In September 2009, Gerald and Patricia Green were found guilty by a federal jury of substantive FCPA violations, conspiracy to violate the FCPA, and other charges. According to the DOJ release (see here) the Los Angeles-area film executives were found guilty of engaging in “sophisticated bribery scheme that enabled the defendants to obtain a series of Thai government contracts, including valuable contracts to manage and operate Thailand’s yearly film festival.”
As noted in the DOJ release:
“The conspiracy and FCPA charges each carry a maximum penalty of five years in prison, and each of the money laundering counts carries a maximum penalty of up to 20years in prison. The false subscription of a U.S. income tax return carries a maximum penalty of three years in prison and a fine of not more than $100,000.”
Sentencing was originally set for December 17, 2009, was delayed several times, and, at one point, was removed from the calendar altogether (see here).
U.S. District Court Judge George Wu of the Central District of California reportedly wanted to learn more about other FCPA sentences as well as Mr. Green’s health issues.
The DOJ requested a 10 year sentence for both Gerald and Patricia Green.
The DOJ stated that the “court must decline defendants’ remarkable invitation to join the wholesale speculation of FCPA ‘pundits’ as to whether corporate settlements are ‘shielding’ to corporate executives from punishment.”
In closing, the DOJ urged the court to “disregard defendants’ efforts to obscure the landscape of FCPA sentencing, which generally reflects significant prison terms for convicted individuals.”
According to this report, Judge Wu yesterday sentenced the Greens, before a packed courtroom, to six months in prison, followed by three years probation (six months of which must be served as home confinement).
According to the report, Judge Wu “also set a restitution figure of $250,000” but “if the Greens, who have had their accounts frozen and assets seized since being arrested in 2007, can prove that none of the $1.8 million they paid in bribes to Thai officials can be recovered, then they will only have to pay $3,000 in restitution.”
Does the “landscape of FCPA sentencing” truly reflect “significant prison terms” as stated by the DOJ?
True, any prison term is significant for a defendant and his/her family and friends.
But with a top sentence of 60 months (Charles Jumet – see here), the 366 day sentence for Frederic Bourke in November 2009 (see here), the 15 month sentence for Jason Edward Steph and the 366 day sentence for Jim Bob Brown both in January 2010 (see here) and now the 6 month sentence for the Greens – is this yet another instance in which DOJ’s FCPA rhetoric does not match reality?
H-P news that does not involve its former CEO, what others are saying about the Giffen Gaffe, SciClone’s stock drop, and Siemens $1 billion customer … it’s all here in the Friday roundup.
H-P Inquiry Escalates
According to a story in today’s Wall Street Journal by David Crawford, the DOJ “has asked Hewlett-Packard Co. to provide a trove of internal records as part of an international investigation into allegations that H-P executives paid bribes in Russia, according to people familiar with the investigations.”
According to the story, the DOJ request “came after German prosecutors complained H-P had refused to provide them with all of the records they requested” and after “H-P initially argued that the German request for bookkeeping records, some of which are five years old, imposed an ‘undue hardship’ on the company.”
The article indicates that the DOJ “asked H-P to comply voluntarily with the request and hasn’t subpoenaed the records” and that “H-P has yet to provide some records” but is “cooperating with the investigations.” According to H-P, the investigation
“involves people that have largely left the company and matters that happened as much as seven years ago.”
What Others Are Saying About Giffen
It’s been one week since the Giffen Gaffe (see here).
Here is what others are saying about the enforcement action that began with charges that James Giffen made “more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions”, yet ended with a misdemeanor tax violation against Giffen and an FCPA anti-bribery charge against a functionally defunct entity (The Mercator Corporation -in which Giffen was the principal shareholder, board chairman, and chief executive officer) focused merely on two snowmobiles.
Scott Horton, writing at Harper’s Magazine (see here) noted that “[t]he outcome is a huge embarrassment to federal prosecutors, who had invested a decade in resources in the effort to convict Giffen of FCPA and related violations.”
