Top Menu

Navigation

Friday Roundup

By on June 1, 2012 in Compliance, Debarment, Distributor Issues, Due Diligence, FCPA Sentences, Haiti Teleco Enforcement Actions, Robert Antoine, World Bank

Distributor due diligence, a double dose of say what, news from the World Bank, and an FCPA-related sentence reduced.  It’s all here in the Friday roundup.

Distributor Due Diligence

David Simon and Alex Kramer (Foley & Lardner – here and here) recently authored “Here’s How U.S. Companies Can Practically Manage FCPA Risks That Come With Global Distribution Networks” in Bloomberg BNA, Prevention of Corporate Liability, Current Report.

The authors note as follows.  “While in some areas of the law selling a product to a distributor may insulate a company from liability, the same cannot be said for the FCPA. When a distributor purchases a product, title technically shifts, but if the distributor is seen as acting as a representative of the company whose goods it sells in foreign countries, and that distributor engages in bribery of foreign officials, FCPA liability may very well attach to the company. Consequently, companies need to be careful when working with distributors to ensure they do not engage in corrupt conduct that may wind up costing a company millions in fines and penalties and investigation and defense costs.”

The article next states as follows.  “Many companies employ vast distributor networks, sometimes including hundreds, if not thousands, of distributors around the world. Many distributors are more like customers than agents; they merely purchase a product and resell it to others, often in conjunction with other products purchased from other manufacturers. Is it really practical and necessary to conduct full FCPA due diligence on every one of those distributors? Do the U.S. companies in these situations even have the leverage to insist on FCPA representations and warranties in the written agreements, to demand audit rights, and to require certifications by and training of these distributors? The question thus arises whether U.S. companies are faced with a difficult choice either to accept substantial FCPA risk or to devote disproportionate resources to running an FCPA compliance program that fully vets all distributors. We think the answer to this question is ‘‘no’’ and that there is a practical way to minimize the FCPA risk associated with a global distributor network without devoting an unreasonable and disproportionate amount of resources to compliance.”

The practical way?

The authors suggest as follows.  “We recommend that companies following a risk-based approach take this risk analysis a step further and focus on the nature of their relationships with their distributors. The goal should be to determine which distributors are the most likely to qualify as agents, for whose acts the company can be held responsible. Think about this as a continuum of risk. On the low-risk end are distributors that are nothing more than resellers with little actual affiliation with the supplier company. On the high-risk end are distributors who are very closely tied to the supplier company, who effectively represent the company in the market and end up looking more like a quasisubsidiary than a customer. […]  Once a company segregates the high-risk distributors that likely qualify as agents and potentially subject the company to FCPA liability from those that are mere resellers and pose little FCPA risk, FCPA compliance procedures can be tailored appropriately. For those distributors that qualify as ‘‘agents’’ and also pose FCPA risk, full FCPA due diligence, certifications, training, and contract language are imperative. For those that do not, more limited compliance measures that reflect the risk adjusted potential liability are perfectly appropriate.”

Say What?  (1)

A recent op-ed in the Minneapolis Star-Tribune (here) was titled “Good Companies Don’t Bribe. Period.”

Say what?

To be sure, certain Foreign Corrupt Practices Act enforcement actions are based on allegations that executive management or the board was involved in or condoned the improper conduct at issue.  For this type of FCPA enforcement action, the title of the article is indeed spot-on.   However, this type of FCPA enforcement action is not typical.  As noted in this prior post, there are several companies that I call the “World’s Most Ethical FCPA Violators.”  These are companies who have earned designation as one of the “World’s Most Ethical Companies” by Ethisphere yet still, during the same general time period, have resolved an FCPA enforcement action or are otherwise the subject of FCPA scrutiny.  Companies on this list include:  General Electric, Statoil, Deere & Company, Hewlett-Packard, Rockwell Automation, AstraZeneca, Novo Nordisk, and Sempra Energy.  For more, see this article from Corporate Crime Reporter titled “World’s Most Ethical Companies and the FCPA.”  See also this prior post discussing W.W. Grainger’s recent FCPA disclosure and noting that the company is consistently ranked as one of the “world’s most admired companies” by Forbes.

Say What? (2)

This recent post on the FCPA Blog states as follows.  “There’s a reason why you don’t see many of the biggest U.S.-based government contractors on the FCPA top ten list […]. Not that they didn’t struggle with compliance during the early years of enforcement, but they moved quickly to update their compliance and ethics programs once they saw the tide of FCPA enforcement turning. Then they moved on.”

Say what?

