Informative Reads
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The quality of FCPA resources continues to impress. Three law firm periodic publications I make sure to put on my reading stack are those authored by Gibson Dunn & Crutcher, Shearman & Sterling, and Miller & Chevalier.
Gibson Dunn’s “2011 Year-End FCPA Update” (here) begins as follows. “2011 marked yet another dynamic year for the Foreign Corrupt Practices Act, including numerous significant enforcement actions, more trials than in any other year in the history of the statute, and a growing public debate about the policy ramifications of a U.S.-dominated international anti-corruption enforcement field. Those close to the statute can feel the unmatched pace at which the 34-year-old law is now developing. With more litigated decisions, more bills pending in Congress, and more interplay between the FCPA and other international laws prohibiting cross-border bribery, there is a growing sense of urgency amongst FCPA practitioners as to the direction the statute will take in the coming years. […] There can be no dispute about it–these are interesting times for the FCPA.” The Update concludes as follows. “Perhaps the most intriguing current development in the FCPA is that everything that made 2011 such a fascinating year promises only to increase in the years to come, as there will only be more litigation, more legislation, and more international coordination in the near future. Companies and their executives doing business in an increasingly global marketplace are well advised to stay abreast of these developments.” Sandwiched between is much useful information and analysis sure to be of interest to readers.
Gibson Dunn also released (here) its annual update on corporate deferred prosecution and non-prosecution agreements. According to the report, the DOJ and SEC entered into 29 NPAs/DPAs in 2011. Such vehicles were used in FCPA enforcement actions (DOJ or SEC) 11 times – approximately 40% of the total.
Shearman & Sterling’s “Recent Trends and Patterns in the Enforcement of the FCPA” (here) always impresses. The latest edition begins as follows. “Although the pace of new FCPA enforcement actions was somewhat off in 2011 – only sixteen corporate cases and eighteen new individual defendants – 2011 was nevertheless an eventful year for FCPA enforcement and indeed for enforcement of other countries’ similar laws. Among the highlights: defendants took the government to trial in a number of FCPA matters, with mixed results reflecting the difficulty and uncertainty of proving foreign bribery beyond a reasonable doubt; judges in multiple districts largely adopted the government’s expansive interpretation of what constitutes an “instrumentality” of a foreign government, including state-owned entities indirectly controlled by a foreign government; the DOJ and the SEC continued their focus on prosecution of individuals; the U.S. enforcement authorities brought fewer cases in 2011 against non-U.S. companies; despite claims that the government extracted exorbitant fines in FCPA matters, the average penalty continued to be less than $25 million; the DOJ and the SEC almost completely withdrew from their prior practice of routinely requiring an independent monitor in all cases and demonstrated a willingness to accept various forms of self-monitoring; with the advent of the U.K.’s Bribery Act, the British government offered considerable guidance on compliance and began exploring ways of encouraging voluntary disclosures and cooperation by emulating the U.S. system of deferred prosecution agreements.”
Shearman & Sterling publications are always strong on jurisdictional issues and its most recent “Trends and Patterns” states as follows regarding the Magyar Telekom enforcement action (see here for the prior post). “The year ended with an entirely new expansion of what constitutes territorial acts. In Magyar Telekom, the DOJ’s sole claim to anti-bribery jurisdiction (but not to books and records jurisdiction) was based on a foreign official’s “U.S.-based email address,” whereby email was “passed through, stored on, and transmitted from servers located in the U.S.” This is a particularly weak jurisdictional basis, given that this one count resulted in a Sentencing Guidelines calculation of eight times what the company would have had to pay under just the books and records provisions.”
Shearman & Sterling’s FCPA Digest (here), at 692 pages, is as complete of an FCPA source as you will find.
Last, but certainly not least, is Miller & Chevalier’s FCPA Winter Review 2012 (here). Complete with charts and graphs, it is a comprehensive resource on the latest developments in the following areas: enforcement actions against companies and individuals; FCPA-related private litigation; domestic legislative and U.S. enforcement agency developments; as well as international developments.
If you have not yet had the opportunity to read the above three publications, you should, it will be time well spent.
What You Need To Know From Q4
This post provides a summary of FCPA enforcement actions and FCPA related events from fourth quarter of 2011. For similar posts regarding Q1, Q2 and Q3 of 2011 – see here, here and here.
As to enforcement actions, this post covers DOJ and SEC enforcement separately and only covers corporate enforcement actions initiated and resolved during the fourth quarter. Thus, for example, the indictment of former Siemens executives and agents (see here for the prior post) is not profiled below.
