Archive for the ‘DOJ’ Category

DOJ’s Empty Rhetoric On Individual FCPA Prosecutions Continues

Wednesday, September 17th, 2014

This previous post highlighted the empty rhetoric of a former DOJ Criminal Division Chief regarding individual FCPA prosecutions.

A change in leadership at the DOJ Criminal Division has not brought about a change in the rhetoric.

As noted in this Reuters FCPA article, current Chief of the Criminal Division Leslie Caldwell stated:

“Certainly…there has been an increased emphasis on, let’s get some individuals.”

“It’s very important for us to hold accountable individuals who engage in criminal misconduct in white-collar (cases), as we do in every other kind of crime.”

Once again, the rhetoric is empty.

Sure the DOJ can point to a few core actions in which the DOJ has “clustered” multiple defendants into one action to achieve notable individual prosecution numbers.  The April 2014 action against six individuals allegedly involved in a conspiracy to obtain Indian mining licenses is a good example as was the “clustering phenomenon” in the enforcement action against five individuals associated with Direct Access Partners.   As highlighted in this previous post (with statistics calculated through the end of 2013), 53% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just four cases and 75% of the individuals charged by the DOJ since 2008 have been in just nine cases.

In the vast majority of corporate FCPA enforcement actions (based presumably on the conduct of real individuals not ghosts as I indicated in my 2010 Senate FCPA testimony), the talk of individual prosecutions is nothing more than empty rhetoric.  Indeed, as highlighted in this previous post (with statistics calculated through the end of 2013) since 2008 approximately 75% of corporate FCPA enforcement have not (at least yet) resulted in any DOJ charges against company employees.

Consider the below chart with the 20 most recent corporate FCPA enforcement actions.  Only one has resulted (at least yet) in any DOJ charges against company employees.

Corporate Action

Related Prosecution of Company Employees

 

HP

No

Marubeni

No

Alcoa

No

ADM

No

Bilfinger

No

Weatherford

No

Diebold

No

Total

No

Ralph Lauren

No

Parker Drilling

No

Tyco

No

Pfizer

No

Nordam Group

No

Orthofix

No

Data Systems & Solutions

No

Biomet

No

BizJet / Lufthansa

Yes

Smith & Nephew

No

Marubeni

No

Magyar / Deutsche Telekom

No

The DOJ has long recognized that an FCPA enforcement program based solely on corporate fines is not effective and does not adequately deter future FCPA violations. For instance, in 1986 the DOJ Deputy Assistant Attorney General stated:

“If the risk of conduct in violation of the [FCPA] becomes merely monetary, the fine will simply become a cost of doing business, payable only upon being caught and in many instances, it will be only a fraction of the profit acquired from the corrupt activity. Absent the threat of incarceration, there may no longer be any compelling need to resist the urge to acquire business in any way possible.”

In 2010, the DOJ Deputy Chief of the Fraud Section likewise stated that a corporate fine-only FCPA enforcement program allows companies to calculate FCPA settlements as the cost of doing business.   In this new era, the DOJ has consistently stated that prosecution of individuals is a “cornerstone” of its FCPA enforcement strategy and in a 2012 speech the Assistant Attorney General stated: “If you look at the FCPA over the past 4 years, you’ll see we really have been vigorous about holding individuals accountable.” Add Caldwell’s recent statements to this long line of empty rhetoric.

Despite the rhetoric, the actual statistics demonstrate that FCPA enforcement is largely corporate enforcement only.

Issues To Consider From The Smith & Wesson Action

Wednesday, July 30th, 2014

This post highlights various issues to consider from this week’s Smith & Wesson Foreign Corrupt Practices Act enforcement action.

Should There Be a Difference?

If the U.S. government uses public taxpayer money to offer or pay a foreign government to induce the government to purchase military and law enforcement products, we construct programs around it and call it “Foreign Military Financing,” “Foreign Military Sales,” etc.

Yet, if a company offers or pays private shareholder money to a representative of a foreign government to induce the government to purchase military and law enforcement programs, the U.S. government calls it bribery.

Should there be a difference?

Either Enforce the FCPA or Don’t

The Department of Justice should either enforce the FCPA or not enforce the FCPA.  Period.  End of story.

The current system in which the DOJ makes opaque, arbitrary, non-reviewable discretionary decisions behind closed doors is contrary to the rule of law.

