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Friday Roundup

Impasse, quotable, scrutiny alerts, um excuse me but, and for the reading stack. It’s all here in the Friday roundup.

Impasse

Walmart’s FCPA scrutiny began in late 2011. Yet, nearly seven years later there still has not been an enforcement action.

Bloomberg reports [1]: “Walmart Inc. set aside nearly $300 million last fall for a possible resolution with the U.S. government over international bribery allegations, a sign that an end to the years-long investigation was imminent. But eight months later, the sides are deadlocked, three people familiar with the matter said. It’s not about the money: One source of tension is prosecutors’ insistence that Walmart, the world’s largest retailer, admit to certain misconduct as part of any deal, one of the people said.”

Bloomberg further reports:

“There’s also a delay with the Securities and Exchange Commission part of the case. The two sides have yet to exchange critical documents to finalize the deal, another person said. It’s unclear what’s causing the delay, the person said.

[…]

The sides reached the outlines of an agreement more than a year ago, under which Walmart would pay about $300 million and enter into a non-prosecution agreement with the Justice Department, people familiar with the matter have said. Under the terms of that deal, at least one Walmart subsidiary would plead guilty to a criminal charge, and an independent monitor would supervise compliance with the settlement, those people have said.”

Quotable

According to this report [2], Secretary of State Mike Pompeo, in announcing new U.S. investments in the Indo-Pacific region stated: “With American companies, citizens around the world know that what you see is what you get: honest contracts, honest terms, and no need for off-the-books mischief. For us the Foreign Corrupt Practices Act is not just a law — it is a point of pride. Integrity in businesses practices is an essential pillar of our Indo-Pacific economic vision.”

I agree that the FCPA should be a point of pride for the U.S, but will once again draw a distinction (see here [3] for a prior post) between the FCPA – the law – and how the FCPA is enforced.

Is it really a point of pride that the vast majority of corporate FCPA enforcement actions are resolved in the absence of any meaningful judicial scrutiny? Is it really a point of pride that, in the rare occasions the enforcement agencies have been put to their burdens of proof, they have an overall losing record? Is it really a point of pride that some companies that sell certain products to certain customers appear to be immune from violating the FCPA’s anti-bribery provisions [4]? Is it really a point of pride that nearly 80% of corporate enforcement actions lack any related prosecution of individuals?

Scrutiny Alerts

AstraZeneca

This 2017 post [5] highlighted a civil complaint filed by American service members and civilians and their families who were killed or wounded while serving in Iraq against AstraZeneca, General Electric, Johnson & Johnson, Pfizer and Roche claiming that the companies’ alleged acts of corruption in Iraq present viable civil claims under the federal Anti-Terrorism Act and for intentional infliction of emotional distress. Specifically, the plaintiffs allege that they or their family members were attacked by a terrorist group (Jaysh al-Mahdi) funded in part by the defendants’ corrupt sales practices.

Recently AstraZeneca disclosed [6]:

“Iraq Ministry of Health litigation/anti-corruption probe

As previously disclosed, in the US, in October 2017, AstraZeneca and certain other pharmaceutical and/or medical device companies were named as defendants in a complaint filed in federal court in the District of Columbia by US nationals (or their estates, survivors, or heirs) who were killed or wounded in Iraq between 2005 and 2009 (the Lawsuit). The plaintiffs allege that the defendants violated the US Anti-Terrorism Act and various state laws by selling pharmaceuticals and medical supplies to the Iraqi Ministry of Health. In addition, AstraZeneca has received an inquiry from the US Department of Justice in connection with an anti-corruption investigation relating to activities in Iraq, including interactions with the Iraqi government and certain of the same matters alleged in the Lawsuit.”

As highlighted in previous posts here [7] and here [8], in 2016 AstraZeneca coughed up $5.5 million to resolve an FCPA enforcement action concerning conduct in China and Russia.

[9]

SBM Offshore

As highlighted in this prior post [10], in November 2017 SBM Offshore and its wholly owned U.S. subsidiary, SBM Offshore USA Inc. (SBM USA) resolved a $238 million FCPA enforcement action concerning conduct in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq. The Brazil portion of the enforcement action involved alleged improper payments for the purpose of securing improper advantages and obtaining and retaining business with Petrobras and other state-owned oil companies.

