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Friday Roundup

By on August 6, 2010 in BP, Congressional Activity, Debarment, FCPA Inc., FCPA Investigative Costs, Team Inc., Trinidad, United Kingdom

The former DOJ top cop speaks, Senator Feingold joins the debarment discussion, anything is possible, and a House Resolution focused on BP … it’s all here in the Friday roundup.

Mendelsohn Interview

During the period of the FCPA’s resurgence, Mark Mendelsohn was the public face and voice on FCPA issues at the Department of Justice. In April, he announced his departure and now maintains an FCPA private practice at Paul Weiss. (See here and here for more).

See here for Mendeloshn’s recent interview with The Metropolitan Corporate Counsel as he reflects back on his DOJ tenure and other issues.

Senator Feingold Joins The Debarment Discussion

Earlier this week Senator Russ Feingold (D-WI) testified before the Senate Judiciary Subcommittee on Administrative Oversight and the Courts (see here). The hearing was on the topic of “Protecting the Public Interest: Understanding the Threat of Agency Capture.” He began his testimony by stating that a better job needs to be done to ensure that there are no significant conflicts of interest or other inappropriate ties between regulators and the corporations they purport to regulate.”

He then stated:

“I want to raise a concern that a new, more subtle type of agency capture is beginning to emerge as a result of our increasing reliance on government contractors. The Council of the Inspectors General on Integrity and Efficiency recently reported that the total number of suspensions and debarments in FY 2008 was half the total from five years ago, and that suspensions and debarments had been steadily decreasing over the last five years. This is a disturbing statistic, especially when you consider that the number of contract fraud, Foreign Corrupt Practices Act, and other corruption investigations involving contractors is on the rise.”

For more on debarment issues, including an FCPA debarment bill pending in the House see here and here and here.

Is It Possible?

Is it possible to spend $3.2 million on “professional costs” associated with an internal investigation “limited in size and scope” to a branch office that represents approximately one-half of one percent of the company’s annual consolidated revenues?

Apparently it is.

In January I ran this post about Team Inc. and its voluntary disclosure of less than $50,000 in potentially improper payments in its Trinidad branch.

Earlier this week, when disclosing its financial results, the company stated as follows:

“The results of the FCPA investigation were communicated to the SEC and Department of Justice in May 2010 and the Company is awaiting their response. The results of the independent investigation support management’s belief that any possible violations of the FCPA were limited in size and scope. The total professional costs associated with the investigation were approximately $3.2 million.” (emphasis added).

Exhibit A for how even isolated instances of improper conduct under the FCPA in a branch office can be very expensive or Exhibit A for just how out of whack professional costs associated with an FCPA internal investigation and disclosure have become?

It’s your conclusion to make.

BP House Resolution

This recent post discussed Senator Charles Schumer’s (D-NY) request that the Department of Justice investigate BP for FCPA violations.

On July 30, House Resolution 1597 was introduced. Sponsored by Representative Daniel Maffei (D-NY) and co-sponsored by Representatives Christopher Lee (R-NY) and Michael McMahon (D-NY) the resolution (see here) encourages the United Kingdom to “investigate British Petroleum (BP) for foreign corrupt practices.”

The reason?

The same as offered by Senator Schumer – that BP attempted to influence the August 2009 release of Abdel Baset al-Megrahi, the Libyan terrorist convicted of the 1988 bombing of Pan-Am flight 103 that killed 270 people, including 189 Americans.

The resolution states, in part:

“Whereas the Scottish courts released al-Megrahi from prison on August 20, 2009, under the understanding that he was suffering from terminal prostate cancer;

Whereas the Scottish authorities have never clarified why al-Megrahi could not receive humane treatment while still in captivity;

Whereas al-Megrahi seems to have well outlived his original diagnosis;

Whereas it is very troubling that al-Megrahi received a hero’s welcome to his home country of Libya;

Whereas British Petroleum (BP) admitted on July 15, 2010, that a delayed prisoner-transfer between Britain and Libya ‘could have a negative impact’ on BP’s oil negotiations;

Whereas there are allegations that BP inappropriately attempted to affect the Scottish Government’s decision and possibly even the doctor’s diagnosis; and

Whereas al-Megrahi’s release sends an incredibly offensive message to the families that lost loved ones on Pan Am Flight 103: Now, therefore, be it

Resolved, That the House of Representatives encourages the United Kingdom to investigate British Petroleum (BP) for foreign corrupt practices.”

