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Monday, July 30th, 2012

Retail Industry Sweep

This previous post discussed the Wal-Mart effect, how Wal-Mart is clearly not the only company subject to the FCPA that needs licenses, permits and the like when doing business in Mexico, and that it is likely that Wal-Mart’s potential FCPA exposure has caused sleepless nights for many company executives doing business in Mexico and the general region.

Sure enough.

Aruna Viswanatha reports in this Reuters story that “retailers have been reviewing their international operations in light of a bribery scandal at Wal-Mart’s operations in Mexico that is the subject of investigations by the Justice Department and the Securities and Exchange Commission.” According to the story, “other retail companies have also since reported to U.S. agencies suspicions of their own potential violations, which in turn has the Justice Department and SEC considering a sweep of the entire industry.” For more on industry sweeps, see this previous post.

Barclays Dealings With Sovereign-Wealth Funds Scrutinized

The Wall Street Journal reported on Friday (here) that Barclays PLC’s “chief financial officer is under investigation by British authorities related to the bank’s 2008 fundraising activities with Middle Eastern investors.” According to the story, the “probe is focused at least in part on how Barclays wooed Qatar’s sovereign-wealth fund to pump billions of pounds into the bank as the financial crisis intensified.” According to this Wall Street Journal article, Barclays previously disclosed “£240 million of payments made to Qatar Holding and Abu Dhabi’s Sheik Mansour Bin Zayed Al Nahyan related to its £7.3 billion capital raise in 2008.”

Barclays has ADRs traded on the New York Stock Exchange and, according to the article, the SEC “is aware of the probe” and will be updated on its progress. As the article notes, the SEC is currently conducting an expansive investigation of various financial institutions concerning relationships with sovereign-wealth funds.

Halliburton’s Latest Disclosure

Halliburton previously disclosed potential FCPA issues concerning the use of an Angolan vendor. Last week in this quarterly report, the company provided an update on that investigation as well as new investigations concerning additional conduct in Angola as well as Iraq. The disclosure states as follows.

“We are conducting internal investigations of certain areas of our operations in Angola and Iraq, focusing on compliance with certain company policies, including our Code of Business Conduct (COBC), and the FCPA and other applicable laws. In December 2010, we received an anonymous e-mail alleging that certain current and former personnel violated our COBC and the FCPA, principally through the use of an Angolan vendor. The e-mail also alleges conflicts of interest, self-dealing, and the failure to act on alleged violations of our COBC and the FCPA. We contacted the DOJ to advise them that we were initiating an internal investigation. Since the third quarter of 2011, we have been participating in meetings with the DOJ and the SEC to brief them on the status of our investigation and have been producing documents to them both voluntarily and as a result of SEC subpoenas to the company and certain of our current and former officers and employees. During the second quarter of 2012, in connection with a meeting with the DOJ and the SEC regarding the above investigation, we advised the DOJ and the SEC that we were initiating unrelated, internal investigations into payments made to a third-party agent relating to certain customs matters in Angola and to third-party agents relating to certain customs and visa matters in Iraq. We expect to continue to have discussions with the DOJ and the SEC regarding the Angola and Iraq matters described above and have indicated that we would further update them as our investigations progress. We have engaged outside counsel and independent forensic accountants to assist us with the investigations. We intend to continue to cooperate with the DOJ’s and the SEC’s inquiries and requests in these investigations. Because these investigations are ongoing, we cannot predict their outcome or the consequences thereof.”

In 2009, Halliburton and related entities settled DOJ and SEC FCPA enforcement actions concerning Bonny Island, Nigeria conduct by agreeing to pay $579 million in combined fines and penalties. See here and here. Pursuant to the SEC settlement, Halliburton is permanently enjoined from violating the FCPA’s books and records and internal control provisions.

W.W. Grainger Updates Its Disclosure

This previous post discussed W.W. Grainger’s February disclosure concerning an investigation that sales employees of a China subsidiary may have provided prepaid gift cards to certain customers. As noted by Chris Matthews in this recent Wall Street Journal Corruption Currents post, the company in a recent SEC filing stated as follows.