Here is the list of the largest contractors in the government market based on an analysis of government procurement data during fiscal 2010.  Seven of the companies in the top twenty-one have, in the past few years, resolved FCPA (or related) enforcement actions or are otherwise the subject of FCPA scrutiny:  Raytheon, H-P, KBR, Dyncorp, ITT Corp., IBM, and BAE.

The “U.S.-based” and “FCPA top ten list” qualifiers were apparently chosen carefully in the FCPA Blog post.

World Bank News

Earlier this week, the World Bank announced (here) publication “for the first time a set of decisions issued by the World Bank Group’s Sanctions boards in cases of alleged fraud and corruption.”  World Bank Managing Director Sri Mulyani Indrawati stated as follows.  “The World Bank Group takes a hard line against corruption, and we believe that greater transparency must be part of that effort. By publishing Sanctions Board decisions, we are making all parties involved in the sanctions process more accountable. This move should deepen the deterrent effect of debarments and enhance the educational value of the Sanctions Board’s findings.”

The Sanctions Board decisions can be found here.

Antoine’s FCPA-Related Sentence Reduced

This recent post provided a Haiti Teleco roundup.  As noted in the prior post, the Haiti Teleco case (minus the manufactured and now former Africa Sting case) is the largest in FCPA history in terms of defendants charged – 13.  Among the group of defendants were three “foreign officials” charged with non-FCPA offenses including Robert Antoine, the former director of international affairs at Haiti Teleco who pleaded guilty in March 2010 to conspiracy to commit money laundering.  In June 2010, he was sentenced to 48 months in prison.

As Samuel Rubenfeld (Wall Street Journal Corruption Currents) noted in this recent post, Antoine, “who testified twice at trial on behalf of prosecutors in foreign bribery cases had [his] four-year prison sentence reduced to 18 months, and he will soon be out of prison.”

*****

A good weekend to all.

Haiti Teleco Roundup

By on March 22, 2012 in Amadeus Richers, Antonio Perez, Carlos Rodriguez, Cecilia Zurita, Cinergy Telecommunications, FCPA Sentences, FCPA Trials, Fusion Telecommunications, Haiti, Haiti Teleco Enforcement Actions, IDT Corporation, Jean Fourcand, Jean Rene Duperval, Joel Esquenazi, Juan Diaz, Marguerite Grandison, Patrick Joseph, Robert Antoine, Washington Cruz

Last week, the DOJ announced (here) that Jean Rene Duperval (a former director of international relations for Haiti Teleco) was “convicted by a federal jury on all counts for his role in a scheme to launder bribes paid to him by two Miami-based telecommunications companies.”

Assistant Attorney General Lanny Breuer stated as follows.  “Mr. Duperval was convicted by a Miami jury of laundering $500,000 paid to him as part of an elaborate bribery scheme.  As the director of international relations for Haiti’s state-owned telecommunications company, Duperval doled out business in exchange for bribes and then used South Florida shell companies to conceal his crimes.  This Justice Department is committed to stamping out corruption wherever we find it.”  Duperval is scheduled to be sentenced on May 21st.

The Haiti Teleco case (minus the manufactured and now former Africa Sting case) is the largest in FCPA history in terms of defendants charged – 13.  Below is a brief summary of the actions.

Individuals Charged With FCPA and/or Related Offenses

Antonio Perez.  In April 2009, Perez pleaded guilty to conspiracy to violate the FCPA.  As noted in this prior post, in January 2010, he was sentenced to 24 months in prison.

Juan Diaz.  In May 2009, Diaz pleaded guilty to conspiracy to violate the FCPA.  As noted in this prior post, in July 2010, he was sentenced to 57 months in prison.

Jean Fourcand.  As noted in this DOJ release, in February 2010, Fourcand pleaded guilty to one count of money laundering for receiving and transmitting bribe monies in the Haiti Teleco scheme.  In May 2010, Fourcard was sentenced to 6 months in prison.

Joel Esquenazi and Carlos Rodriguez.  As noted in this prior post, in August 2011, Esquenazi and Rodriguez were convicted by a jury for conspiracy to violate the FCPA, FCPA violations, and other offenses.  As noted in this prior post, in October 2011, Esquenazi was sentenced to 180 months in prison and Rodriguez was sentenced to 84 months in prison.  As noted below, Esquenazi and Rodriguez are appealing their convictions to the 11th Circuit.

Marguerite Grandison.  As noted in this DOJ release, in December 2009, Grandison was charged with one count of conspiracy to violate the FCPA and commit wire fraud, seven counts of FCPA violations, one count conspiracy to commit money laundering and 12 counts of money laundering.  According to a recent docket search, in February 2012, Grandison entered a not guilty plea and shortly thereafter the docket states as follows – “docket restricted/sealed until further notice.”