DOJ Enforcement
The DOJ resolved two FCPA enforcement action in fourth quarter. Total DOJ recovery in these enforcement actions was approximately $65.7 million.
Magyar Telekom / Deutsche Telekom (Dec. 29th)
See here for the prior post.
Charges: Magyar Telekom – FCPA anti-bribery and books and records charges; Deutsche Telekom – N/A
Resolution Vehicle: Magyar Telekom – DPA – term two years; Deutsche Telekom – NPA – term two years.
Guidelines Range: Magyar Telekom – $72.5 million – $145 million; Deutsche Telekom – not set forth in the NPA.
Penalty: Magyar Telekom – $59.6 million (18% below the minimum Guidelines range); Deutsche Telekom – $4.4 million
Disclosure: Yes, voluntary disclosure.
Monitor: No.
Individuals Charged: No.
Aon Corp. (Dec. 20th)
See here for the prior post.
Charges: N/A although the NPA refers to Aon’s knowing violation of the anti-bribery, books and records, and internal controls provisions.
Resolution Vehicle: NPA – term two years.
Guidelines Range: Not set forth in the NPA.
Penalty: $1.8 million.
Disclosure: Aon’s SEC filings stated that “following inquiries from regulators, the Company commenced an internal review of its compliance with certain U.S. and non-U.S. anti-corruption laws, including the U.S. Foreign Corrupt Practices Act.”
Monitor: No.
Individuals Charged: No.
SEC Enforcement
The SEC resolved three FCPA enforcement actions in the third quarter. Total recovery in these enforcement actions was $49.5 million.
Magyar Telekom / Deutsche Telekom (Dec. 29th)
See here for the prior post.
Charges: Settled civil complaint charging FCPA anti-bribery and books and records and internal controls violations.
Settlement: $31.2 million in disgorgement and pre-judgement interest.
Disclosure: Yes, voluntary disclosure.
Individuals Charged: Yes.
Related DOJ Enforcement Action: Yes.
Aon Corp. (Dec. 20th)
See here the prior post.
Charges: Settled civil complaint charging FCPA books and records and internal controls violations.
Settlement: Approximately $14.5 million (disgorgement of $11,416,814 and prejudgment interest of $3,128,206).
Disclosure: Aon’s SEC filings stated that “following inquiries from regulators, the Company commenced an internal review of its compliance with certain U.S. and non-U.S. anti-corruption laws, including the U.S. Foreign Corrupt Practices Act.”
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
Watts Water Technologies (Oct. 13th)
See here for the prior post.
Charges: None. SEC administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.
Settlement: $3.8 million ($2.8 million in disgorgement, $820,000 in prejudgment interest and a $200,000 civil monetary penalty).
Disclosure: Yes, voluntary disclosure.
Individuals Charged: Yes.
Related DOJ Enforcement Action: No.
Other Events
Lindsey Verdicts Tossed
As detailed in this prior post, on December 1st, Judge Howard Matz (C.D. of Cal.), after months of legal wrangling, vacated the convictions and dismissed the indictment against Lindsey Manufacturing and its President (Keith Lindsey) and CFO (Steven Lee) after finding numerous instances of prosecutorial misconduct. On one level, Judge Matz’s ruling would seem to have little impact on FCPA enforcement; after all, prosecutorial misconduct motions focus on specific actions by specific actors. Yet it seems clear that Judge Matz’s decision was based in part on the quality of the DOJ’s case in the first instance. Whatever impact Judge Matz’s decision will have on FCPA enforcement, this much is clear: the DOJ is now 0-2 in corporate criminal prosecutions.
Second Circuit Bourke Decision
As detailed in this prior post, on December 14th, the Second Circuit Court of Appeals affirmed Frederic Bourke’s 2009 conviction of conspiring to violate the FCPA and the Travel Act and of making false statements. The Bourke case was arguably the most complex and convoluted case in the history of the FCPA and focused on the conduct of Bourke and others – including most notably Viktor Kozeny – in a bribery scheme connected to the privatization of the Azerbaijan state-owned oil company, SOCAR. The legal issues largely focused on the FCPA’s knowledge element and whether Bourke, as an investor, had sufficient knowledge of the bribery scheme. In principal part, the Second Circuit held that Bourke enabled himself to participate in a bribery scheme without acquiring actual knowledge of the specific conduct at issue and that such conscious avoidance, even if supported primarily by circumstantial evidence, is sufficient to warrant FCPA-related charges. Soon after the Second Circuit’s decision, Judge Scheindin (S.D.N.Y.) denied Bourke’s request for a new trial and ordered Bourke to begin serving his 366 day sentence in January 2012.
