- FCPA Professor - https://fcpaprofessor.com -

What You Need To Know From Q2

This post provides a summary of Foreign Corrupt Practices Act enforcement activity and related events from the second quarter of 2014. (See here [1] for a similar post from Q1).

DOJ Enforcement (Corporate)

The DOJ brought one corporate enforcement action in the second quarter.  DOJ recovery is this enforcement action was approximately $77 million.  The enforcement action has not resulted, at least yet, in any individual charges against company employees.

Year-to-date, the DOJ has brought three corporate enforcement actions.  DOJ recovery in these enforcement actions has been approximately $388 million.  At present, none of these enforcement actions have resulted in any individual charges against company employees.

HP Related Entities (April 9th)

See here [2] for the prior post

Charges:  As to HP Russia – (i) conspiracy to violate the FCPA’s anti-bribery provisions and books and records and internal controls provisions; (ii) one count of violating the FCPA’s anti-bribery provisions; (iii) one count of violating the FCPA’s internal controls provisions; and (iv) one count of violating the FCPA’s books and records provisions; As to HP Poland – violation of the FCPA’s books and records and internal controls provisions; As to HP Mexico – not applicable.

Resolution Vehicle:  As to HP Russia, a plea agreement; as to HP Poland a DPA; as to HP Mexico an NPA.

Guidelines Range:  As to HP Russia $87 million to $174 million; as to HP Poland $19.3 million to $38.6 million; as to HP Mexico not specified in the NPA.

Penalty:  As to HP Russia $58.8 million; as to HP Poland $15.5 million; as to HP Mexico $2.5 million.

Disclosure:  The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here [3] for the prior post).

Monitor:  No

Individuals Charged:  No

DOJ Enforcement (Individual)

In the second quarter, the DOJ brought an FCPA and related enforcement action against various individuals in connection with securing Indian mining licenses.  As noted in this [4] post, the following individuals were charged:

All of the defendants except Rao (the alleged Indian “foreign official”) were charged with, among other charges, conspiracy to violate the FCPA’s anti-bribery provisions.

Also in the second quarter, the DOJ brought additional criminal charges against individuals associated with broker-dealer Direct Access Partners.  As noted in this [5] post, Benito Chinea and Joseph DeMeneses (the Chief Executive Officer and a managing partner, respectively of Direct Access Partners) were criminally charged in connection with alleged improper payments to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes, an alleged Venezuelan state-owned banking entity that acted as the financial agent of the state to finance economic development projects).

Year-to-date, in addition to the above individual enforcement actions, the DOJ also brought criminal charges against three former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.” (See here [6] for the prior post). The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold and former general counsel Gregory Weisman.

SEC Enforcement (Corporate)

The SEC resolved one corporate FCPA enforcement action via an administrative order  in the second quarter.  SEC recovery in this enforcement action was approximately $32 million. The enforcement action has not resulted, at least yet, in any individual charges against company employees.

Year-to-date, the SEC has resolved two corporate enforcement actions, both via administrative orders.  SEC recovery in these enforcement actions has been approximately $193 million.  At present, none of the enforcement actions have resulted in any individual charges against company employees.

HP (April 9th)

See here [2] for the prior post.

Charges:   None.  Administrative cease and desist order finding violations of the FCPA’s books and records and internal control provisions.

Settlement:  $34 million in disgorgement and prejudgment interest (approximately $2.5 million of the disgorgement amount was satisfied by payment of $2.5 million in connection with the HP Mexico DOJ action).

Disclosure:   The enforcement action appears to have been the result of a previous German and Russian law enforcement investigation (see here [3] for the prior post).

Individuals Charged:  No

Related DOJ Enforcement Action:  Yes

SEC Enforcement (Individual)

The SEC did not bring any FCPA charges against individuals in the second quarter.

Year-to-date there have not been any SEC FCPA enforcement actions against individuals.

Other Developments or Items of Interest

As highlighted here [7], the 11th Circuit issued its long-awaited “foreign official” decision – the first time in FCPA history in which an appellate court addressed the prominent enforcement theory that employees of alleged state-owned or state-controlled entities can be “foreign officials” under the FCPA.  This [8] post highlights the key language, this [9] post captures the current landscape regarding “foreign official” issues, this [10] post aggregates approximately 25 law firm publications regarding the 11th Circuit’s decision, this [11] post offers a perspective on the court’s flawed reasoning, and this [12] post explores the 193 meanings of “foreign official.”

As highlighted here [13], the 2nd Circuit issued its long-awaited decision regarding Judge Jed Rakoff’s (S.D.N.Y.) refusal to approve the settlement in SEC v. Citigroup.  In pertinent part, the Second Circuit concluded that “there is no basis in the law for the district court to require an admission of liability as a condition for approving a settlement between the parties. The decision to require an admission of liability before entering into a consent decree rests squarely with the S.E.C.”  According to the Second Circuit, the SEC does not need to establish “the truth” of the allegations against a settling party as a condition for approving consent decrees because, in the words of the Court, “trials are primarily about truth” whereas “consent decrees are primarily about pragmatism.”

As highlighted here [14], in a campaign finance case a majority of the Supreme Court adopted a narrow view of corruption and stated that “ingratiation and access are not corruption.”