Washington Vasconez Cruz, Amadeus Richers and Cecilia Zurita.  These individuals (associated with Cinergy Telecommunications) are fugitives according to the DOJ.

“Foreign Officials” Charged With Non-FCPA Offenses

Duperval – see above.

Patrick Joseph. As noted in this prior post, the former director of international relations at Haiti Teleco pleaded guilty in February 2012 to conspiracy to commit money laundering. In July 2012, he was sentenced to 366 days in prison.

Robert Antoine.  As noted in this prior post, the former director of international affairs at Haiti Teleco pleaded guilty in March 2010 to conspiracy to commit money laundering.  In June 2010, he was sentenced to 48 months in prison.

Entity Charged

Cinergy Telecommunications.  As noted in this prior post, in February the DOJ moved to dismiss charges against Cinergy because it is a non-operational entity with no assets of any real value.

*****

Carlos Rodriguez and Joel Esquenazi are appealing their convictions to the 11th Circuit.  See here for the prior post regarding Rodriguez and his appellate counsel.  Recently, T. Markus Funk and Michael Sink (here and here of Perkins Coie) began representing Esquenazi in connection the appeal.  Funk, a former federal prosecutor in Chicago and US State Department lawyer co-chairs the ABA’s Global Anti-Corruption Task Force (here).

*****

This prior post discussed Haiti Teleco’s other preferred providers – namely IDT Corp. and Fusion Telecommunications – and linked to a recent Wall Street Journal article titled the “Looting of Haiti Teleco.”  The WSJ article was shortly countered with this post by Lucy Komisar.

The Case That Just Keeps On Giving

By on July 20, 2011 in 2011 Enforcement Actions, Amadeus Richers, Antonio Perez, Carlos Rodriguez, Cinergy Telecommunications, DOJ Enforcement Action, Executive Enforcement Action, Haiti Teleco Enforcement Actions, Individual Enforcement Action, Jean Fourcand, Jean Rene Duperval, Joel Esquenazi, Juan Diaz, Marguerite Grandison, Patrick Joseph, Robert Antoine, Washington Cruz

Last week, the Haiti Teleco case netted additional defendants as the DOJ announced (here) a superseding indictment in the never-ending enforcement action. Named in the superseding indictment (here) are:

Cinergy Telecommunications Inc. (a privately-held telecommunications company incorporated in Florida, charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering);

Washington Vasconez Cruz (the president of Cinergy, charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering);

Amadeus Richers (a former director of Cinergy, charged with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering);

Patrick Joseph (a former general director for telecommunications at Haiti Teleco and thus a “foreign official” according to the DOJ, charged with one count of conspiracy to commit money laundering);

Jean Rene Duperval (a former director of international relations for telecommunications at Haiti Teleco and thus a “foreign official” according to the DOJ, charged with two counts of conspiracy to commit money laundering and 19 counts of money laundering); and

Marguerite Grandison (the former president of Telecom Consulting Services Corp., and Duperval’s sister, charged with two counts of conspiracy to commit money laundering and 19 counts of money laundering.

Duperval and Grandison were previously charged in the case in December 2009 (see here).

With this latest development, the Haiti Teleco case has become, other than the manufactured Africa Sting enforcement action, the largest FCPA enforcement action in history – in terms of number of defendants – 12. In addition to those listed above, the following individuals were also charged: Antonio Perez, Joel Esquenazi, Juan Diaz, Robert Antoine, Jean Fourcand, and Carlos Rodriguez.

The Haiti Teleco case stands in stark contrast to many corporate FCPA enforcement actions (enforcement actions that sometimes involve tens or hundreds of millions of dollars in bribe payments) that yield no individual enforcement actions. See here for the prior post discussing the numbers from 2010 and thus far this year.

All bribery and corruption of course is bad, but does approximately $1 million in alleged bribe payments in the Haiti Teleco case justify the largest real FCPA enforcement action in history?

I previously observed (here) in connection with the Haiti Teleco case that often the DOJ resolves seemingly clear-cut instances of corporate bribery and corruption involving tens or hundreds of millions of dollars in bribe payments (per the government’s own evidence) without FCPA anti-bribery charges and without charging any corporate employees. In other cases, often relatively minor ones, the DOJ comes out with guns-a-blazing.

To call it inconsistent law enforcement is an understatement.