In the Smith & Wesson action, the SEC alleged that FCPA “violations took place from 2007 through early 2010, when a senior employee and other employees and representatives of Smith & Wesson made, authorized, and offered to make improper payments and/or to provide gifts to foreign officials in an attempt to win contracts to sell firearm products to foreign military and law enforcement departments.”  The culpable individuals were identified as Smith & Wesson’s Vice President of International Sales and its Regional Director of International Sales and the improper conduct concerned business practices in several countries (Pakistan, Indonesia, Turkey, Nepal and Bangladesh).

It’s not every SEC FCPA enforcement action that alleges a multi-year scheme in a number of countries involving a V.P. of International Sales and a Regional Director of International Sales under circumstances in which the company did not voluntarily disclose.

Nevertheless, as previously reported in June, Smith & Wesson disclosed that “the DOJ declined to pursue any FCPA charges against us and closed its investigation.”

Why did the DOJ “decline” to pursue FCPA charges against Smith & Wesson, yet Ralph Lauren (voluntary disclosure of conduct in one country involving one employee of an indirect subsidiary in which the company cooperated) receive a NPA?

Why did the DOJ “decline” to pursue FCPA charges against Smith & Wesson, yet Data Systems & Solutions (conduct in one country involving one employee in which the company cooperated) receive a DPA?

Numerous other examples could be cited as well, but let’s call a spade a spade.  The DOJ’s FCPA enforcement program is not always based on the rule of law, but often opaque, arbitrary, non-reviewable discretionary decisions made behind closed doors.

For instance, as highlighted in this prior post, last September the-then Chief of the DOJ’s FCPA Unit stated at an ABA conference that a large company (he did not provide the company’s name – other than it would be recognizable to the audience) was a “serial reporter” of FCPA issues to the DOJ’s FCPA Unit.  The FCPA Unit Chief said that this company has a “good compliance program and system” in place and does “robust” internal investigations when issues arise.  The FCPA Unit Chief further stated that he and his unit have a “relationship of trust” with this company and its counsel and that “frankly, most of the time” the issue is “not a particularly large issue.”  According to FCPA Unit Chief, this company remediates the issue and then it “goes on its way.”

The following quote (albeit from a different era) is most appropriate:

“We [practitioners] must be able to advise our clients as to whether their conduct violates the law, not whether this year’s crop of administrators is likely to enforce a particular alleged violation.  That would produce, in effect, a government of men and women rather than a government of law.”

There are reasons why the DOJ’s FCPA enforcement program is not as credible as it could and should be and is viewed by many as arbitrary.  The circumstances surrounding Smith & Wesson contribute to these reasons.

Ripples

In my recent article, “Foreign Corrupt Practices Act Ripples,” I highlight how settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.

Smith & Wesson is another instructive example of this dynamic (a dynamic that escapes many who write about the FCPA and try to argue that “bribery pays” by measuring settlements amounts vs. bribe payments or business allegedly obtained or retained).

The “Ripples” article talks about the “three buckets of FCPA financial exposure” as follows.

  • Bucket #1 = pre-enforcement action professional fees and expenses
  • Bucket #2 = enforcement action settlement amount
  • Bucket #3 = post-enforcement action professional fees and expenses

In the Smith & Wesson action we know bucket #2 (approximately $2 million).

To my knowledge, Smith & Wesson (like many companies) has not disclosed bucket #1, but it is safe to assume that bucket #1 far exceeded bucket #2, likely by a ratio of at least 2-3 to 1.

As indicated in the earlier post summarizing the SEC’s enforcement action, per the SEC’s order Smith & Wesson has review and reporting obligations to the SEC for a two-year period.  Again, it is safe to assume that bucket #3 will exceed bucket #2.

And then of course there are a variety of negative business consequences that often flow from FCPA scrutiny or enforcement as highlighted in the “Ripples” article.  For instance, in the Smith & Wesson action, the SEC stated, among other things, as follows regarding the company’s “remedial measures” – the company terminated its entire international sales staff; terminated pending international sales transactions; and re-evaluated the markets in which it sought international sales.  Again, it is safe to assume that the financial costs and consequences of these measures far exceeded bucket #2.

Is The DOJ Picking on Non-U.S. Companies and Individuals?

Wednesday, June 18th, 2014

Today’s post is from David Simon (Foley & Lardner).

*****

The debate over whether the United States should impose its values on the rest of the world through enforcement of the Foreign Corrupt Practices Act (“FCPA”) is over.

