Friday Roundup
“Scurrilous and hypocritical,” scrutiny alerts and updates, a foreign official brain teaser, quotable, and for the reading stack. It’s all here in the Friday roundup.
“Scurrilous and Hypocritical”
As I have highlighted for years (see approximately 25 separate posts under the subject matter heading double standard), there is a double standard concerning corporate interaction with “foreign officials” under the FCPA and corporate interaction with U.S. officials under other U.S. laws – specifically 18 U.S.C. 201.
Commenting on JPMorgan’s current FCPA scrutiny concerning its alleged hiring practices in China, former SEC Commissioner Arthur Levitt writes, in pertinent part, in this Wall Street Journal opinion piece as follows.
“[A]ccording to financial regulators now looking into the hiring practices of major U.S. banks and multinationals in China—some of which have employed members of influential Chinese families—anyone who once hired me [Levitt’s father was the New York state comptroller] might have been violating ethical and legal standards. Securities and Exchange Commission regulators now suggest that such hiring overseas is a form of untoward influence, akin to bribing foreign officials to win business.
The accusation is scurrilous and hypocritical. If you walk the halls of any institution in the U.S.—Congress, federal courthouses, large corporations, the White House, American embassies and even the offices of the SEC—you are likely to run into friends and family members of powerful and wealthy people.
[…]
Whether this is right or wrong, unfair or fair, is not the point. It is hypocritical of financial regulators to criticize—even penalize—practices abroad that are commonplace in Washington, New York and other seats of political and economic power.
Were the SEC to be completely consistent in its approach, it would have to come down hard on the same practices here in the U.S. And the agency would have a field day. Members of Congress and the executive branch regularly hire the children of major donors. Regulators would find scores of examples of men and women, occupying internships and entry-level positions in U.S. corporations, who were hired on the say-so of someone much higher up in the organization.
[…]
[I]f we were to deny multinational companies the ability to hire locally recommended talent, where do we draw the line? Are spouses of influential officials off-limits, but not their children? What about siblings? If not siblings, what about cousins, uncles, nephews? And then there is the issue of friends: How can a financial regulator know whether a friend of someone in power received a job offer in good faith or as a form of influence peddling?
I would hate to imagine what would happen if we applied the same kind of sliding scale to the many people who have received job offers by way of their familial relationships. If that happened, there aren’t many people in finance who would escape the accusation that their hiring was the byproduct of influence peddling.”
Scrutiny Alerts and Updates
This Macau Business Daily report notes the timing of a $10 million pledge by Nasdaq-listed Melco Crown Entertainment for a cultural project in collaboration with the Tokyo University of the Arts. As noted in the article, the company needs various government permissions to increase its presence in Japan. As noted in this prior post, among others, casino operators including Wynn Resorts have been the subject of FCPA scrutiny based on similar charitable contributions.
This previous post highlighted how Transparency International urged the DOJ to investigate the conduct of Walters Power International (an Oklahoma based company that supplies, develops, services and manages electrical generation power plants around the world) in connection with power plant projects in Pakistan. This recent article in The News International reports that Walters Power has “been cleared of any misconduct by the US Department of Justice.” The article notes:
“Following [TI’s] complaint, the US Department of Justice launched a lengthy inquiry against WPIL […]. On Oct 31, 2012, it informed WPIL’s […] lawyers in the US that the inquiry was being closed as no evidence of wrongdoing could be found against the companies. The clearance letter, a copy of which is available with The News, said: “Over the past several months, your client, Walters Power International Ltd., has responded to a number of inquires by the Department of Justice, Criminal Division, Fraud Section, into possible violations of the Foreign Corrupt Practices Act. You have also responded to inquiries on behalf of Pakistan Power Resources, LLC, and Walters Power International, LLC. As you are aware, the Supreme Court of Pakistan issued an order on March 30, 2012, that declared the country’s rental power plant contracts void ab initio. Our review of that order and related pleadings has revealed no allegations of bribery in connection with those contracts. In addition, on July 24, 2012, Pakistan’s National Accountability Bureau closed its case regarding Walters Power noting that “there remains no basis for further proceedings about the Company.” Finally, Transparency International Pakistan, which publicly referred this matter to the US Department of Justice, has provided no evidence of bribery in connection with the RPP contracts in response to our request for further information. Based upon our investigation and the information that has been made available to us to date, we presently do not intend to take any enforcement action and are closing our inquiry into this matter. If, however, additional information or evidence should be made available to us in the future, we may reopen our inquiry.”
