February 22nd, 2012

Africa Sting – A “Long And Sad Chapter In The Annals Of White Collar Criminal Enforcement”

Those were the words used by U.S. District Court Judge Richard Leon yesterday in granting the DOJ’s motion to dismiss (see here for the prior post) charges against the remaining Africa Sting defendants. As noted in this Washington Post story, Judge Leon further stated as follows. “I, for one, hope this very long, and I’m sure expensive, ordeal will be a true learning experience for both the [Justice] Department and the FBI.”

For additional coverage see here from Reuters, here from the Wall Street Journal, here from Bloomberg, here from Associated Press, here from Politico, here from the Financial Times, here from the website Main Justice.

As to the three defendants (Jonathan Spiller, Haim Geri, and Daniel Alvirez) who previously plead guilty to a charge of conspiracy to violate the FCPA, a charge Judge Leon dismissed as to all defendants in the second Africa Sting trial, Main Justice reports that the DOJ “is working on scheduling a hearing for those defendants ‘to give them an opportunity to be heard on this issue.” As indicated in this previous post, Alvirez was also charged with non-sting conduct related to the Republic of Georgia.

Below are comments of several of the lawyers involved in the Africa Sting case below.

David Krakoff (BuckleySandler LLP) who represented John Mushriqui stated as follows. “We are extremely pleased that the Department of Justice has decided to do the right thing by moving to dismiss the Indictment against our client, John Mushriqui, ending his two year nightmare. We recognize that this was a difficult decision given the substantial resources that the government invested in this case. It’s really hard to take on the government, but when you believe in your innocence and fight for your freedom, these cases can be won. Ultimately, the system worked for John Mushriqui. John can start the rest of his life today with his good name intact.”

Charles Leeper (Drinker Biddle & Reath LLP) who represented Jeanna Mushriqui stated as follows. “Jeanna is innocent of these charges, a fact recognized by nearly all of the jurors who considered the evidence produced by the government at trial, and she was prepared to confront and refuse these charges again at re-trial. Nevertheless, Jeanna is grateful that the decision-makers at the Department of Justice recognized that it was time to bring this case to an end.”

Lisa Prager (Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer PC) who represented Israel Weisler stated as follows. “I am very pleased with the government’s dismissal. For my client, it has been a long two years. I believe it was a wise decision to put this case, finally, to rest.”

Michael Madigan (Orrick, Herrington & Sutcliffe LLP) who represented John Godsey, who was found not guilty in the second Africa Sting trial (see here for the prior post), stated as follows. “While I commend the DOJ from the Attorney General on down for making the right decision today, the Government filing before Judge Leon (who was as fair, careful and thorough as any trial judge could be throughout the 66 day jury trial) missed its mark terribly in failing to recognize that the case was flawed from Day 1, both by it’s choice of a snitch (a despicable, dishonest 30 yr cocaine addict and admitted thief of millions of dollars hidden in Swiss bank accounts from his prior employer), the “it’s all just a game” commentary from the agents who disrespected the rule of law, and the structuring of the “sting” in its documents and taped conversations to make the Defendants think it was a legal transaction they were being asked to participate in—all of which a courageous and always attentive jury so found. My client was acquitted of all charges almost two years to the day after he was arrested and chained to a chair for several hours—he rightly asks how our Justice system could have gone so awry and where he goes to get his reputation and two full years of his life back!”

At the end of the day, the Africa Sting case was about real people. Real people with real parents, real spouses, real children, and real friends. Real people with real lives disrupted, real careers sidetracked, real reputations damaged, and real wallets emptied to defend themselves in this manufactured case.

Dee Wempler, Joseph Passanise, and Adam Woody (Law Offices of Dee Wempler and Joseph Passanise) who represented Lee Tolleson captured the human element in a release that stated as follows. “Lee Tolleson and his family are elated at this unnecessary and worthless nightmare is now over with the Government dismissing the multi count indictment with prejudice. Lee was a victim of a scheme by the Government, which was the mother of all gigantic taxpayers’ waste of dollars, to entrap him and others by faking an overseas business scam. The prosecutors were testing the Foreign Corrupt Practices Act by setting up a sting to raise a national awareness of the law, but the little guy suffers. The Government went to great expense to attempt to sucker many businesses into a fake business deal in Gabon, West Africa. The Government pinned its entire investigation on a despicable character, Bistrong, who manipulated Federal Agents throughout the investigation, in order to save his soul for his misdeeds. Ultimately, the Government finally did the right thing today and should think twice about going after honest business people in the future. Now, where does Lee go to get back his good name back? He is from a small Arkansas town with a GED and has a home school education. His family has been devastated financially by this process. Two things have kept him grounded; his faith in God and his family.”