Almost everyone now rejects the cultural relativist argument—that there are different business cultures in different parts of the world, and that the United States should respect those differences and refrain from imposing our standards of doing business on U.S. companies operating abroad.  Rather, the rise of anti-corruption legislation, the proliferation of OECD standards, and increased enforcement—not only by the United States, but by many countries enforcing their own anticorruption laws—all show an emerging consensus that corruption of this nature is objectively bad.  The United States should be commended for leading the way on this.

Yet the recent enforcement activity of the Department of Justice[i] (“DOJ”) raises questions as to whether it is enforcing the FCPA in a manner consistent with the statute’s purpose (and the overarching purpose of domestic criminal law).  According to Deputy Assistant Attorney General James Cole, whose remarks are available here, that purpose is U.S.-centric:

“In enacting the FCPA … Congress recognized that foreign bribery had tarnished the image of U.S. businesses, impaired public confidence in the financial integrity of U.S. companies, and had hampered the functioning of markets, resulting in market inefficiencies, market instability, sub-standard products and services, and an unfair playing field.”

True enough, but it is hard to dispute that the focus of FCPA enforcement has to some extent shifted away from U.S. businesses and citizens.  As noted on FCPA Professor, eight of the top ten corporate FCPA settlements have involved non-U.S. businesses.

Likewise, the number of individual FCPA prosecutions against non-U.S. citizens has been increasing.  In recent years, individual criminal prosecutions have been brought against citizens of the Ukraine, Hungary, Slovakia, Switzerland, Venezuela, and Sri Lanka—and some involve very tenuous connections to the United States.

For example, as previously highlighted on this blog, in December 2011 the DOJ charged, among others, former Siemens executive and German national Stephan Signer under the FCPA based on conduct concerning the Argentine prong of the 2008 Siemens enforcement action.  The jurisdictional allegation against Signer was that he caused Siemens to transfer two wires to bank accounts in the United States in furtherance of a scheme to bribe Argentine government officials.[ii]

I do not argue that the FCPA does not permit the DOJ to charge non-U.S. citizens or companies.  Indeed, the 1998 amendments make it clear that Congress intended to give the DOJ that power, providing it with jurisdiction over several categories of non-U.S. entities and individuals.  It should be noted, however, that the DOJ has adopted a markedly broad interpretation of the FCPA’s territorial jurisdiction provisions, resulting in increasingly attenuated connections between the United States and individual defendants like Mr. Signer.  These connections may include merely “placing a telephone call or sending an e-mail, text message, or fax from, to, or through the United States.”[iii]  The legal significance of these increasingly tenuous jurisdictional justifications, previously referred to on FCPA Professor as “de facto extraterritorial jurisdiction,” remains a contentious, and related, issue.

The question I raise here is not whether the DOJ’s policy of enforcement is legal, but whether such a focus (or, at least, the perception of such a focus) on non-U.S. persons and companies is prudent and appropriate.  In describing the principles underlying the jurisdiction to prescribe, the American Law Institute (“ALI”) notes that the United States has “generally refrained from exercising jurisdiction where it would be unreasonable to do so.”[iv]  But “[a]ttempts by some states—notably the United States, to apply their law on the basis of very broad conceptions of territoriality or nationality [has bred] resentment and brought forth conflicting assertions of the rules of international law.”[v]  Indeed.

The concerns I have about this are not confined to FCPA enforcement.  The same trend is apparent in other areas of the law, such as economic sanctions and export controls.  The pattern of enforcement being concentrated against non-U.S. companies is shown just as sharply under those laws, with the recent economic sanctions against such firms as ING Bank ($619 million against Netherlands financial institution), Royal Bank of Scotland ($100 million against UK financial institution), and Credit Suisse ($536 million against Swiss financial institution).  With the U.S. Government reportedly considering the first $10 billion penalty for violations of U.S. economic sanctions laws against BNP Paribas (a French financial institution), French President Francois Hollande reportedly has personally lobbied against what is perceived as an unfair singling out of an EU financial institution for payment of such a large fine.  To the French Government, at least, the inequity of the U.S. Government assessing a fine that surpasses the entire yearly profits of one of the largest French financial institutions is plain.

The pattern of enforcement described above, should it be allowed to continue, sends a message to the rest of the world that the DOJ is mostly interested in big dollar settlements and soft foreign targets.  Is this the message we wish to send to our foreign allies in the fight against corruption?

