Archive for the ‘Congressional Activity’ Category

Politically-Speaking Is The FCPA Doomed In The Next Five To Seven Years?

Tuesday, August 7th, 2012

Today’s post is from is Rajat Soni who recently started a new website FCPA World Monitor.  If you do not currently read FCPA World Monitor you should consider adding it to your list.  Soni has a nice style and an informed perspective on the issues.

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Politically-Speaking is the FCPA Doomed in the Next Five to Seven Years?

One of the best aspects of studying and writing about the FCPA is the large amount of thoughtful scholarship examining the various twists and turns in the statute.  Given its open-ended use of terms like “foreign official”, “instrumentality” and “obtain or retain business” the FCPA has always been fertile ground for statutory stargazers and those seeking law review article topics.  Indeed, a ready source of information comes from the wide body of legal scholarship providing up to the minute assessments of cases and investigations with an eye toward predicting (or perhaps astrologically guessing) the future course of litigation.

A funny feature of the academic scholarship (and law firm newsletters) is that almost every article begins with a recitation of the history of the statute.  I suppose its great for the newly initiated and it can also be interesting when pondering specific issues.  But for regular commentators and practitioners, the introduction to the statute almost feels as well-known and predictable as the preamble of the Constitution.  To wit:  (i) the statute was born out of a corollary to the Watergate scandal, (ii) Congress was appalled that hundreds of companies were paying millions of dollars of bribes and doing so via off-the-books slush funds, (iii) Congress was concerned in particular about Lockheed Martin which was receiving corporate welfare assistance at the same time it was paying foreign bribes.

I’ve read various iterations of the phrase “Watergate inspired statute” lines in literally dozens of articles.  But then I stopped for a moment and thought about the historic and literally unprecedented times out of which the FCPA was born.   Watergate is so cliched and barren of meaning today that its hard to remember it was a real event.  Well maybe “full-blown constitutional crisis” is a better term.  It has no equal in historical precedent in the last forty years (sorry, Whitewater land deals don’t cut it.)   So I was playing a bit of a thought game as I perused the various political blogs lately.  Can you imagine the current Congress passing the FCPA? I laughed when I thought about it.  They can’t pass a budget, a debt ceiling extension or even routine funding bills.   There is absolutely, positively no way today’s Congress would ever pass the FCPA, given the strength of the business lobby (such as the Chamber of Commerce and ALEC, although the latter is focused on state legislatures), the current economic malaise, and the general inability to move any legislation.

Following Citizens United, the very targets of the FCPA, large multi-national corporations, can now donate unlimited funds.  Who do you think Charles and David Koch think should decide whether a bribe is paid: the free market or prosecutors?  I have a guess.  Before we get too far along, your politics can be whatever you want them to be.  I am not here to argue pro or against one party or the other. I am simply asking, is the statute really that safe looking at politics as it is today.   There are many people on both sides of the aisle who are troubled by the FCPA regime as it is today.  And Democrats can be as corporation-friendly as Republicans.

Today’s Republicans, which are more in line with Barry Goldwater, really love corporations and really hate perceived government overreach (particularly if it is aimed corporations). I  have a hard time seeing today’s politicians rejecting the common business position at the time the FCPA was being debated that businesses paying bribes were already victims because they are coerced into going along with the schemes.  I also think Republicans are more open to blaming the corrupt foreign countries and their toxic political and business environments, rather than the corporations themselves.  For example, who do you think Republicans would like to punish more for FCPA violations in China:  errant US companies or the Chinese?  Right now, the FCPA punishes the companies quite severely.

So when will the FCPA erode?  If you play political guessing games, you can still come up with the same 5 to 7 year timeline.  Let’s assume President Obama wins reelection (whether or not you support him).  In that case, Congress will most likely continue to tip to the GOP (even the Senate could fall in 2014).  Republicans will be motivated to continue holding Congress to keep a check on a Democratic White House.  This means Congressional committees will be run by the GOP. With GOP committees friendly to business interests, I would be utterly unsurprised to see FCPA reform become a key business issue. Indeed, if the reform is framed as eliminating the punishment of US companies abroad while also curtailing “business uncertainty” it will fit within a broader GOP narrative, especially as our inevitably anemic recovery continues to putter along.