Posted by Mike Koehler at 12:02 am. Post Categories: Africa Sting • FCPA Trials

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February 21st, 2012

Game Over – DOJ Moves To Dismiss Africa Sting Cases

In a filing this morning (see here), the DOJ has moved “to dismiss with prejudice the Superseding Indictment, and all underlying indictments, against the remaining defendants who are pending trial.”

The filing states as follows. “The government has carefully considered (1) the outcomes of the first two trials in which, after extensive deliberations, the juries remained hung as to seven defendants and acquitted two defendants, and one defendant was acquitted on the sole charge against him pursuant to Fed. R. Crim. P. 29; (2) the impact of certain evidentiary and other legal rulings in the first two trials and the implications of those rulings for future trials, including with respect to Rule 404(b) and other knowledge and intent evidence the government proposed to introduce; and (3) the substantial governmental resources, as well as judicial, defense, and jury resources, that would be necessary to proceed with another four or more trials, given that the first two trials combined lasted approximately six months. In light of all of the foregoing, the government respectfully submits that continued prosecution of this case is not warranted under the circumstances.”

Today’s request for dismissal comes two weeks after the jury foreman in the second Africa Sting trial wrote this guest post on this site.

Posted by Mike Koehler at 9:16 am. Post Categories: Africa Sting • FCPA Trials

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February 21st, 2012

FCPA Inc. And The Business Of Bribery

On March 2nd, the Indiana International & Comparative Law Review will present its annual symposium titled “Recent Developments in the War on Corruption: The U.S. Foreign Corrupt Practices Act and Beyond” (see here for more information). The event, to be held at Indiana University Robert H. McKinney School of Law in Indianapolis, features panels of U.S. and international scholars and practitioners and I am pleased to be participating. CLE credits are available for the event and I hope FCPA Professor readers in the Indianapolis area and region are able to attend.

The title of my talk (and work in progress) is “FCPA Inc. and the Business of Bribery.”

This new era of FCPA enforcement has meant many things, including the emergence of “a thriving and lucrative anti-bribery complex.” (See here from Forbes). The Wall Street Journal Law Blog has asked (here) whether the FCPA is ”just a full-employment act for the private bar?” Others have noted (see here ”Scare The Crap Out Of Them” that those in the industry “vastly overstate the risk that the FCPA brings to companies” and that “the degree to which the industry that has popped up around the FCPA has an inherent interest in puffing up the underlying risk creates at the least an apparent bias”). The Wall Street Journal has noted (here) that “from this wellhead of anxiety, a gusher of compliance lawyers, trainers and FCPA navigators has flowed.”

Even back in 2008, this Washington Post article titled “Cashing in On Corruption” observed, among other things as follows: “FCPA business is booming, a welcome growth area for Washington law offices …”; ”sharing in the bonanza [are] accounting firms, forensic computer specialists and a growing army of compliance consultants.” The Post piece concludes with this “… don’t think law firms aren’t playing off those fears by aggressively marketing their services as investigators, risk mitigators and compliance counselors” and the article notes that “the result is [a] sudden flood of labor-intensive legal work for both partners and associates, particularly in the local offices of big international firms.”

Others have noted (see here) as follows. “It is getting pretty crowded these days out in the Anti-Corruption Compliance space. There are more and more companies, consultants, software providers and other entities offering to provide the right mix of information and data needed to support a due diligence review of a third-party, joint venture partner or acquisition target. These companies, consultants and investigators are at the infancy of this new and sophisticated industry. Just look on the Internet for information and you will be overwhelmed.”

What does this all mean? What events contributed to these market conditions? Are these market conditions short-term or long term? Which people contributed to these market conditions and what are they doing now?

“FCPA Inc. and the Business of Bribery” will categorize the participants in this “new and sophisticated industry” which includes: law firms; accounting firms; compliance and consulting companies; insurance companies; conference and training providers; and document retention and translation companies among others. How does one measure the growth and profitability of the FCPA market? There are a few publicly traded companies in FCPA Inc., but the vast majority are not.

This project will analyze the services each industry participant provides and how industry participants market their services. Do market participants engage in fear-based marketing? For instance, how often is the Siemens FCPA enforcement action (the largest in terms of fines and penalties in FCPA history – $800 million) used in marketing materials? Do marketing materials inflate the number of FCPA enforcement actions? For instance, and sticking with Siemens, is that 20 enforcement actions (DOJ enforcement action against Siemens AG, Siemens Argentina, Siemens Bangladesh and Siemens Argentina as well as DOJ enforcement actions against 8 individuals; SEC enforcement action against Siemens AG as well as SEC enforcement actions against 7 individuals) or 1 enforcement action based on the same core set of facts? Is the Africa Sting case 22 enforcement actions or 1 enforcement action based on the same set of facts? How one answers this basic question matters in analyzing the number of FCPA enforcement actions and the number of FCPA enforcement actions is a key marketing tool.