As I asked in my original post – following Schumer’s (and now Maffei’s) lead will a British politician request that the U.K. Serious Fraud Office or the U.S. government investigate a U.S. company because it lobbied its own government officials in connection with a business purpose?

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A good weekend to all.

Schumer Calls For BP Investigation

By on July 22, 2010 in BP, Congressional Activity, Double Standard, Foreign Issuers, Libya, Lobbying, Opinion Procedure Release, United Kingdom

Senator Charles Schumer (D-NY) has requested a Department of Justice investigation of BP.

It has nothing to do with the Gulf of Mexico, but rather the Foreign Corrupt Practices Act.

BP is British company, but its ADR shares trade on the New York Stock Exchange and BP is thus subject to the FCPA.

In a letter to Attorney General Eric Holder (see here) Schumer requests that the DOJ investigate whether BP violated any of the provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with the August 2009 release of Abdel Baset al-Megrahi, the Libyan terrorist convicted of the 1988 bombing of Pan-Am flight 103 that killed 270 people, including 189 Americans. [This post is limited to a discussion of the FCPA, and not the above referenced release.]

Why does Schumer think BP may have violated the FCPA?

Because, according to Schumer’s letter – “BP has admitted that it lobbied United Kingdom government officials to wrap up a proposed prisoner transfer agreement (PTA) with the Libyan government amid concerns that a delay in reaching this agreement would harm a deal BP had signed with Libya’s National Oil Company to explore for oil and gas in the Gulf of Sidra and in parts of Libya’s western desert—an agreement which BP estimated could lead to eventual earnings of up to $20 billion.”

Hold the phone and stop the presses … a large corporation has admitted that it lobbied its own government in connection with a business purpose.

This would seem to be yet another example of the FCPA’s double standard in that what is routinely done at home suddenly becomes a potential criminal matter when done in connection with international business. For other examples of the double standard see here and here.

Unless there is a finding that something of value went to a foreign official, the FCPA is not implicated because the law does not apply to giving things of value to a foreign government itself. Strange you say, but that is how the FCPA is written – a fact even the DOJ recognizes. See here for DOJ Opinion Procedure Release 09-01 in which the DOJ states that the proposed course of conduct “fall[s] outside the scope of the FCPA in that the [thing of value] will be provided to the foreign government, as opposed to individual government officials …”

Schumer’s letter also states:

“If BP, or its officials, promised the Libyan Government that it would secure al-Megrahi’s release from detention in exchange for oil exploration rights—or even that it would provide lobbying services for such a release on the Libyan Government’s behalf—BP may have been unlawfully authorizing performance of valuable services to the Libyan Government in exchange for profitable oil exploration rights in express violation of the FCPA. Similarly, if BP promised anything of value to United Kingdom government officials to secure al-Megrahi’s release, this would also violate the FCPA.”

According to Schumer’s press release, he and “Senators Gillibrand, Menendez, and Lautenberg last week requested the British government investigate the circumstances surrounding al-Megrahi’s release and requested that BP and the British government turn over all documents related to the oil companies’ efforts lobbying for a prison-release agreement with Libya. They also called for the US State Department to press the British to investigate BP’s involvement in the incident.”

It is unusual for a U.S. politician to call upon DOJ to investigate a foreign-based company (or any company for that matter) for FCPA violations – particularly when the conduct at issue largely centers on conduct between the company and its own government officials.