Although the DOJ’s application of the FCPA (and other laws governing international business conduct)  to prosecute increasing numbers of foreign persons may be legal, and technically “reasonable” at international law, that does not necessarily make it appropriate or advisable.  Rather, these attempts to apply a broad conception of territoriality in pursuit of greater numbers of prosecutions and larger settlements may be more damaging than DOJ perceives.  This has the potential to undermine the U.S. position that anti-corruption is a global issue, and counteracts the progress the U.S. has made in altering its image from that of an overreaching imperialist power to a competent and moderate leader in the creation and enforcement of global anti-corruption norms.

*****

This article in today’s New York Times DealBook discusses many of the same issues highlighted in the above post.


[i] I focus here principally on the DOJ, not the SEC.  The DOJ, of course, is a law enforcement agency charged with enforcing criminal laws.  The SEC is a regulatory agency, and the companies and individuals subject to its jurisdiction essentially opt in by taking advantage of the U.S.’s financial markets.

[ii] Indictment at 40, United States v. Uriel Sharef, et. al., 11CR-1-56 (S.D.N.Y 2011), available at http://www.justice.gov/criminal/fraud/fcpa/cases/sharef-uriel/2011-12-12-siemens-ndictment.pdf.

[iii] See U.S. Dep’t of Justice & U.S. Sec. Exch. Comm’n, A Resource Guide to the U.S. Foreign Corrupt Practices Act, 11 (Nov. 14, 2012), available at http://www.justice.gov/criminal/fraud/fcpa/guide.pdf.

[iv] Restatement (Third) of the Foreign Relations Law of the United States, § 403 cmt. a. (1986).

[v] Id. at Chapter One: Jurisdiction to Prescribe, Subchapter A.: Principles of Jurisdiction to Prescribe, Introductory Note.

Calls For Action Regarding How DOJ Resolves Alleged Instances Of Corporate Crime

Wednesday, May 7th, 2014

Deferred prosecution and non-prosecution agreements of course are not unique to Foreign Corrupt Practices Act enforcement. However, year-after-year the most prominent use of NPAs and DPAs tends to be in connection with FCPA enforcement.  (See here for Gibson Dunn’s useful summary of NPAs and DPAs).

Thus, last week’s introduction of H.R. 4540 “Accountability in Deferred Prosecution Act of 2014″ by Representative Bill Pascrell (D-NJ) is relevant to FCPA enforcement.

In short, the bill provides, among other things, as follows.

“In order to promote uniformity and to assist prosecutors and organizations as they negotiate and implement deferred prosecution agreements and nonprosecution agreements, the Attorney General shall, not later than 90 days after the date of the enactment of this Act, issue public written guidelines [concerning a variety of issues] for deferred prosecution agreements and nonprosecution agreements.”

I have long called for NPAs and DPAs to be abolished in the FCPA context so long as such reform is coupled with a compliance defense.  (See here and here).  Thus, I do not believe that H.R. 4540 goes far enough in reining in the alternate world that the DOJ has created and championed through frequent use of NPAs and DPAs.  However, H.R. 4540 highlights that Congress need not be a “potted plant” when it comes to how DOJ resolves alleged instances of corporate crime.

H.R. 4540 is not the first time that Representative Pascrell has introduced the “Accountability in Deferred Prosecution Act.”  See here for a similar bill introduced in 2009.

*****

Last week, Ralph Nader, Public Citizen and the Center for Corporate Policy sent this letter to Attorney General Eric Holder urging the Justice Department to prepare an annual report and public database on corporate crime.  The letter states:

“Currently, the DOJ does not compile comprehensive data on corporate crime.  This is a notable oversight.  It is as if the Department of Education had no measures for how well our children learn, or if the U.S. Department of Agriculture had no idea of how much wheat or corn our farmers grew.  The failure to measure can lead to sloppy thinking, bad decisions and entrenched neglect.  We urge the DOJ to equip itself with the power afforded by measurement and data analysis.”