The article concludes as follows.
“Interestingly, WPIL […] sat on this letter issued by the US Department of Justice for over a year. When asked why this letter had not been made public for so long, a spokesman for WPIL said: “We cooperated unreservedly with the impartial and unimpeachable investigation of the US Department of Justice and are satisfied with the results. The findings of the US Department of Justice were shared with all shareholders and financial institutions but not made public for fear that this might be misconstrued as a rebuke by the now former chief justice of Pakistan.” He added that the Washington inquiry found no evidence of wrongdoing on the part of either company, contrary to popular misconceptions within Pakistan.”
“Foreign Official” Brain Teaser
As noted in this recent Wall Street Journal article, China State Construction Engineering Corp. (the largest home builder in the world), “is making its first acquisition in the U.S. market through its American subsidiary, as the company continues its aggressive push into overseas markets. China Construction America, the U.S. subsidiary, … agreed to acquire Manhattan-based Plaza Construction for an undisclosed sum.” As noted in the article, “Plaza Construction mainly provides construction management and consulting services in places including New York, Florida, California and Washington, D.C.”
Congress never intended for employees of state-owned or state-controlled enterprises (SOEs) to be “foreign officials” under the FCPA – see here for my “foreign official” declaration – but given the DOJ and SEC’s “foreign official” interpretations, post-acquisition are Plaza Construction employees now Chinese “foreign officials?”
Quotable
World Bank Group President Jim Yong Kim recently stated as follows:
“I’d like to make clear why fighting corruption is a critical priority for me personally, and for the entire World Bank Group: Every dollar that a corrupt official or a corrupt business person puts in their pocket is a dollar stolen from a pregnant woman who needs health care; or from a girl or a boy who deserves an education; or from communities that need water, roads, and schools. Every dollar is critical if we are to reach our goals to end extreme poverty by 2030 and to boost shared prosperity. Let’s not mince words: In the developing world, corruption is public enemy number one. We will never tolerate corruption, and I pledge to do all in our power to build upon our strong fight against it.”
Reading Stack
The most recent edition of the always-informative Debevoise & Plimpton FCPA Update is here. As to the recent Weatherford settlement, the Update states as follows.
“The $152 million in fines and penalties paid by Weatherford make it the eighth largest FCPA settlement in history. Although the monetary resolution is objectively large, comparing it to the monetary resolution in another recent enforcement action points to the difficulty of ascertainting the logic of penalty determinations.
[…]
Beyond the lack of transparency in the calculations that led to the financial resolution – a recurring feature of settled FCPA matters – the Weatherford settlement, like other recent settlements, is a disposition in which facts are included in the allegations or information without an explanation as to why they are relevant, potentially creating even more confusion as to what is or is not acceptable from the enforcement agencies’ point of view.”
For the recent post titled “FCPA Settlements Have Come a Long Way In a Short Amount of Time,” see here.
As to the recent Corruption Perception Index scores recently released by Transparency International (see here for the prior post), the FCPA Update rightly notes as follows.
“[W]hile companies subject to the FCPA, the UKBA, or other transnational anti-bribery regimes should continue to pay heed to the CPI, those seeking most efficiently to assess compliance risks also need to assess such matters as: (1) sector risk; (2) business model risk (including the degree to which the firm relies on third parties and the nature of controls over their activities); and (3) the nature and scope of government interactions, not only in connection with winning sales from government customers but also in obtaining zoning and building permits, tax clearances, customs rulings, currency transaction permissions, investment and financing approvals, and a range of other daily decisions from government actors. Firms with business risks associated with non-compliance such as expiring patents, excess capacity, disproportionate sales-based compensation, and limited oversight over sales and supply chain personnel, may well have significant corruption risks even in nations ranked highly in the CPI.”
