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Friday Roundup

Acquitted, scrutiny alert, under scrutiny again, across the pond, and compassionate release. It’s all here in the Friday roundup.

Acquittals

The so-called conventional wisdom in the U.S. is that business organizations under Foreign Corrupt Practices Act scrutiny (particularly publicly-traded corporations) simply can’t put the DOJ (or SEC for that matter) to its burden of proof in an enforcement action because it is too risky and may result in a “death sentence” for the company.

As highlighted in this post [1], the conventional wisdom is b.s., but the narrative still persists. In other countries however, corporations more frequently put government enforcement agencies to their burdens of proof by making factual and legal arguments.

As highlighted in this article [2]:

“An Italian court acquitted oil companies Royal Dutch Shell PLC and Eni  [3]SpA, along with the latter’s chief executive, of bribery in connection with oil-drilling rights in Nigeria, ending a three-year trial that had shone a spotlight on the energy industry’s operations in Africa.

Shell, Eni and individuals including current Eni CEO and company veteran Claudio Descalzi were on trial over a $1.3 billion payment made for drilling rights in Nigeria that prosecutors argued was mostly for the purpose of bribes. Eni and Shell jointly bought drilling rights off the coast of Nigeria in 2011 in an area known as OPL 245.

[…]

The Italian court case concerned a payment Eni and Shell made to a Nigerian government bank account in London. According to court documents, the money later landed at a Nigerian shell company owned by a former oil minister, who was later convicted in France of money laundering. From there, the money was paid out in kickbacks that funded a variety of purchases by Nigerian nationals, including a private jet in the U.S., according to the court documents.

Eni, Shell and their managers maintained they didn’t know the money would be paid out in bribes.

All other defendants were also acquitted, including Paolo Scaroni, Eni’s chief executive at the time of the deal, Roberto Casula, Eni’s former head of exploration at the time, and Malcolm Brinded, Shell’s former chief of global exploration and production.”

Granted there might be certain legal and/or regulatory differences that partially explain the difference, but if corporations can put law enforcement agencies to their burden of proof in foreign countries, why are corporations so reluctant to do so in the U.S.?

Scrutiny Alert

Japan-based Toyota Motor Company recently disclosed in a prospectus [4] in connection with a U.S. securities offering:

“In April 2020, Toyota reported possible anti-bribery violations related to a Thai subsidiary to the SEC and the U.S. Department of Justice (“DOJ”), and is cooperating with their investigations. The investigations could result in the imposition of civil or criminal penalties, fines or other sanctions, or litigation by the DOJ or the SEC. Toyota cannot predict the scope, duration or outcome of the matter at this time.”

This prior post [5] foreshadowed Toyota’s potential FCPA scrutiny. For more on the civil suit that may have prompted Toyota’s disclosure see here [6].

If there is an FCPA enforcement action against Toyota, the company would join a long list of Japanese companies to resolve an FCPA enforcement action (see here [7]).

Under Scrutiny Again

As highlighted in this prior post [8], in 2016 Odebrecht S.A. (a Brazilian holding company) and Braskem S.A. (a Brazil-based petrochemical company in which Odebrecht owned a majority of voting shares) resolved a significant FCPA enforcement action. Braskem had American Depositary Receipts registered with the SEC and traded on the NYSE and thus the enforcement action also included an SEC component.

Braskem is again under scrutiny as it recently disclosed:

“[The] Company hired an independent American law firm to carry out an internal investigation, due to allegations of alleged improper payments related to to the Ethylene XXI project, originally published in news reports in the media in Mexico and included in the testimony presented by the former CEO of Pemex to the Office of the Attorney General of Mexico. The investigation is ongoing and, to date, the Company has not been able to estimate the timetable for its conclusion.”

[9]

Across the Pond

In April 2017, the United Kingdom Serious Fraud Office announced [10] that it opened “an investigation into the activities of KBR, Inc’s United Kingdom subsidiaries, their officers, employees and agents for suspected offences of bribery and corruption.” The investigation was related to the SFO’s investigation into the activities of Unaoil.

The SFO recently announced [11]:

“Following a thorough investigation of the available evidence, the SFO has closed its investigation into the activities of KBR, Inc.’s United Kingdom subsidiaries, their officers, employees and agents. The evidence in this case did not meet the evidential test as defined in the Code for Crown Prosecutors.”

Compassionate Release

As highlighted in this prior post [12], in 2017 a federal jury convicted Ng Lap Seng of two counts of violating the Foreign Corrupt Practices Act, one count of paying bribes and gratuities, one count of money laundering and two counts of conspiracy “for his role in a scheme to bribe United Nations ambassadors to obtain support to build a conference center in Macau that would host, among other events, the annual United Nations Global South-South Development Expo.”

In 2018 Seng was sentenced to 48 months in prison and three years of supervised release. In addition, Seng was ordered to pay a $1 million fine, $302, 977 in restitution to the United Nations and the judge also ordered a forfeiture money judgment of $1.5 million.

Recently, a judge granted Seng compassionate release due to COVID-19 concerns. This article [13] highlights the decision including a tussle between the DOJ and Seng’s counsel regarding his COVID-19 vaccination status:

“A jailed Chinese real estate developer’s compassionate release over COVID-19 concerns will go ahead after a Manhattan federal judge on Wednesday rejected a last minute objection from prosecutors, who cited the defendant’s initial refusal to be vaccinated last month.

Ng Lap Seng’s four-year-sentence for allegedly bribing United Nations officials will be cut short after all following U.S. District Judge Vernon S. Broderick’s decision not to reverse his Monday order granting release. However, the 72-year-old Ng will remain in custody until he receives his second vaccine dose next week, the judge ruled.

“There’s a certain level of humanity in this situation I’ve decided to exercise and not put Mr. Ng through that sort of whipsaw effect,” the judge said at a telephone conference Wednesday afternoon. “This is a unique situation.”

Prosecutors raised the alarm Tuesday that Ng declined to be vaccinated in early February before changing his mind a few weeks later, arguing that Ng’s behavior “substantially diminishes any otherwise-applicable basis to be considered for early release in light of the pandemic.”

In a same-day response, Ng’s legal team at Brafman & Associates PC countered that Ng was worried about potential side effects and that he ultimately did receive the first dose.

“No one should be faulted for taking time to learn about the benefits and risks of a vaccine, especially inmates who have restricted access to the news,” Ng’s attorneys said. “It would be the ultimate form of cruelty to now have to inform Mr. Ng and his family members that upon reflection, the Court changed its mind based on a Hail Mary attempt by the Government after the fact.”

Ng initially chose not to receive the Moderna COVID-19 vaccine on Feb. 9, but later agreed to receive his first dose on Feb. 24, with the second dose scheduled for next week, court records show.

Each side faulted the other for failing to bring Ng’s vaccination status to the court’s attention until now, but Judge Broderick said at the hearing Wednesday that his decision was not based on “who did or didn’t inform me about the vaccine and when.” Instead, the judge cited his earlier findings on the matter, including that Ng has already served at least 75% of his sentence and that backtracking now could conceivably rise to the level of “some sort of cruel and unusual punishment.”

One of Ng’s lawyers, Ben Brafman, told Law360 on Wednesday that Judge Broderick reached the right conclusion.

“Judge Broderick focused on perhaps the key issue at hand, concluding that changing his mind and reversing his original decision would result in substantial cruelty to Mr. Ng,” said Brafman. “Being told he is going home, then to be told he is not because the judge changed his mind, is fundamentally unfair.”

Ng is set to be turned over to U.S. Immigration and Customs Enforcement shortly after his second dose, and from there will be deported to China.”

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