Although the U.K. Bribery Act is not yet law (see yesterday’s post here), when enacted, it is expected to have a broad jurisdictional scope and apply to certain U.S. companies, just as the FCPA applies to certain U.K. companies.

Following Schumer’s lead will a British politician request that the U.K. Serious Fraud Office investigate a U.S. company because it lobbied its own government officials in connection with a business purpose? As John Gapper, the associate editor and chief business commentator of the U.K. based Financial Times, stated in an editorial on the subject, “the US has been no stranger to dubious deals with foreign governments that benefit both its strategic interests and US companies.”

For more, see here for Christopher Matthew’s Main Justice story on the topic.

UK Anti-Corruption Champion Appointed

By on June 17, 2010 in Serious Fraud Office, United Kingdom

As indicated in this U.K. Ministry of Justice release, Kenneth Clark has been appointed “as the United Kingdom’s new international anti-corruption champion.”

According to the release, Clark’s appointment “demonstrates the coalition government’s clear commitment to transparency and accountability and recognises the significant cost of international corruption to our economy.” The release further notes that Clark “will ensure the effective implementation of the Bribery Act 2010, legislation which will help to achieve the highest in international standards and demonstrates cross-party commitment to the fight against bribery.”

The U.K. Serious Fraud Office has been criticized in recent months for its lack of transparency in resolving corruption matters (see here for more) and many have questioned the U.K.’s commitment to effectively prosecute such cases in light of the BAE bribery, yet no bribery enforcement action (see here, here and here).

Yet with the U.K.’s new Bribery Act, a new era is set to begin.

DOJ Guidance and the FCPA

By on June 10, 2010 in Compliance, DOJ, Enforcement Agency Policy, Guest Posts, Legislative History, United Kingdom

That is the issue addressed by James Parkinson (Mayer Brown – see here) in the below guest post.

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As followers of this blog know well, the UK’s newly-enacted Bribery Act (here) calls for the UK government to “publish guidance about procedures that relevant commercial organisations can put into place to prevent persons associated with them from bribing…” Seeing this provision in the Bribery Act suggests the question whether similar guidance issued by the US government would be helpful.

As it turns out, the US government considered this very question over 20 years ago but declined to offer guidance to companies affected by the FCPA. In the 1988 amendments to the FCPA, Congress added provisions entitled “Guidelines by Attorney General,” which required the following:

“Not later than one year after August 23, 1988, the Attorney General, after consultation with the Commission, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtaining the views of all interested persons through public notice and comment procedures, shall determine to what extent compliance with this section would be enhanced and the business community would be assisted by further clarification of the preceding provisions of this section and may, based on such determination and to the extent necessary and appropriate, issue–

(1) guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice’s present enforcement policy, the Attorney General determines would be in conformance with the preceding provisions of this section; and

(2) general precautionary procedures which issuers may use on a voluntary basis to conform their conduct to the Department of Justice’s present enforcement policy regarding the preceding provisions of this section.

The Attorney General shall issue the guidelines and procedures referred to in the preceding sentence in accordance with the provisions of subchapter II of chapter 5 of Title 5 and those guidelines and procedures shall be subject to the provisions of chapter 7 of that title.”

15 U.S.C. §§ 78dd-1(d), 78dd-2(e).

Following the 1988 mandate, the DOJ issued a formal notice inviting all interested persons “to submit their views concerning the extent to which compliance with 15 U.S.C. 78dd-1 and 78dd-2 would be enhanced and the business community assisted by further clarification of the provisions of the anti-bribery provisions through the issuance of guidelines.” Department of Justice, Anti-Bribery Provisions of the Foreign Corrupt Practices Act, 54 Fed. Reg. 40,918 (Oct. 4, 1989).

What happened?

On July 12, 1990, the DOJ declined to issue guidelines on the anti-corruption provisions of the FCPA, stating:

“After consideration of the comments received, and after consultation with the appropriate agencies, the Attorney General has determined that no guidelines are necessary…. [C]ompliance with the [anti-bribery provisions] would not be enhanced nor would the business community be assisted by further clarification of these provisions through the issuance of guidelines.”