*****
A good weekend to all.
Friday Roundup
Looking for talent … got talent, the DOJ is sued, the Corruption Perceptions Index, a pulse on FCPA Inc., and for the reading stack. It’s all here in the Friday roundup.
Looking for Talent … Got Talent
If your firm or organization is looking for either a summer associate or full-time lawyer with a solid Foreign Corrupt Practices Act foundation, please e-mail me at fcpaprofessor@gmail.com. This past semester, twenty Southern Illinois University law students completed a semester long class on the FCPA, FCPA enforcement and FCPA compliance.
Learning objectives for the class included: (i) developing a comprehensive understanding of the FCPA’s anti-bribery provisions and books and records and internal controls provisions; (ii) analyzing legal, ethical and policy issues associated with FCPA enforcement; (iii) understanding the FCPA’s long tentacles and how actual FCPA enforcement actions brought by the DOJ and/or SEC are often just one consequence of FCPA scrutiny; and (iv) gaining practical FCPA compliance skills including the ability to conduct an FCPA risk assessment and develop FCPA compliance policies.
I am confident in saying that few, if any, law students in America have as solid a foundation in the FCPA and FCPA compliance as these students. I encourage you to give them an opportunity.
The DOJ Is Sued
University of Virginia Law Professor Brandon Garrett and Reference Librarian Jon Ashley maintain the excellent Federal Organizational Prosecution Agreements website which contains hundreds of federal organizational prosecution agreements such as non-prosecution and deferred prosecution agreements … at least those in the public domain.
Recently Ashley filed this lawsuit against the DOJ under the Freedom of Information Act seeking release of a certain non-prosecution agreement. The complaint asserts:
“Plaintiff is statutorily entitled to the disclosure of [the] non-prosecution agreement and [the DOJ] has improperly withheld the requested records in violation of the law and in opposition to the strong public interest in understanding the judicial system and why admitted wrongdoers are not criminally prosecuted.”
While lacking knowledge as to the specifics of the complaint, I applaud the lawsuit for seeking to shine a light on DOJ enforcement practices.
As noted in this prior post, the 2012 FCPA Guidance highlighted secret FCPA enforcement. While I did not file a formal Freedom of Information Act request, I sought on several occasions to seek information from the DOJ regarding its secret FCPA enforcement practices. In each instance, my requests were ignored.
Corruption Perceptions Index
Transparency International (“TI”) recently released its annual Corruption Perceptions Index (“CPI”) (see here).
The CPI ranks countries/territories based on how corrupt their public sector is perceived to be and is a composite index drawing on corruption-related data collected by a variety of institutions and reflecting the views of observers from around the world including those living and working in the countries/territories evaluated.
The top four (very clean) countries in the CPI were Denmark, New Zealand, Finland and Sweden. The bottom four (highly corrupt) countries were Somalia, North Korea, Afghanistan, and Sudan.
The United States placed 19th on the list of 177 countries.
The DOJ has spoken in religious terms regarding its FCPA enforcement actions as former Assistant Attorney General Lanny Breuer stated “we in the United States are in a unique position to spread the gospel of anti-corruption, because there is no country that enforces its anti-bribery laws more vigorously than we do.”
Yet, it remains a bit ironic that as the U.S. aggressively expands its Foreign Corrupt Practices Act enforcement practice and theories, the U.S. remains far from the top of the CPI. The latest CPI should again cause us to pause as to our claimed exceptionalism and moral superiority on this topic. For instance, see this prior post “We Really Ought to Pause and Reflect.”
See the “Double Standard” subject matter tag for more.
Pulse of FCPA Inc.