“The results of the investigation, which have been submitted to the DOJ and the SEC, did not substantiate initial information suggesting significant use of gift cards for improper purposes. The Company cannot predict at this time whether any regulatory action may be taken or any other potential consequences may result from this matter.”

The Corruption Currents post contains a quote from Grainger spokeswoman as follows. “We conducted a very thorough investigation, and based on our findings we do not believe this is a material issue. We have submitted our findings to the DOJ and the SEC and we are in conversations with them regarding the conclusion of this matter.”

Contrary to the Corruption Currents headline “W.W. Grainger’s FCPA Probe Finds No Wrongdoing” the disclosure is qualified by the term “significant” use of gift cards for improper purposes and the quote from the company representative is qualified by the term “material” issue. Very few FCPA issues in multinational companies rise to the level of quantitative materiality – even if the SEC takes the view that all payments in violation of the FCPA are qualitatively material.

As noted in this previous post concerning Congressional interest in DOJ FCPA declination decisions, the DOJ has stated that it “has declined to prosecute corporate entities in several cases based on particular facts and circumstances presented in those matters” including the following: “a single employee, and no other employee, was involved in the provision of improper payments; and the improper payments involved minimal funds compared to the overall business revenues.”

Cobalt Experiences The Front Page Effect As Well

Wednesday, April 25th, 2012

Wal-Mart’s stock is not alone in experiencing a wild ride based on recent front page news coverage of FCPA issues. Last week, Cobalt International (a Houston based oil exploration and production company) experienced a wild ride as well.

On Friday, April 13th, Cobalt’s shares closed at $28.38.

On Sunday, April 15th, the Financial Times (“FT”) published two articles: “Spotlight Falls on Cobalt’s Angola Partner” and “Angola Officials Held Hidden Oil Stakes” that spooked investors the following day. Never mind that, as in Wal-Mart’s case, Cobalt disclosed FCPA scrutiny weeks earlier – see here for the prior post. (Point taken that market reaction to Wal-Mart – the stock was down an additional 3% yesterday, down approximately 8% this week – is likely not just based on Wal-Mart’s potential FCPA scrutiny, but Wal-Mart’s response (or lack thereof) to the payments since 2005 and the impact this could have for senior leadership at the company).

The FT articles document how in 2008 Cobalt was looking to obtain rights to drill for oil in Angolan waters. According to the FT, an Angolan government stipulation was that Cobalt would have partner with Nazaki Oil & Gaz, described by the FT as “an obscure local company.” According to the articles, FT confirmed that “three of the most powerful figures in the Angolan regime have held interests in Nazaki.” The FT stated that these individuals “interests in Cobalt’s local partner could raise questions about compliance with U.S. anti-corruption laws, which make it a crime to pay or offer anything of value to foreign officials to win business.” For its part, Cobalt stated in the articles that its extensive and ongoing due diligence “has not found any credible support for the central allegation that Angolan government officials, and specifically the officials identified … have any ownership in Nazaki” and that the company “has at all times complied fully with both U.S. and Angolan laws.”

Nevertheless, in mid-day trading on Monday, April 16th, the company’s stock plunged approximately 11% and closed at $26.35, down approximately 7% from its previous close.

After watching its stock dive based on the FT article, Cobalt issued a release (here) strongly refuting “any allegations of wrong doing and once again stood behind its principles of full compliance with all laws in all jurisdictions in which it operates.” According to Cobalt’s release, “prior to publication of [the FT] articles, Cobalt went on the record asking for any documentation that the Financial Times could offer which was at odds with its position. The Financial Times declined Cobalt’s repeated requests for supporting documentation. In fact, in the course of these communications, Cobalt informed the Financial Times of certain egregious, demonstrably false allegations that it provided to Cobalt.” As noted in the release, “Cobalt began its investigation into its Angola business relationships in 2007. Cobalt has based its decisions and actions on the results of these extensive investigations and will continue to maintain rigorous due diligence in all of its worldwide activities. Cobalt remains confident that it has not violated any US or Angolan Law and will vigorously defend its reputation and legal rights in this matter.”

