Siemens delists, former Siemens execs fail to show up, quotable, to FCPA Inc. and for the reading stack. It’s all here in the Friday roundup.
Siemens to Delist ADRs
The record-setting 2008 FCPA enforcement action against Siemens A.G. was primarily based on the fact that the company had its shares listed on a U.S. exchange and was thus subject to the FCPA’s books and records and internal controls provisions. (Note: Siemens AG itself was not charged with FCPA anti-bribery violations).
I doubt – six years after the fact – that there is a cause and effect relationship here, but it is interesting nevertheless to note that last week Siemens announced that “it is planning to delist its American Depositary Receipts (ADR) from the New York Stock Exchange (NYSE).” The company further announced that “Siemens intends to terminate its reporting obligations (deregistration) to the American Securities and Exchange Commission (SEC).” As stated in the release:
“The goal of the delisting and deregistration is to address the change in the behavior of its investors. As a consequence processes of financial reporting are simplified and efficiency is improved. The trading of Siemens shares is nowadays conducted predominantly in Germany and via electronic trading platforms (‘over-the-counter’). Trading volume of Siemens shares in the USA is low, amounting to significantly less than 5% of its global trading volume in the year 2013.”
A delisting of course does not remove Siemens from the reach of the FCPA. There still is the 78dd-3 prong of the FCPA, but the jurisdictional reach of it is the most restrictive found in the FCPA.
For a moment, let’s just pretend that Siemens delisting was related, in some way, to the FCPA. If so, is this a good thing or a negative impact of the DOJ and SEC’s expansive jurisdictional theories of FCPA liability against foreign actors?
For instance, as noted in this 2010 post, approximately one month after Daimler resolved its FCPA enforcement action it decided – after 17 years on being on the NYSE to delist from the exchange. (See here for more).
Former Siemens Execs
One way for the SEC to win its FCPA cases is when the defendants do not show up.
As highlighted here, in December 2011 the SEC filed a civil lawsuit against former Siemens executives Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Stephan Signer, Carlos Sergi, and Bernd Regendantz. The complaint was based on conduct concerning the Argentine prong of the 2008 Siemens enforcement action.
On the same day the enforcement action was announced, Regendatz agreed to resolve the enforcement action. As noted in the SEC release, Regendatz “paid a €30,000 administrative fine ordered by the Munich prosecutor (equivalent to $40,000 in U.S. dollars).”
As highlighted in this prior post, when put to its burden by Steffen, Judge Shira Scheindlin dismissed the SEC’s complaint in February 2013 for lack of personal jurisdiction (an initial threshold issue not unique to the FCPA).
As noted in this prior post, in April 2013 Uriel Sharef agreed to resolve the enforcement action by paying a $275,000 civil penalty. (See here).
The SEC voluntarily dismissed its claims against Carlos Sergi in October 2013.
Earlier this week, on February 3rd, Truppel consented to a final judgment in which he agreed to pay a $80,000 civil penalty.
Also earlier this week, on February 4th, Judge Scheindlin entered a default judgment as to Bock and Signer. As part of the order, Bock was ordered to pay $937,957 (a $524,000 civil penalty, $316,452 in disgorgement, plus prejudgment interest of $97,505) and Signer was ordered to pay a $524,000 civil penalty. The Bock and Signer settlement amounts rank first and third in terms of individual SEC FCPA settlements amounts with Ousama Naaman (approximately $877,000) ranking second.
The burning question of course is whether the SEC would have prevailed against Truppel, Bock and Signer if put to its burden of proof. Like in Steffen, there would no doubt have been an initial threshold issue of personal jurisdiction before turning to FCPA specific jurisdictional issues.
The relevant jurisdictional allegations against Truppel were as follows.
“Truppel participated in meetings in Miami, Florida, and New York, NY, in which bribes to Argentine officials were negotiated and promised. He caused Siemens to pay, and promise to pay, millions of dollars in bribes in an effort to retain the DNI Contract. Some ofthe bribes were paid via bank accounts in the United States.”
The relevant jurisdiction allegations against Bock were as follows.
“Bock participated in a meeting in Miami, Florida, at which bribes to Argentine officials were negotiated and promised. Bock also provided false testimony in two arbitration proceedings, one of which was filed in Washington, D.C., in an effort to conceal Siemens’ corrupt payments and recover its expected profits from the DNI Contract.”
The relevant jurisdictional allegations against Signer were as follows.
“Signer authorized the payment of bribes to government officials in Argentina. Some of the bribes were paid to bank accounts in the United States.”
As noted here OECD Secretary General Angel Gurria warned that the bribery of foreign public officials by businesses was contributing to an “erosion of public trust.” True, but “enforcing” bribery and corruption laws through resolution vehicles not subjected to judicial scrutiny and otherwise inconsistent with rule of law principles (see here for my recent article) also contribute to an “erosion of public trust.”
Gurria also reportedly stated: “corporations need to stop bribing public officials, and that is going to help recover public trust and legitimacy, that is going to help markets work.”
In all due respect, this is just such a naive way to view the problem of bribery and corruption.
I like what Alexandra Wrage (President of Trace International) said here:
“Whether they’re stating it expressly or acting on it quietly, governments are using corporations as their primary tool to reduce international bribery. They alarm companies with vast fines and terrify individuals with substantial prison sentences with the hope of ending the payment of bribes because they cannot, in most cases, do much of anything about those demanding them. This is not inappropriate. Companies are regulated, subject to laws and answerable to shareholders. The worst offenders demanding bribes, on the other hand, do so with impunity, hiding behind sovereign immunity and, often, their own, complicit local law enforcement. Abacha. Suharto. Marcos. Duvalier. It’s a longstanding tradition, still thriving in many countries today. U.S. and some European law enforcement agencies have been extraordinarily successful, with fines in the United States now counted in the billions of dollars and other jurisdictions promising to catch up soon. While these efforts have done more than anything else to reduce bribery, they have yet to convince us that companies are both the sole source and solution of all international corruption — and that’s insupportable. […] The simple reality is that there are just some things that companies can’t do about corruption.”
See here and here for further reasons why Gurria’s statement is off-base.
To FCPA Inc.
Weil Gotshal announced that Adam Safwat, most recently the Deputy Chief in the DOJ’s Fraud Section where he worked on – among other things – FCPA enforcement actions – has joined the firm. According to the release, “with several years of senior level experience in the DOJ, as well as experience as a former federal prosecutor, [Safwat] brings a deep understanding of criminal and regulatory enforcement to the Firm, including with regard to corporate securities fraud and Foreign Corrupt Practices Act investigations.”
A handy-dandy “Master List of Third Party Corruption Red Flags” courtesy of the FCPAmericas Blog.
For your viewing enjoyment, the recent program at Fordham Law School “China and the Foreign Corrupt Practices Act: Challenges for the 21st Century.”
For your viewing enjoyment, Senator Elizabeth Warren talking about an issue discussed in last week’s Friday roundup regarding JPMorgan.
I’ve written before about “offensive use” of the FCPA, but I am still trying to figure out the purpose of this press release.
A good weekend to all.