August 21st, 2014

Summer FCPA Reading List

The dog days of summer.  A time for reflection, a time to think, a time to read.

In this post, I provide an overview of my FCPA writings that can help you elevate your Foreign Corrupt Practices Act knowledge, sophistication, and practical skills.

“The Foreign Corrupt Practices Act in a New Era”

My new book “The Foreign Corrupt Practices Act in a New Era” is the most comprehensive and candid book written about the FCPA.  The book dissects the FCPA’s new era and readers from the boardroom, to the courtroom, to the classroom will benefit from the nine chapters of the book which place the FCPA’s new era in context and provide a practical and provocative analysis of the FCPA, its enforcement, and related topics.

To see what others are saying about the book see here and here.

The first print of the book sold-out, but additional copies are now available.  To order a hard copy of the book, see here and here; to order an e-copy of the book, see here and here.

“The Facade of FCPA Enforcement”

According to available metrics, “The Facade of FCPA Enforcement” is the most downloaded article written about the FCPA. The 2010 article began a much-needed discussion of various aspects of FCPA enforcement, analyzes various pillars that contribute to the facade of FCPA enforcement, and highlights that the FCPA, in its so-called new era, is being enforced like no other law.  To download the article, click here.

“The Story of the Foreign Corrupt Practices Act”

This article, published on the FCPA’s 35th anniversary, is the most extensive piece written about the history of the FCPA and it weaves together information and events scattered in the FCPA’s voluminous legislative record to tell the FCPA’s story through original voices of actual participants who shaped the law.  To download the article, click here.

“Foreign Corrupt Practices Act Ripples”

The most extensive article written about the negative business effects of FCPA scrutiny and enforcement beyond actual enforcement actions.  The Article shifts the FCPA conversation away from a purely legal issue to its more proper designation as a general business issue that needs to be on the radar screen of business managers operating in the global marketplace.   The article assists in-house counsel and compliance professionals stress the importance of FCPA compliance by highlighting issues that matter most to corporate leaders. To download the article, click here.

“Revisiting a Foreign Corrupt Practices Act Compliance Defense”

This article asserts that the current FCPA enforcement environment does not adequately recognize a company’s good faith commitment to FCPA compliance and does not provide good corporate citizens a sufficient return on their compliance investments.  To download the article, click here.

“Grading the Foreign Corrupt Practices Act Guidance”

A critical analysis of the FCPA Guidance released by the DOJ and SEC in November 2012.  Among other things, the following topics are discussed: (i) the enforcement agencies’ motivations in issuing the Guidance and the fact that it should have been issued years ago; (ii) the utility of the Guidance from an access-of-information perspective and how the Guidance can be used as a measuring stick for future enforcement agency activity; and (iii) how the Guidance is an advocacy piece and not a well-balanced portrayal of the FCPA as it is replete with selective information, half-truths, and, worse information that is demonstratively false. To download the article, click here.

“Foreign Corrupt Practices Act Enforcement as Seen through Wal-Mart’s Potential Exposure”

What does the most high-profile instance of FCPA scrutiny in history tells us about the current FCPA enforcement environment?  Quite a lot actually.  To download the article, click here.

“Why You Should Be Alarmed by the ADM FCPA Enforcement Action”

Certain FCPA enforcement actions should legitimately cause many to wonder whether the enforcement agencies have transformed FCPA enforcement into a free-for-all in which any conduct the agencies find objectionable is fair game to extract a multimillion-dollar settlement from a risk-averse corporation. This article highlights why anyone who values the rule of law should be alarmed by the ADM enforcement action.  To download the article, click here.

What Percentage of DOJ FCPA Losses is Acceptable?

Bringing criminal charges and marshalling the full resources of law enforcement against an individual is an awesome power that our government possess. Because that power alters the lives of real people and their families, sidetracks real careers, empties real bank accounts in mounting a defense, and causes often irreversible damage to real reputations, it ought to be exercised with real discipline and prudence. It is fact that during this new era of FCPA enforcement the DOJ has an overall losing record in FCPA enforcement actions when actually put to its ultimate burden of proof and this article poses the question:  what percentage of DOJ FCPA losses is acceptable?  To download the article, click here.

In addition to the above articles, each year I publish an extensive FCPA year in review.  Put them all together and you will have an extensive collection of FCPA statistics, trends, and analysis over time.