How do industry participants in the same sector seek to differentiate their services to establish a niche? Do law firms tout having former DOJ or SEC FCPA enforcement attorneys as part of their FCPA practice group?

Do participants in the FCPA compliance industry promise more than they can deliver given that pre-existing FCPA compliance policies and procedures – while perhaps lessening the impact of FCPA exposure – do not reduce FCPA exposure?

How has FCPA Inc. impacted, both positively and negatively, FCPA enforcement and FCPA compliance? For instance, is one reason for the increase in FCPA enforcement the result of the industry itself?

“FCPA Inc. and the Business of Bribery” is very much in its early stages and I would value input from readers as to additional issues worthy of exploring. I can be reached at mjkoehle@butler.edu or you can leave a comment on this post below.

Posted by Mike Koehler at 5:02 am. Post Categories: FCPA Inc.

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February 20th, 2012

Wynn’s Boardroom Battle Royale

[There are two posts today]

Rarely does a company issue a press release accusing a director of Foreign Corrupt Practices Act violations. But then again, rarely does a director file a lawsuit against the company alleging facts that could implicate the FCPA, which then sets into motion an SEC inquiry.

Welcome to Wynn Resorts boardroom battle royale.

As indicated in this prior post, in January, Wynn boardmember Kazuo Okada filed a civil lawsuit in Nevada alleging facts which could implicate the FCPA – a $135 million Wynn donation to the University of Macau. As noted in the post, last week Wynn announced that the SEC has launched an inquiry requesting information relating to the donation, other donations made by the company and the company’s “casino or concession gaming licenses or renewals in Macau.”

Yesterday, in a Sunday press release (here), Wynn announced that its “Compliance Committee has concluded a year-long investigation after receiving an independent report detailing numerous apparent violations of the U.S. Foreign Corrupt Practices Act (FCPA) by Aruze USA, Inc. [see here], its parent company Universal Entertainment Corporation [see here] and its principal shareholder, Kazuo Okada.”

Okada’s bio on Wynn’s website (here) states as follows. “Mr. Okada founded Universal Lease Co. Ltd., which became Aruze Corp. in 1998, a company listed on the Japanese Association of Securities Dealers Automated Quotation Securities Exchange. In November 2009, Aruze Corp. changed its name to Universal Entertainment Corporation. Universal Entertainment Corporation a Japanese manufacturer of pachislot and pachinko machines, amusement machines, and video games for domestic sales. In 1983, Mr. Okada also founded Universal Distributing Nevada, Inc., which changed its name to Aruze Gaming America, Inc. in 2005. Aruze Gaming America, Inc. is a manufacturer and distributor of gaming machines and devices in the United States and is expanding its sales business in Asia, Australia and South Africa. Mr. Okada currently serves as director and Chairman of the board of Universal Entertainment Corporation, as director, President, Secretary and Treasurer of Aruze USA, Inc., which is a wholly owned subsidiary of Universal Entertainment Corporation, and as director, President, Secretary and Treasurer of Aruze Gaming America, Inc.”

In yesterday’s release, Wynn further stated as follows. “The Compliance Committee, chaired by former Nevada Governor Robert Miller, engaged several investigators, including Freeh, Sporkin and Sullivan, LLP, led by Louis J. Freeh, the former Director of the U.S. Federal Bureau of Investigation, which conducted a thorough independent investigation. Freeh’s investigators uncovered and documented more than three dozen instances over a three-year period in which Mr. Okada and his associates engaged in improper activities for their own benefit in apparent violation of U.S. anti-corruption laws and gross disregard for the Company’s Code of Conduct. These troubling discoveries include cash payments and gifts totaling approximately$110,000 to foreign gaming regulators. “Mr. Okada and his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two chief gaming regulators at the Philippines Amusement and Gaming Corporation (PAGCOR), who directly oversee and regulated Mr. Okada’s Provisional Licensing Agreement to operate in that country,” according to the Freeh Report. The report further stated that Mr. Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments.””

Based on the Freeh Report, the Wynn releases states as follows. “The Board has requested that Mr. Okada resign as a Director of Wynn Resorts. The Company will immediately inform the Board of Directors of its Hong Kong listed subsidiary, Wynn Macau, Limited, of its actions and will recommend that Mr. Okada be removed from the Wynn Macau Board.” [...] “The Freeh Report is the culmination of a year-long investigation by the Compliance Committee based on increasing concerns the Board had relating to the activities of Mr. Okada and Aruze USA, Inc. in the Philippines and statements made by Mr. Okada to Wynn Resorts’ Directors that gifts to regulators are permissible in Asia. Mr. Okada is the only Director of Wynn Resorts who has continued to refuse to sign the Company’s Code of Conduct or participate in mandatory Foreign Corrupt Practices Act training for Directors.”