What is one reason Wal-Mart is spending in excess of $1 million per working day on its FCPA issues? Because, in many instances corporate FCPA scrutiny has turned into a full employment act for FCPA Inc.
Reuters recently reported here that Wal-Mart “is paying for lawyers to represent more than 30 of its executives involved in a foreign corruption investigation, according to people familiar with the matter, an unusually high number that shows the depth of the federal probe.” The article states:
“In recent months, the U.S. government has brought in a number of senior Wal-Mart executives for questioning, including officials from corporate headquarters in Bentonville, Arkansas, the sources said. The move, along with widespread publicity about the probe, appears to have prompted executives to seek their own legal representation. The sources declined to name the executives who have submitted to interviews.”
As noted in this recent Friday roundup, there are few relevant data points associated with the pulse of FCPA Inc. Much information is anecdotal, including the following from Legal Search Consultants Major, Lindsey & Africa in its Asia Legal Market, Semi-Annual Report.
“FCPA practices continue to grow with firms continuing to relocate specialists from their US offices to Asia. This is reflective of an effort to meet the unrelenting demand in investigations work. There seem to be few certainties in Asia, but one is that FCPA business will not be diminishing anytime soon.”
Reading Stack
An informative post recently on the FCPAmericas site titled “Conducting Effective FCPA Training in Latin America.” The eight pointers discussed are true regardless of which region FCPA compliance is focused.
A little dickey bird whispers to thebriberyact.com here regarding U.K. DPAs and Bribery Act prosecutions.
For the resources stack, the OECD, the U.N. Office on Drugs and Crime, and the World Bank recently released here the “Anti-Corruption Ethics and Compliance Handbook for Business.” It states:
“The handbook is not intended to create new standards or represent any form of legally binding requirement for businesses. It has been developed to serve as a useful, practical tool for companies seeking compliance advice in one, easy-to-reference publication. The handbook is divided into three sections. The first section provides an overview of the international anti-corruption framework, within which companies conducting international business must operate. The second section provides a brief introduction to how companies can assess their risk in order to begin developing an effective anti-corruption ethics and compliance programme. The third and most significant section brings together the major business guidance instruments. A comparison of these instruments reveals that they all largely include the same basic anti-corruption ethics and compliance elements. These elements are further illustrated using real-life, anonymised case studies provided by companies. Finally, the handbook includes as an annex a quick-reference table providing a cross-comparison of all the major business guidance instruments referenced in this handbook.”
*****
A good weekend to all.
Transparency International’s Progress Report
Transparency International (TI) does good work in raising awareness of bribery and its effects and seeking to reduce bribery and corruption around the world.
Yet, every time I read TI’s annual progress report on OECD Anti-Bribery Convention enforcement (see here for the recently released report), I find myself asking the same question: does TI (and other civil society groups) view more “enforcement” as an inherent good regardless of enforcement theories, regardless of resolution vehicles, and regardless of outcomes?
The answer appears to be yes, as the progress report focuses on the quantity of enforcement actions with little to no discussion of resolution vehicles or the outcomes of those enforcement actions (i.e. quality).
Of course the U.S. is going to have strong quantity of enforcement numbers because of the DOJ’s (and now SEC’s) invention and use of non-prosecution and deferred prosecution agreements. At present, these resolution vehicles are not used elsewhere, but not surprisingly are desired elsewhere because they lead to more quantity of enforcement.
Would “lagging” governments (that term is used multiple times in the TI report) shine in the eyes of TI if those “lagging” governments came up with resolution vehicles that largely bypassed the judicial system?
Would “lagging” governments shine in the eyes of TI if those “lagging” governments manufactured cases through sting operations – even if those cases were dismissed by the judge after stating that the cases appear “to be the end of a long and sad chapter in the annals of white collar criminal enforcement.”
As to the U.S. enforcement data itself in the progress report, it is presented in a materially different format than the enforcement data from the other countries. It takes some footnote reading, but “the methodology used to compile enforcement statistics for the U.S.” was as follows.