For 2013, see here.

For 2012, see here.

For 2011, see here.

For 2010, see here.

For 2009, see here.

To read my Senate FCPA testimony click here to download, and to see a full listing of all my FCPA writings click here.

Thanks for reading!

Posted by Mike Koehler at 12:03 am. Post Categories: FCPA Scholarship




August 20th, 2014

Mid-Year Review of Anti-Corruption Law North of the 49th Parallel

A guest post  from Mark Morrison (Blake, Cassels & Graydon) the Canada expert for FCPA Professor, and Blake attorneys Michael Dixon and James Reid.

*****

Canadian authorities have not slowed down since 2013, which marked the most active year to date in Canada’s anti-corruption law enforcement history. This post discusses law enforcement proceedings in Canada so far this year under Canada’s equivalent to the FCPA, the Corruption of Foreign Public Officials Act (CFPOA).

Recent Enforcement Proceedings

Canadian authorities continue to demonstrate their willingness to enforce Canadian anti-corruption laws. While we do not expect enforcement activity to reach the level of our good neighbor to the south, Canadian enforcement continues at a moderate pace, which is a significant change from the historic total lack of enforcement.

This year has seen authorities focus on pursuing individuals under the CFPOA, which included the first jail sentence being handed out. The current trend of increased sanctions and enforcement against individuals is worth noting for corporate officers.

Notable enforcement proceedings are discussed below.

Chowdhury – Five individuals were jointly charged with one count of bribing a foreign public official. The alleged purpose of the bribes were to obtain a contract to provide consultancy services for the building of the World Bank funded Padma Bridge Project in Bangladesh. One of the individuals charged, Abdul Hasan Chowdhury, was a Bangladeshi citizen and resident. Chowdhury was formerly the Minister of State in Bangladesh and had never been to Canada. The allegations against Chowdhury were that he had exerted influence over the selection committee for the Padma Bridge Project.

All of the conduct in relation to the alleged bribery scheme was said to have occurred in Bangladesh.

Justice Nordheimer of the Ontario Superior Court conducted an analysis on the different bases on which states exercise jurisdiction over offences with transnational or international aspects. In doing so, Justice Nordheimer distinguished jurisdiction over an accused from jurisdiction over an offence and held that the CFPOA does not give the Court jurisdiction over foreign nationals who do not reside, or are not otherwise present (such as through extradition or otherwise), in Canada. The court held that the mere fact Chowdhury was a party to the offence was not sufficient to give Canada personal jurisdiction over him unless he either physically came to Canada or Bangladesh offers to surrender him to Canada.

Karigar – On May 23, 2014, Nazir Karigar was sentenced to three years in prison for offering to bribe foreign officials. This is the first time that a jail term has been handed out to an individual convicted under the CFPOA. This case will likely stand as a precedent for sentencing in future corruption cases.

Karigar was convicted on August 15, 2013 for his role in a plan to bribe Indian officials, including a government minister. The case concerned an agreement to pay approximately US $450,000 in cash as well as certain shares to Air India officials and the Indian Minister of Civil Aviation to secure a contract for the provision of facial recognition software and related equipment. At the time, Karigar was acting for Cryptometrics Canada. Karigar was convicted despite Cryptometrics not being successfully awarded the contract or there being any evidence the bribe was actually paid to Indian officials.

In sentencing, Justice Hackland of the Ontario Superior Court took Karigar’s age, his cooperation and the fact the scheme was unsuccessful into account as mitigating factors. However, since the bribery scheme was viewed as a serious crime, the principles of denunciation and deterrence were placed at the forefront in administering the sentence.

It is also important to note, that at the time Karigar was charged, the maximum prison sentence was only five years. Since then however, the CFPOA has raised the maximum penalty from five years to 14 years. This sentencing reflects the continuing trend of significant judicial denunciation when it comes to offences under the CFPOA.

Ongoing RCMP Investigations –Following the Karigar sentencing in May, on June 4, the Royal Canadian Mounted Police (RCMP) charged US nationals Robert Barra (former Cryptometrics CEO) and Dario Berini (former Cryptometrics COO) for bribery offences under CFPOA. UK national Shailesh Govindia, an agent for Cryptometrics, has also been charged with bribery under CFPOA and with one count of fraud contrary to the Criminal Code of Canada.  Canada-wide warrants have been issued for all three accused.

