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Criminal Internal Controls Charges Against Individuals

Criminal Law

Pardon me for being that guy, but in the Foreign Corrupt Practices Act space someone needs to put on the stripes every now and then and blow the whistle on certain commentary.

Another statement (see here for a similar prior post) from Michael Volkov’s Corruption, Crime & Compliance has left me scratching my head and thinking to myself “you gotta be kidding me.” In the post, Volkov writes: “If you follow my blog, you know that I have often predicted that DOJ will eventually prosecute criminally an individual for circumventing internal controls. The implications of such a prosecution will be significant.”


As highlighted in this post, the DOJ has already criminally prosecuted several individuals for circumventing internal controls.

Individuals Associated With Siemens

As highlighted in this previous post, in 2011 the DOJ criminally charged 8 former employees or agents of Siemens with FCPA (and other) offenses. The first words of the DOJ’s indictment states in bold language as follows.


(Conspiracy to Commit Bribery, Falsify Corporate Books and Records, Circumvent Internal Controls, and Commit Fraud)

In summary fashion, the indictment alleges:

“It further was a part and an obj ect of the conspiracy that Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Berhard Reichert, Stephan Singer, Carlos Sergi, Miguel Czysch, the defendants, and co-conspirators known and unknown, would and did knowingly and willfully circumvent a system of internal accounting controls sufficient to provide reasonable assurances that transactions were recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and any other criteria applicable to such statements, and to maintain accountability for assets at Siemens AG, an issuer of securities registered pursuant to the Securities and Exchange Act of 1934, in violation of Title 15, United States Code, Sections 78m(b) (2) (B), 78m(b) (5) and 78ff (a).”

Garth Peterson

As highlighted in this previous post, in 2012 the DOJ criminally charged Garth Peterson, a former managing director for Morgan Stanley’s real estate business in China, with “conspiring to evade internal accounting controls that Morgan Stanley was required to maintain under the FCPA.”

The DOJ’s information contains the heading “Peterson’s Efforts to Evade Morgan Stanley’s Internal Controls,” and states in big bold letters:


(18 U.S.C. 371)

In summary fashion, the information alleges:

“In or about and between October 2004 and December 2007, within the Southern District of New York and elsewhere, the defendant Garth Peterson, together with others, did knowingly and willfully conspire to circumvent the system of internal accounting controls of Morgan Stanley and Morgan Stanley Real Estate, contrary to Title 15, United States Code, Sections 78m (b) (5) and 78ff (a).”

The headline of the DOJ’s press release stated in bold letters: “Former Morgan Stanley Director Pleads Guilty for Role in Evading Internal Controls Required by FCPA” and the first sentence states: “a former managing director for Morgan Stanley’s real estate business in China pleaded guilty today for his role in a conspiracy to evade the company’s internal accounting controls.”

In the DOJ’s release, then Assistant Attorney General Lanny Breuer stated:

“Mr. Peterson admitted today that he actively sought to evade Morgan Stanley’s internal controls in an effort to enrich himself and a Chinese government official. As a managing director for Morgan Stanley, he had an obligation to adhere to the company’s internal controls; instead, he lied and cheated his way to personal profit.  Because of his corrupt conduct, he now faces the prospect of prison time.”

Then U.S. Attorney Loretta Lynch stated:

“This defendant used a web of deceit to thwart Morgan Stanley’s efforts to maintain adequate controls designed to prevent corruption.  Despite years of training, he circumvented those controls for personal enrichment. We take seriously our role in detecting and prosecuting efforts to evade those controls.”

Alan Riedo

As highlighted in this previous post, the DOJ criminally charged Alain Riedo (a Swiss citizen who was a Vice President and General Manager of Maxwell Technologies S.A. and a Senior Vice President and officer of Maxwell Technologies) with conspiracy and substantive violations of the FCPA’s anti-bribery provisions, books and records and internal controls provisions.

Count 9 of the DOJ’s indictment is titled “Circumvention of Required Internal Accounting Controls”  and alleges in pertinent part:

“… Alain Reido, being an officer, employee, stockholder, and agent of Maxwell, which was an issuer organized under the laws of the U.S., knowingly and willfully, directly and indirectly, circumvented and caused to be circumvented a system of internal accounting controls …”

In  short, the FCPA space does not need predictions about whether “the DOJ will eventually prosecute criminally an individual for circumventing internal controls.”

As summarized in this post and previously highlighted in prior FCPA Professor posts, the DOJ has already criminally prosecuted several individuals for circumventing internal controls.

And the “implications” of such prosecutions really weren’t that “significant.”

When writing a post about internal controls, you would hope that the least an FCPA commentator could do is have some internal controls (perhaps some basic research) before hitting the publish button.

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