“For the United States portion of this report, investigations are counted as “initiated” in the year in which an FCPA investigation is first publicly disclosed (for example, in press reports or a company’s securities filings). Investigations not disclosed in public sources are not counted. Cases are counted as “commenced” for the purposes of this report when an enforcement action results in ongoing judicial proceedings not involving a settlement; for example, a criminal indictment filed by the DOJ against one or more individuals, or an unsettled civil complaint filed by the SEC. Where a case “commenced” names multiple defendants under a single docket number, it is counted as a single case“commenced”. Where complaints or indictments are filed against multiple defendants under separate docket numbers, they are counted as separate cases “commenced”. “Cases concluded” include settlements between companies and individuals and the US DOJ and/or SEC, as well as criminal and civil judicial proceedings resulting in final judgment. Parallel settlements between a company and DOJ and SEC are treated as separate “cases concluded”; a settlement between a single US enforcement agency and more than one corporate entity in a corporate group is also counted as a single “case concluded”. Cases concluded are counted as “major” if they result in more than $25 million in criminal fines, civil penalties or disgorgement (for companies), or if they result in a prison term for an individual. Cases concluded against companies are counted in the year in which the settlement was reached and approved by a judge (for criminal and civil settlements), or finally ordered (for administrative settlements). Cases “concluded” against individuals are counted in the year a plea agreement or civil settlement was reached with the DOJ or SEC and publicly announced, or a final verdict reached by a presiding judge or jury.”
I’ve read this description three times and it still leaves my head spinning. Is there anything wrong with the simple “core” approach to keeping FCPA enforcement data – an approach even the DOJ endorses?
Enforcement statistics aside, while the TI progress report bears all the hallmarks of the work of a non-profit, non-governmental organization and is portrayed as an “independent assessment on the status of enforcement,” the fact is, the progress report is an ad hoc compilation of scattered data assembled and opinions expressed by just a few people in their respective countries.
To TI’s credit, this is made transparent in the progress report. The report states: “as in years past, this report is based on information provided by national experts in each reporting country responding to a questionnaire.” Elsewhere, the report states: “The following country reports summarize the assessments by TI experts of enforcement of the Convention in their countries.”
In the case of the U.S., the TI experts were three people (one senior partner and two associates) at a law firm with a vibrant FCPA practice. In other words, the U.S. country report and its discussion of “inadequacies in legal framework,” “inadequacies in enforcement system,” the FCPA Guidance, Morgan Stanley’s so-called declination and other topics are merely the opinions of three people.
Regardless of the deficiencies in the TI report, kudos are in order for the recommendation in the report to “ensure the fairness and public credibility of settlements, [and to] make all settlements subject to court approval.”
However, the supporting text states: “a substantial number of foreign bribery cases are settled through negotiations between prosecutors and the accused companies and individuals. This is an understandable development in view of the complexity, cost, delays and uncertainties of litigation.”
It may be understandable, but is this a welcome development?
Show me a rule of law principle that suggests charging someone (whether a legal person or natural person) with a crime ought to be easy, cheap, quick and certain?
These issues, along with quality of enforcement, is where the focus ought to be. Not quantity of enforcement.
Friday Roundup
A prosecutorial common law defeat, the SEC repeats its prior positions, better but not good, document issues, and recent scrutiny news.
Prosecutorial Common Law Defeat
One of the best guest posts in FCPA Professor history was this 2011 post from Michael Levy in which he described the concept of prosecutorial common law. Prosecutorial common law is all around us. Take a look at the footnotes of the recent FCPA Guidance – most of the “authority” cited for “legal” propositions is DOJ or SEC settlements.