To learn more, see here from Reuters.

Posted by Mike Koehler at 5:12 am. Post Categories: Gaming Industry • Kazuo Okada • Permits / Licenses / Customs / Tax • Philippines • Wynn Resorts

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February 20th, 2012

Hail To The Chief

Today is Presidents’ Day.

This post highlights the role of Gerald Ford, Jimmy Carter, Ronald Reagan, and William Clinton in enactment and subsequent development of the FCPA.

Ford

After watching Congress investigate and hold hearings on the foreign payments problem for approximately nine months, in March 1976 President Ford issued a “Memorandum Establishing the Task Force on Questionable Corporate Payments Abroad” (see here).

The great debate at this time was whether the foreign payments problem should be addressed through a disclosure regime or through a criminalization regime. The Ford Administration favored the former and in June 1976, Ford released “Remarks Announcing New Initiatives for the Task Force on Questionable Corporate Payments Abroad.” (see here). As noted in the remarks, Ford directed the task force “to prepare legislation that would require corporate disclosure of all payments made with the intention of influencing foreign government officials.”

Certain bills were introduced in Congress consistent with Ford’s vision and in August 1976 Ford issued “Foreign Payments Disclosure – Message From the President of the United States Urging Enactment of Proposed Legislation to Require the Disclosure of Payments to Foreign Officials.” (see here).

Neither Ford’s proposal, or any other, was enacted by Congress prior to the 1976 elections in which Ford was defeated by Jimmy Carter.

Carter

Unlike the Ford Administration, the Carter administration favored the criminalization regime that was under consideration in the prior Congress and a movement that soon picked up speed when Congress reconvened in January 1977.

Certain members of the Carter administration testified at Congressional hearings throughout 1977 in favor of the criminalization regime and in December 1977, S. 305 (the Foreign Corrupt Practices Act of 1977 and the Domestic and
Foreign Investment Improved Disclosure Act of 1977) was presented to President Carter.

On December 20, 1977, President Carter signed S. 305 into law – see here for his signing statement.

Reagan

As noted in this previous post, President Reagan’s administration very soon sought decriminalization of foreign payments subject to the FCPA. During the Reagan administration (1981-1989), numerous efforts were made in Congress to amend the FCPA. Soon after the FCPA was enacted, it was widely recognized that the FCPA had addressed a serious problem, but that the statute created much uncertainty and was, in the minds of many, unworkable.

Among other things, the FCPA antibribery provisions enacted in 1977 contained a broad knowledge standard (“reason to know”) applicable to indirect payments to “foreign officials”; (ii) did not contain any affirmative defenses; and (iii) did not contain an express facilitating payments exception. Beginning in 1980, various bills were introduced – either as stand alone bills or specific titles to omnibus trade and export bills – that sought to amend the FCPA. This legislative process took eight years.

In August 1988, President Reagan signed H.R. 4848 the Omnibus Trade and Competitiveness Act of 1988. Title V, Subtitle A, Part I of the Act was titled “Foreign Corrupt Practices Act Amendments.” President Reagan’s signing statement does not refer to the FCPA amendments buried in the omnibus trade bill. Among the amendments were a revised knowledge standard applicable to indirect payments and the creation of affirmative defenses and an express facilitating payment exception.

Clinton

In November 1998, President Clinton signed S. 2375, the “International Anti-Bribery and Fair Competition Act of 1998.” Among other things, the Act amended the FCPA by (i) creating a new class of persons subject to the FCPA – “any person” not an issuer or domestic concern to the extent such person’s bribery scheme has a U.S. nexus; and (ii) creating a new alternative nationality jurisdiction test for U.S. issuers and domestic concerns.

See here for President Clinton’s signing statement.

An FCPA reform debate has been active for over a year. Most recently, Chris Matthews (Wall Street Journal Corruption Currents) reports (here) that “big tobacco has waded into the ongoing push to amend the Foreign Corrupt Practices Act” and that “Altria Group, the parent company of Philip Morris USA, has retained a lobbyist to represent the company’s interest in the FCPA.” In August 2010, tobacco companies Alliance One International and Universal Corporation resolved similar FCPA enforcement actions (see here for the prior post). Matthews also reports that “several other companies have lobbied on the FCPA, including FedEx Corp. and the Chubb Corp., a property insurer.”

As the FCPA reform debate unfolds, will President Obama play a role in FCPA history?

Posted by Mike Koehler at 5:10 am. Post Categories: FCPA Reform • Legislative History • Tobacco Industry

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