FCPA Reform Related Issues
There was much activity in Q4 as to FCPA reform (broadly speaking). As detailed in this prior post, in December the International Business Transactions Committee of the Association of the Bar of the City of New York released a report titled “The FCPA and its Impact on International Business Transactions – Should Anything Be Done to Minimize the Consequences of the U.S.’s Unique Position on Combating Offshore Corruption?” As detailed in this prior post, the American Bar Association is also pondering FCPA reform.
As detailed in this prior post, in November Assistant Attorney General Lanny Breuer announced before an FCPA audience that in 2012 the DOJ hopes to “release detailed new guidance on the [FCPA’s] criminal and civil enforcement provisions.” While a welcome development, the DOJ’s promise of FCPA guidance in 2012 will not cure many of the issues that are being debated during this new era of FCPA enforcement. DOJ’s guidance is likely to be little more than a compilation in one document of information that is already in the public domain for those who know where to look.
As to bills actually introduced in Congress, as detailed in this prior post, in December Representative Peter Welch (D-VT) and Representative Jason Chaffetz (R-Utah) introduced the “Overseas Contractor Reform Act.” The bill is a revised version of the impotent legislation Welch previously introduced in May 2010 and that unanimously passed the House in September 2010. The bill states that “it is the policy of the United States Government that no Government contracts or grants should be awarded to individuals or companies who violate the FCPA after the date of the enactment of this Act.” This is a sound policy statement, however, the problem with the bill, as with the previous bill, is its trigger for debarment – “any person found to be in violation of the [FCPA – defined to include only the FCPA’s antibribery provisions] shall be proposed for debarment from any contract or grant awarded by the Federal Government within 30 days after the judgment finding such person to be in violation becomes final.” As strange as it may sound, in this “new era” of FCPA enforcement or this “facade era” of FCPA enforcement if you prefer (see here) few companies are actually ever “found to be in violation of the FCPA.”
As detailed in this prior post, in November Representative Ed Perlmutter (D-CO) introduced the “Foreign Business Bribery Prohibition Act of 2011.” The bill is similar to other bills Perlmutter introduced in the past and would “authorize certain private rights of action under the [FCPA] for violations by foreign concerns that damage domestic business.” However, the bill would have limited application as it seeks to amend only the 78dd-3 prong of the FCPA because a foreign concern can only violate the FCPA “while in the territory of the U.S.”
Record-Setting Sentence
As detailed in this prior post, on October 25th in the Southern District of Florida (a district quickly earning the distinction of handing out the toughest FCPA sentences in the country), Judge Jose Martinez sentenced Joel Esquenazi to a record-setting 15 years . The previous record for an FCPA sentence was in April 2010 when Charles Jumet was sentenced to a then record 7.25 years.
The Year That Was
Thank you for making FCPA Professor a part of your day in 2011. Whether you are an everyday reader (256 posts in 2011) or an occassional visitor, your readership is appreciated.
Today’s post links to the thoughts of others as to the year that was. In this post, Thomas Fox (FCPA Compliance and Ethic Blog) has a “Top 10 FCPA Enforcement Actions for 2011 in the Corporate Division.” In this post, Michael Volkov (Corruption, Crime, and Compliance) has a “Top Ten FCPA Events in 2011.” In this post, Richard Cassin (FCPA Blog) has a “Top Stories of 2011.”
The FCPA again picked up plenty of Collar Awards from the White Collar Crime Prof Blog – here. The Collar for the Gun Used Most Often in Corporate Hold-ups – The Foreign Corrupt Practices Act.(two years in a row). The Collar for the Least Likely to Survive– A FCPA case that goes to trial. The Collar for Recidivism– to the Department of Justice’s Fraud Section for Lindsey Manufacturing. The Collar for Most Qualified Judge for American Idol – Tie – Hon. Howard Matz for voting off Lindsey Manufacturing.
I will be doing several year in review posts in the coming days, but for the time being, I was pleased to participate in the Wall Street Journal Corruption Currents year-end roundup – see here. My responses were as follows.
What will be the biggest corruption story of 2012?
Difficult to predict of course, but in 2012 I see a continuation, and indeed an escalation, of scrutiny of the FCPA and FCPA enforcement. What is the purpose of the FCPA? Does the current enforcement landscape best advance that purpose? If not, is it the enforcement approach that needs re-visiting rather than the statute itself? If the statute itself, what reform is needed? These are all valid and legitimate questions that should continue to be asked. 2012 will be an important year in the FCPA’s history.