On Tuesday April 17th, as if on cue, a plaintiff shareholder firm announced (here) that it is investigating “potential claims on behalf of purchasers of the securities of Cobalt International Energy Inc. concerning whether the company and certain of its officers and directors have violated federal securities laws.” Other shareholder firms have joined in as well – see here.

Also on Tuesday April 17th, Morgan Stanley, in a morning equity summary, said that the “market is overreacting to worries of alleged” Cobalt violations and that Cobalt “has no risk of losing” its interest in the Angola blocks. The company’s shares climbed approximately 4% and closed at $27.44. Since then the company’s stock has generally trended downward, yesterday it closed at $26.41.

What to make of Cobalt’s potential FCPA exposure?

Time will tell of course, but the DOJ has previously brought FCPA enforcement actions where the thing of value given to the “foreign official” was provided in the context of a business relationship with a company owned or controlled by a “foreign official” or family members.

For instance, in both the Charles Jumet and John Warwick (these individuals were employed by Ports Engineering Consultants Corporation) charging documents (here and here) the DOJ generally alleged as follows.

“Government Official A was the Administrator of Panama’s National Maritime Ports Authority (APN), the Panamanian governmental entity responsible for operating and maintaining the lighthouses and buoys in the waterways near the Panama Canal.” ”Government Official B” was at various times the Deputy Administrator or Administrator of APN. “Government Official C was a very high-ranking executive official of the Republic of Panama.”

According to the charging documents, Government Official A owned a shell corporation, Soderville Corporation, which become a majority shareholder of Ports Engineering Consultants Corporation (PECC). Government Official B’s relatives were corporate officers of Warmspell Holding Corporation, which became a shareholder of PECC.

The DOJ alleged a conspiracy “to pay money secretly to Panamanian government officials in return for awarding PECC contracts to maintain lighthouses and buoys along Panama’s waterways.” According to the DOJ, part of the conspiracy was that Government Official A and Government Official B received “corrupt payments” in the form of purported ‘dividends’ and that Government Official C received “bearer” shares from PECC as part of the conspiracy.

Doing business with a “foreign official” of course is not per se illegal under the FCPA and several FCPA Opinion Procedure Releases discuss the issue – see here, here and here for instance.

Yet one of the red flags when engaging foreign partners is when a company is told by the foreign government who to do business with. In such a situation, a company needs to ask itself – why are we being told to do business with this company? A company needs to do sufficient pre-engagement due diligence, as Cobalt claims it did in Angola, to understand who the owners are to be satisfied that it is not being told to do business with the particular entity simply as an indirect way of enriching foreign officials.

Friday Roundup

Friday, February 24th, 2012

The Chamber and others weigh in on the DOJ’s promised FCPA guidance, a re-run worth watching, the DOJ dismisses its FCPA case against defunct Cinergy Telecommunications, this week’s FCPA disclosure, a World Bank debarment, and reflecting on this “new era” of FCPA enforcement. It’s all here in a souped-up version of the Friday roundup.

Guidance

The conventional wisdom is that when the DOJ announced in November 2011 (see here for the prior post) that it would be issuing FCPA guidance in 2012, that this stalled introduction of an FCPA reform bill. The current conversation thus seems to be focused on DOJ’s promised guidance.

This prior post highlighted how Senator Charles Grassley is curious about DOJ’s guidance and this prior post highlighted how Senators Amy Klobuchar and Chris Coons are as well.

Earlier this week, the Chamber of Commerce (and approximately 30 other trade associations or councils ranging from the American Gaming Association, the Financial Services Roundtable, the Poultry Federation, and the West Virginia Bankers Association) sent a letter (here) to Assistant Attorney General Lanny Breuer and SEC Director of Enforcement Robert Khuzami titled “Guidance Concerning the Foreign Corrupt Practices Act.”

The letter begins as follows. “On behalf of the more than three million businesses and organizations whose interests we represent, we the undersigned organizations, write to request that this guidance address several issues and questions of significant concern to businesses seeking in good faith to comply with the FCPA. Detailed, authoritative guidance on these matters will enhance companies’ compliance with the FCPA by clarifying the “rules of the road” and by mitigating the significant interpretive challenges that companies face when applying the text of the statute to complex real-world circumstances.”