Conclusion

Canada has continued to focus on anti-corruption compliance and enforcement in the first half of 2014. A notable trend in enforcement from last year is the RCMP’s current focus on individuals involved in corruption schemes. Canadian courts have also made it clear that offences under the CFPOA are unlikely to receive leniency.

Posted by Mike Koehler at 12:04 am. Post Categories: CanadaGuest Posts




August 19th, 2014

The Odd Dynamic Persists

What happens when Congress passes a law with various provisions that generically apply to any securities law violations without thinking through, on a micro level, the intersection of such provisions?

The answer is this recent Second Circuit decision in the Liu Meng-Lin v. Siemens.

This observation is the same as it was in 2012 concerning Khaled Asadi v. GE Energy (see here for the prior post) and as it was in 2013 concerning the trial court decision in the Liu case (see here for the prior post).

To repeat, an odd dynamic exists when a foreign national is unable to maintain a private cause of action under Dodd-Frank’s anti-retaliation provisions based on allegations that his foreign employer retaliated against him for internally reporting conduct that could implicate the Foreign Corrupt Practices Act, yet that same foreign national can be awarded a whistleblower bounty under Dodd-Frank should the SEC bring an enforcement action based on the information the foreign national provided to it.

In Liu, the Second Circuit held, consistent with the trial court, that the anti-retaliation provisions of Dodd-Frank do not apply extraterritorially because “a statute is presumed, in the absence of clear congressional intent, to apply only domestically.”

Thus, the Second Circuit dismissed Liu’s complaint because Liu alleged that he was a non-citizen (a citizen and resident of Taiwan), employed by a foreign company (a former compliance officer of Siemens China, a Chinese corporation that is a wholly owned subsidiary of Siemens, a German corporation with shares listed on the New York Stock Exchange), and that all the events allegedly giving rise to liability occurred outside the United States (Liu alleged that Siemens employees were indirectly making improper payments to officials in North Korea and China in connection with the sale of medical equipment in those countries).

Consistent with the odd dynamic referenced above, Liu argued that Dodd-Frank’s anti-retaliation provisions should have extraterritorial application because Dodd-Frank’s whistleblower bounty provisions seemingly do citing to SEC guidance and regulations for support.

As to Liu’s argument regarding the whistleblower bounty provisions, the Second Circuit initially observed in dicta that “it is far from clear that [the SEC's] assertion that a statute has extraterritorial effect, unmoored from any plausible statutory basis for rebutting the presumption against extraterritoriality, should be given deference.”

More to the point, the Second Court concluded as to the anti-retailiation provisions follows.

“[E]ven if we assume that the [SEC regulations] clearly apply the bounty program to whistleblowers located abroad and that some deference would be due such an agency interpretation, it would not follow that Congress intended the anti-retailiation provision to apply similarly.  [...] [A] regulation addressing the bounty provision cannot be taken to support the proposition that the anti-retailiation provision should apply extraterritoriality. [...]  [E]xtraterritorial application of the bounty and anti-retailiation provisions have far different international ramifications.  Providing rewardings to persons, foreign or domestic, who supply information about lawbreaking is far less intrusive into other countries’ sovereignity than seeking to regulate the employment practices of foreign companies with respect to the foreign nationals they employ in foreign countries.  Applying the anti-retaliation provision in circumstances such as Liu’s would effect such an intrusion.  Thus, whatever their merits, none of the arguments that the bounty provision is meant to have extraterritorial reach provide any support for Liu’s claim that the anti-retaliation provision is meant to have extraterritorial reach.”  (emphasis is original).

From my perspective, the most interesting aspect of the Second Circuit’s decision is the above dicta statement which calls into question whether Dodd-Frank’s bounty provisions have extraterritorial application.

This will be an interesting issue to follow and once again the current odd dynamic (as well as potential future odd dynamics) are the direct result of Congress being sloppy in passing a law with various provisions that generically apply to any securities law violations without thinking through, on a micro level, the intersection of such provisions.

Posted by Mike Koehler at 12:03 am. Post Categories: Whistleblowers




August 18th, 2014

This And That

What Others Are Saying About the “Foreign Official” Cert Petition

From this Law360 article.