The letter further states:

“The DOJ should also issue an annual report on corporate crime.  At a minimum, the report should provide an estimate of the total annual cost of corporate crime in the United States. It should include not only costs of crimes committed by individuals against businesses and investors (white collar crime), but also the costs that corporate crime imposes on the rest of society, such as the trillions of dollars lost, and millions of Americans who lost their jobs, due to the mortgage fraud-induced financial crisis of 2008-9.  The report should present an analysis of trends in corporate crime and an explanation of the relative effectiveness of different sanctions. While the UCR [Uniform Crime Reporting Program] does measure certain forms of white collar crime, it is far from a thorough treatment of corporate crime. The DOJ’s annual corporate crime report should also tally data about prosecutions. This should include the number of cases referred to U.S. attorneys for prosecution each year by the FBI or other federal and state agencies, as well as the status and ultimate disposition (i.e. how many referrals were prosecuted; how many prosecuted were found guilty; how many settled with deferred and non prosecution agreements; the magnitude and kind of penalties involved; how many cases settled).”

Readers likely know that the DOJ and SEC have FCPA specific websites (here and here); however both websites are incomplete in certain respects.  For instance, the DOJ website does not contain several FCPA enforcement actions (I recently requested information from the DOJ concerning the following FCPA enforcement actions:  U.S. v. UNC/Lear Services and U.S. v. Litton Applied Technology Division).

As relevant to the above letter to Attorney General Holder and as this previous post highlighted, the DOJ does not even know whether NPAs and DPAs deter future conduct in the FCPA context.  In response to an OECD question concerning deterrence, the DOJ merely stated:

“Scholars have recognized that quantifying deterrence is extremely difficult. This is equally true for the deterrent effect of DPAs and NPAs. Thus, as discussed at the time this recommendation was made, measuring ‘the impact of NPAs and DPAs in deterring the bribery of foreign public officials’ would be a difficult task, save providing certain anecdotal and other circumstantial evidence.”

Friday Roundup

Friday, May 2nd, 2014

U.S. reportedly did not cooperate, Avon’s reaches a settlement “understanding” and other scrutiny alerts, the “financial SWAT team,” at the SEC, FCPA Inc. news, and for the reading stack.  It’s all here in the Friday roundup.

U.S. Reportedly Did Not Cooperate

The DOJ talks a lot about cooperation with foreign law enforcement partners with its comes to its Foreign Corrupt Practices Act enforcement program.  For instance, and as noted in this prior post, in June 2013 the DOJ’s Acting Assistant Attorney General stated:

“Through our increased work on prosecutions with our foreign counterparts and our participation in various multi-lateral fora like the OECD and United Nations, it is safe to say that we are cooperating with foreign law enforcement on foreign bribery cases more closely today than at any time in history.  This type of collaboration is absolutely critical if we are going to have a meaningful impact on corruption internationally.  As our economies become more interdependent, corruption itself is increasingly transnational.  What may be a domestic corruption concern for one country may very well be a foreign bribery concern for another.”

In 2012 and 2013 (see here and here) the DOJ brought related FCPA enforcement actions against BizJet and various former executives regarding, in part, conduct involving officials from Panama’s Aviation Authority.

Panama also investigated the conduct at issue, but according to this report in Panama-Guide.com (a website that provides English translations of original source news articles):

“Panama’s Superior Prosecutor for Organized Crime requested the judges responsible for the case to provisionally close a case involving allegations of the payments of bribes to officials of the Civil Aviation Authority by the US company BizJet, that received the contract to maintain the presidential aircraft between 2004 and 2009. The prosecutor sent his request in early March 2014, because law enforcement authorities in the United States failed to respond to a second request for judicial assistance in order to clarify key pieces of data (evidence) contained in the Panamanian investigation. The prosecutor sent their first request for assistance to the United States in May 2012 asking for collaboration, but the answer they sent in response to the Panamanian investigators was not enough (insufficient) for them to continue the investigation. They sent a second request for assistance in 2013, asking for the evidence that linked the Panamanians to the alleged bribes.  According to judicial sources, these elements would be important to the process. The director of the AAC, Rafael Barcenas, confirmed that the officials mentioned in investigation in the United States are still working for the entity, and while there is no legal decision his office will not take any action against them.”

Scrutiny Alerts

Avon

Yesterday, Avon disclosed as follows regarding the FCPA scrutiny it has been under since 2008.

