Archive for the ‘Double Standard’ Category

New Article: The Uncomfortable Truths And Double Standards Of Bribery Enforcement

Thursday, October 29th, 2015

Double Standard4My new article “The Uncomfortable Truths and Double Standards of Bribery Enforcement” will soon be published in the Fordham Law Review. Click here to download the article.

Here is what the article is about.

“In recent years, Foreign Corrupt Practices Act (FCPA) enforcement has become a top priority for the U.S. government, and government enforcement officials have stated that “we in the United States are in a unique position to spread the gospel of anti-corruption” and that FCPA enforcement ensures not only that the United States “is on the right side of history, but also that it has a hand in advancing that history.”

However, the FCPA is not the only statute in the federal criminal code concerning bribery. Rather, the FCPA was modeled in large part after the U.S. domestic bribery statute, and when speaking of its FCPA enforcement program, the government has recognized that it “could not be effective abroad if we did not lead by example here at home.” Indeed, the policy reasons motivating Congress to enact the FCPA—that corporate payments were subverting the democratic process, undermining the integrity and stability of government, and eroding public confidence in basic institutions—apply with equal force to domestic bribery.

Against this backdrop, this Article explores through various case studies and examples whether the United States’s crusade against bribery suffers from uncomfortable truths and double standards. Through these case studies and examples, readers can decide for themselves whether the U.S. government “practices what it preaches” when it comes to the enforcement of bribery laws and whether the United States is indeed “in a unique position to spread the gospel of anti-corruption.”

Do read the article and decide for yourself.

Corruption Of Government Officials Is The Top Fear Of Americans

Friday, October 23rd, 2015

fear2The Foreign Corrupt Practices Act by design looks outward.

Because of this, most of the chatter in the FCPA space is about foreign corruption and how foreign citizens feel about corruption in their own countries, and how that foreign corruption (however defined) serves as a destabilizing force resulting in broad-ranging effects in the foreign country.

Many in the FCPA space latch on to foreign developments, no matter how loosely tied to corruption, such as a hunger strike in one foreign country, a march in another foreign country, or an act of civil disobedience in another foreign country.

There is nothing wrong with this of course, but the anti-corruption community here in the United States should pause from time-to-time and look inward.


Because according to the recent Chapman University Survey of American Fears (a random sample of 1,541 adults from across the United States) the top fear of Americans is corruption of government officials.  This fear, expressed by 58% of poll respondents, exceeds the fear Americans have about, among other things, terrorism, identify theft, and economic issues.

It is time for the anti-corruption community to wise up and look a bit more inward.

A good place to start is by reviewing the over 55 posts tagged under this double standard heading.

Issues To Consider From The Bristol-Myers Enforcement Action

Thursday, October 8th, 2015

IssuesThis recent post highlighted the SEC’s FCPA enforcement action against Bristol-Myers.

This post continues the analysis by highlighting various issues to consider from the enforcement action.

False and Misleading SEC Release

The SEC routinely brings enforcement actions against companies for false and misleading public statements.

Pardon me for being the stickler, but the first paragraph of the SEC’s press release announcing the Bristol-Myers action is false and misleading. It states:

“The Securities and Exchange Commission today announced that New York-based pharmaceutical company Bristol-Myers Squibb has agreed to settle charges that its joint venture in China made cash payments and provided other benefits to health care providers at state-owned and state-controlled hospitals in exchange for prescription sales.”

The above is false and misleading because the only charges that the SEC brought against Bristol-Myers (BMS) were the following as stated in the SEC’s order:

“BMS, through the actions of certain BMS China employees, violated [the FCPA's books and records provisions] by falsely recording, as advertising and promotional expenses, cash payments and expenses for gifts, meals, travel, entertainment, speaker fees, and sponsorships for conferences and meetings provided to foreign officials, such as HCPs at state-owned and state-controlled hospitals as well as employees of state-owned pharmacies in China, to secure prescription sales. BMS also violated [the FCPA's internal controls provisions] by failing to devise and maintain a system of internal accounting controls relating to payments and benefits provided by sales representatives at BMS China to these foreign officials.”

No Allegations Regarding Germany

As previously stated in Bristol-Myers disclosures, its FCPA scrutiny began in 2006 the following way.

“In October 2006, the SEC informed the Company that it had begun a formal inquiry into the activities of certain of the Company’s German pharmaceutical subsidiaries and its employees and/or agents. The SEC’s inquiry encompasses matters formerly under investigation by the German prosecutor in Munich, Germany, which have since been resolved. The Company understands the inquiry concerns potential violations of the Foreign Corrupt Practices Act (FCPA). The Company has been cooperating with the SEC.

In March 2012, the Company received a subpoena from the SEC issued in connection with its investigation under the FCPA, primarily relating to sales and marketing practices in various countries. In particular, the Company is investigating certain sales and marketing practices in China. The Company has been cooperating with the government in its investigation and is in discussions with the SEC regarding a potential settlement agreement that would result in a resolution of the SEC’s investigation. The Company believes it is fully reserved for this matter.”