Topics addressed in the letter include: “definitions of ‘foreign official’ and ‘instrumentality’”; “consideration of compliance programs in enforcement decisions”; “parent-subsidiary liability”; “successor liability”; “de minimis gifts and hospitality”; “mens rea standard for corporate criminal liability”; and “declination issues.”

In this previous post regarding the DOJ’s promised guidance I commented that while a welcome development, DOJ’s promise of FCPA guidance in 2012 will not cure many of the issues that are being debated in good faith during this new era of FCPA enforcement. Furthermore, I expect DOJ’s guidance to be little more than a compilation in one document of information that is already in the public domain for those who know where to look. The Chamber letter similarly states as follows concerning compliance programs. “If the forthcoming guidance on this issue consists merely of a recitation in summary form of specific corporate compliance programs that have been adopted pursuant to deferred prosecution agreements, non-prosecution agreements or SEC settlements, the marginal utility of such guidance to the cause of FCPA compliance in the business community will be limited.”

Whenever released and whatever it says, the DOJ’s guidance will be merely that – guidance. What the FCPA needs is not guidance, but limited structural reforms (such as a compliance defense) as well as a change in DOJ policy (such as elimination of non-prosecution and deferred prosecution agreements).

A Re-Run Worth Watching

If you missed “The FCPA Compliance: Yes Or No” debate between Howard Sklar and I earlier this week on Securities Docket, here is the audio replay (approximately 70 minutes) along with the presentation slides. At the end of the presentation participants were asked to vote “yes” or “no” and the vote tally was 68% “yes” 32% “no.” Many thanks to Bruce Carton at Securities Docket for hosting.

Cinergy Telecommunications

In July 2011, Cinergy Telecommunications was added to the Haiti Teleco enforcement action (see here for the prior post). In a superceding indictment, the privately-held telecommunications company incorporated in Florida was charged
with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering. In addition, Washington Vasconez Cruz (the president of Cinergy) was also charged as was Amadeus Richers (a former director of Cinergy). As noted in this January post by Samuel Rubenfeld (Wall Street Journal Corruption Currents) in a second superceding indictment Cecilia Zurita (a former vice president of Cinergy as well as Cruz’s wife) was also added to the case.

Earlier this week, the DOJ moved to dismiss (see here) its case against Cinergy. The motion states as follows. “The government has recently learned that defendant Cinergy Telecommunications, Inc. is a non-operational entity that effectively exists only on paper for the benefit of two fugitive defendants, Washington Vasconez Cruz and Cecilia Zurita. For several years, these defendants took actions making it appear as though Cinergy was an on-going operational company.” The motion states that “defense counsel recently confirmed that Cinergy is in fact now non-operational, has no employees, and has no assets of any real value.” The motion concludes as follows. “In light of persuasive information the government has developed that Cinergy no longer exists in any real sense and that it was portrayed as existing at least in part to further fugitive defendants’ litigation strategy, the government in its discretion and under the circumstances presented has elected not to proceed with a trial against Cinergy.”

Joel Hirschhorn (here - Hirschhorn & Bieber P.A.) represents Cinergy as well as certain individual defendants in the case.

This Week’s FCPA Disclosure

In this prior post, I commented (somewhat tongue-in-cheek) that every week another company seems to be disclosing FCPA scrutiny. So far so good. This week’s disclosure is from Cobalt International Energy which disclosed as follows in its recent annual report.

“In connection with entering into our RSAs for Blocks 9 and 21 offshore Angola, two Angolan-based E&P companies were assigned as part of the contractor group by the Angolan government. We had not worked with either of these companies in the past, and, therefore, our familiarity with these companies was limited. In the fall of 2010, we were made aware of allegations of a connection between senior Angolan government officials and one of these companies, Nazaki Oil and Gáz, S.A. (“Nazaki”), which is a full paying member of the contractor group. Nazaki has repeatedly denied the allegations in writing. In March 2011, the SEC commenced an informal inquiry into these allegations. To avoid non-overlapping information requests, we voluntarily contacted the U.S. Department of Justice (“DOJ”) with respect to the SEC’s informal request and offered to respond to any requests the DOJ may have. Since such time, we have been complying with all requests from the SEC and DOJ with respect to their inquiry. In November 2011, a formal order of investigation was issued by the SEC related to our operations in Angola. We are fully cooperating with the SEC and DOJ investigations, have conducted an extensive investigation into these allegations and believe that our activities in Angola have complied with all laws, including the FCPA. We cannot provide any assurance regarding the duration, scope, developments in, results of or consequences of these investigations.”