Earlier this week, SBM Offshore announced [11] that the company signed a leniency agreement with Brazil law enforcement pursuant to which SBM Offshore will make a cash payment to “Petrobras totalling BRL549 million (Brazilian Reais) (approximately US$148 million), of which BRL264 million (approximately US$71 million) is a civil fine and BRL285 million (approximately US$77 million) is compensation for alleged damages.” Pursuant to the agreement, SBM Offshore “is invited back to participate in Petrobras’ tenders under equal conditions as other bidders.”

Um Excuse Me But

This FCPA Blog [12] post asserts:

“Compliance with the civil side of the FCPA (implementing strong accounting controls) supports compliance with the criminal side (not paying bribes).”

Um excuse me but, the books and records and internal controls provisions are not necessarily the civil side of the FCPA (the DOJ has brought numerous criminal enforcement actions invoking those provisions – see here [13]) and the anti-bribery provisions are not necessarily the criminal side of the FCPA (the SEC frequently brings enforcement actions invoking those provisions – see here [14] for just one of numerous examples which could be cited).

This piece [15] by the Center for Media and Democracy titled “Law and Order Trump Is Soft on Corporate Crime and Wrongdoing” asserts that under Trump the DOJ has:

“Allowed corporations that engage in illegal bribery abroad to completely avoid prosecution. As long as they meet certain DOJ conditions, corporations that violate the Foreign Corrupt Practices Act never have to enter a plea, and their penalties are reduced by 50 percent.”

Um excuse me but the Trump administration has used the same resolution vehicles to resolve FCPA enforcement actions as prior administrations. Non-prosecution and deferred prosecution agreements were introduced to the FCPA context during the Bush administration and become the norm in corporate FCPA enforcement during the Obama administration. Declinations with disgorgement were introduced to the FCPA context during the Obama administration. The November 2017 DOJ FCPA Corporate Enforcement Policy represented a slight tweek from the DOJ’s April 2016 FCPA Pilot Program unveiled during the Obama administration.

This piece [16] written by an attorney states:

“Most American companies are precluded from doing business in many parts of the world due to the Foreign Corrupt Practices Act of 1977 that prohibits the making of payments to foreign government officials to assist in earning or retaining business.”

Um excuse me, but what the …?

The FCPA’s anti-bribery provisions contain (for lack of a better word) a payment prohibition and the books and records and internal controls provisions (applicable to only issuers) contains various bookkeeping and financial controls requirements. The FCPA most certainly does not “preclude” companies from doing business in many parts of the world.

This article [17] asserts:

“In terms of the Foreign Corrupt Practices Act of 1977, the US government can prosecute anyone anywhere in the world for crimes involving state institutions and influential politicians.”

Um excuse me but this is a false statement.

Yes, the FCPA (as applied to U.S. business organizations and U.S. citizens, nationals, etc.) is extraterritorial, but as applied to non-U.S. business organizations and non U.S. citizens, etc. the anti-bribery provisions only apply to the extent (generally speaking) the alleged bribery scheme has a U.S. nexus.

Reading Stack

The most recent edition of the always informative FCPA Update from Debevoise & Plimpton is here [18] with articles regarding the recent dismissal of the SEC’s FCPA case against Michael Cohen and Vanja Baros (former Och-Ziff executives) as well as recent enforcement actions against Credit Suisse and Beam.

Regarding the former, the Update notes:

“The SEC argued that in a disgorgement action the limitations period should accrue upon receipt of ill-gotten gains, not merely when the underlying conduct took place. The district court so found, however, that the limitations period for an FCPA claim accrues at that point that a violation occurs and not later. Nowhere does the FCPA prohibit the receipt of money or other benefits that are the result of an improper payment. Instead, the FCPA prohibits the use of the means of interstate commerce to offer, promise, or give anything of value to a foreign official. The idea that the limitations period begins with (or that the offense continues through) the receipt of subsequent benefits from a bribe often surfaces in contexts such as the seemingly abandoned “tainted contracts” theory of successor liability and elsewhere. It is useful for companies and counsel to have another judicial decision debunking this mistaken assertion.”

As to the Credit Suisse enforcement action, the Update notes:

“Setting aside the open question of statutory interpretation of the “thing of value” provided “to a foreign official” in such cases, the SEC and DOJ should consider whether guidance found only in lists of remedial measures effectively results in over-regulation of foreign labor markets.”

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