For obvious reasons, prosecutorial common law does not sit well with federal court judges. For instance, in U.S. v. Bodmer, Judge Shira Scheindlin of the Southern District of New York, in rejecting the DOJ’s position that the FCPA’s criminal penalty provisions applied to a foreign national prior to the 1998 FCPA amendments, noted as follows – “the Government’s charging decision, standing alone, does not establish the applicability of the statute.” Likewise as noted in this previous post about the Giffen enforcement action, Judge William Pauley of the Southern District of New York stated that prosecutorial common law “is not the kind or quality of precedent this Court need consider.”
Prosecutorial common law recently suffered a major defeat when the Second Circuit, in a non-FCPA case, rejected (see here for the opinion) a DOJ theory of prosecution concerning off-label promotion of drugs that it has previously used to secure billions (yes that is a “b”) in recent settlements with pharmaceutical companies.
Commenting on this recent development, Levy stated as follows. “It is amazing to me how consistently this pattern seems to repeat but, given the incentives on both sides, I don’t really see any structural solutions that would change it.”
For additional reading, see this client alert from Debevoise & Plimpton, this client alert from Arnold & Porter, and this client alert from Gibson Dunn.
SEC Responds to Magyar Telekom Execs Motion to Dismiss
Given the SEC’s positions in its recent response to Herbert Steffen’s motion to dismiss (see here for the prior post), it comes as little surprise that the SEC is taking the same positions in its response to the motion to dismiss filed by former Magyar Telecom executives Elek Straub, Andras Balogh and Tamas Morvai.
In its response brief (here), the SEC states, in summary form, as follows.
“The defendants move to dismiss the complaint, arguing that (1) the Court lacks personal jurisdiction; (2) the SEC’s claims are time-barred; (3) the complaint fails to allege facts supporting the SEC’s anti-bribery claims; and (4) the complaint fails to allege facts supporting the SEC’s lying to auditors claims. The Court should deny the motion on all four grounds.
First, the defendants are subject to personal jurisdiction because their conduct caused foreseeable consequences in the United States. The complaint alleges that the defendants orchestrated a bribery scheme in Macedonia; that they concealed their bribes through the use of sham contracts and falsified books and records; that they lied to Magyar’s auditors by signing false annual and quarterly certifications; and that their actions caused Magyar to file annual and quarterly reports with the SEC in the United States that misrepresented the company’s financial statements and included false Sarbanes-Oxley certifications.
Second, the complaint was timely filed within the statute of limitations set forth at 28 U.S.C. § 2462. That provision expressly states that the limitations period does not begin to run until the defendants are “found within the United States.” The defendants acknowledge in their brief that they have remained outside of the United States since their commission of this scheme. Thus, the statute of limitations period has not begun to run as to them. In any event, claims for equitable relief are not subject to the limitations period of Section 2462, which by its terms applies only to “penalties.”
Third, the complaint pleads all facts necessary to support every element of every claim against the defendants. The defendants met the “interstate commerce” prong of Exchange Act Section 30A, 15 U.S.C. § 78dd-1, by sending, in furtherance of their bribery scheme, electronic mail messages that were routed through servers located in the United States. Because the use of interstate commerce is a jurisdictional element, the Exchange Act does not require that defendants know, let alone “corruptly” intend, that their messages would reach the United States. The complaint sufficiently identifies the foreign officials whom the defendants bribed; Section 30A does not require that the officials be expressly named. And the complaint sufficiently identifies the specific false statements made by each defendant to Magyar’s auditors and why those statements were material.”
Of particular note as to “foreign official,” the SEC makes the sweeping statement that “there is no requirement under the FCPA or in the case law interpreting it that the SEC’s complaint [needs to] identify bribed foreign officials by name.” The SEC then states in a footnote as follows. “Any such requirement would be completely at odds with the FCPA’s statutory scheme. […] By its very structure, [the anti-bribery provisions were] drafted to prohibit corrupt transactions in which the precise identity of a government official might not be known even to the payor.”
As noted in this previous post, the SEC is asserting the same “foreign official” position in the Mark Jackson / James Ruehlen challenge. Oral arguments are to take place today on that motion in Houston.