Rita Glavin, a partner at Seward & Kissel who previously served as head of the DOJ’s criminal division, called [the cert petition] “tremendously significant.”  “The definition of what constitutes a foreign official has been expanding into the abyss,” Glavin said. “That’s a real problem for companies. Instrumentality pretty much becomes whatever the DOJ says it is.” Glavin compared the expansion of the foreign official provision to that of the “honest services fraud” statute — a provision that served for years as a blunt legal instrument in public corruption cases but was curtailed in the Supreme Court’s 2010 decision in Skilling v. United States. “The government was pushing that statute in cases where people could not have comfort as to where the line was drawn and conduct crossed into criminality,” Glavin said. “The Supreme Court finally put a stop to it.”

Morgan Lewis & Bockius partner George Terwilliger, who served as a top Justice Department official under presidents Ronald Reagan and George H.W. Bush, noted that companies have spent large sums of money policing activities that fall into a legal gray area under the FCPA. He said a ruling on the instrumentality language would provide helpful guidance. “To have a statute of this scope and geographical reach, where some of the key terms remain subject to legitimate debate among legal experts, is unconscionable,” said Terwilliger, who co-chairs Morgan Lewis’ white collar litigation and government investigations practice. “It’s not an appropriate way to administer the law.”

Larry Urgenson, a partner at Mayer Brown, … called [last week's] petition “a useful landmark” for FCPA attorneys. He previously served in several leadership positions at the DOJ, including as acting deputy assistant attorney general and chief of the FCPA unit.  “It is very important in terms of whether the government is properly executing its prosecutorial powers to the right subjects and the right targets,” Urgenson said.

From this Global Investigations Review article:

Steven Michaels at Debevoise & Plimpton in New York said the petition involves issues which the current Supreme Court Justices are potentially keen to examine. “The Justices may find this case attractive, as they would hear arguments about statutory interpretation and whether the standard set forth by the Eleventh Circuit improperly encourage over-reaching by the government,” he said. “The Supreme Court likes to see criminal liability based on precision and clarity, and given the uncertainty in the law governing FCPA enforcement they may be willing to hear this case.” FCPA cases are also rarely litigated, Michaels said. This may encourage the court to grant the petition, as the court may have to wait a long time before the issue is litigated again in a court of appeals. The Supreme Court typically expects to see a split between US appeals courts before it hears a case, but such a split is also unlikely to occur soon.

John Chesley at Gibson Dunn & Crutcher in Washington, DC said the lack of a circuit split is “the main uphill battle” the petitioners will have to fight. ”The lack of clarity in the FCPA’s definition of instrumentality could get the justices interested, especially Justice Antonin Scalia who has written extensively in this area, but the petitioners will nevertheless have a hard time overcoming the court’s preference for only acting when there is a split.” Chesley said the Esquenazi decision was controversial, as the Eleventh Circuit’s complex, multi-factored test for determining whether a company is a government instrumentality makes it difficult to determine whether the recipient of an alleged bribe is a foreign official. “There’s certainly a lot of concern about vagueness,” he said. “For example, one of the factors in the Esquenazi test revolves around whether companies are perceived as government entities in their home jurisdiction. How do you advise a client on that?”

Jessie Liu at Jenner & Block in Washington, DC, said Supreme Court guidance on instrumentality would be “fantastic”, but also said such guidance is unlikely in the near future. ”The Eleventh Circuit’s reasoning was pretty robust,” she said. “We would probably need to see another appeals court go the opposite way for the Supreme Court to get involved, but there’s a good chance the Eleventh Circuit’s reasoning will dissuade future litigants from fighting the issue.”

Wal-Mart’s Pre-Enforcement Action Professional Fees and Expenses

In its August 14th second quarter earnings call, Wal-Mart disclosed:

“FCPA and compliance-related costs were approximately $43 million, which represented approximately $31 million for the ongoing inquires and investigations and roughly $12 million related to our global compliance program and organizational enhancements.”

Doing the math, that is approximately $662,000 in FCPA-related expenses per working day.

Over the past approximate two years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses. While some pundits have ridiculed me for doing so, such figures are notable because, as has been noted in prior posts and in my article “Foreign Corrupt Practices Act Ripples,” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny.  Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.