If President Romney takes office in January 2013, and Congress holds in its current configuration, two things will happen.  First, President Romney will just shut down the vigorous FCPA enforcement regime in the DOJ and SEC.  Since so much of the FCPA’s teeth is simply the government’s enforcement posture, FCPA enforcement may simply die by neglect.  Marching orders will change drastically as President Romney certainly won’t tolerate the DOJ hauling CEOs to the dock.  Second, if the GOP holds the House, tips the Senate and gets the White House, the statute could be amended and have additional defenses added, narrowed definitions, and perhaps even smaller penalties. One final point, if Romney loses, then a GOP-led White House is almost assured for 2016. The race will be wide-open but the nation will be ready to flip the Oval Office to the party out of power, and Republicans will be highly motivated to take back the executive branch.  In which case, the same curtailment discussed here will occur in 2017 instead of 2013.

In conclusion, right now it is common and accepted wisdom to say that FCPA enforcement is vigorous and getting even more so.  But that’s part of the sales pitch for FCPA, Inc.  I’m not saying that there isn’t truth or hard numbers to back the claims.  Rather, law firms, forensic firms, discovery consultants and accountants do themselves no particular good to downplay the FCPA.  But remember that Watergate was a political earthquake in America. The GOP was literally at its weakest and most humbled point in the last seventy years.  It is in this environment that the statute took flight.   In that sense, the FCPA probably could not have been born at any other time, and certainly not today (like it’s transatlantic cousin the UK Bribery Act.)

Again, it doesn’t really matter if you are a Republican or Democrat or Independent.  More likely than not, in the near future, the FCPA is going to become one more political football tossed about between the parties.  That means its robust future is not as certain as it might seem today.

Friday Roundup

Friday, July 6th, 2012

Out with the tide, a former DOJ Fraud Section Chief speaks on voluntary disclosure, guidance issues, will candy fall from the pinata, schooled in the FCPA, a Section 1504 development, and “Minegolia.”

Tidewater Derivative Complaint Dismissed

As highlighted in this previous post, in November 2010 Tidewater Inc. was one of several companies to resolve a ”CustomsGate” case.  The conduct at issue focused on Azeri tax officials and Nigerian temporary import permits and the company resolved DOJ and SEC enforcement actions by agreeing to pay $15.7 million in fines and penalties.

As if on cue in this new era of FCPA enforcement, along came the private plaintiff firms representing shareholders who filed a derivative complaint alleging that officers and members of the Board of Directors of Tidewater breached their fiduciary duties “in that they: (1) knew or recklessly disregarded the fact that employees, representatives, agents and/or contractors were paying, had paid and/or had offered to pay bribes to Azerbaijani and Nigerian government officials to obtain favorable treatment for Tidewater; (2) caused Tidewater to pay bribes and to disguise the bribe payments as legitimate expenses in Tidewater’s books and financial disclosures; and (3) failed to maintain adequate internal controls to ensure compliance with the FCPA and Exchange Act.”

Earlier this week, the case was swept out with the tide as U.S. District Court Judge Jane Triche Milazzo dismissed the complaint – see here for the decision.  In short, Judge Milazzo found that “Plaintiff did not adequately plead demand futility.”  Judge Milazzo utilized various tests in reaching her decision such as director interest and independence and whether the board could impartially consider the merits of the demand without being influenced by improper considerations.

As to interest, Judge Milazzo stated as follows.

