the Inspector General of Colombia (“OIG”) is an independent public institution with authority over public conduct of those in authority or exercising a public function. The OIG is charged with overseeing public officials’ performance, intervening in defense of the legal order, public funds, and fundamental rights, and instituting disciplinary actions against public officials. Ecopetrol employees are subject to the purview of the OIG.

The National Accounting Office of the Colombian government adopted accounting principles for state-owned entities in 2007 known as the Regime of Public Accounting (“RCP”). RCP differs in some regards from the accounting principles required for private enterprises. Ecopetrol has been required to prepare its financial statements in accordance with RCP since 2008. In its Form 20-F, Ecopetrol refers to this accounting regime as Colombian Government Entity GAAP.

Ecopetrol is subject to the jurisdiction of Colombia’s administrative court system. Disputes between Ecopetrol and private companies must be addressed within the administrative court system, whereas disputes between private parties are handled within Colombia’s ordinary court system.

Ecopetrol’s employees are subject to prosecution under Colombia’s laws against public corruption.

Ecopetrol is subject to Colombia’s Transparency Law, which applies to entities that exercise a public function. This law is similar to the Freedom of Information Act in the U.S.

As a government-controlled entity, Ecopetrol is required to unilaterally terminate contracts with contractors who finance terrorist activities. Private companies are not subject to this requirement.

Ecopetrol is controlled by the Colombian government. Ecopetrol functions as an instrumentality of the state, including as an industrial and commercial operator with respect to exploring, exploiting, transporting, and supplying hydrocarbon resources for the Colombian state. Ecopetrol also functions as an instrumentality of the state through its administrative functions in connection with association contracts entered into prior to December 31, 2003, including the Mansarovar contract at issue in this case. Ecopetrol also manages public resources.

Carlos Mantilla McCormick

Mr. Mantilla is the Vice President of Hydrocarbon Contracts of the NHA, and he has been in this position since 2014. Mr. Mantilla’s testimony is based on his training, education, and experience as described in his curriculum vitae, including his experience at NHA, as well as his review of relevant material including, but not limited to, Colombian laws and regulations and NHA materials. If called as a witness, Mr. Mantilla would generally testify about the history and structure of the NHA since its inception in 2003 to present, as well as the history and background of Ecopetrol as further described above in the description of Mr. Linares’s anticipated testimony. Mr. Mantilla would also testify about the Colombian government’s control of Ecopetrol and the functions that Ecopetrol and the NHA have performed and continue to perform, as described in greater detail above. More specifically, if called as a witness, we anticipate Mr. Mantilla would testify to the following:

In 2003, Colombia created the NHA and granted the NHA authority over, among other things, the design, promotion, negotiation, conclusion, tracking, and management of new exploration and exploitation of Colombian hydrocarbon resources.

After December 31, 2003, Ecopetrol continued to administer substantial hydrocarbon resources covered by association contracts with third parties, and it remained the government’s principal instrument of engaging in commercial and industrial activity in the hydrocarbon market. The NHA took over certain administrative and regulatory functions from Ecopetrol in the upstream sector, except as to those resources covered by Ecopetrol’s association contracts entered into prior to December 31, 2003. Ecopetrol has retained certain administrative functions with regard to association contracts it entered into prior to December 31, 2003, including the Mansarovar contract at issue in this case.

As a state-controlled entity, Ecopetrol is charged with exploring, extracting, processing, transporting, and marketing Colombia’s hydrocarbon resources. It is also charged with the administration of hydrocarbon resources related to association contracts entered into prior to December 31, 2003, as well as exploiting those resources and others administered by other agencies as an operator in the commercial sphere as an instrumentality of the Colombian government.