Horton, who has been following the case for years, highlighted how the “case has been the focus of political manipulation concerns for years” and closed with this paragraph:
“Kazakhs have long claimed that their government’s strategy of resolving the Giffen case by using the right levers with the American administration–a process that led them to hire former attorneys general and high-profile retired prosecutors, private investigators, and public-relations experts–would be successful. The outcome in the Giffen case appears to ratify that view. The notion of an independent, politically insulated criminal-justice administration in America has just taken another severe hit.”
Steve LeVine, author of The Oil and The Glory page at Foreign Policy, noted (here) that the Giffen resolution is “a considerable comedown for the federal government” and that Giffen’s lawyer “understood correctly that he could set up a collision between the Justice Department and the CIA in which the latter would probably prevail.”
The FCPA and Stock Price
What affect, if any, does an FCPA disclosure or resolution have on a company’s stock price?
It’s an issue I’ve explored before (see here) and best I can tell the evidence is inconclusive and the answer is – it depends.
In the case of a company that does business almost exclusively in China disclosing an FCPA inquiry focused on China, the answer is that disclosure of the FCPA inquiry matters – and quite a bit.
On Monday, SciClone Pharmaceuticals Inc., a Delaware company based in California, disclosed in a 10-Q filing (here) as follows:
“On August 5, 2010 SciClone was contacted by the SEC and advised that the SEC has initiated a formal, non-public investigation of SciClone. In connection with this investigation, the SEC issued a subpoena to SciClone requesting a variety of documents and other information. The subpoena requests documents relating to a range of matters including interactions with regulators and government-owned entities in China, activities relating to sales in China and documents relating to certain company financial and other disclosures. On August 6, 2010, the Company received a letter from the DOJ indicating that the DOJ was investigating Foreign Corrupt Practices Act issues in the pharmaceutical industry generally, and had received information about the Company’s practices suggesting possible violations.”
SciClone’s business is focused primarily on China with 90+% of its revenue derived from China sales. Thus, it is not surprising that an FCPA inquiry focused on China had a material impact on the company’s stock price.
As noted in this Reuters story, news of the FCPA inquiry sent SciClone’s shares, at one point, down 41% to a 52 week low.
Siemens $1 Billion Customer
In December 2008, Siemens agreed to pay $800 million in combined U.S. fines and penalties to settle FCPA charges for a pattern of bribery the DOJ termed “unprecedented in scale and geographic scope.” According to the DOJ, for much of Siemens’ operations around the world, “bribery was nothing less than standard operating procedure.”
The Siemens enforcement action remains the largest FCPA settlement ever (even though Siemens itself was not charged with FCPA anti-bribery violations).
On the one year anniversary of the Siemens enforcement action, I ran a post – Siemens – The Year After (see here) which highlighted how the U.S. government continues to do substantial business with the company it charged with engaging in a pattern of bribery “unprecedented in scale and geographic scope.”
This U.S. government business has helped Siemens outperform its competitors in a difficult recessionary environment and much of the company’s recent success is the direct result of government stimulus programs around the world.
Using Recovery.gov (a U.S. government website designed “to allow taxpayers to see precisely what entities receive Recovery money ..”), I highlighted how several Siemens’ business units have been awarded several dozen contracts funded by U.S. taxpayer stimulus dollars.
It is against this backdrop that Paul Glader’s recent piece in the Wall Street Journal “Siemens Seeks More U.S Orders” caught my eye.
According to the article, Siemens Corp. (the U.S. division of Siemens) currently brings in about $1 billion a year from the U.S. government, a figure the division hopes to double by 2015.
Eric Spiegel, chief executive of Siemens Corp., is quoted in the article as saying: “[o]ne of the beauties of the federal-government spending is it didn’t drop off during the recession.”
To that, I’ll add that one of the unfortunate beauties of engaging in bribery the U.S. government terms “unprecedented in scale and geographic scope” is no slow down in U.S. government contracts in the immediate aftermath of the enforcement action.
It’s one of the FCPA greatest headscratchers – FCPA violaters are and remain some of the U.S. government’s biggest suppliers and contracting partners.
As I’ve noted in numerous prior posts, efforts are underway to try to change this. See here, here and here.
A good weekend to all.