Department of Justice, Anti-Bribery Provisions, 55 Fed. Reg. 28,694 (July 12, 1990).

How many responses did the DOJ receive?

According to the OECD’s Phase I Report on the US implementation of the Convention (at 15), “[o]nly 5 responses were received, and 3 of the responses were to the effect that guidelines were unnecessary.”

This suggests another question: what would the commentary landscape look like today if the DOJ published a new Federal Register notice soliciting “views concerning the extent to which compliance with 15 U.S.C. 78dd-1 and 78dd-2 would be enhanced and the business community assisted by further clarification of the provisions of the anti-bribery provisions through the issuance of guidelines”?

Given the rise in enforcement activity and the focus companies now bring to compliance, it seems very likely that far more than five people would submit comments.

Friday Roundup

By on June 4, 2010 in Deferred Prosecution Agreements, Guest Posts, Haiti, Monitor, Non-Prosecution Agreement, United Kingdom, Universal Corporation

A “foreign official” headed to prison, more on monitors, the language of bribery, more pre-enforcement action news, and perspectives from the field.

It’s all here in the Friday roundup.

Haitian “Foreign Official” Headed to U.S. Prison

Numerous prior posts (see here, here, and here) have covered the FCPA and FCPA-related enforcement action involving Telecommunications D’Haiti (“Haiti Teleco”).

The action was noteworthy because it involved “foreign officials.” Because the Foreign Corrupt Practices Act only applies to bribe givers and not bribe recipients, the charges were not FCPA charges, but rather a money laundering conspiracy charge.

Earlier this week, Robert Antoine (a former Director of International Relations of Haiti Teleco responsible for negotiating contracts with international telecommunications companies on behalf of Haiti Teleco), was sentenced to four years in prison. In addition, Antoine was ordered to serve three years of supervised release following his prison term, ordered to pay $1,852,209 in restitution, and ordered to forfeit $1,580,771. (See here for the DOJ release).

Certain of the indicted defendants, including “foreign official” Jean Rene Duperval, have not pleaded and the DOJ release notes that “trial for these remaining defendants is scheduled to begin July 19, 2010, in U.S. District Court in Miami.”

Additional Guidance on the Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements

Most corporate FCPA enforcement actions involve deferred prosecution or non-prosecution agreements. Many of these agreements require the appointment of a compliance monitor.

Thus, most FCPA aficionados are familiar with the “Morford Memo” – the March 2008 DOJ guidance “relating to the use of independent corporate monitors in connection with deferred prosecution agreements and non-prosecution agreements with corporations.” The Morford Memo (see here) sets forth nine basic principles for
drafting monitor-related provisions in such agreements.

Recently Acting Deputy Attorney General Gary Grindler issued a memo (see here) “to supplement the guidance in the Morford Memorandum by adding a tenth basic principle to guide prosecutors in drafting agreements: namely, that an agreement should explain what role the Department could play in resolving any disputes between the monitor and the corporation, given the facts and circumstances of the case.”

The Language of Bribery

The FCPA is a serious topic.

But that doesn’t mean an FCPA article can’t be informative and entertaining at the same time.

Case in point, “A Bribe By Any Other Name” by James Tillen and Sonia Delman (Miller & Chevalier) (see here).

Don’t understand the significance of “moon cakes,” “rice cake expenses” or “black mist?”

You probably should.

As the authors note, “[w]hen an expatriate manager does not recognize that a subordinate is seeking reimbursement for a bribe disguised by a code word or when auditors miss a suspect transaction concealed behind a local idiom, the employees themselves and the company as a whole are at serious risk of running afoul of anti-bribery laws.”

The article concludes with a “few simple steps” companies can take to incorporate the language of bribery into compliance training and policies.

The Flood of Pre-Enforcement Action News Continues

One of these days, the FCPA dam is going to burst because the surge of pre-enforcement action news continues.