“This Court finds that the Complaint is completely devoid of any allegations of an interested director. There is no allegation that any director appeared on both sides of a transaction or expected to derive a personal financial benefit from it. Nowhere in the Complaint can it be found that any one of the directors, much the less a majority of them, benefitted from the bribes themselves, benefitted from failing to establish and maintain adequate internal controls, benefitted from enforcing policies and programs designed to prevent violations, benefitted from improperly recorded payment of bribes in Tidewater’s books and records or benefitted from inadequately training their employees, agents, representatives and/or contractors with respect to compliance with the FCPA.”

As to alleged director participation or knowledge , Judge Milazzo stated that the ”Complaint falls woefully short of pleading facts that are sufficient to show that there was any knowledge or conscious disregard on behalf of the directors.”

As to whether the directors exhibited bad faith sufficient to overcome business judgment rule presumptions, Judge Milazzo stated as follows.  “While Plaintiff’s allegations are sufficient to show that Tidewater was evidently violating both the FCPA and the Exchange Act, nowhere in the Complaint do Plaintiff’s allegations meet the specificity to show that the Individual Defendants were acting with the intent to violate these laws.  ‘[T]he mere fact that a violation occurred does not demonstrate that the board acted in bad faith.  Alleging that ‘upon information and belief’ the ‘Headquarters’ made the decision to avoid tax assessments in violation of the FCPA falls woefully short of the pleading requirements. Nowhere can this Court find who made this decision, how this decision was made or that there was an intent to violate any law. Moreover, the Court finds it significant that Tidewater’s directors voted and voluntarily initiated an FCPA investigation and advised the federal government of their violations before the government even suspected any violations.”

Tyrell on Voluntary Disclosure

You know the talking points.  The DOJ wants companies to voluntarily disclose, not ifs, ands or buts about it.  It’s interesting though how this becomes less of a black and white issues when individuals leave the DOJ.

In this recent Q&A in The Metropolitan Corporate Counsel, Steven Tyrell (a former DOJ Fraud Section Chief and current partner at Weil Gotshal – here) was asked the following question – “what is the role of voluntary reporting in establishing a good relationship with the regulatory and enforcement authorities?”

He stated as follows.

In the first instance, if a company has a legal obligation to disclose – for example, government contractors are obliged to disclose fraud – then the analysis begins and ends there. Assuming there is no legal obligation that compels disclosure or no imminent threat of disclosure by an outside party, such as a newspaper, then I typically advise clients to take credible allegations of wrongdoing seriously, look into those allegations in a manner that is appropriate under the circumstances, and assess the nature and extent of the company’s exposure and the pros and cons of disclosure. Then, and only then, should a disclosure be made if it is in the best interest of the company – or, for a public company, if the securities laws require it. Of course, it often will not be in a company’s best interest to disclose if, for example, the allegations prove not to be credible or if it is unclear whether the conduct even amounts to a violation of law. Under those circumstances, a disclosure could unnecessarily embroil the company in a lengthy and costly government investigation and result in other repercussions such as triggering civil litigation and harm to a company’s reputation that could otherwise be avoided. It’s a challenging calculus. I can tell you from past experience that there are companies that have strong reputations for compliance with regulators and others that do not. However, the fact that a company doesn’t disclose a problem that ultimately comes to DOJ’s attention is not necessarily going to damage the company’s credibility with DOJ. Regulators recognize that not every allegation should be of interest to them – and, frankly, having counsel that knows when they’ll be interested and when they won’t is really important.”

Guidance Issues

As highlighted in this previous post, soon after Assistant Attorney General Lanny Breuer announced in November 2011 that FCPA guidance would be forthcoming in 2012, Senator Grassley sought guidance on the guidance and asked Attorney General Holder several follow-up questions for the record.  For a copy of Holder’s responses, see here.

In this previous post, among others, I commented that non-binding DOJ guidance is not the best way to accomplish real and meaningful FCPA reform.

Thus, I completely agree with former DOJ Deputy Attorney General George Terwilliger and former DOJ attorney and Senate counsel Matthew Miner (both currently at White & Case, see here and here) when they state as follows in this article.