“We have now reached an understanding with respect to terms of settlement with each of the DOJ and the staff of the SEC. Based on these understandings, the Company would, among other things: pay aggregate fines, disgorgement and prejudgment interest of $135 [million] with respect to alleged violations of the books and records and internal control provisions of the FCPA, with $68 [million] payable to the DOJ and $67 [million] payable to the SEC; enter into a deferred prosecution agreement (“DPA”) with the DOJ under which the DOJ would defer criminal prosecution of the Company for a period of three years in connection with alleged violations of the books and records and internal control provisions of the FCPA; agree to have a compliance monitor which, with the approval of the government, can be replaced after 18 months by the Company’s agreement to undertake self monitoring and reporting obligations for an additional 18 months. If the Company remains in compliance with the DPA during its term, the charges against the Company would be dismissed with prejudice. In addition, as part of any settlement with the DOJ, a subsidiary of Avon operating in China would enter a guilty plea in connection with alleged violations of the books and records provision of the FCPA. The expected terms of settlement do not require any change to our historical financial statements. Final resolution of these matters is subject to preparation and negotiation of documentation satisfactory to all the parties, including approval by our board of directors and, in the case of the SEC, authorization by the Commission; court approval of the SEC settlement; and court approval of the DPA and acceptance of the expected guilty plea by an Avon subsidiary operating in China. We can provide no assurances that satisfactory final agreements will be reached, that authorization by the Commission or the court approvals will be obtained or that the court will accept the guilty plea or with respect to the timing or terms of any such agreements, authorization, and approvals and acceptance.”

A $135 million settlement will be the 11th largest in terms of fine / penalty amounts.

Some media outlets were quick to link disclosure of the future FCPA settlement to the approximate 10% slide in Avon’s stock price yesterday.  For instance, USA Today stated:

“Avon Products stock swooned more than 12% in mid-day trading after the company agreed to pay $135 million for long-standing federal changes that it paid bribes in China and other countries.”

However, Avon’s FCPA disclosure was in the same SEC filing in which the company disclosed, among other things, a 6% drop in total units sold during Q1, beauty sales were off 12%, and sales in North America fell 22%.

Johnson Controls

In its most recent quarterly filing, Johnson Controls first disclosed the following:

“In June 2013, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) alleged Foreign Corrupt Practices Act (FCPA) violations related to its Building Efficiency marine business in China dating back to 2007. These allegations were isolated to the Company’s marine business in China which had annual sales ranging from $20 million to $50 million during this period. The Company, under the oversight of its Audit Committee and Board of Directors, proactively initiated an investigation into this matter with the assistance of external legal counsel and external forensic accountants. In connection with this investigation, the Company has made and continues to evaluate certain enhancements to its FCPA compliance program. The Company continues to fully cooperate with the SEC and the DOJ; however, at this time, the Company is unable to predict the ultimate resolution of this matter with these agencies.”

In 2007, Johnson Controls was a signatory to the York International FCPA enforcement action (see here and here) principally involving alleged conduct in connection with the Iraq Oil for Food Program.  According to the DOJ, “nearly all of the conduct described in the [York International Criminal] Information took place prior to York’s acquisition by Johnson Controls, Inc. on December 9, 2005.”

JPMorgan

In its most recent quarterly filing, JPMorgan disclosed as follows regarding its pending FCPA scrutiny:

“Referral Hiring Practices Investigations. Various regulators are investigating, among other things, the Firm’s compliance with the  Foreign Corrupt Practices Act and other laws with respect to the  Firm’s hiring practices related to candidates referred by clients, potential clients and government officials, and its engagement of consultants in the Asia Pacific region. The Firm is cooperating with these investigations.”

Teva Pharamaceuticals

In August 2012, the company first disclosed its FCPA scrutiny and in its most recent SEC filing disclosed as follows.

“Beginning in 2012, Teva received subpoenas and informal document requests from the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) to produce documents with respect to compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”) in certain countries. Teva has provided and will continue to provide documents and other information to the SEC and the DOJ, and is cooperating with the government in their investigations of these matters. Teva is also conducting a voluntary worldwide investigation into certain business practices that may have FCPA implications and has engaged independent counsel to assist in its investigation. In the course of its investigation, which is continuing, Teva has identified issues in Russia, certain Eastern European countries, certain Latin American countries and other countries where it conducts business that could rise to the level of FCPA violations and/or violations of local law. In connection with its investigation of these issues, Teva has become aware that Teva affiliates in certain countries under investigation provided to local authorities inaccurate or altered information relating to marketing or promotional practices. Teva continues to bring these issues to the attention of the SEC and the DOJ. No conclusion can be drawn at this time as to any likely outcomes in these matters.”

