This prior post went in-depth into the recent FCPA enforcement action against Telefónica Venezolana (a subsidiary of Telefonica S.A.) concerning a bribery scheme in Venezuela.
This post highlights additional issues to consider.
Timeline
Beginning in early 2020, the annual report of Telefónica S.A. (a Spanish company with shares traded in the U.S.) contained the following disclosure.
“Although the Group has internal policies and procedures designed to ensure compliance with the abovementioned applicable anti-corruption laws and sanctions regulations, there can be no assurance that such policies and procedures will be sufficient or that the Group’s employees, directors, officers, partners, agents and service providers will not take actions in violation of the Group’s policies and procedures (or, otherwise in violation of the relevant anti-corruption laws and sanctions regulations) for which the Group, its subsidiaries or they may be ultimately held responsible. In this regard, the Group is currently cooperating with governmental authorities (and, where appropriate, conducting the relevant internal investigations) regarding requests for information potentially related, directly or indirectly to possible violations of applicable anti-corruption laws. Telefónica believes that, considering the size of the Group, any potential penalty as a result of matters relating to those specific information requests would not materially affect the Group’s financial condition.”
The same generic disclosure was included in subsequent annual reports including Telefónica’s most recent annual report.
From start to finish, the FCPA scrutiny of Telefónica thus appears to have lasted approximately 4.5 years.
I’ve said it many times, and will continue saying it until the cows come home: if the DOJ/SEC want their FCPA enforcement programs to be viewed as more credible and more effective, the enforcement agencies must resolve instances of FCPA scrutiny much quicker.
This includes the Telefónica matter in which the DOJ stated that the company’s cooperation included (among other things):
“(i) making regular factual presentations to the [DOJ] based on the information learned in the course of the Company’s internal investigation; (ii) voluntarily making employees based outside the United States available for interviews in the U.S.; (iii) producing a significant number of documents … while navigating foreign data privacy and related laws; (iv) collecting, analyzing, and organizing voluminous evidence and information for [the DOJ] accompanied by translations of documents.”
Lack of SEC Enforcement Action
An odd aspect of the Telefónica Venezolana enforcement action is that – at least at present – it was DOJ only and lacked an SEC component. Nearly all DOJ FCPA enforcement actions against an issuer or a subsidiary of an issuer (as was the case with Telefónica Venezolana) also involve a parallel SEC enforcement action.
However, there has been nothing from the SEC regarding an enforcement action against Telefónica and there is no mention of a potential SEC enforcement action in the DOJ resolution documents.
Again, this is odd.
For instance, in 2019 the SEC brought an FCPA enforcement action against Telefonica Brasil (also a subsidiary of Telefonica) in connection with an alleged bribery scheme in bribery. There was no parallel DOJ enforcement action – a dynamic which is fairly common.
However, the dynamic in the Telefónica Venezolana is the opposite. A criminal DOJ enforcement action, but not a civil SEC enforcement action. The only other instance of this dynamic I aware of involved Legg Mason in which there was an approximate two month delay between the DOJ and SEC enforcement action concerning the same core conduct. (See here).
Things of Value
In addition to actual money being paid to Venezuelan officials, the DOJ also alleged that the culpable intermediaries also “paid for the lavish expenses” of the officials including “more than $500,000” for a “lavish vacation in Saint Barthélemy” and “$605,000 on luxury watches and jewelry in Saint Barthélemy.”
Obtain Or Retain Business?
Telefónica Venezolana was charged conspiracy to violate the FCPA’s anti-bribery provisions.
The allegations in connection with the FCPA’s required “obtain or retain business” element were unique.
The FCPA generally states that the money or thing of value provided directly or indirectly to a foreign official be 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 such issuer in obtaining or retaining business for or with, or directing business to,
any person.
The alleged bribery of Venezuelan officials was in connection with a government sponsored currency auction which helped Telefónica Venezolana to exchange local currency for U.S. dollars which then allowed Telefónica Venezolana to purchase equipment from two suppliers.
Statute of Limitations
The statute of limitations for an FCPA anti-bribery violation is five years.
The conduct alleged in the Telefónica Venezolana enforcement action occurred between 2014 and 2015. In other words, 9-10 years prior to the enforcement action.
However, statute of limitations (like other legal issues) often matter very little in FCPA matters given that companies “cooperate” in the DOJ’s investigation. Part of cooperation is often waiving statute of limitation defenses or agreeing to toll the statute of limitations.