Ecopetrol is still a counterparty to the contracts that it signed before January 1, 2004, including the Mansarovar contract at issue in this case. Those contracts have clauses providing, at Ecopetrol’s sole option, for extensions. If Ecopetrol were to refuse to extend one of those contracts, the right to exploit the hydrocarbon reserves that are the subject of the contract would revert to Ecopetrol, and Ecopetrol would have the right to exploit those reserves for an indefinite period at no additional cost to it.

After NHA was created, Ecopetrol continued to perform administrative functions with regard to association contracts and performed many of the same governmental functions with respect to those contracts after NHA was created that it had performed before NHA was created.

NHA sets oil prices for exploration and production contracts that it controls, but has no role in setting prices for association contracts controlled by Ecopetrol. With regard to exploration and production contracts, NHA establishes plans related to drilling, budget, extraction, general rules, and contracting. In association contracts maintained by Ecopetrol, Ecopetrol carries out those functions, and NHA has no role in those decisions.

NHA plays no part in approving contracts with service providers with respect to association contracts, and it has no role in ensuring that private companies that sign association contracts with Ecopetrol adhere to their agreements. Ecopetrol had that responsibility before NHA was created and has retained that responsibility. NHA has certain authority over all oil fields, and thus has limited functions with respect to association contracts, including: NHA conducts technical inspections of all oil fields in Colombia. Once an association contract ends, Ecopetrol may continue to maintain the oil fields that the contract covered. To do so, Ecopetrol must submit a petition for NHA’s approval to continue to administer the oil fields covered by the contract. Ecopetrol is the only company that may submit such a petition. Royalties that are paid for oil extraction are set by NHA.

NHA has significant authority over exploration and production contracts signed after December 31, 2003.

In this letter, Sigelman’s defense counsel provides notice of the expert testimony it intends to offer.  In pertinent part, the letter states:

Justice Carlos G. Arrieta

We anticipate that Justice Arrieta will offer testimony regarding Ecopetrol, including the functions it performed between 2009 and 2010 and its relationship with the Republic of Colombia (“Colombia”) during that period. This testimony is expected to include Ecopetrol’s history, the laws and regulations bearing on its functions and its relationship with Colombia, Ecopetrol’s internal governance and operations, and the role of Ecopetrol’s employees. Justice Arrieta has already provided one declaration in this matter, […]  and we expect that his testimony at trial will be consistent with and supplemental to that declaration.

Justice Arrieta is qualified to offer this testimony on the basis of his education, professional training, academic research, and experience in administrative law. His extensive judicial experience includes terms as Justice on Colombia’s State Council (Colombia’s highest court for administrative law disputes) and as adjunct Justice on Colombia’s Constitutional Court (Colombia’s highest court for constitutional law matters). In addition, he served for four years as Colombia’s Attorney Inspector General. Justice Arrieta’s private practice experience includes litigation and client advisory services related to administrative law issues prevalent in the oil and gas industry. He also acts as an arbitrator in disputes arising from public and commercial contracts. Additionally, Justice Arrieta was a professor of law at the Los Andes School of Law in Bogota, Colombia, for many years and served as the school’s Dean from 1986-89.

Professor David R. Mares

We anticipate that Professor Mares will offer testimony regarding the characteristics and relative autonomy of various nationally-owned and private oil and gas companies, including Ecopetrol. Professor Mares is also expected to provide testimony regarding the political, social, and economic factors influencing the creation and/or privatization of national oil companies. Professor Mares is qualified to offer this testimony on the basis of his extensive academic research of Latin American energy issues. In addition to his current teaching position at the University of California, San Diego, Professor Mares is the Baker Institute Scholar for Latin American Energy Studies at Rice University. Professor Mares has also held teaching posts at El Colegio de Mexico; the Universidad de Chile; FLACSO Ecuador; Harvard University; Stanford University; and a fellowship at the Oxford Institute for Energy Studies. In the course of his scholarship, Professor Mares has written or edited nine books, as well as hundred journal articles, book chapters, and reports. Professor Mares’s teaching includes classes on energy politics.