While $662,000 per working day remains eye-popping, Wal-Mart’s recent figure suggests that the company’s pre-enforcement action professional fees and expenses have crested as the figures for the past three quarters were approximately $855,000, $1.1 million and $1.3 million per working day.

In the aggregate, Wal-Mart’s disclosed pre-enforcement professional fees and expenses are as follows.

FY 2013 = $157 million.

FY 2014 = $282 million.

FY 2015 (first two quarters) = $96 million.

Scrutiny Alerts and Updates

Layne Christensen Company

Layne Christensen Company has been under FCPA scrutiny since 2010 concerning conduct in Africa (see here for the prior post).  As noted in this November 2013 post, the company disclosed that it was “engaged in discussions with the DOJ and the SEC regarding a potential negotiated resolution” of the matter.

However, last week the company issued this release stating:

“The DOJ has decided to not file any charges against the Company in connection with the previously disclosed investigation into potential violations of the FCPA.  The DOJ has notified Layne that it considers the matter closed.

As previously reported by Layne, in connection with updating its FCPA policy, questions were raised internally in September 2010 about, among other things, the legality of certain payments by Layne to agents and other third parties interacting with government officials in certain countries in Africa.  The audit committee of the board of directors engaged outside counsel to conduct an internal investigation to review these payments with assistance from outside accounting firms.  Layne has been consistent and forthcoming in providing voluntary disclosure to the DOJ and the SEC regarding the results of the investigation, and has cooperated fully with those agencies in connection with their review of the matter.  The parallel investigation by the SEC remains open and the Company is actively engaged in settlement discussions with the SEC to resolve this matter.

Layne had previously accrued a reserve of $10.4 million for the settlement of the investigations. Based on the decision by the DOJ, the Company will reduce the accrual related to this investigation by approximately $5.3 million, which will be reflected in Layne’s results of operations for the second fiscal quarter ended July 31, 2014.

David A.B. Brown, President & CEO, commented, “We are very pleased to conclude the DOJ investigation without any charges being brought against Layne and we hope to settle the SEC investigation in the near future. From the very beginning, we have maintained a position of full disclosure and complete cooperation with the authorities and have worked diligently to implement remedial measures to enhance our internal controls and compliance efforts. Based on conversations with the DOJ, we understand that our voluntary disclosure, cooperation and remediation efforts have been recognized and appreciated by the staff of the DOJ and that the resolution of the investigation reflects these matters.”

Qualcomm

As noted in this previous post, in April 2014 Qualcomm disclosed:

“As previously disclosed, the Company discovered, and as a part of its cooperation with these investigations informed the SEC and the DOJ of, instances in which special hiring consideration, gifts or other benefits (collectively, benefits) were provided to several individuals associated with Chinese state-owned companies or agencies. Based on the facts currently known, the Company believes the aggregate monetary value of the benefits in question to be less than $250,000, excluding employment compensation.

On March 13, 2014, the Company received a Wells Notice from the SEC’s Los Angeles Regional Office indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company for violations of the anti-bribery, books and records and internal control provisions of the FCPA. The bribery allegations relate to benefits offered or provided to individuals associated with Chinese state-owned companies or agencies.

[...]

On April 4, 2014, the Company made a Wells submission to the staff of the Los Angeles Regional Office explaining why the Company believes it has not violated the FCPA and therefore enforcement action is not warranted.”

Is this recent New York Times article the reason for Qualcomm’s FCPA scrutiny?  The article states that “an adviser to a Chinese government antitrust committee has been dismissed, accused of accepting payments from Qualcomm, an American technology company under investigation in China on suspicion of antitrust violations.”  According to the article, Qualcomm “had made ‘large payments’ to Zhang Xinzhu, an economist at the Chinese Academy of Social Sciences, while he also was an adviser on an antimonopoly committee under the State Council, China’s cabinet.”  As noted in this Reuters article, Qualcomm said “it had no direct financial links with an antitrust expert sacked from a government advisory post after state media reported he had received payments from the firm.”

Derwick Associates / ProEnergy Services

This August 2013 post predicted FCPA scrutiny for Derwick Associates based on a civil RICO lawsuit filed alleging conduct in Venezuela.