It should be noted that in the DOJ’s unsuccessful prosecution of John O’Shea, Judge Hughes stated as follows. “[W]hile the Government does not have to trace a particular dollar to a particular pocket of a particular official, it has to connect the payment to a particular official, that the funds made under his authority to a foreign official, who can be identified in some reasonable way, that is, with no reasonable doubt.” Judge Hughes also stated as follows. “You can’t convict a man promising to pay unless you have a particular promise to a particular person for a particular benefit. If you call up the [intermediary] and say, look, I’m going to send you 50 grand, bribe somebody, that does not meet the statute.”
Corruption Perception Index
Transparency International (“TI”) recently released its annual Corruption Perceptions Index (“CPI”) (see here). The CPI ranks countries/territories based on how corrupt their public sector is perceived to be and is a composite index drawing on corruption-related data collected by a variety of reputable institutions and reflecting the views of observers from around the world including experts living and working in the countries/territories evaluated.
The top three (very clean) countries in the CPI were Denmark, Finland and New Zealand. The bottom three (highly corrupt) countries were Afghanistan, North Korea and Somalia.
The United States placed 19th on the list of 176 countries. While this is better than last year’s 24th place finish, as noted in this prior post it’s a bit ironic that as the U.S. aggressively expands its Foreign Corrupt Practices Act enforcement theories, the U.S. remains far from the top of the CPI.
Assistant Attorney General Lanny Breuer recently spoke of the U.S. FCPA enforcement effort in religious terms (“we in the United States are in a unique position to spread the gospel of anti-corruption, because there is no country that enforces its anti-bribery laws more vigorously than we do”), yet CPI’s rankings should again cause pause as to our claimed moral superiority.
Document Issues
I am not one to usually highlight FCPA Inc. marketing material, but I thought this video clip from e-discovery firm H5 was instructive as to many of the document issues involved in an FCPA investigation. The enforcement agencies have commented from time to time that FCPA Inc. has a tendency to sometimes over do it in this area, but be that as it may – data collection, data storage, data analysis, etc. are among the reasons why FCPA investigations often soar into the millions.
Recent Scrutiny News
Rolls-Royce
Reuters reports (here) that Rolls-Royce, the world’s second-largest maker of aircraft engines “said the [U.K. Serious Fraud Office] had asked it to conduct an internal inquiry into dealings involving intermediaries in China, Indonesia and other overseas markets.” According to the report, “a source close to the investigation said the allegations relate to events in the “distant past” and Rolls-Royce had told the U.S. Department of Justice about the inquiry.”
As noted in this previous post, in June, Data Systems & Solutions, LLC, a wholly-owned subsidiary of Rolls-Royce Holdings, resolved an FCPA enforcement action.
Barclays
Reuters also reports (here) that a previously disclosed DOJ and SEC “investigation into whether Barclays Plc paid bribes to win a banking license in Saudi Arabia has spread to other banks that operate in the region.”
Net 1
Earlier this week, Net 1 UEPS Technologies Inc. disclosed in an SEC filing (here) as follows.
“On November 30, 2012, we received a letter from the U.S. Department of Justice, Criminal Division (the “DOJ”) informing us that the DOJ and the Federal Bureau of Investigation have begun an investigation into whether Net 1 UEPS Technologies, Inc. and its subsidiaries, including their officers, directors, employees, and agents (collectively, “Net 1”) and other persons and entities possibly affiliated with Net 1 violated provisions of the Foreign Corrupt Practices Act and other U.S. federal criminal laws by engaging in a scheme to make corrupt payments to officials of the Government of South Africa in connection with securing a contract with the South African Social Security Agency to provide social welfare and benefits payments and also engaged in violations of the federal securities laws in connection with statements made by Net 1 in its SEC filings regarding this contract. On the same date, we received a letter from the Division of Enforcement of the Securities and Exchange Commission (the “SEC”) advising us that it is also conducting an investigation concerning our company. The SEC letter states that the investigation is a non-public, fact-finding inquiry.”
In this additional release, the company states as follows.