World Bank Debarment

Earlier this week, the World Bank announced (here) “debarment of Alstom Hydro France and Alstom Network Schweiz AG (Switzerland) – in addition to their affiliates – for a period of three years following Alstom’s acknowledgment of misconduct in relation to a Bank-financed hydropower project.” According to the release, “in 2002, Alstom made an improper payment of €110,000, to an entity controlled by a former senior government official for consultancy services in relation to the World Bank-financed Zambia Power Rehabilitation Project.” The release further states as follows. ”The debarment is part of a Negotiated Resolution Agreement between Alstom and the World Bank which also includes a restitution payment by the two companies totaling approximately $9.5 million. The debarment can be reduced to 21 months - with enhanced oversight – if the companies comply with all conditions of the agreement.”

What to make of the debarment based on conduct 10 years ago is a bit difficult. This Wall Street Journal Story by Dionne Searcey and David Crawford states as follows. “There was some confusion about the company’s official response. Early Wednesday, Alstom spokesman Patrick Bessy said Alstom didn’t admit guilt in its settlement with the World Bank. “The World Bank made assumptions which were not proved,” he said, adding that because the matter was so old, “Alstom was unable to find evidence it could present in its own defense so we decided to settle.” Mr. Bessy said the blacklisting won’t affect Alstom Group, which has had only one project that involved World Bank funding since 2007. He said the company has several other subsidiaries engaged in hydroelectric projects that aren’t affected by the ban and will be eligible for World Bank funding of their projects. In all only about 5% of Alstom sales are in the hydroelectric field, Mr. Bessy said. In a later statement, the company rejected Mr. Bessy’s comments: “Alstom’s general counsel … stated that any comments that were previously made by Alstom are not valid.”

Reflecting On The New Era of FCPA Enforcement

As discussed in this previous post, in November 2010 Assistant Attorney General Lanny Breuer declared as follows. “We are in a new era of FCPA enforcement’ and we are here to stay.” Thomas Gorman (Dorsey Whitney) runs the always informative SEC Actions blog – see here. In this post, titled “The New Era of FCPA Enforcement: A Time For Reflection” Gorman hit the ball out of the park when he states as follows.

“Perhaps now is a good time to stop and reflect on what the courts and jurors have said about the “new era” of FCPA enforcement. Surely that era should be more than a dazzling array of ever increasing monetary payments by corporations or actions against individuals built on questionable blue collar tactics. Surely it should be more than business organizations spending ever increasing sums to conduct far reaching and perhaps at times unnecessary investigations at huge expense in a effort to win cooperation credit. Surely it should be more than brining increasing numbers of charges against individuals and demanding longer and longer prison terms. Perhaps now is the time to craft meaningful reform to the Act and enforcement policy to ensure clearer guidance and a more balanced application of the statutes to ensure that the laudable goals of the statute in a fair and balanced manner in the future. That would truly be a “new era” of FCPA enforcement.”

For additional reflections on this “new era” of FCPA enforcement, see this piece I published with the ABA Global Anti-Corruption Task Force.

*****

A good weekend to all.

Friday Roundup

Friday, February 17th, 2012

Dear Attorney General Holder, U.K. developments not involving News Corp., and Halliburton updates its disclosure … it’s all here in the Friday roundup.

*****

Senators Klobuchar and Coons Write to Attorney General Holder On FCPA Guidance

As noted in this previous post, in November 2011, Senator Charles Grassley (R-IA) asked Attorney General Holder for detailed information about the DOJ’s promised upcoming FCPA guidance.