Sure enough.  This recent Wall Street Journal article reports:

“The U.S. Department of Justice and the Manhattan district attorney’s office are probing Derwick Associates … a company awarded hundreds of millions of dollars in contracts in little more than a year to build power plants in Venezuela, shortly after the country’s power grid began to sputter in 2009.  [...]  ProEnergy Services, a Sedalia, Mo.-based engineering, procurement and construction company that sold dozens of turbines to Derwick and helped build the plants, is also under investigation …”.

Cubist Pharmaceuticals

This previous post highlighted the FCPA scrutiny of Optimer Pharmaceuticals.  The company has since been acquired by Cubist Pharmaceutical which recently disclosed as follows.

Optimer U.S. Governmental Investigations

We are continuing to cooperate with the investigations by the SEC and the U.S. Department of Justice in their review of potential violations by Optimer of certain applicable laws, which occurred prior to our acquisition of Optimer. The investigations relate to an attempted share grant by Optimer and certain related matters in 2011, including a potentially improper payment to a research laboratory involving an individual associated with the share grant, that may have violated certain applicable laws, including the Foreign Corrupt Practices Act (FCPA). Optimer had already taken remedial steps in response to its internal investigation of these matters; nonetheless, these events could result in lawsuits being filed against us or Optimer and certain of Optimer’s former employees and directors, or certain of our employees. Such persons could also be the subject of criminal or civil enforcement proceedings and we may be required to indemnify such persons for any costs or losses incurred in connection with such proceedings. We cannot predict the ultimate resolution of these matters, whether we or such persons will be charged with violations of applicable civil or criminal laws, or whether the scope of the investigations will be extended to new issues. We also cannot predict what potential penalties or other remedies, if any, the authorities may seek against us, any of our employees, or any of Optimer’s former employees and directors, or what the collateral consequences may be of any such government actions. We do not have any amounts accrued related to potential penalties or other remedies related to these matters as of June 30, 2014, and cannot estimate a reasonably possible range of loss. In the event any such lawsuit is filed or enforcement proceeding is initiated, we could be subject to a variety of risks and uncertainties that could have material adverse effects on our business, results of operations and financial condition.”

Quotable

Returning to a theme previously explored in the “The Bribery Racket” (Forbes) and “FCPA Inc. and the Business of Bribery” (Wall Street Journal), not to mention my own article “The Facade of FCPA Enforcement,” Robert Amsterdam writes in this Forbes piece titled “When Anti-Corruption Becomes Corrupted,” as follows.

“Like many laws born out of politics, anti-corruption has become alarmingly mired in ambiguity, abuse, and misapplication. In the United Kingdom, the introduction of the Bribery Act, in conjunction with the U.S. Foreign Corrupt Practices Act (FCPA), means that now essentially the globe is covered with a bundle of vague principles and unfettered prosecutorial discretions that leaves multinational businesses dangerously exposed. Not only are the laws vague, but they are accompanied by incredible powers on behalf of prosecutors, who can issue orders to freeze assets, cripple business operations, harass employees, and destroy reputations, all before you’ve even had a chance to defend yourself in court. This ambiguity is heightened by the outsourcing of prosecutorial responsibilities to white collar criminal “defense” lawyers, who have embraced emerging regimes of “self reporting,” placing the onus on corporate decisions to avoid the stigma of criminal charges, requiring them to inform on themselves or their own senior employees, often in the absence of any substance.

[...]

[P]art of the problem is the proliferation of Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs), which entail the company surrendering its rights to defense and admitting to a series of accusations that are not subjected to exhaustive judicial scrutiny.

[...]

Many big law firms now feature celebrity prosecutors who formerly worked in enforcement, so they see their new job as a continuation of their old job, specializing in negotiating NDAs and DPAs.

In several cases that we are familiar with, the self-reporting doctrine has ended up causing much more damage than benefit. Particularly with respect to non-public companies, a better strategy would be to fight against any untrue or exaggerated accusation, uphold basic rights to defense, take internal measures to address any issues, but above all else, refuse to be bullied into a position of confessing to actions that the company has not committed or destroying the careers and personal lives of a handful of executives to serve as the sacrifice to save the company.

We do fear that if this trend of prosecutorial hubris is not checked, we may face a very dangerous future. The potential consequences of these laws, which include lengthy periods of incarceration, could morph beyond big business and impact other areas of society, where the accused are always guilty, where rights to defense do not exist, and dirty deals replace due process.