Given the above disclosure, it is notable that the Bristol-Myers enforcement action concerned conduct only in China. Granted, 2006 is a long time ago but the SEC has not shied away from “old” allegations in other FCPA enforcement actions and, as a practical matter, statute of limitations have little impact in corporate FCPA enforcement actions.

Double Standard

At its core, the Bristol-Myers action focused on various things of value (such as gifts, meals, travel, entertainment, speaker fees, and sponsorships for conferences and meetings) provided to foreign physicians.

Pardon me for saying this, but this happens all the time in the U.S. (See here and here for the most recent posts).

Compliance Take-Aways

Regardless of the above, set forth below are certain compliance take-aways from the Bristol-Myers action:

  • If a company is going to provide FCPA training to its employees (and companies most certainly should), the company needs to make sure the employees are actually taking the training.  The SEC’s order dings Bristol-Myers as follows: “[The] BMS sales force in China received limited training and much of it was inaccessible to a large number of sales representatives who worked in remote locations. For example, when BMS rolled out mandatory anti-bribery training in late 2009, 67% of employees in China failed to complete the training by the due date.”
  • The use and abuse of employee reimbursement requests.  The SEC’s order dings Bristol-Myers as follows. “BMS lacked effective internal controls sufficient to provide reasonable assurances that funds advanced and reimbursed to employees of BMS China were used for appropriate and authorized purposes.”
  • Boots on the ground.  The SEC’s order dings Bristol-Myers as follows. “The corporate compliance officer responsible for the Asia-Pacific region through 2012 was based in the U.S. and rarely traveled to China. There was no dedicated compliance officer for BMS China until 2008, and no permanent compliance position in China until 2010.”

Friday Roundup

Friday, August 28th, 2015

Roundup2The latest edition of the double standard, survey says, when the dust settles, and for the reading stack.  It’s all here in the Friday roundup.

Double Standard

An individual currently holds political office in one unit of government, yet is also a candidate for a higher unit of government.

Among the contributors to organizations supporting the individual’s campaign for higher office are companies that have secured millions in contracts from the lower unit of government run by the individual.  After all, the individual may not prevail in the higher office race and thus return to the lower unit.

A prudent FCPA practitioner would spot the “red flags” as the contributions could be viewed as a way to curry favor with the individual upon return to the lower unit of government.

However, the individual (more accurately individuals) are not “foreign officials” they are current governors Chris Christie, John Kasich, Bobby Jindal, and Scott Walker who are also running for President.

For the latest edition of the double standard, see this Wall Street Journal article.


Silly you for even mentioning the “b” word.  This is all about “First Amendment rights” according to a source in the article.

Why do business interactions with “foreign officials” seem to be subject to different standards than business interactions with U.S. officials? Why do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet generally turn a blind eye when it happens here at home or call it something different such as participation in the political process? Is the FCPA enforced too aggressively or is enforcement of the U.S. domestic bribery statute too lax? Ought not there be some consistently between enforcement of the FCPA and the domestic bribery statute?

For approximately 50 other post highlighting these double standards, see this subject matter tag.

Survey Says

According to this recent ASEAN (Association of Southeast Asian Nations) Business Outlook Survey:

“The risk of pressure to bribe officials for essential licenses and permits varies greatly depending on the country from which executives responded. Less than half of the respondents in Brunei, Malaysia, Myanmar, and Singapore foresee that this risk will hinder their long-term operations, while large percentages of respondents in Cambodia (89%), Laos (85%), and Vietnam (74%) foresee that it will.”

“In contrast, facilitation payments for routine government services are a more common part of international business. (Routine government services may include processing governmental papers, such as visas and work orders, or such services as police protection, power supply, phone service, etc.) In nearly all countries, the risk of pressure to bribe officials to speed up routine government services is slightly higher than the comparable risk for essential licenses and permits.”

In passing the FCPA, Congress recognized the inherent difficulties companies encounter in foreign markets and thus elected not to capture payments in connection with licenses, permits and the like in the anti-bribery provisions.  (To learn more, see “The Story of the FCPA“).  Congress also chose to exempt facilitation payments from the anti-bribery provisions.

When The Dust Settles

FCPA enforcement actions only focus on alleged bribe payers.  However, when an FCPA enforcement action concludes, there is still an alleged “foreign official” who allegedly received the bribe payments.  When the dust settles, what happens to the “foreign official”?

For years, guest contributor Mike Dearington followed the DOJ’s 2011 enforcement action against Juthamas Siriwan, the former government officer of the Tourism Authority of Thailand, and Jittisopa Siriwan, the daughter of the alleged “foreign official” who was also alleged to be an “employee of Thailand Privilege Card Co. Ltd.” an entity controlled by TAT and an alleged “instrumentality of the Thai government.”  The Siriwan’s allegedly received improper payments from Gerald and Patricia Green who were convicted of FCPA and related offenses in 2009 and served time in federal prison. (See prior posts at this subject matter tag).