What was the biggest surprise of 2011?
The following issue received scant attention, but it still causes me to scratch my head. In September, Innospec settled a civil lawsuit brought by a competitor based on the same core set of conduct alleged in the 2010 FCPA enforcement action. In the 2010 enforcement action, Innospec received a pass on approximately $135 million in fines and penalties based on its claimed inability to pay—a claim the enforcement agencies accepted. Yet in September, Innospec agreed to resolve the civil suit by paying the competitor, in the aggregate, approximately $45 million (including an immediate $25 million payment). It sure seems like the enforcement agencies were duped. (See here for the prior post).
*****
I look forward to your readership in 2012. If you want to make your voice heard in the new year and have something novel, candid or interesting to say about the FCPA or related issues, please consider a guest post.
Happy Birthday!
I was born in 1977. Yet for most of my life, nobody cared or talked much about me. However, about eight years ago, my caretakers suggested that I change my look (get a new haircut, change my wardrobe, those sort of things). Boy did that help.
In some circles at least, I am now the most popular person in town. Indeed, I recently read (see here) that I am one of the top legal concerns of general counsel. There are now numerous seminars and training sessions about me. In fact an entire industry of lawyers, accountants, and other business and compliance professionals have sprung up devoted to just me! I even hear (see here) you can now buy insurance to protect against the high costs of investigating whether I am relevant. I even hear there are a few websites devoted to me. As you can see, it is a good time to be me.
Lawyers travel to the far reaches of the globe just to determine if I am relevant. Corporations publicly disclose potential dates with me. and lawyers run to Washington D.C. (my birthplace) to tell my caretakers how relevant I am (when I may not be relevant at all).
Yet, I am relevant. What could be more relevant that being the reason for some individuals eating breakfast this morning in federal prison?
Who am I?
Why of course I am the FCPA and today is my 34rd birthday!
There is much that happened during my 33rd year. I gained brothers and sisters around the world and my closest sibling, after a long gestation period, was finally born – he is both taller than me, yet at the same time shorter than me. I didn’t expect to receive worldwide media attention this past summer, but I guess when I am mentioned in the same sentence as a media company owned by a politically divisive figure, well, that just sort of happens. I continue, in some instances, to be misapplied and misunderstood, but at least this past year some of that misapplication was by individuals in black robes. In the past, I didn’t have many dates with those black robes people. This past year, other people didn’t like it when my caretakers made up a scheme so that I would be relevant. My parents never intended me to be an all-purpose corporate ethics statute, but that is what I am becoming. Speaking of the parents, they continue to examine my application and have suggested reforming me. Who knows, next year at this time I may look and feel a bit different.
*****
On December 19, 1977, the FCPA was enacted. On December 20, 1977, President Carter signed the FCPA into law.
Hosting an FCPA birthday party?
Here is the signing statement to read just before the candles are placed on the cake. After cake, instead of a game of “pin the cash-filled suitcase on the foreign official” how about a discussion as to whether the enacting Congress and President Carter would recognize certain enforcement theories which have become a hallmark of current enforcement environment. After that, if guests remain, how about an FCPA reform discussion, this is sure to liven the party.
What You Need To Know From Q3
This post provides a summary of FCPA enforcement actions and FCPA related events from the third quarter of 2011. For a similar post regarding Q1 and Q2 of 2011 – see here and here.
As to enforcement actions, this post covers DOJ and SEC enforcement separately and only covers enforcement actions initiated and resolved during the third quarter of 2011. For a summary of other indictments, guilty pleas and sentences during the third quarter see here – the FCPA Blog’s Q3 Enforcement Report.
DOJ Enforcement
The DOJ resolved two FCPA enforcement actions in the third quarter. Total DOJ recovery in these enforcement actions was approximately $32 million (this figure apportions approximately 80% of Bridgestone’s $28 million fine to FCPA conduct – see below). Both of the enforcement actions were based on voluntary disclosures.
Year to date, the DOJ has resolved eight FCPA enforcement actions. Total DOJ recovery year to date has been approximately $289 million (same Bridgestone estimate as above). All of the enforcement actions have been based on voluntary disclosures or (in the case of JGC of Japan) disclosure based on a previous foreign law enforcement investigation. Only two enforcement actions (Bridgestone – Misao Hioki) and Armor Holdings – Richard Bistrong) have resulted, at present, in related individual prosecutions of company employees.
Bridgestone (Sept. 15th)
See here for the prior post.
