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Friday Roundup


Scrutiny alerts and updates, quotable, and for the reading stack. It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

As highlighted in this recent post, Glencore plc, an Anglo–Swiss mining company with headquarters in Switzerland and ADRs traded on a U.S. exchange recently announced that it received a subpoena from the DOJ “to produce documents and other records with respect to compliance with the Foreign Corrupt Practices Act and United States money laundering statutes.  The requested documents relate to the Glencore Group’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present.”

Earlier this week, the company disclosed:

“A committee of the Board has been established to oversee the Company’s response to the DOJ’s subpoena. This committee comprises the Chairman, Tony Hayward, Leonhard Fischer (Independent Non-Executive Director) and Patrice Merrin (Independent Non-Executive Director). Chairman Tony Hayward said: “Glencore takes ethics and compliance seriously throughout the Group. The Company will cooperate with the DOJ, while continuing to focus on our business and seeking to maximise the value we create for our diverse stakeholders in a responsible and transparent manner.”

Upon disclosure of the subpoena, Glencore’s stock price fell and as sure as the sun rises in the east and dogs bark, plaintiffs’ lawyers representing shareholders filed securities fraud class actions (see here for more).

As reported by the Wall Street Journal:

“A former Goldman Sachs Group Inc. banker is in talks with U.S. prosecutors to potentially plead guilty to criminal charges stemming from an alleged scheme to steal billions of dollars from a Malaysian state investment fund, people familiar with the matter said. The talks bring the fast-moving investigation closer to Goldman, which raised billions for the Malaysian fund, 1Malaysia Development Bhd, and come after the arrest of Malaysia’s former prime minister,  who founded the fund and lost his re-election bid earlier this year. The onetime Goldman partner and Southeast Asia chairman, Tim Leissner, who hasn’t been charged, is seeking an agreement with prosecutors that would involve his cooperation with the government’s criminal-fraud probe into 1MDB and Goldman, the people said. One potential charge Mr. Leissner could ultimately plead guilty to would be a violation of the U.S. Foreign Corrupt Practices Act, which bans the use of bribes to foreign officials to get or keep business, according to some of the people familiar with the matter.”


From the New York Times Magazine:

“An obsession with corruption is an American tradition; it dates back to the founding fathers, who declared independence in part on the conviction that the British monarchy was wielding its expanding financial and patronage power to subvert the independence of Parliament. In a 1994 essay, the historian John Murrin observed that after the revolution, “anxiety about corruption, instead of receding in the republic designed to destroy it, acquired unprecedented force in American public life, sometimes almost enough to overwhelm all other concerns.”

You could argue that Americans have been well served by this anxiety. By international standards, we live in a cleanly run country, and always have. For all but two of the 23 years that Transparency International has published its index, the United States has appeared in the Top 20 least-evidently-corrupt countries. It’s true that we have had our share of spectacular episodes: the Whiskey Ring and Boss Tweed in the 19th century; Teapot Dome and Abscam in the 20th. In 2006, the Republican lobbyist Jack Abramoff was convicted of felony corruption, bringing 20 people, including a congressman, down with him. In 2011, Rod Blagojevich, the Democratic former governor of Illinois, went to prison for trying to auction off Barack Obama’s old Senate seat. But the fact that these incidents remain so memorable is the point; they were seen as unacceptable aberrations, with consequences in the courts of law and public opinion. People went to prison, lost elections and, in Abramoff’s case, were played by Kevin Spacey in a biopic.

And yet, in a Gallup poll released three years ago, 75 percent of American respondents said that corruption was “widespread” in the country’s government. Among the other countries in Transparency International’s Top 20 that were also surveyed by Gallup, none were remotely as pessimistic about corruption as the United States. No other country has done so well at containing corruption while leaving so many of its people convinced that it has done poorly.

If this reflects the legacy of the founders’ anxieties, it also reflects Americans’ expansive definition of “corruption.” The idea suffuses our politics and hangs heavily over any intersection of money and politics, however legal: The practice of earmarking appropriations bills is “inherently corrupt,” in the view of the former Republican senator Tom Coburn; the sweeping tax bill that Republicans hastily drafted and passed last year would have them “nailed with corruption,” Howard Dean vowed; post-Citizens United election spending is a “corrupt campaign-finance system,” in Bernie Sanders’s formulation.

Is it even worth distinguishing between this unseemly-but-legal stuff and true corruption if the outcome is, arguably, not much different? It’s an interesting question, but one you would only think to ask in a country, like the United States, where illegal corruption is relatively rare. The true cost of illegal corruption, in countries where it is rampant, is rarely the direct one; it is the way even the most banal and minor forms of it erode the rule of law, introducing uncertainty into every dealing with the state and reducing it to the self-interest of its human agents: not just politicians but also customs inspectors, permit issuers, police officers, anyone vested with enough power to extract a dollar.”

For the Reading Stack

Shearman & Sterling’s recent FCPA Digest is here (BTW, I really like the firm’s new logo). Similar to this prior post, the Digest likewise flags the Supreme Court’s recent decision in Jesner v. Arab Bank and states:

“[T]he DOJ and SEC have historically interpreted the FCPA’s jurisdictional requirements extremely broadly, claiming that slight touches on U.S. territory such as a transaction between two foreign banks that cleared through U.S. banks or, even more tenuously, an email between two foreign persons outside the U.S. that transited through a U.S. server, were sufficient. This year in Jesner v. Arab Bank, the Supreme Court’s opinion included dicta that pushed back on this expansive jurisdictional scope, at least in the context of clearing U.S. dollar transactions. 138 S. Ct. 1386 (2018).

Jesner involved a suit under the Alien Tort Statute (“ATS”) against Arab Bank, a Jordanian bank with a branch in New York, which the plaintiffs claimed provided financing to Hamas and other terrorist groups resulting in terrorist attacks on plaintiffs and their families. The main U.S.-based conduct alleged by the plaintiffs was Arab Bank’s use of the Clearing House Interbank Payments System (“CHIPS”) for transactions that benefitted terrorists. CHIPS utilizes U.S. dollars, both directly and to facilitate exchanges between other foreign currencies, and operates in the United States and abroad. The Court noted that “it could be argued” that a corporation whose only connection to the United States is the use of CHIPS has “insufficient connections to the United States to subject it to jurisdiction under the ATS.” Id. at 1398. However, it declined to answer the question of whether these contacts were sufficient, reaching its decision in Jesner on other, unrelated grounds specific to the ATS.

We might be trying to read into the smoke here, but in an area bereft of judicial guidance, we have to take what we can get. The Supreme Court’s treatment of the question of the sufficiency of U.S. dollar clearing operations to sustain jurisdiction on a foreign corporation was too brief and inconclusive to provide a firm precedential basis for this argument. However, this mere hint that this type of activity is not sufficient to warrant jurisdiction may provide support to future challenges or may dissuade the U.S. authorities from relying on it too heavily. This could, in time, have a significant effect on the DOJ’s and SEC’s ability to bring bribery charges, as the main or only jurisdictional hook in several recent cases, including VimpleCom, Teva, and Telia, has been the use of U.S. dollars. Jesner provides some support for the notion that such connections might just be “insufficient.”


Gibson & Dun’s 2018 mid-year update is here and the firm’s mid-year update on corporate NPAs and DPAs is here.

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