The philosophy of self reporting, impacting as it does the lives and reputations of executives in major corporations, requires a dramatic rethink. We must carefully examine the incentives driving prosecutors and how they choose their targets, review sentencing guidelines in both the United States and United Kingdom, and reinforce the core values of the presumption of innocence and due process in order to effectively address genuine issues of corruption practices abroad while sparing compliant businesses from the burden of unnecessary harassment.”

In-House Position

Avon Products, Inc., is looking for an attorney to join the Ethics & Compliance team.

The Regional Legal & Compliance Counsel (RLCC), Latam, reports to the Regional Ethics & Compliance Director for compliance matters and V.P. & General Counsel, Legal, Ethics & Compliance, Latam for legal matters.  The position resides in Miami.  The RLCC plays an active role in the execution of the Global Ethics & Compliance program and provides legal support to the region.  The Company’s Ethics & Compliance program seeks to minimize exposure of corporate and regulatory risks through company guidance and controls.  Working with Legal Department colleagues, especially the legal leadership and Compliance Counsels in the markets and the Regional Compliance Director, the RLCC counsels on compliance-related questions, implementation and execution of policies and procedures, with a particular focus on the anti-corruption policy, as well as assists with the design and implementation of compliance enhancements, as necessary.  The RLCC may spend appreciable time implementing anti-corruption policy controls, such as those concerning third party engagements, gift giving, and donations, thereby facilitating legitimate commercial activities while mitigating risk exposure.

Interested candidates may send their CV directly to Gregory Bates (Director, Ethics & Compliance, Latam) (gregory.bates@avon.com)  and should also apply via the http://www.avoncompany.com/aboutavon/careers/index.html.





August 15th, 2014

“Foreign Official” Cert Petition Filed In Supreme Court

As highlighted in this previous post, in May the 11th Circuit affirmed the FCPA (and related) convictions of Joel Esquenazi and Carlos Rodriguez.  Numerous previous posts have analyzed the 11th Circuit’s “foreign official” decision (see here for the key language of the decision; here for “foreign official” – the current landscape; here for a “foreign official roundup; here for the 193 different meanings of foreign official; and here for why the meaning of “foreign official” matters).

Perhaps most importantly, this previous post highlighted the 11th Circuit’s flawed reasoning.

Yesterday, Esquenazi and Rodriguez (through their counsel Markus Funk of Perkins Coie and David Simon of Foley & Lardner and others) filed this petition for certiorari in the Supreme Court.

The cert petition is believed to be the first substantive FCPA cert petition in FCPA history.  (As noted in this prior post, the Frederic Bourke FCPA enforcement action did result in a cert petition to the Supreme Court.  However, the issues presented were not FCPA specific. The Supreme Court denied cert.  Prior to Bourke’s cert petition, David Kay and Douglas Murphy filed a cert petition in the Supreme Court.  Again, the issues presented were not FCPA specific.  The Supreme Court denied cert.)  

The Supreme Court, which decides its own docket, has never substantively addressed any FCPA issue.

The petition states, in pertinent part, as follows.

“Few, if any, laws match the FCPA when it comes to the chasm between its profitability for the Government and the near-universal confusion concerning how far the statute actually reaches. The Eleventh Circuit’s ruling below only amplified the problem by providing a  purported “definition” of key FCPA provisions that differs from all provided previously and deepens the confusion over the term “foreign official.”

Under the heading, “Reasons for Granting the Petition” the petition states, in full, as follows.

The FCPA leaves open the pivotal question of who qualifies as a “foreign official” by not defining what “instrumentality [of a foreign government]” means.  Without a clear definition of “instrumentality,” the scope of the term “foreign official” cannot be understood. So it comes as no surprise that, though the statute was enacted in 1977, persistent questions about the correct interpretations of these terms have plagued it in this case and others.

Based on long-standing and straight-forward principles of statutory interpretation, Petitioners argued that instrumentalities should either be an actual part of the foreign government, or, at a bare minimum, perform core traditional governmental functions. The Government has lobbied for, and received from the Eleventh Circuit, an unacceptably broad interpretation of the term “instrumentality” that expands the reach of the statute to include partially state-owned or state-controlled enterprises that are not a part of any foreign  government, but whose employees could be considered “foreign officials” under the FCPA if they somehow fall into one or more of the court’s open-ended definitional options. Demonstrating the illogic of the Eleventh Circuit’s approach, consider that under its statutory construction, a janitor working for U.S. Government subsidized General Motors could qualify as a “foreign official” if General Motors were located overseas.