“It’s Not Easy Being Under Investigation for Two Years …”

By on March 15, 2010 in BAE, Haiti, Nigeria, Panalpina, Reputational Damage, Robert Antoine

Panalpina is dealing with some FCPA issues (see here for the prior post).

Now, the company’s shareholders are getting a bit testy.

According to this report, during the company’s annual meeting last week, a shareholder demanded that someone “step up and take responsibility” for the company’s poor performance over the last two years.

According to the report, CEO Monika Ribar said, “[i]t is not easy being under investigation for two years, and [the FCPA investigation] is not making the situation any easier.”

According to the report, COO Karl Weyeneth added: “You can say the whole FCPA and Nigeria situation reflects badly on the management, but the fact is that as long as we are still involved in the investigation we will continue to lose market share, because our customers have internal regulations which prevent them from doing business with companies which are under investigation by the DoJ.” “As soon as this investigation is over, we will win some of this business back. Customers have told us ‘as soon as you have settled the FCPA, we will do business with you again’.”

Time will no doubt tell whether the FCPA investigation is a convenient excuse for company management for poor performance or whether this instance demonstrates the difficulty of running a company and maintaining customer relationships during the lifespan (often times several years) of an FCPA investigation / enforcement action.

*****

The seemingly minor case involving Telecommunications D’Haiti (“Haiti Teleco”) (see here) keeps on giving.

Last Friday, the DOJ announced (here) that Robert Antoine, one of the “foreign officials” (at least according to the DOJ given that Antoine served as the “Director of International Relations of Haiti Teleco” – an alleged state-owned entity), in the far-reaching case pleaded guilty to a money laundering conspiracy charge.

U.S. Attorney Jeffrey Solman (S.D. of Florida) is quoted as saying, “[t]oday’s conviction should be a warning to corrupt government officials everywhere that neither they nor their money will find any safe haven in the United States.”

Such get-tough language is difficult to reconcile with the BAE bribery, yet not bribery circus in which an identifiable Saudi official was widely alleged to have received from BAE over a billion dollars in a U.S. bank account (see here) and in light of this situation.

Indicting a “Foreign Official”

By on December 8, 2009 in Antonio Perez, Carlos Rodriguez, DOJ Enforcement Action, FCPA Related Charges, Foreign Official, Haiti, Individual Enforcement Action, Jean Rene Duperval, Joel Esquenazi, Juan Diaz, Marguerite Grandison, Robert Antoine

Yesterday, the DOJ announced (see here) the unsealing of an indictment (see here) against Joel Esquenazi, Carlos Rodriguez, and Marguerite Grandison which charges (among other things) conspiracy to violate the FCPA and substantive FCPA violations for an alleged scheme to bribe two former employees of Haiti Teleco, the alleged “state-owned national telecommunications company.”

Esquenazi and Rodriguez are former executives of a privately owned, Florida-based telecommunications company and Grandison was the President of Telecom Consulting Services Corp., a Florida based company which served as an intermediary.

The unsealed indictment is the latest chapter in this matter; in May 2009, the DOJ announced (see here) the guilty pleas of Juan Diaz and Antonio Perez in connection with the same scheme.

This matter is also yet another example of an FCPA enforcement action in which the “foreign official” is an employee of an alleged state-owned or state-controlled entity.

That, however, is not why this enforcement action is noteworthy.

It is noteworthy because DOJ also indicted Robert Antoine and Jean Rene Duperval – the alleged “foreign officials.” According to the indictment, Antoine and Duperval both served as the “Director of International Relations of Haiti Teleco” and were responsible for negotiating contracts with international telecommunications companies on behalf of Haiti Teleco.

Of course, the charges were not FCPA charges, because the FCPA only covers “bribe-payers” not “bribe-takers” (see here, here, for prior posts on this subject).

Rather the charges against Antoine and Duperval were money laundering conspiracy and/or substantive money laundering charges.

According to the DOJ release, Antoine is from “Miami and Haiti” and Duperval is from “Miramar, Fla. and Haiti.” Further, according to the indictment, both individuals had bank accounts in the U.S. and these accounts were used in connection with the bribery scheme. (I wonder if Washington Mutual, Wachovia, or Miami Federal Credit Union were aware that Haitian “foreign officials” were among its customers!)

To my knowledge this is the first time “foreign officials” have been specifically charged as defendants in connection with an FCPA enforcement action. This indictment of “foreign officials” comes on the heels of AG Holder’s recent speech (see here) in which he stated that the U.S. government was committed to recovering funds obtained by “foreign officials” through bribery.

Powered by WordPress. Designed by WooThemes