“The fact that the Justice Department recognizes the need for such guidance underscores the existence of blurry lines and fuzzy standards surrounding the FCPA. US businesses trying to compete successfully in the international commercial arena deserve better. Justice Department ‘guidance’ is neither enough, nor is it properly the role of prosecutors to be definitive interpreters of ambiguities in criminal laws. Congress writes the laws and, as the US Supreme Court has firmly established, has a responsibility to set clear standards for what is permissible and what is not. It should not stand aside in deference to the Justice Department’s plan to craft guidance, especially when that guidance will have no effect in court.”

Yara Fertilizer

It has been said before that anytime a foreign company is the subject of a corruption probe, the U.S. enforcement agencies are like children at a birthday party waiting for some candy to fall from the pinata.  Think what you will of the analogy.

The Wall Street Journal recently reported (here) that “Norwegian fertilizer producer Yara International ASA’s chief executive, Jorgen Ole Haslestad, apologized Friday to the company’s employees after an investigation uncovered millions of dollars in ‘unacceptable’ payments in India and Switzerland, as well as ‘unacceptable offers of payments’ in Libya.”  According to the article, the “unacceptable offers of payments” in Libya involve “a consultant related to the establishment of the company Libyan Norwegian Fertilizer Co., or Lifeco, in Libya, a joint venture with the Libyan National Oil Corp. and the Libyan Investment Authority.”

As noted on the company’s website here, Yara ”has a sponsored Level 1 ADR program for American Depositary Receipts (ADRs), which represent ownership in shares of foreign (non-US) companies that trade on US financial markets.”  Whether foreign companies, including those with Level 1 ADR’s can become subject to the FCPA, see this excellent piece “When Does an ADR Program Give U.S. Authorities FCPA Jurisdiction Over a Foreign Issuer?”

Time will tell if the candy falls.

Checking in on Wynn Resorts

Previous posts here, here and here focused on the Wynn-Okada dispute including Wynn’s $135 million charitable contribution to the University of Macau.  On that topic, this recent Wall Street Journal article focused on the “web of political ties” between a Macau company paid by Wynn and government officials.  Regarding Wynn’s FCPA compliance in expanding in Macau, company CEO Steve Wynn stated as follows.  “This whole business of the Foreign Corrupt Practices Act—we were schooled in this.”

Final grade is pending.

Section 1504 Development

Several prior posts, see here for example, discussed Section 1504 of Dodd-Frank, the so-called Resource Extraction Disclosure Provisions and the long delay in SEC final rules.  As noted in this Corruption Current post by Samuel Rubenfeld, the SEC recently announced here that on August 22nd, “the Commission will consider whether to adopt rules regarding disclosure and reporting obligations with respect to payments to governments made by resource extraction issuers to implement the requirements of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“Minegolia”

There has been only one FCPA enforcement concerning, at least in part, business conduct in Mongolia (see here for the 2009 UTStarcom action).  This is hardly surprising, as few companies subject to the FCPA have traditionally engaged in business in the country.  However, as noted in this recent Al Jazerra article, Mongolia or “Minegolia” as the country is sometimes called, “is undergoing a rapid transformation, due to its incredible resource wealth in minerals such as coal, copper, and gold.” At the same time, the article notes that “Transparency International placed Mongolia 120th out of 183 nations on its corruption perception index” and that “90 percent of Mongolians believe politicians are benefitting from ‘special arrangements’ with foreign enterprises over mining rights.”

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A good weekend to all.

Friday Roundup

Friday, June 15th, 2012

Checking in on Wal-Mart, an enforcement action that flew under the radar from beginning to end, a guilty plea in the U.K., and is sex a thing of value?  It’s all here in the Friday roundup.