“These investigations appear to be directed at matters which are similar to those that were the subject of articles which appeared in various South African newspapers after AllPay Consolidated Investment Holdings (Pty) Limited (“AllPay”) instituted legal proceeding in the South African courts to set aside the contract awarded to us in January 2012 by SASSA. AllPay was an unsuccessful bidder for the SASSA contract.”
News of the company’s FCPA scrutiny caused the company’s U.S. listed shares to plunge approximately 58%. This of course caused several plaintiff law firms to announce investigations of their own. See here, here, and here. In the meantime, the company’s shares have risen 46%.
It’s an FCPA world.
*****
A good weekend to all.
Worth Reading
Transparency International – UK (“TI-UK”) recently published “Deterring and Punishing Corporate Bribery” (here) and it is worth reading. A meaty 93 pages, the document is full of useful information, from U.K. charging issues, corporate criminal liability principles under U.K. law, a list of SFO and FSA bribery or related enforcement actions and much more.
As noted in the foreword, the “paper seeks to identify the problems faced by prosecutors and companies in trying to settle cases of overseas bribery against the background of the current legal system and practice, and to make some recommendations to improve transparency, recognising that bribery is a serious criminal offence and there is a strong public interest in seeing offenders prosecuted.”
Several of the recommendations in the report I agree with such as the following.
- “all settlements should be subject to judicial scrutiny independent from the prosecutor’s office” [that clearly does not happen in the U.S. given frequent use of non-prosecution and deferred prosecution agreements]
- “victim countries should receive restitution and prosecutors should work with development agencies … to manage this process” [although figuring out just how to do this is the difficult issue]
- “prosecutors should properly label bribery offenses and not select alternative charges in order to avoid mandatory debarment, which is a logical and fair outcome in certain cases as it provides a very strong deterrent to corporate offending” [this frequently happens in the U.S., for instance, Siemens, Daimler, BAE – none of these companies were charged with FCPA anti-bribery violations because of potential debarment concerns]
The recommendation from the TI-UK report that I disagree with (and I am grateful for the citations and mentions in the report) is the following. “[The U.K.] government should consider the introduction of DPAs or some similar sentencing procedure after a thorough assessment of the alternatives. DPAs have proved to be a useful procedure to settle FCPA cases in the USA but the process has also been criticized with little judicial oversight.” Elsewhere, the report states as follows. “The reason that this [high level of U.S. enforcement of the FCPA] is possible with relatively few resources is that in the US most FCPA cases are settled through either [DPAs or NPAs] both of which avoid the preparation of casework for a trial by jury.”
How is a resolution vehicle that avoids the preparation of casework for a trial by jury a good thing? Requiring an enforcement agency to meet its burden of proof in an adversarial proceeding before independent observers who consider mitigating facts and weigh viable defenses is central to the rule of law and how law best advances. Allowing enforcement agencies a third option (the first two options being prosecute vs. not prosecute) facilitates both the under-prosecution of egregious instances of corporate conduct as well as the over-prosecution of corporate conduct and contributes to a facade of enforcement.
Moreover, as I noted in this previous post, why does the U.K. need alternative resolution vehicles when the U.K. Bribery Act has an adequate procedures defense. If a corporate has adequate procedures, but an isolated act of bribery nevertheless occurs within its organization, the corporate presumably would not face prosecution under the Bribery Act. Seems like a reasonable result. In other words, no need for the third option in such a case. On the other hand, if a corporate does not have adequate procedures (i.e. has no committment to anti-bribery compliance) and an act of bribery occurs within its organization, it presumably would face prosecution under the Bribery Act. Seems like a reasonable result. Does a third option really need to be created for corporates who do not implement adequate procedures? Also relevant to the analysis and further suggesting that alternative resolution vehicles are not needed in the U.K. is the notion that (Section 7 of the Bribery Act aside) corporate criminal liability in the U.K. requires evidence that a so-called controlling mind of the corporate was involved in the improper conduct.