This previous post summarized the recent $155 million FCPA enforcement action against J&F Investimentos S.A. (a Brazilian holding company) and a related entity for allegedly bribing Brazilian officials.
This post continues the analysis by highlighting additional issues to consider.
The DOJ can claim that it has an anti-piling on policy (see here). However, piling on is precisely what the DOJ (and SEC) did in the recent enforcement action.
There really is no other way to describe it when the DOJ (and SEC) bring a $155 million enforcement action against a company from another OECD Convention country “related to the same conduct” (DOJ’s words) in which the company previously resolved an enforcement action in its “home” country.
The J&F enforcement action was not a situation like – for instance – the recent Airbus enforcement action in which France, the U.K., and the U.S. divided up the improper conduct in various countries to bring separate enforcement actions.
Rather the U.S. enforcement action against J&F and related entities was based on the same conduct as Brazil’s prior enforcement action against J&F and related entities.
Not only does this contradict the DOJ’s supposed anti-piling policy, but it is also contrary to Article 4 of OECD Convention (something the DOJ pledges allegience to in other situations) which states that “when more than one Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution.”
Obtain or Retain Business?
The FCPA’s anti-bribery provisions are not an all-purpose corporate ethics statute, but rather a limited statute with specific elements that must be met for there to be a violation.
Among the required elements is “obtain or retain business.” The FCPA’s anti-bribery provisions capture the authorizing or payment of money or anything of value, to a foreign official, for purposes of:
(A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or
(B) Inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality
in order to assist … in obtaining or retaining business for or with, or directing business to, any person.
According to the DOJ, J&F paid “bribes that it understood were to, and for the benefit of, foreign officials in Brazil” to “ensure” that a state-owned and state-controlled banks and state-controlled pension fund “would enter into financing and equity transactions benefiting J&F.” According to the government, at least one of the bribery schemes were to “facilitate JBS’s [an entity in which J&F was the ultimate parent] acquisition of U.S. issuer Pilgrim’s Pride Corp.
It is an open question whether the conduct at issue in the J&F enforcement, if subjected to judicial scrutiny, would have satisfied this required element of the FCPA’s anti-bribery provisions. In other words, is the “obtain or retain business” element met based on allegations of bribes being paid to alleged “foreign officials” to obtain money that is then used to purchase an asset?
To bring an FCPA enforcement action against a foreign company like J&F, the U.S. must of course have jurisdiction. In the criminal information charging J&F with conspiracy to violate the FCPA’s anti-bribery provisions, the DOJ invoked the 78dd-3 portion of the anti-bribery provisions.
This portion of the FCPA, added to the statute in 1998, has a narrow jurisdictional element. That is “while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance” of a bribery scheme.
The J&F enforcement action (like many enforcement actions against foreign companies) make mention of U.S. bank accounts. However, those allegations alone likely would not meet the “while in the territory of the U.S.” jurisdictional hook. Thus, the overt acts alleged in the information include allegations about J&F executives traveling to New York and having meetings in New York in furtherance of the alleged bribery schemes.
Strange SEC Enforcement Action
The SEC’s enforcement action against J&F, JBS [an entity in which J&F was the ultimate parent] and Joesley and Wesley Batista is – in one word – strange.
According to the SEC:
- following JBS’s acquisition of Pilgrim’s Pride, Wesley Batista served as the Chairman of the Board for Pilgrims and Joesley Batista was a member of Pilgrim’s Board;
- “After the acquisition” the Batista’s “carried out the bribery scheme” and “Pilgrim’s books did not reflect” various means used to facilitate the bribery scheme;
- To “conceal their conduct, the Batistas did not disclose to Pilgrim’s accountants and independent public accounts during due diligence and audits that” certain funds were commingled with Pilgrim’s funds “used to pay bribes in Brazil.”
- The Batistas “caused Pilgrim’s books and records to inaccurately record the transfers and payments and caused Pilgrim’s failure to maintain an adequate system of internal accounting controls in violation of the books and records and internal controls provisions of the FCPA.”
The reason the enforcement action is strange is because it is against entities other than Pilgrim’s Pride.
I struggle to think of another instance in which board members of an issuer were engaged in improper conduct and caused the issuer’s books and records to be inaccurate and caused the issuer’s failure to maintain an adequate system of internal accounting controls – and yet there was no enforcement action against the issuer (in this case Pilgrim’s Pride).
The lack of an enforcement action against Pilgrim’s Pride is even stranger given the SEC’s findings that: (i) “Pilgrim’s did not enact its own Code of Conduct until 2015 – more than five years after being acquired”; and (ii) “as of 2018, nearly nine years after [the acquisition] Pilgrims was still in the process of implementing a formal anti-bribery compliance program and developing policies that covered employees and consultants; and (iii) during the time period relevant to the enforcement action “Pilgrims also lacked compliance personnel.”
On the same day as the J&F enforcement action was announced, Pilgrim’s Pride also announced that it “entered into a plea agreement with the United States Department of Justice Antitrust Division in respect to its investigation into the sales of broiler chicken products in the United States. In the plea agreement … Pilgrim’s and the Antitrust Division agreed to a fine of $110,524,140 for restraint of competition that affected three contracts for the sale of chicken products to one customer in the United States.”
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