Wal-Mart

Various reports this week reported on the expansion of Wal-Mart’s FCPA probe.  As many readers know, this is hardly surprising as most FCPA inquiries result in the “where else” question as indicated in this prior guest post.  Even if the enforcement agencies do not actually ask the “where else” question, a company knows it will eventually be asked and will thus likely conduct a broader review of certain other FCPA high-risk jurisdictions not part of the original inquiry on its own initiative and to demonstrate to the enforcement agencies its committment to compliance and its cooperation.

This June 12th letter from Elijah Cummings (D-MD, Ranking Member, House Committee on Oversight and Government Reform) and Henry Waxman (D-CA, Ranking Member, House Committee on Energy and Commerce)  to Wal-Mart CEO Michael Dukes references that Wal-Mart’s review has expanded beyond Mexico to also include Brazil, China, South Africa and India.  Indeed, the letter references that Wal-Mart is “conducting a worldwide assessment of the company’s anti-corruption policies” something Wal-Mart indicated it was already doing.  In short, Wal-Mart’s FCPA inquiry is following a typical path.

In the letter, Cummings and Waxman again express disappointment as to Wal-Mart’s cooperation in their own Congressional probe.  For more on Cummings and Waxman’s interest in Wal-Mart, see this prior post (and links therein).

Meanwhile on the civil litigation front, a 12th lawsuit has been filed in the wake of April’s New York Times story.  As noted in this release from the New York City Comptroller, New York City Pension Funds filed a shareholder derivative action in the Delaware Chancery Court alleging “that  Wal-Mart’s officers and directors breached their fiduciary duty to the company  and its shareholders by failing to properly handle credible claims of the  bribery allegations and attempting to cover up details of the  scandal.”

Under the Radar

This post from March 2011 highlighted how criminal charges against Manual Salvoch flew under the radar in that the DOJ did not issue a press release announcing the charges and the enforcement action appeared to escape coverage elsewhere.  Salvoch is the former CFO of LatiNode and was charged in connection with payments to Hondutel (see here - according to the charging documents a state-owned telecommunications company in Honduras responsible for providing telecommunications services in Honduras). The Hondutel payments also resulted in criminal charges against Jorge Granados (the founder and former CEO and Chairman of the Board of LatiNode), Manuel Caceres (a former Vice President of Business Development) and Juan Vasquez (a former senior commercial executive).

This prior post highlights the sentences of Granados, Caceres and Vasquez.

Last week, Salvoch was sentenced by Judge Paul Huck (S.D. of Florida) t0 10 months in prison and 3 years of supervised release.  Just like the beginning, the end of the Salvoch enforcement action also flew under the radar.

The final sentencing scorecard in the LatiNode individual prosecutions is thus as follows.

Granados – 46 months

Caceres – 23 months

Vasequez – 3 years probation

Salvoch – 10 months.

U.K. Plea

Previous posts (here and here) discussed charges on both sides of the Atlantic against Paul Jennings, the former CEO of Innospec.  Earlier this week, the U.K. Serious Fraud Office announced (here) that Jennings pleaded guilty to the following charges:  “Two allegations of conspiracy to corrupt in that he gave or agreed to give corrupt payments to public officials and other agents of the Government of Indonesia (between 14 February 2002 and 31 December 2008) and Iraq (between 1 January 2003 and 31 January 2008) as inducements to secure, or as rewards for having secured, contracts from that Government for the supply of its products including Tetraethyl Lead by Innospec.”

As noted in this previous post, in March 2010, Innospec resolved enforcement actions on both sides of the Atlantic based on the same core set of facts.

Thing of Value?

At its core, the FCPA’s anti-bribery provisions require “anything of value” to a “foreign official” to “obtain or retain business.”

This recent Reuters story concerning an employee of Oracle’s business unit in Singapore has a “foreign official” (the former head of the city-state’s anti-narcotics agency) and the article describes that the thing of value was provided to the “foreign official” as “an inducement to help further the firm’s business interest.”

The thing of value?

Sex.