Justice Jorge A. Gomez

We anticipate that Justice Gomez will offer testimony regarding Colombia’s criminal laws and procedure, including the effects of certain criminal penalties. Justice Gomez is expected to provide testimony as to the penalty of debarment from performing public functions as well as to the effect of such penalty on crimes against the public administration of Colombia, such as bribery. Justice Gomez is qualified to offer this testimony on the basis of his education, professional training, academic research, and experience. His professional background includes extensive judicial experience, including terms on the Criminal Section of Colombia’s Supreme Court of Justice (Colombia’s highest court for criminal matters) as well as appellate and trial courts with jurisdiction over criminal matters. In addition, Justice Gomez’s private practice experience focuses on criminal law matters. He has taught Colombian criminal law at several universities and published academic articles in Colombian legal journals.


Sigelman’s trial in U.S. District Court, District of New Jersey – Camden, is scheduled to begin on June 1st.

How The DOJ Can Better Achieve Its FCPA Policy Objectives

Last week the DOJ’s Principal Deputy Assistant Attorney General for the Criminal Division, Marshall Miller, delivered this speech focused on how the DOJ is “addressing criminal conduct when it takes place at corporations and other institutions.”  While not specific to the Foreign Corrupt Practices Act, Miller did reference the FCPA several times during the speech.

The post is not about the DOJ’s empty rhetoric when it comes to individual FCPA prosecutions – that post was published last week the same day that Miller carried forward DOJ talking points on individual prosecutions.

Nor is this post about Miller carrying forward the DOJ’s talking points on Morgan Stanley’s so-called declination.  That post was published here in 2012.

Nor is this post about Miller’s suggestion that PetroTiger did not face any charges “of any kind […] and no non-prosecution agreement was entered” because the company voluntarily disclosed and cooperated.  As highlighted in this post regarding the charges against the former PetroTiger executives, the core DOJ allegations concerned self-dealing by the executives and not disclosing conflicts of interest to their employer and other investors involved in a business deal.  To be sure, there have been several companies – ADM, Diebold, Ralph Lauren, Maxwell Technologies, and Tyson Foods to name just a few –  that have voluntarily disclosed and cooperated yet received NPAs or DPAs in the FCPA context.

Nor is this post about the “wow” factor of Miller’s speech – as termed by the FCPA Blog – because contrary to the suggestion by the FCPA Blog, the FCPA information in Miller’s speech was not new – all was previously mentioned in original source documents and/or previously highlighted in prior FCPA Professor posts or by others (see herehere, and here).

Rather, this post highlights for the DOJ (and others) how an FCPA reform proposal can help the DOJ better achieve its policy objectives, as sensibly articulated in Miller’s speech,. in the FCPA context.

For starters, I realize – based on reliable information – that I am a persona non grata within the DOJ’s FCPA Unit.  Nevertheless, I share an interest in advancing policies to make FCPA enforcement more effective so that the laudable objectives of the FCPA can best be achieved.

I’ve written about the below issue several times (see here for “Revisiting a Foreign Corrupt Practices Act Compliance Defense” and see here for the prior post “Seeing the Light From the Dark Ages”).

In his speech, Miller stated the following sensible policy objectives.

“[W]e would like corporations to cooperate.  We will ensure that there are appropriate incentives for corporations to do so.


I want to focus today on an aspect of [The Principles of Federal Prosecution of Business Organization and/or the DOJ’s internal “Filip” factors]  that I believe, at times, receives insufficient attention – but that lies at the heart of our approach at the Criminal Division.   And that is what the factors have to say about the importance of individual prosecutions to the decision on how to approach a corporation.


[In analyzing cooperate cooperation], companies are always quick to tout voluntary disclosure of corporate misconduct and the breadth of an internal investigation.   What is sometimes given short shrift, however, is in many ways the heart of effective corporate cooperation: whether that cooperation exposed, and provided evidence against, the culpable individuals who engaged in criminal activity […].

