VimpelCom Securities Fraud Case Largely Gets Past The Motion To Dismiss Stage
It’s as predictable as the sun rising in the east. In the aftermath of a Foreign Corrupt Practices Act enforcement action (and in some instances after mere FCPA scrutiny is disclosed) a plaintiffs’ lawyer representing a shareholder and working on a contingent fee basis files a securities fraud class action against the company and/or its executives.
Given the legal framework relevant to such actions (that is heightened pleading requirements as well as the Private Securities Litigation Reform Act) few of these actions actually get past the motion to dismiss stage.
Yet, recently a securities class action against VimpelCom (which recently changed its name to VEON Ltd.) did largely get past the motion to dismiss stage. Yet, even in this egregious instance of corporate bribery (see here and here for the prior posts), several of the plaintiffs’ allegations were deemed not viable.
Development From The “Other Universe” – In Dismissing FCPA-Related Civil Claims, Judge Rejects The Notion That The FCPA “Establishes A Statutory Floor For Adequate Internal Controls”
Foreign Corrupt Practices Act issues often co-exist in two parallel universes.
One universe is ruled by perceived all-powerful gods with big and sharp sticks in which subjects dare challenge the gods. Another universe consists of checks and balances in which independent actors call the balls and strikes.
The first universe refers to FCPA enforcement by the DOJ and SEC. The second universe refers to litigation of FCPA-related claims in which judges make decisions in the context of an adversarial legal system. This second universe is often referred to as the rule of law universe.
There are several examples of theories used in the first universe that do not work in the second universe.
Friday Roundup
Mebiame sentenced, a multi-billion dollar settlement in Brazil, remember that, and for the reading stack. It’s all here in the Friday roundup.
Mebiame Sentenced
As highlighted in this prior post, in August 2016 the DOJ unsealed a criminal complaint charging Samuel Mebiame, a Gabonese national connected to Och-Ziff, with conspiracy to violate the FCPA’s anti-bribery provisions in connection with African mining projects. In December 2016, Mebiame pleaded guilty. (See here).
Earlier this week, the DOJ announced that Mebiame was sentenced to 24 months in prison.
Checking In On The Wal-Mart FCPA-Related Securities Fraud Action
As highlighted in this October 2014 post, a securities fraud class action against Wal-Mart and certain former executives in connection with its Foreign Corrupt Practices Act scrutiny made it past the motion to dismiss stage.
It is unusual for such claims to proceed to trial and the Wal-Mart action, if it follows the typical path, is unlikely to proceed to trial.
Yet this post highlights two pre-trial developments in the case. The first concerns the judge granting plaintiffs access to certain internal documents and thus denying Wal-Mart’s claim that such documents were covered by the attorney-client privilege or work product doctrine. The second concerns the judge granting plaintiffs the ability to depose Wal-Mart’s current CEO.
Scrutiny Alerts and Updates
Late April or early May is when foreign issuers tend to file Form 20-F’s with the SEC and as highlighted in this post several foreign issuers from Brazil, Peru, the U.K. and South Korea disclosed Foreign Corrupt Practices Act scrutiny.
But first, Cognizant Technology Solutions appears to continue to “boil the ocean” in terms of pre-enforcement action professional fees and expenses and Misonix is hit with a civil lawsuit connected to its FCPA scrutiny.