Can sex be a thing of value under the FCPA’s anti-bribery provisions?  I guess it depends, it’s a factual issue.

On that note, a good weekend to all.

Friday Roundup

Friday, May 25th, 2012

Efforts to influence the upcoming guidance, a stiff FCPA-related sentence, Representatives Cummings and Waxman think they are on to something, and thumbs up – it’s all here in the Friday roundup.

Guidance

Earlier this week, Global Financial Integrity, Open Society Foundations, and others released this letter to the DOJ and SEC concerning upcoming FCPA guidance.  The letter addresses “foreign official,” a compliance defense, voluntary disclosure, declination decisions, parent-subsidiary liability, successor liability, de minimis gifts and hospitality, and mens rea and corporate criminal liability.

As to “foreign official” the letter states “that ownership of companies around the world, including in the U.S., is impossible to determine independently” and that “the staff of a U.S. company is not likely to be able to independently verify the direct and indirect ownership of foreign companies.”  The letter also states, as to control of an instrumentality by a foreign government, that control can be conferred, among other ways, by “unspoken custom.”

Should one laugh or cry when reading such statements concerning a key element of the most important U.S. law governing international business transactions?  Perhaps the groups don’t care.  After all, as noted here, some of the groups have previously stated as follows regarding “foreign official” – “The U.S. Chamber is promoting the creation of a definition of “foreign official” so that companies have greater legal certainty. Greater certainty of what? Greater certainty of who they are permitted to bribe and who they are not permitted to bribe.  [...]  In short, defining the term “foreign official” would underscore the idea that it is OK to bribe certain people and not others, a principle the United States surely does not want to promulgate.”

Duperval Sentenced

Earlier this week, the DOJ announced (here) that “Jean Rene Duperval, a former director of international relations for Telecommunications D’Haiti S.A.M. (Haiti Teleco), a Haitian state-owned telecommunications company, was sentenced [by U.S. District Court Judge Jose Martinez in the Southern District of Florida] to nine years in prison for his role in a scheme to launder bribes paid to him by two Miami-based telecommunications companies.”  The stiff sentence continues the trend of the Southern District of Florida (and Judge Martinez in particular) handing out the toughest FCPA or FCPA-related sentences in the country.

As noted in the release,  Duperval was convicted in March 2012 of two counts of conspiracy to commit money laundering and 19 counts of money laundering. According to the release, ”Judge Martinez also ordered Duperval to forfeit $497,331.”  Assistant Attorney General Lanny Breuer stated as follows.  “Mr. Duperval took bribes in exchange for giving companies an unfair and illegal advantage in the marketplace, and then tried to hide these illicit transactions behind the cloak of shell corporations and fake invoices.  Just as we prosecute corrupt businesspeople under the FCPA, we will hold accountable corrupt foreign officials when they seek to launder the proceeds of that bribery through the U.S. financial system.  Today’s nine-year prison sentence sends a strong message to foreign officials and others who would facilitate foreign corruption that they will face serious consequences.”

As noted in this prior post, the Haiti Teleco case (minus the manufactured and now former Africa Sting case) is the largest in FCPA history in terms of defendants charged – 13.  The prior post provides a summary of all the enforcement actions.

The Latest FCPA Reform Volley

If your third cousin received a speeding ticket years ago does this prohibit you from forever seeking reform of speed limit laws?  Probably not the best analogy, but Representatives Elijah Cummings and Henry Waxman seem to think so.  As noted in this previous post, Cummings (Ranking Member of the House Committee on Oversight and Government Reform) and Waxman (Ranking Member of the House Committee on Energy and Commerce) sent letters to the Chairman of the Board of Directors of the Retail Industry Leaders Association and the President of the U.S. Chamber of Commerce stating as follows.  “We are concerned about the role that Wal-Mart officials may have played in the Chamber’s Institute for Legal Reform (“ILR”).  It would appear to be a conflict of interest for Wal-Mart officials to advise on ways to weaken the Foreign Corrupt Practices Act at a time when the leadership of the company was apparently aware of corporate conduct that may have violated the law.”