The importance of cooperating regarding individuals is set forth, in black and white, in the text of the [Principles of Prosecution] itself.   Factor Four expressly states that prosecutors should evaluate a corporation’s “willingness to cooperate in the investigation of [its] agents.”   This key point is fleshed out later in the guidance section, where prosecutors are directed to consider the corporation’s “willingness to provide relevant information and evidence and identify relevant actors within and outside the corporation, including senior executives.”

Voluntary disclosure of corporate misconduct does not constitute true cooperation, if the company avoids identifying the individuals who are criminally responsible.  Even the identification of culpable individuals is not true cooperation, if the company fails to locate and provide facts and evidence at their disposal that implicate those individuals.

This principle of cooperation is not new or unique to companies.   We have applied it to criminal cases of all kinds for decades.   Take, for example, organized crime cases.   Mob cooperators do not receive cooperation credit merely for halting or disclosing their own criminal conduct.   Attempted cooperators should not get reduced sentences if they refuse to provide testimony or fail to turn over evidence against other culpable parties.   A true cooperator – whether a mobster or a company – must forthrightly provide all the available facts and evidence so that the most culpable individuals can be prosecuted.

The importance of this principle is enhanced by a second Filip factor – Factor Eight – which states that, in deciding whether to charge a corporation, prosecutors must consider “the adequacy of the prosecution of individuals responsible for the corporation’s malfeasance.”   So, effective and complete corporate cooperation in the investigation and prosecution of culpable individuals is not only called for by Factor Four, but reinforced by Factor Eight.


Corporations do not act criminally, but for the actions of individuals.   The Criminal Division intends to prosecute those individuals, whether they’re sitting on a sales desk or in a corporate suite.

The prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list under Assistant Attorney General Caldwell.”

The above are all sensible policy statements from the DOJ and are consistent with Attorney General Eric Holder’s similar sensible policy statements articulated on the same day in a different speech.  As Holder stated:

“[T]he department recognizes the inherent value of bringing enforcement actions against individuals, as opposed to simply the companies that employ them.  We believe that doing so is both important – and appropriate – for several reasons:

First, it enhances accountability.  Despite the growing jurisprudence that seeks to equate corporations with people, corporate misconduct must necessarily be committed by flesh-and-blood human beings.  So wherever misconduct occurs within a company, it is essential that we seek to identify the decision-makers at the company who ought to be held responsible.

Second, it promotes fairness – because, when misconduct is the work of a known bad actor, or a handful of known bad actors, it’s not right for punishment to be borne exclusively by the company, its employees, and its innocent shareholders.

And finally, it has a powerful deterrent effect.  All other things being equal, few things discourage criminal activity at a firm – or incentivize changes in corporate behavior – like the prospect of individual decision-makers being held accountable.  A corporation may enter a guilty plea and still see its stock price rise the next day.  But an individual who is found guilty of a serious fraud crime is most likely going to prison.”

Again, sensible policy statements.

The problem is – at least in the FCPA context – the DOJ is not achieving its policy objectives.  This is the unmistakable conclusion from the following statistics.

  • As highlighted in this previous post (with statistics calculated through the end of 2013) since 2008 approximately 75% of corporate FCPA enforcement have not (at least yet) resulted in any DOJ charges against company employees.
  • As highlighted in this previous post, in the 20 most recent DOJ corporate FCPA enforcement actions, only one has resulted (at least yet) in any DOJ charges against company employees.

An FCPA compliance defense can help the DOJ better achieve its above-stated policy objectives.