Prosecutorial discretion is one thing, but permitting the Government to take a “we-know-it-when-we-see it” approach to FCPA enforcement violates basic constitutional protections. In fact, the scope of the Government’s enforcement efforts have broadened to the point that even former Assistant Attorney General Breuer conceded the uncertainty—and the breadth of the Government’s interpretation—of who is a “foreign official” under the FCPA:

[C]onsider the possible range of ‘foreign officials’ who are covered by the FCPA: Some are obvious, like health ministry and customs officials of other countries. But some others may not be, such as the doctors, pharmacists, lab technicians and other health professionals who are employed by state-owned facilities. Indeed, it is entirely possible, under certain circumstances and in certain countries, that nearly every aspect of the approval, manufacture, import, export, pricing, sale and marketing of a drug product in a foreign country  will involve a ‘foreign official’ within the meaning of the FCPA.

The Government’s excessively broad (and now judicially sanctioned) interpretation of who is considered to be a “foreign official” stands in direct contrast to the stated purpose of the FCPA, namely, to prohibit payments to a “narrow recipient category of traditional government officials performing official or public functions.” Decl. of Professor Michael J. Koehler In Support of Defendants’ Motion to Dismiss Counts One Through Ten of the Indictment in United States v. Carson, No. 8:09-cr-00077, ¶ 16(b) (C.D. Cal. Feb. 21, 2011).

Recognizing this untenable state of affairs, there has been widespread commentary and concern about the Government’s pursuit of “an increasingly expansive view of what makes an enterprise an ‘instrumentality’ of a foreign government, and, therefore, what makes employees of such enterprises ‘foreign officials.’” [...]  Professor Koehler, for his part, has noted that no FCPA element “is more urgently in need of judicial scrutiny than the FCPA’s ‘foreign official’ element.” Michael J. Koehler, The Façade of FCPA Enforcement, 41 Geo. J. Int’l L. 907, 916 (2010).”

Elsewhere, the petition states, in pertinent part, as follows.

“In light of the Government’s recent increased enforcement action, and the span of time it has taken for just one federal appellate court to interpret this core statutory term, the time is now ripe for this Court to settle the meaning of instrumentality under the FCPA. This Court should not defer answering the question presented in this Petition until additional federal appellate courts reach conflicting decisions regarding whether state-owned enterprises are instrumentalities under the FCPA. By that time, the Government will have brought many more prosecutions or enforcement actions involving payments made, or benefits provided, to individuals who are not traditional government officials. Individuals and companies around the globe will be left to wonder whether the Government will unilaterally declare their conduct criminal. This Court should, therefore, settle the question of the meaning of “instrumentality” to clarify which of those enforcement actions Congress intended to sanction under the FCPA, and which it did not.

What is more, an acceptable answer to the definitional challenge lies near at hand. Congress is certainly capable of enacting language that applies to state-owned or state-controlled enterprises when it intends to do so. When Congress enacted the Foreign Sovereign Immunities Act (FSIA), for example, it specifically included within the definition of “agency or instrumentality of a foreign state” entities a “majority of whose shares or other ownership interest is owned by a foreign state or political subdivisions.” 28 U.S.C. § 1603(b). The presence of such an explicit definition in FSIA indicates that Congress knew how to include such language in the FCPA, but chose not to include it.

[...]

That absence is significant here and warrants construing “instrumentality” as excluding state-owned or state-controlled enterprises that are not political subdivisions and that do not perform core, traditional governmental functions. See Dole Food Co. v. Patrickson, 538 U.S. 468, 475-76 (2003) (contrasting the absence of language in FSIA with that used in other statutes and concluding that the absence of language was instructive). With regard to the FCPA, “[i]f Congress desires to go further . . . it must speak more clearly than it has.”

*****

A previously disclosed, I have provided pro bono expert services to pro bono defense counsel in this case.

Posted by Mike Koehler at 12:05 am. Post Categories: Carlos RodriguezForeign OfficialJoel EsquenaziSupreme Court