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BAE – The Circus Continues

Just when you think the final circus wagon has left the station, the BAE bribery, yet no bribery circus continues to keep on giving.

As I posted earlier this week (here), debarment issues clearly drove resolution of this prosecution as demonstrated by the DOJ’s sentencing memorandum. That post also noted that the U.S. Attorneys’ Manual specifically states that “where the corporation was engaged in fraud against the government […], a prosecutor may not negotiate away an agency’s right to debar or delist the corporate defendant” – a relevant fact given that both the DOJ release announcing resolution of the BAE matter, as well as the sentencing memorandum, expressly state that BAE “defrauded” the U.S.

Today’s circus act has to do with the magician’s uncanny ability to make things disappear and concerns the State Department’s treatment of BAE’s license applications.

The FCPA Blog today (see here) profiles a DefenseNews article (here) and notes that the” first debarment notice posted on the State Department’s website Monday was withdrawn and a second notice was changed at least once and then also withdrawn.”

Defense News quoted a Washington trade lawyer as saying:

One notice Monday, another one Tuesday, and now they’re both down. Which is it, guys? What State has done sends a terrible message. It makes it seem like State does not have a handle on what it wants to do – or that it’s being manipulated by outside interests.


For Christopher Matthews’ (Main Justice) first-hand account of how the judge, prosecution and defense all carefully avoided talking about the FCPA bribery element in the room at Monday’s hearing, see here. Matthews notes that BAE’s lawyer specifically requested “that the record reflect that BAE did not know payments would be used for bribes, only that there was a high probability they might be used in that fashion.”

Blackwater In Hot Water

The New York Times (here) reports that the DOJ “is investigating whether officials of Blackwater Worldwide tried to bribe Iraqi government officials in hopes of retaining the firm’s security work in Iraq.”

According to the Times, the DOJ’s fraud section open an investigation “late last year” to determine whether Blackwater employees violated the FCPA. The investigation follows a November 2009 times article (here) which first raised questions about Blackwater’s (now known as Xe Services) conduct in Iraq. That article suggested that the alleged payments at issue were made to Iraqi “foreign officials” to help secure an operating license the company needed to continue doing business in Iraq.

As noted in a prior post (here), this case is interesting on several levels.

First, the case (from an FCPA antibribery perspective) would seem to hinge on the FCPA’s “obtain or retain” business element, and is another example of the post-Kay explosion in enforcement actions in which alleged improper payments were made to help secure foreign government licenses, permits, etc. An interesting wrinkle to this analysis is that the Iraqi license was apparently needed so that Blackwater could retain its contract with the U.S. State Department – not with a foreign entity as is usually the case.

Second, rarely if perhaps ever, has an FCPA inquiry focused on the conduct of a company so intertwined with U.S. government agencies (State Department and CIA) operating in a war zone.

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