As stated in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”

“An FCPA compliance defense will better facilitate the DOJ’s prosecution of culpable individuals and advance the objectives of its FCPA enforcement program. At present, business organizations that learn through internal reporting mechanisms of rogue employee conduct implicating the FCPA are often hesitant to report such conduct to the enforcement authorities. In such situations, business organizations are rightfully diffident to submit to the DOJ’s opaque, inconsistent, and unpredictable decision-making process and are rightfully concerned that its pre-existing FCPA compliance policies and procedures and its good faith compliance efforts will not be properly recognized. The end result is that the DOJ often does not become aware of individuals who make improper payments in violation of the FCPA and the individuals are thus not held legally accountable for their actions. An FCPA compliance defense surely will not cause every business organization that learns of rogue employee conduct to disclose such conduct to the enforcement agencies. However, it is reasonable to conclude that an FCPA compliance defense will cause more organizations with robust FCPA compliance policies and procedures to disclose rogue employee conduct to the enforcement agencies. Thus, an FCPA compliance defense can better facilitate DOJ prosecution of culpable individuals and increase the deterrent effect of FCPA enforcement actions.”

Is the DOJ capable of viewing an FCPA compliance defense, not as a race to the bottom, but a race to the top?  Is the DOJ capable of viewing an FCPA compliance defense as helping it better achieve its FCPA policy objectives?

Let’s hope so.


In his speech, Marshall also provided specifics as to what type of cooperation the DOJ looks for.  He stated:

“[I]f a corporation wants credit for cooperation, it must engage in comprehensive and timely cooperation; lip service simply will not do.

Corporations are often too quick to claim that they cannot retrieve overseas documents, emails or other evidence regarding individuals due to foreign data privacy laws.   Just as we carefully test – and at times reject – corporate claims about collateral consequences of a corporate prosecution, the department will scrutinize a claimed inability to provide foreign documents or evidence.   We have forged deepening relationships with foreign governments and developed growing sophistication and experience in analyzing foreign laws.   A company that tries to hide culpable individuals or otherwise available evidence behind inaccurately expansive interpretations of foreign data protection laws places its cooperation credit at great risk.   We strongly encourage careful analysis of those laws with an eye toward cooperating with our investigations, not stalling them.

Understand too, that we will use our own parallel investigation to pressure test a company’s internal investigation: to determine whether the company actually sought to root out the wrongdoing and identify those responsible, as far up the corporate ladder as the misconduct goes, or instead merely checked a box on a cooperation punch list.

Companies that have not conducted comprehensive investigations will not secure significant cooperation benefits.   Worse, companies that hamper the government’s investigation while conducting an internal investigation – for example, by conducting interviews that serve to spread corporate talking points rather than secure facts relating to individual culpability – will pay a price when they ask for cooperation credit.

A few final words: when you come in to discuss the results of an internal investigation to the Criminal Division and make a Filip factor presentation – expect that a primary focus will be on what evidence you uncovered as to culpable individuals, what steps you took to see if individual culpability crept up the corporate ladder, how tireless your efforts were to find the people responsible.

At the risk of being a little too Brooklyn, I’m going to be blunt.

If you want full cooperation credit, make your extensive efforts to secure evidence of individual culpability the first thing you talk about when you walk in the door to make your presentation.

Make those efforts the last thing you talk about before you walk out.

And most importantly, make securing evidence of individual culpability the focus of your investigative efforts so that you have a strong record on which to rely.”

Friday Roundup

Elevate your FCPA knowledge and practical skills, FCPA ripples, origins of PetroTiger’s FCPA scrutiny, news flash, and for the reading stack.  It’s all here in the Friday Roundup.

Elevate Your FCPA Knowledge and Practical Skills

Join lawyers and other in-house counsel and compliance professionals from around the country – indeed the world –  already registered for the inaugural FCPA Institute July 16-17th in Milwaukee, Wisconsin.  The FCPA Institute is a unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills.  FCPA Institute participants will have their knowledge assessed and upon successful completion of a written assessment tool can earn a certificate of completion. In this way, successful completion of the FCPA Institute represents a value-added credential for professional development.

To register see here.

FCPA Ripples

An obvious reason to comply with the Foreign Corrupt Practices Act is that non-compliance can expose a company to a criminal or civil FCPA enforcement action by the Department of Justice and/or the Securities and Exchange Commission.   However, settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.