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions (and conspiracy to violate the Sherman Act).
Resolution Vehicle: Criminal information resolved via a plea agreement.
Guidelines Range: For the FCPA conduct, the guidelines range (see here) was approximately $40 million – $80 million.
Penalty: $28 million (it would appear that approximately 80% of this figure – approximately $22 million was based on the FCPA conduct)
Disclosure: Yes, voluntary disclosure.
Monitor: No.
Individuals Charged: Yes.
Armor Holdings (July 13th)
See here for the prior post.
Charges: None
Resolution Vehicle: Non-Prosecution Agreement – term two years.
Guidelines Range: Not set forth in the NPA.
Penalty: $10.3 million
Disclosure: Yes, voluntary disclosure.
Monitor: No (although Armor Holdings is now part of BAE and falls under the monitorship in the BAE FCPA-related enforcement action).
Individuals Charged: Yes.
SEC Enforcement
The SEC resolved two FCPA enforcement actions in the third quarter. Total recovery in these enforcement actions was $22.1 million. Of the $22.1 million, $17 million (77%) has been disgorgment and prejudgment interest. Both of the enforcement actions were based on voluntary disclosure.
Year to date, the SEC has resolved eleven FCPA enforcement actions. Total recovery year to date has been $98.4 million. Of the $98.4 million, $90.8 million (92%) has been disgorgment and prejudgment interest. All of the corporate enforcement actions have been based on voluntary disclosures.
Diageo (July 27th)
See here for the prior post.
Charges: Settled civil complaint charging FCPA books and records and internal controls violations.
Settlement: Approximately $16.4 million (approximately $11.3 million in disgorgment, approximately 2.1 million in prejudgment interest; and a $3 million civil penalty)
Disclosure: Yes, voluntary disclosure and/or based on previous foreign law enforcement investigation.
Individuals Charged: No.
Related DOJ Enforcement Action: No.
Armor Holdings (July 13th)
See here for the prior post.
Charges: Settled civil complaint charging FCPA anti-bribery, books and records and internal controls violations.
Settlement: approximately $5.7 million (approximately $1.5 million in disgorgment; $458,000 in prejudgment interest; and a $3.7 million civil penalty)
Disclosure: Yes, voluntary disclosure.
Individuals Charged: No.
Related DOJ Enforcement Action: Yes.
Other Events
News Corp. Scrutiny
July witnessed the most intense worldwide media coverage of the FCPA in its nearly 35 year history. As detailed in this prior post, one aspect of the News Corporation scandal implicated the FCPA given allegations of payments to U.K. police officers. Major newspapers dissected FCPA details (see here) and some made the senseless assertion that the First Amendment makes an FCPA inquiry of News Corporation “inappropriate.” (See here). While there would appear to be a firm foundation for a News Corp. FCPA inquiry based on the enforcement agencies’ theories of enforcement, what the News Corp. inquiry has accomplished, perhaps more than any other FCPA event in recent history, is to focus attention on the enforcement theories common in this new era of FCPA enforcement. That focus is a good thing and it is in the public interest for that focus to continue as the New Corp. FCPA inquiry develops over the coming months – and likely – years.
Africa Sting Mistrial
In January 2010, a new type of DOJ FCPA enforcement action was unveiled. While not the first use of undercover techniques in an FCPA enforcement action, the new type of case was certainly the largest and most dramatic use of pro-active, undercover investigative techniques in the FCPA’s history. In announcing the indictments in the Africa Sting case, Assistant Attorney General Lanny Breuer called the action a “turning point.”
On July 7th, in the first Africa Sting trial involving defendants Andrew Bigelow, Pankesh Patel, John Benson Weir, Judge Richard Leon declared a mistrial in the DOJ’s “turning point” prosecution. Before the mistrial, Judge Leon also dismissed a substantive FCPA count as to Patel (see here for the prior post) and dismissed a money laundering count as to all defendants. As detailed here, the second Africa Sting trial began last week.
Bribery Act Finally Goes Live
With much hype preceding it, on July 1st the U.K. Bribery Act finally went live. While there has been one enforcement action under the Bribery Act’s domestic bribery provisions (see here), to date there has not been a foreign bribery prosecution. However, this is not surprising and of little significance. The Bribery Act only applies to conduct occurring after July 1st and, as with any new law, there is likely to be a learning phase for both the enforcement agencies and those subject to the law. Thus, it very well may be the case that there are no enforcement actions for some time (recognizing that it often takes a few years from beginning of an inquiry to resolution of an action).