Earlier this week, Representatives Cummings and Waxman again put pen to paper and sent this letter to the President of the U.S. Chamber of Commerce stating as follows.  “A new analysis by our staff reveals that Wal-Mart is not the only company represented on the ILR’s board that has faced allegations that it violated the Foreign Corrupt Practices Act. Our review of ILR’s tax filings from 2007 to 20 10, member companies’ filings with the U.S. Securities and Exchange Commission (SEC), and other documents reveals that 14 out of 55 ILR board members-almost one in four- were affiliated with companies that were reportedly under investigation for violations or had settled allegations that they violated the Foreign Corrupt Practices Act.”  See here for more.

Closing with the analogy, perhaps Representatives Cummings and Waxman should instead inquire about how the speeding laws are being enforced – or at the very least – read this prior post titled “The Sun Rose, A Dog Barked, And A Company Disclosed FCPA Scrutiny.”

Thumbs Up

To Howard Sklar for this recent post on his Open Air Blog.  I agree with the general thrust of Howard’s argument.  So did Congress when it passed the FCPA.  For that reason, and here is where I disagree with Howard, the issues he identifies are legal issues, not merely policy issues.

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A good weekend to all.

Friday Roundup

Friday, May 18th, 2012

Wal-Mart news, the shadow regulatory state, save the date, checking in on Wynn-Okada, and there’s an app for that.

Wal-Mart News

Yesterday Wal-Mart released its first quarter financial results and stated as follows in its SEC filing.

The Audit Committee of the Company’s Board of Directors (the “Audit Committee”), which is composed solely of independent directors, is conducting an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other alleged crimes or misconduct in connection with foreign subsidiaries including Wal-Mart de México, S.A.B. de C.V. (“Walmex”) and whether prior allegations of such violations and/or misconduct were appropriately handled by the Company. The Audit Committee and the Company have engaged outside counsel from a number of law firms and other advisors who are assisting in the on-going investigation of these matters. The Company is also conducting a voluntary global review of its policies, practices and internal controls for FCPA compliance. The Company is engaged in strengthening its global anti-corruption compliance programs through appropriate remedial anti-corruption measures. In November 2011, the Company voluntarily disclosed that investigative activity to the U.S. Department of Justice (the “DOJ”) and the SEC.

The Company has been informed by the DOJ and the SEC that it is also the subject of their respective investigations into possible violations of the FCPA. The Company is cooperating with the investigations by the DOJ and the SEC. A number of federal and local government agencies in Mexico have also recently initiated investigations of these matters. Walmex is cooperating with the Mexican governmental agencies conducting these investigations. Furthermore, lawsuits relating to the matters under investigation have recently been filed by several of the Company’s shareholders against it, its current directors, certain of its former directors, certain of its current and former officers and certain of Walmex’s current and former officers.

The Company could be exposed to a variety of negative consequences as a result of the matters noted above. There could be one or more enforcement actions in respect of the matters that are the subject of some or all of the ongoing government investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders or other relief, criminal convictions and/or penalties. The shareholder lawsuits may result in judgments against the Company and its current and former directors and officers named in those proceedings. The Company cannot predict accurately at this time the outcome or impact of the government investigations, the shareholder lawsuits, or its own internal investigation and review. In addition, the Company expects to incur costs in responding to requests for information or subpoenas seeking documents, testimony and other information in connection with the government investigations, in defending the shareholder lawsuits, and in conducting its internal investigation and review, and it cannot predict at this time the ultimate amount of all such costs. These matters may require the involvement of certain members of the Company’s senior management that could impinge on the time they have available to devote to other matters relating to the business. The Company may also see ongoing media and governmental interest in these matters that could impact the perception among certain audiences of its role as a corporate citizen.