I will be discussing this issue and others during a free webinar on June 17th titled “The Ripple Effect:  Understanding Financial and Business Consequences of FCPA Scrutiny and Enforcement.”  The webinar is hosted by Hiperos and you can register here.

Origins of PetroTiger’s FCPA Scrutiny

An interesting article here from Wall Street Journal Risk & Compliance Journal regarding the origins of the FCPA enforcement action against various PetroTiger executives.   The article highlights the $85 million private equity investment of Alberta Investment Management Corp.’s (“Aimco”) in PetroTiger in the hopes of greater returns in an emerging market.

Although the article suggests that the alleged improper conduct was discovered by Aimco, the article states:

“In hindsight, despite extensive due diligence prior to the investment, [an Aimco representative] says he should have taken a harder look at company expenses immediately after the purchase. Had he reviewed every invoice in the months following the investment, [an Aimco representatives] says Aimco would likely have discovered the issue sooner. ‘PetroTiger didn’t have the controls of a bigger company and we should have been more sensitive to the higher risk’ [an Aimco representative] said.”

Perhaps not a clear parallel to U.S. v. Bourke, but it is hard not to think of Bourke while reading the article.  As highlighted here, in Bourke the Second Circuit held that Bourke enabled himself to participate in a bribery scheme without acquiring actual knowledge of the specific conduct at issue and that such conscious avoidance, even if supported primarily by circumstantial evidence, is sufficient to warrant an FCPA-related charges.

As noted in the prior post, the message to international investors should be clear: if a potential investment results in sleepless nights and fear of asking specific direct questions because of the answers you might receive, there is probably better uses for your money.

News Flash

The media is often quick to pounce on instances of FCPA scrutiny involving companies.  Many of the articles seem to advance the “good companies don’t bribe period” fallacy (see here for the prior post).

I am glad that the media now recognizes that it is not that simple.  This recent article in the Press Gazette concerning recent comments by the BBC’s legal chief caught my eye.

In the article, the individual states as follows:

“In the newsgathering sense, what this means [complying with bribery and corruption laws] is that it can be very difficult to operate in many parts of the world.

“If you’re a reporter, for example, in a place like Kenya, you turn up at the border, you have got all your visas, you try to get to Somalia, and a border official says to you ‘Well, I am terribly sorry, you can’t bring your camera – you have one of two options, you can either go back to Nairobi and that’ll take three days, to get another pass which you urgently need, or perhaps I might be able to help you if you give me 25 dollars’.

“What is the reporter supposed to do?

“Around the world people in newsgathering are being put in a position where they are being asked to make quite difficult decisions.”

My interest in the above article was mostly a result of this prior post concerning News Corp.’s scrutiny and the suggestion by some that because the commodity of news organizations is information, and because that commodity is processed into news, that somehow the First Amendment or some perceived public interest insulates news organizations from bribery and corruption scrutiny.

Making improper payments to secure a commodity (whether it is oil or information) should be treated the same.   As to any perceived public interest, sure there is a public interest in the news, but then again there is also a public interest in having oil and gas or a public interest (as relevant to the pharmaceutical industry) of providing medicine and other medical devices to those who need them.

Reading Stack

This Reuters article regarding the escalating criminal fines against banks notes:

“In the past two years the U.S. Justice Department has said it’s broken records on penalties for corporate misconduct at least seven times, including three times this year alone.”

“The numbers are going up because they can,” one former prosecutor said.”

 Some lawyers representing major banks said they viewed the escalating penalties as essentially exploiting defendants who usually don’t fight back in court. “Lots of sophisticated observers view these as extortion at this point,” said one bank lawyer.”

For a discussion of similar issues in FCPA enforcement actions, see here for the prior post.


A good weekend to all.

Powered by WordPress. Designed by WooThemes