Och-Ziff

Och-Ziff Capital Management disclosed as follows in its recent quarterly filing:

“Beginning in 2011, and from time to time thereafter, the Company has received subpoenas from the Securities and Exchange Commission and requests for information from the U.S. Department of Justice in connection with an investigation involving the Foreign Corrupt Practices Act and related laws. The investigation concerns an investment by a foreign sovereign wealth fund in some of the Och-Ziff funds in 2007 and investments by some of the funds, both directly and indirectly, in a number of companies in Africa. At this time, the Company is unable to determine how the investigation will be resolved and what impact, if any, it will have. An adverse outcome could have a material effect on the Company’s consolidated financial statements. “

“Financial SWAT Team”

It receives scant attention compared to FCPA enforcement, but another prong of the DOJ’s efforts to combat bribery and corruption is its Kleptocracy Asset Recovery Initiative under which prosecutors in the DOJ Asset Forfeiture and Money Laundering Section work in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption. (See this 2009 post highlighting Attorney General Holder’s announcement of the program).

Earlier this week, speaking at Ukraine Forum on Asset Recovery Attorney General Holder announced “the creation of a dedicated Kleptocracy squad within the FBI.”  He stated:

“This specialized unit will partner with our Asset Forfeiture and Money Laundering Section to aggressively investigate and prosecute corruption cases – not only in Ukraine, but around the world. The squad of about a dozen personnel will consist of case agents and forensic analysts who are capable of unraveling the intricate money laundering transactions commonly employed by kleptocrats. Their sophisticated work will be supported by deputy marshals from the United States Marshals Service and analysts from FinCEN, which is our financial intelligence unit. And this new initiative will provide the United States with increased capacity to respond rapidly to political crises as they arise – so we can help prevent stolen assets from being dissipated or secreted away by deposed regimes.”

At the SEC

Further to the notion that SEC enforcement seems at times to be a numbers game, SEC Chair Mary Jo White testified as follows before the House Financial Services Committee.

“The Commission continues to pursue companies that bribe foreign officials to obtain or retain business, and over the last two-and-a-half years, we have obtained over $679 million in monetary relief from FCPA actions. For example, the SEC has brought FCPA actions charging a company with a bribe scheme involving business with Aluminum Bahrain; another company with various bribes and improper payments in the Middle East and Africa and violations of U.S. sanctions and export control laws involving Cuba, Iran, Syria, and Sudan; and a third company with bribe schemes involving business with the National Iranian Oil Company. The Commission is also focused on holding individuals accountable, with ongoing FCPA-related litigation against former executives of a number of corporations.”

Fact check.

Since 2008,  approximately 82% of corporate SEC FCPA enforcement actions have not (at least yet) resulted in any SEC charges against company employees and the SEC has not brought an individual FCPA enforcement action since 2012.

Although White’s FCPA testimony focused on the numbers, elsewhere she was quick to point out that:

“Quantitative metrics alone, however, are not the proper yardstick of the measure of Enforcement’s effectiveness. Enforcement considers the quality, breadth, and effect of the actions pursued.”

Staying with the SEC, its tough to beat the following for lack of transparency.  Recently in an insider trading enforcement action, the SEC entered into a non-prosecution agreement with an “individual.”

FCPA Inc. News

Few FCPA Inc. participants are publicy-traded companies.  Thus, it is often difficult to take the pulse of FCPA Inc. other than anecdotal information.  However, one FCPA Inc. participant that is publicly traded is FTI Consulting.  In a recent earnings release, the company stated:

“The major driver of quarterly results was Forensic and Litigation Consulting with a record quarter, fueled by a number of front-page newspaper assignments from across the globe relating to high-stakes client events ranging from FCPA investigations to mortgage-backed security litigations. Similarly, our Technology business continued to perform very well, driven by ongoing FCPA and financial services investigations as well as increased cross-border M&A related ‘second request’ activity.”

As previously highlighted, as Acting Assistant Attorney General for the Criminal Division, Mythili Raman often carried forward much of the same rhetoric former Assistant Attorney General Lanny Breuer frequently articulated concerning the DOJ’s FCPA enforcement program.  Raman will now be joining Breuer at Covington & Burling.  The firm announced that “Mythili Raman … is joining Covington & Burling as a partner. Ms. Raman will practice in the firm’s litigation and white collar groups and be resident in the Washington office.”