Earlier this week, Senators Amy Klobuchar (D-MN) and Chris Coons (D-DE) sent Attorney General Holder this letter regarding the DOJ’s forthcoming FCPA guidance. From my perspective, the most notable paragraph of the letter was as follows. “[I]t has become apparent that too many companies are devoting a disproportionate amount of resources to FCPA compliance and internal investigations. To be clear, it is both necessary and desirable that companies pay adequate attention to compliance efforts, and in certain cases, adequate anti-corruption initiatives may require a significant corporate committment. Over-compliance, however, can have a negative effect on product development, export promotion, and workforce expansion.”

I agree and devoted an entire section of “The Facade of FCPA Enforcement” (see here pages 997-1009) to why the facade of FCPA enforcement matters including the breeding of overcompliance and time-consuming internal investigations. See also here pages 8-9 of my Senate FCPA testimony.

In addition, Senator Klobuchar and Coons encouraged the DOJ “to seek out the participation of U.S. corporate stakeholders when formulating its guidance.” The Senators stated as follows. “Engagement with the stakeholder community ought to occur prior to the release of guidance. In the alternative, guidance should be issued in draft form and finalized after a comment period of sufficient length.”

U.K. Developments

Some recent U.K. developments that do not involve News Corp.

In this release, the U.K. Serious Fraud Office announced that Bruce Hall was charged with corruption offenses based on his alleged receipt of bribes while an employee of Aluminium Bahrain B.S.C. (“Alba”). The charges against Hall relate to previous SFO charges against Victor Dahdaleh, an agent for Alcoa, who allegedly made bribe payments to Alba – see here for the prior post. In recent years, the DOJ has likewise brought non-FCPA charges against bribe recipients. See here for instance.

In this release, the U.K. Serious Fraud Office announced charges against a fourth person in connection with the Innospec enforcement action. (See here for more on the corporate enforcement action). Miltos Papachristos, a former Regional Sales Director for the Asia Pacific Region for Innospec, was charged with ”conspiracy to corrupt in that he gave or agreed to give corrupt payments to public officials and other agents of the Government of Indonesia as inducements to secure, or as rewards for having secured, contracts from the Government of Indonesia for the supply of Innospec Ltd products including Tetraethyl Lead.” For more on the other three individuals charged – see here.

Halliburton Updates Disclosure

Yesterday’s post (here) touched upon FCPA disclosures and how it seems like every week there is new disclosure to report.

Halliburton’s disclosure yesterday was not new, but it stated as follows. “We are conducting an internal investigation of certain areas of our operations in Angola, focusing on compliance with certain company policies, including our Code of Business Conduct (COBC), and the FCPA and other applicable laws. In December 2010, we received an anonymous e-mail alleging that certain current and former personnel violated our COBC and the FCPA, principally through the use of an Angolan vendor. The e-mail also alleges conflicts of interest, self-dealing and the failure to act on alleged violations of our COBC and the FCPA. We contacted the DOJ to advise them that we were initiating an internal investigation with the assistance of outside counsel and independent forensic accountants. During the third quarter of 2011, we met with the DOJ and the SEC to brief them on the status of our investigation and provided them documents. We are currently responding to a subpoena from the SEC regarding this matter and are producing all relevant documents. We understand that one of our employees has also received a subpoena from the SEC regarding this matter. We expect to continue to have discussions with the DOJ and the SEC, and we intend to continue to cooperate with their inquiries and requests as they investigate this matter. Because these investigations are at an early stage, we cannot predict their outcome or the consequences thereof.”

In 2009, Halliburton (and related entities) resolved a $579 million DOJ/SEC FCPA enforcement action concerning conduct at Bonny Island, Nigeria. (See here).

*****

A good weekend to all.

The Sun Rose, A Dog Barked, And A Company Disclosed FCPA Scrutiny

Thursday, February 16th, 2012

Yesterday, a colleague stopped by my office and commented how it seems like every day the news contains a story about a company subject to FCPA scrutiny. Every day may be a stretch, but a new company every week is probably accurate.

In its Feb. 14th 10-K filing, Goodyear Tire and Rubber Company disclosed as follows.