The Company is in the early stages of assessing and responding to the governmental investigations, the shareholder lawsuits, and its internal investigation and review are on-going. Although the Company does not presently believe that these matters will have a material adverse effect on its business, given the inherent uncertainties in such situations, the Company can provide no assurance that these matters will not be material to its business in the future.

Wal-Mart stock closed yesterday at $61.68.  On Friday April 20th (the day before the New York Times article – see here for the prior post) Wal-Mart stock closed at $62.45.  See here for a recent Forbes column titled “Mexican Bribery Gave Me A Chance To Make Money In Wal-Mart” in which the contributor states as follows.  “My 30 years of experience in the markets has repeatedly shown to me that whenever a company is accused of violations of FCPA, headlines are always scary, but in the end, the downdraft in the stock invariably becomes a buying opportunity.”

In other Wal-Mart news, as highlighted in this prior post, Elijah Cummings (D-MD), Ranking Member, House Committee on Oversight and Government Reform, and Henry Waxman (D-CA), Ranking Member, House Committee on Energy and Commerce have taken a keen interest in Wal-Mart’s potential FCPA exposure.  Yesterday, the Congressmen sent this letter to Wal-Mart CEO Michael Dukes in which they state, among other things, that “we have obtained hundreds of internal documents relating to the Wal-Mart bribery allegations.”

The Shadow Regulatory State

In this previous post, I called for the abolition of non-prosecution and deferred prosecution agreements in the FCPA context.  I noted how use of NPAs and DPAs to resolve alleged corporate criminal liability in the FCPA context present two distinct, yet equally problematic public policy issues and highlighted other critiques of NPAs and DPAs as well.

This recent report titled “The Shadow Regulatory State:  The Rise of Deferred Prosecution Agreements” by James Copland (Senior Fellow, Manhattan Institute for Policy Research) caught my eye.  Copland states as follows.

“… [P]rosecutors’ virtually unchecked powers under DPAs and NPAs threaten our constitutional framework. To be sure, prosecutors are acting upon duly enacted laws, but federal criminal provisions are often vague or ambiguous, and the fact that prosecutors and large corporations alike feel obliged to reach agreement, rather than follow an orderly regulatory process and litigate disagreements in court, denies the judiciary an opportunity to clarify the boundaries of such laws. Instead, the laws come to mean what the prosecutors say they mean—and companies do what the prosecutors say they must. Federal prosecutors are thus assuming the role of judge (interpreting the law) and of legislature (setting broad policy choices about industry conduct), substantially eroding the separation of powers. That such discretion is often delegated to private contractors with sweeping powers—namely, corporate monitors—makes the denial of justice even graver.”

Save the Date

I am pleased to be participating in this June 5th program sponsored by The American Bar Association Criminal Justice Section and the ABA Center for Continuing Legal Education in cooperation with Dorsey & Whitney & LLP, and  Pepper Hamilton, LLP.  Titled “The New Era of FCPA Enforcement and the Collapse of the Africa Sting Cases:  Time to Reevaluate?” the program will “evaluate the impact of Africa Sting cases in view of key New Era trends,  calls for FCPA reform, and a reevaluation of the prosecution standards utilized  by the DOJ and the SEC in enforcing statutes.”  Panelists include DOJ, SEC, and OECD representatives, Stanley Sporkin and noted FCPA practitioners including Greg Andres (former DOJ who testified on behalf of the DOJ at the November 2010 Senate and June 2011 House FCPA hearings).

Wynn-Okada

Remember that Wynn-Okada dispute?  (See here, here, here, and here for the prior posts).

Here is an update from Vegas Inc.

There’s An App For That

Click 4 Compliance recently launched “C4C Mobile Compliance Officer App” (see here).  In a release (here) the company says the free mobile app “places practical anti-corruption compliance tips (including the FCPA and UK Bribery Act) in the hands of your company’s workforce and partners.”

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It’s an FCPA world – a good weekend to all.