This previous post highlighted the DOJ’s recent $11.2 million declination with disgorgement and forfeiture against Linde for nearly decade-old conduct of an acquired entity.
This post continues the analysis by highlighting additional issues to consider.
Nearly all decisions to voluntary disclose should be questioned (see this article for the reasons why), but Linde’s decision to voluntarily disclose should seriously be questioned.
After all, the conduct at issue involved three individuals at Spectra Gases who, prior to Linde’s acquisition of Spectra Gases, agreed to share the profits earned from a certain sale with certain alleged high-level officials at the National High Technology Center (NHTC) of the Republic of Georgia, a 100% state-owned and-controlled entity.
There is not one single allegation concerning Linde in the DOJ’s letter which further notes that in January 2010, prior to Linde’s discovery of the corrupt conduct, Linde dissolved Spectra Gases and become its successor-in-interest.
Not only is Linde’s voluntary disclosure suspect for the above reasons, but furthermore the conduct at issue was beyond any conceivable statute of limitations.
If history is any guide, certain commentators are likely to peddle the narrative that Linde received a fantastic result because of its voluntary disclosure. (Indeed this commentator called the result “superior”). However, such a narrative completely misses the point that the DOJ likely never would have found out about the alleged old conduct, and even if it did, the conduct (for the statute of limitations issue discussed above) does not represent a viable case to be brought. The narrative also completely misses the point that pre-enforcement action professional fees and expenses in an FCPA inquiry tend to be higher (often 3 – 5 times higher or more) compared to a settlement amount. Perhaps this is why the voluntary disclosure took place (see here for a 2009 post – still relevant today – titled “Voluntary Disclosure and the Role of FCPA Counsel).
In short, some serious questions should be asked about Linde’s voluntary disclosure.
Kokesh Only Matters to the Extent Companies Don’t Roll Over and Play Dead
As highlighted here, recently the Supreme Court unanimously held in SEC v. Kokesh that disgorgement is a penalty and thus disgorgement actions must be commenced within five years of the date the claim accrues. Although Kokesh was a civil enforcement action construing a civil statute of limitations (28 USC 2462), the holding and logic of Kokesh have broad application.
For instance, this recent law firm post states: “Although [Kokesh] did not involve a Foreign Corrupt Practices Act (“FCPA”) enforcement action, it nonetheless has important implications for FCPA enforcement and importantly, the DOJ’s recently-renewed Pilot Program.”
Indeed, Kokesh should impact disgorgement in DOJ FCPA enforcement actions, but as highlighted in this recent post, Kokesh, other Supreme Court decisions, and indeed the law itself only matters to the extent companies under FCPA scrutiny do not roll over and play dead.
By voluntarily disclosing conduct beyond any conceivable statute of limitations and “fully cooperating” with the DOJ, Linde rolled over and played dead.
Same Old, Same Old
This November 2016 post encouraged those hyperventilating over the election of Donald Trump and the impact on FCPA enforcement to take a deep breath.
The Linde enforcement action was the first corporate FCPA enforcement action in the Trump era. No meaningful conclusions should be based on one enforcement action, but it is worth noting that the enforcement action, both in process and substance, is indistinguishable from several FCPA enforcement actions brought by the Obama DOJ.
Use of a creative and controversial resolution vehicle invented by the DOJ? Check.
An enforcement action based on suspect legal theories (including the statute of limitations issue discussed above)? Check.
An enforcement action based on the notion that employees of alleged state-owned and state-controlled entities are “foreign officials” under the FCPA? Check. (For more information about the National High Technology Center see here).
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