“In June 2011, an anonymous source reported, through our confidential ethics hotline, that our majority-owned joint venture in
Kenya may have made certain improper payments. In July 2011, an employee of our subsidiary in Angola reported that similar
improper payments may have been made in Angola. Outside counsel and forensic accountants were retained to investigate the
alleged improper payments in Kenya and Angola, including our compliance in those countries with the U.S. Foreign Corrupt
Practices Act. We do not believe that the amount of the payments in question in Kenya and Angola, or any revenue or operating
income related to those payments, are material to our business, results of operations, financial condition or liquidity.
Following our internal investigation, we have implemented, and are continuing to implement, appropriate remedial measures
and have voluntarily disclosed the results of our investigation to the U.S. Department of Justice (“DOJ”) and the Securities and
Exchange Commission (“SEC”), and are cooperating with those agencies in their review of these matters. We are unable to predict the outcome of any review that may be undertaken by the DOJ and SEC.”

In this prior post, I asked why in this era of increased FCPA compliance there seems to be more, not less, FCPA inquiries? Does effective compliance reduce FCPA scrutiny or does effective compliance uncover more potential FCPA issues? Based on Goodyear’s disclosure, it seems that in its case, the later is true, its compliance policies and procedures worked! If so, does this not argue in favor of an FCPA compliance defense? See here for a webcast next Tuesday on this topic.

If every company hired FCPA counsel to do a thorough review of its world-wide operations would – given the enforcement agencies theories of interpretation - 50% of companies find technical FCPA violations? 75%? 95%? If the answer is any one of these numbers, is that evidence of how corrupt business has become or is that evidence of how unhinged FCPA enforcement theories have become?

In other words, what does it say about enforcement of a law if, at any given time, the majority of corporations are on the wrong end of how that law is enforced? After all, according to the FCPA Blog’s most recent corporate disclosure list (here) approximately 80 companies are currently under investigation for FCPA violations. As the FCPA Blog rightly notes “nearly all entries are based on disclosures in SEC filings. That means non-issuers (non-public companies) aren’t included. And perhaps not all issuers have made a disclosure about a pending FCPA investigation, in which case the company may not appear on this list.”

Indeed, today’s Wall Street Journal editorial is titled “Justice’s Bribery Racket.” It begins as follows. “The Justice Department’s creative prosecutions under the Foreign Corrupt Practices Act (FCPA) continue to disintegrate [...] The 1977 FCPA was intended to prevent American companies from joining the Third World’s payoff habits. Over the last five years, however, Justice has begun to stretch the law into a far more blunt instrument. Instead of going after clear violations, the vague statute has become a tool to prosecute or threaten legions of companies.” I agree and the issues discussed in the WSJ editorial have been the focus of my writing for years. See here for the “Facade of FCPA Enforcement,” here for ”Revisiting A Foreign Corrupt Practices Act Compliance Defense,” here for my Senate FCPA testimony and here for my “foreign official” declaration. [As to the WSJ's reference to News Corp. "if Justice tries to portray payments made as part of traditional news-gathering as criminal acts, the list of felons won't stop at the tabloids," I've stated before (here) that News Corp.'s FCPA exposure - and the intense media coverage it has generated - does shine a much needed light on the current era of FCPA enforcement and raises two distinct questions. The first question is whether – given the DOJ and SEC’s current enforcement theories – the News Corp. payments at issue can expose it to FCPA liability and the answer is yes. The second question is whether Congress intended the FCPA to apply to the numerous enforcement actions in this new era that have nothing to do with obtaining or retaining foreign government contracts. This is a valid and legitimate question and the same question could also be asked as to many other current FCPA enforcement theories.]

Goodyear states in its disclosure that it does not believe that the amount of the payments in question or any revenue or operating income related to those payments, are material to its business, results of operations, financial condition or liquidity. Then why disclose? It is perfectly acceptable in a situation like this to promptly implement remedial measures, revise and enhance compliance policies and procedures – all internally without disclosure to the enforcement agencies.

Yet the steady stream of disclosures feed a growing and vibrant FCPA industry where FCPA issues, no matter how limited in scope, often turn into a boondoggle for many involved. Corporate voluntary disclosures are like a rainbow and waiting on the other side is often the pot of gold “where else” question. For more on this dynamic, see this prior post.