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An Obscure Enforcement Action

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

In 1993, the DOJ brought a Foreign Corrupt Practices Act enforcement action against American Totalisator Company (“ATC”), a company engaged in the manufacture and sale of totalisator systems.  A totalisator system is machine for computing and showing totals, especially a pari-mutuel machine showing the total number and amounts of bets at a racetrack.  The conduct at issue focused on ATC’s business “with the Horse Races Administration of Greece (“ODIE”), an instrumentality of the Greek government … in connection with the sale of a totalisator system and spare parts for the Phaleron racetrack in Athens, Greece.”

Oddly enough, the ATC enforcement was not the first “old” FCPA enforcement action concerning bribery at the racetrack.  See here for the prior post regarding a 1981 FCPA enforcement action against Sam Wallace Company and various individuals concerning alleged payments made to the chairman of the Trinidad and Tobago Racing authority concerning a racetrack project in Trinidad.

In a civil Complaint for Permanent Injunction, the DOJ alleged:

“Beginning in or about 1985 and continuing through the present, ATC … corruptly used means and instrumentalities of interstate commerce, in furtherance of the offer, payment, promise to pay, and authorization of the payment of money, to a person, to wit, its Greek agent, while knowing that all or a portion of such money would be offered, given, or promised, directly or indirectly, to a foreign official, for purposes of: influencing the acts and decisions of such foreign official in his official capacity or; inducing such foreign official to do or omit to do any act in violation of the lawful duty of such foreign official or; inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence an act or decision of such government or instrumentality, in order to assist ATC in obtaining or retaining business in connection with its contract for the sale of a totalisator system and spare parts to ODIE …”.

The DOJ requested a Final Judgment of Permanent Injunction restraining and enjoining ATC from violating the FCPA.  The Consent and Undertaking indicates that the DOJ “declined criminal prosecution.”  The DOJ letter setting forth the declination states that “illicit payments were made to officials of the Greek government and judiciary by ATC’s agent, O. Nicholas Katsanis.”  The letter does not provide a specific reason for the declination other than that the Fraud Section “determined that a criminal prosecution of ATC or [its parent company General American Totalisator Company] was not warranted, but that the [Fraud] Section deemed it appropriate for ATC to consent” to the Order of Permanent Injunction.

See here for original source documents in connection with the enforcement action.

The ATC enforcement action is an obscure enforcement action.  My searches revealed no real-time media reporting of the action and the action is not found on the DOJ’s FCPA website.

The ATC enforcement action is also a reminder of an obscure FCPA provision – the ability of the DOJ to bring civil injunctive actions. 15 USC 78dd-2(d)(1) states:

“When it appears to the Attorney General that any domestic concern to which this section applies, or officer, director, employee, agent, or stockholder thereof, is engaged, or about to engage, in any act or practice constituting a violation of subsection (a) or (i) of this section, the Attorney General may, in his discretion, bring a civil action in an appropriate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond.”

Bribery At The Racetrack

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

The FCPA enforcement action against Sam Wallace Company Inc. (“Wallace”) was a first in several regards.  It was the first FCPA enforcement action involving both a DOJ and SEC component (all prior enforcement actions were either SEC only or DOJ only) and it was the first FCPA enforcement action involving criminal FCPA books and records charges.

In 1981, the SEC filed a complaint against Wallace (a Texas based construction company), Robert Buckner (Chairman of the Board of Wallace, CEO of Wallace, and a Director of Wallace) and Alfonso Rodriguez (Executive Vice President of Wallace, Regional Manager of various Wallace subsidiaries, and a Director of Wallace).  The conduct at issue focused on “payments from Wallace bank accounts totaling at least $1.391 million to a certain foreign official to aid Wallace in procuring and maintaining certain contracts and billings with a certain foreign government.”  According to the SEC complaint, the defendants “disguised and concealed such payments on Wallace’s books and records by utilizing, or causing to be utilized, certain false accounting entries which did not reflect the true nature and purpose of, and falsely described the expenditures used in the making of these payments to a certain foreign official.”  The SEC complaint for permanent injunction and certain ancillary relief charged FCPA anti-bribery violations as well as a variety of other securities law violations such as Section 10b-5 and filing false reports and proxy statements with the SEC.  Without admitting or denying the SEC’s allegations, Wallace agreed to establish a Special Committee of its Board to investigate the matters alleged in the SEC’s complaint and to file the report with the Court and the SEC.

In 1983, the DOJ filed a criminal information against Wallace containing more detail than the SEC’s complaint.  According to the DOJ, the recipient of the bribe payments was “John H. O’Halloran, then chairman of the Trinidad and Tobago Racing authority” and the payments were made “in order to obtain and retain a contract to construct the grandstand and receiving building portion of the Caroni Racetrack Project in Trinidad.”  The information charges that Wallace, aided and abetted by certain of its officers and employees, caused the Sam P. Wallace & Co. of P.R. Inc. (a wholly owned subsidiary of Wallace whose earnings were consolidated with the financial reports of Wallace) to “create fictitious purchase orders to purported suppliers for the purpose of concealing the withdrawal of corporate funds in order” to pay bribes to O’Halloran.  Among other charges, the information charges violations of the FCPA’s books and records provisions.  Wallace pleaded guilty and was ordered to pay a criminal fine of $530,000.

In 1983, the DOJ also filed a criminal information against Rodriguez.  In the information, the DOJ alleged that the “Trinidad and Tobago Racing Authority was an agency of the government of the Republic of Trinidad and Tobago and was an instrumentality of the Trinidad and Tobago government.”  The information charged FCPA anti-bribery violations and Rodriguez pleaded guilty.  His sentence was suspended and he was placed on probation for two years and ordered to pay a $10,000 fine.

See here for original source documents from the SEC’s and DOJ’s enforcement action.

For more on the “foreign official” – Johnny O – see here; for recent news regarding the Caroni racetrack, see here.

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