As noted in this Covington biography:

“As Acting Assistant Attorney General of the Criminal Division from 2013-2014, and before then, as the Principal Deputy Assistant Attorney General of the Criminal Division from 2009-2013, Ms. Raman oversaw the work of more than 600 prosecutors and led the Justice Department’s national and international criminal law enforcement initiatives, including investigations of [among other things] violations of the U.S. Foreign Corrupt Practices Act.”

For additional coverage see here from the New York Times and here from the Wall Street Journal.

For the Reading Stack

ProPublica takes a look at various aspects of white-collar law enforcement, including the “Breu Crew” (a reference to former Assistant Attorney General Lanny Breuer”) in “The Rise of Corporate Impunity.”  See here for my article “Lanny Breuer and Foreign Corrupt Practices Act Enforcement.”

Three cheers for Northwestern Professors Juliet Sorensen and Karen Alter for resisting the “feel good” notion that the International Criminal Court ought to be prosecuting corruption.  Writing in “Let Nations, Not the World, Prosecute Corruption,” the authors state:

“It is easy to understand the attraction of adding the crime of corruption to the International Criminal Court’s jurisdiction. Like violent atrocities, embezzlement and blackmail may be perpetrated on innocents. Corruption can be an international crime, featuring offshore accounts, money laundering and bribery of foreign officials. Moreover, when political leaders are involved in mass corruption, their crimes can become too dangerous for local judges and prosecutors to tackle. [...] But to add this crime to the court’s jurisdiction would be a mistake. It is limited for good reason to genocide, war crimes, crimes against humanity and in the future, the crime of aggression.  [...]  Before we give the court a new and even harder crime to prosecute, we must make sure that it can succeed in its core mandate. What international criminal law does best is prosecute those most responsible, at the apex of the pyramid, when individual nations are unwilling or unable to do so.  Finally, we must recognize that already the International Criminal Court faces a crisis of political support. [...]  The status quo is surely not a perfect one. But international intervention is not a panacea. The International Criminal Court needs to stay focused on the important task of prosecuting those most responsible for mass atrocities. Rather than put more resources into international criminal prosecution, the resources and energy of the international community should go towards bolstering national resources to investigate, prosecute, and deter public corruption.”

See here for “Anti-Corruption Compliance:  Meeting the Global Standard” recently published in Bloomberg BNA’s Corporate Law and Accountability Report by Arnold & Porter attorneys Keith Korenchuk, Samuel Witten and Daniel Bernstein:

“Designing an effective anti-corruption compliance program that meets the requirements of many different jurisdictions seems like a daunting task. Executives at global companies are likely to ask themselves: Do we need dozens of different compliance programs? Will we be subject to conflicting standards in the various countries where we do business? How can we ensure proper oversight of activity that occurs all over the globe? In addressing these questions, multinational companies should take note of the broad global consensus that has developed around what governments and international organizations expect of corporate anti corruption compliance programs. While there is no one-size-fits-all program—and a company must bear in mind applicable local laws—this global standard is welcome news. Here we review the commonly accepted best practices for an anti-corruption compliance program.”

From various Jones Day attorneys (here), “India’s New Corporate Social Responsibility Requirements – Beware of the Pitfalls”:

“In August 2013, the Indian parliament passed the Indian Companies Act, 2013 (the “New Act”), which has replaced the Companies Act of 1956. The New Act has made far-reaching changes affecting company formation, administration and governance, and it has increased shareholder control over board decisions. [...]  One of the New Act’s most startling changes—which came into effect on April 1, 2014—has been to impose compulsory corporate social responsibility  obligations (“CSR”) upon Indian companies and foreign companies operating in India. These obligations mainly come in the form of mandatory amounts companies must contribute to remediating social problems. This is a wholly new requirement; although companies were permitted, within certain limits, to make charitable contributions in the past, the New Act is essentially a self-administered tax.  [...] If the Indian company undertaking CSR is a subsidiary of a United States entity, or if its business activities “touch” the U.K., then the U.S. Foreign Corrupt Practices Act (“FCPA”) or the U.K. Bribery Act (“UKBA”), respectively, as well as other regulatory laws of these jurisdictions, may apply to the Indian company’s CSR payments. This may raise serious issues of compliance and liability.”

See here for “China Introduces New Health Care Sector Anti-Corruption Regulations” by Richard Grams and Allan Golder:

“As part of a concerted effort to tackle systemic commercial bribery in the country’s health care sector, China’s National Health and Family Planning Commission recently introduced separate new regulations aimed at hospitals and physicians, as well as the medical product companies that supply them.”

*****

A good weekend to all.