Among others in the “stay-tuned” category are: Alcatel-Lucent, Technip, Panalpina, Pfizer and Johnson & Johnson.

Add to the list Universal Corporation, “the world’s leading leaf tobacco merchant and processor.” (see here).

The company’s recent 10-K (see here) notes as follows:

“As a result of a posting to our Ethics Complaint hotline alleging improper activities that involved or related to certain of our tobacco subsidiaries, the Audit Committee of our Board of Directors engaged an outside law firm to conduct an investigation of the alleged activities. That investigation revealed that there have been payments that may have violated the U.S. Foreign Corrupt Practices Act. The payments approximated $2 million over a seven-year period. In addition, the investigation revealed activities in foreign jurisdictions that may have violated the competition laws of such jurisdictions, but we believe those activities did not violate U.S. antitrust laws. We voluntarily reported these activities to the Department of Justice (“DOJ”) and the SEC in March 2006. On June 6, 2006, the SEC notified us that a formal order of investigation had been issued.

Since voluntarily reporting, we have cooperated with and assisted the DOJ and SEC in their investigations, and for the past year we have engaged in settlement discussions with both authorities to resolve the matter. Those negotiations have resulted in agreements in principle being reached with representatives of the DOJ and the staff of the SEC. The final resolution of this matter remains subject to the completion of definitive agreements and the approval and execution of those agreements by the DOJ and the SEC. In addition, each settlement is subject to the approval of a federal district court with jurisdiction over the matter. We have been given no assurance that the settlements will be approved by the DOJ, SEC, or federal district courts. Based on the agreements in principle that have been reached to date, the resolution of this matter with the DOJ and the SEC is expected to include injunctive relief, disgorgement and prejudgment interest, fines, penalties, and the retention of an independent compliance monitor. Based in part on the progress of the matter and consultation with outside counsel, we have recorded accruals from time to time since the matter arose that are adequate to satisfy the estimated financial settlement we expect with the resolution of the matter. The financial settlement is not expected to have a material effect on our financial condition or results of operations.”

Incidentally, on the same day, Universal issued a press release announcing record annual earnings (see here).

U.K. Bribery Bill – Perspectives from the Conference Circuit

Michael Osajda (see here) is an attorney and business ethics consultant. He frequently writes and speaks on FCPA issues, including for World-Check (see here).

In the below guest post, Osajda offers perspectives from recent presentations in Singapore and Hong Kong attended by over 120 business professionals and attorneys.

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“My presentation compared and contrasted the FCPA and the U.K. Bribery Act. I spoke of the different bases for the two statutes, the FCPA being a product of a unique post Watergate cloture and a significant Cold War foreign policy element and the Bribery Act, a product of legislative efficiency and the need for the UK to comply with the OECD convention. The new offenses of foreign private bribery and failure to prevent bribery were stressed.

Like many commentators, the attendees were nervous about the SFO’s stated use of prosecutorial discretion to address issues such as facilitation payments and the appropriateness of business expenses. Attendees were concerned that SFO statements that it does not intend to shut down business and that it will look reasonably at facilitation payments, especially in circumstances that appear to be coercion that can be given to the field. These issues may be a mine filed until some pattern of prosecution or abstention is established. Another concern of attendees was the new strict liability offense of failure to prevent bribery. The attendees were interested as to the elements of “adequate procedures.” While the Sentencing Guidelines, the Woolf Report and OECD guidance are good starts, we will all wait for the guidance to come from the UK Secretary of State on the components of “adequate procedures”.

All in all this Asia trip underscores the world-wide interest of multinationals, whatever their home jurisdictions, to the issue of corruption. All understand that the landscape is changing and are interested in doing the right thing.”

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Also, Trace recently conducted a symposium in London “attended by over 60 company representatives and featuring speakers from government, the private bar and in-house legal and compliance departments.” For insight into what was on the minds of program participants see here.

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