In short, the federal court judge overseeing the DOJ’s money laundering case against Siriwan stayed the case pending expected legal proceedings in Thailand against Siriwan.

Earlier this week, the Bangkok Post reported:

“The Criminal Court has indicted former Tourism Authority of Thailand (TAT) governor Juthamas Siriwan and her daughter in a film festival bribery case, the Office of the Attorney-General spokesman said Wednesday.  Prosecutors indicted Mrs Juthamas, 68, and her daugther Jittisopha, 41, in the Criminal Court on Tuesday on charges of taking bribes, corruption and bid-rigging, plus breaching Section 6 of the law dealing with state employees’ offences and Section 12 of the law governing submitting tenders to state agencies, which carries a maximum jail term of 20 years.”

This development is expected to functionally end the U.S. prosecution.

In other news relevant to the above enforcement action, the Hollywood Reporter reports that Gerald Green recently died.  He was 83.

Reading Stack

The most recent edition of the always informative FCPA Update by Debevoise & Plimpton has a nice write-up of the recent BNY Mellon enforcement action (see here and here for prior posts).  In pertinent part, the Update states:

In the SEC’s View, a Thing of Value Can Be Purely Psychological

[T]he government’s investigations in this area face a key threshold legal issue under the FCPA: can providing a job or internship to an official’s relative constitute a thing of value to the official him/herself? Can offering the purely psychological benefit of helping a child or relative land a job give rise to an actionable attempt at bribery? The official does not stand to see any personal financial gain from the internship, except in the arguable circumstance of reducing the official’s financial obligations to a dependent. But the SEC seems to have purposely disclaimed – or at least strained – that theory here, given that one of the internships at issue was unpaid. The SEC addressed this thorny issue in a single sentence in the Order, asserting that “[t]he internships were valuable work experience, and the requesting officials derived significant personal value in being able to confer this benefit on their family members.”

The SEC has previously suggested that an intangible benefit can be a “thing of value” under the FCPA, having faulted Schering-Plough for providing a requested donation to a legitimate charity with which a foreign official and his spouse were closely involved, in an alleged attempt to influence the official. The BNYM Order, however, seems to represent a significant expansion of that thinking. Notably, in Schering-Plough the SEC charged only a “books and records” violation, not a violation of the FCPA’s anti-bribery provisions. Moreover, even assuming intangible prestige or listing an internship on a resumé can be a thing of value, Schering-Plough at least involved a transfer of funds at the official’s request, which arguably allowed the official himself to reap the prestige of the donation. Here, the prestigious and valuable work experiences – one of which was entirely unpaid – went not to the official but to the official’s family member, and thus only indirectly benefited the official.

Evidentiary Issues: Quid Pro Quo or Internal Speculation?

The BNYM case and others like it also raise difficult evidentiary issues for FCPA enforcement authorities. How can one draw the line between a genuine quid pro quo – an actual exchange of a personal benefit to an official for a business assignment – from mere internal speculation and anxiety about potentially damaging an important relationship? Here, the BNYM Order is notable for what it does not say: the Order does not place the internship hiring requests in the context of any specific business opportunity, or any review or re-evaluation of whether the Sovereign Wealth Fund should maintain its existing business relationship with BNYM. Rather, the cited internal communications reflect a generalized desire to gather additional business in the future or to a perception that existing business could be diminished relative to competitors.

Here, the lack of any tie to a concrete business opportunity could simply be a function of the asset management business, in which funds for investment are (in general terms) fungible. Time will tell whether, in other contexts, courts or enforcement authorities will focus more on an attempt to win a specific business opportunity rather than simply an effort to create or maintain good relations that may (or may not) bear fruit over time. For now, the SEC appears to have followed the controversial “quid pro quo lite” theory that has garnered some success in DOJ criminal domestic bribery prosecutions; in that sense, the reach of the Order may not be that surprising – although its theoretical underpinnings in the FCPA arena remain largely untested.

The SEC’s justification for the imposition of a disgorgement remedy is also difficult to locate within its factual recitation. The disgorgement amount of $8.3 million cannot be explained by the relatively minor new investment with BNYM (of less than $1 million). It stands to reason, then, that the disgorgement amount is based, at least in part, on BNYM’s retention of its existing business with the Sovereign Wealth Fund. The causation analysis on that point is not transparent, as the facts stated do not suggest any meaningful way to assess the degree to which the intern hires arguably contributed to maintaining the existing relationship. The result may be the product of any number of unstated factors that went into the settlement, highlighting once again, why settlements should not make law.


Overall, the BNYM Order highlights two areas of frequent criticism of FCPA enforcement. First, the activity under scrutiny bears a strong similarity to what are perceived as common practices in the private sector in which firms seek to accommodate client representative requests in order to maintain good relations with key decision makers. In this way, enforcement authorities risk criticism that they are using the FCPA to excise business practices affecting relationships with foreign officials abroad that are routinely tolerated in the private sector in the United States – and that are not unprecedented or even rare in the context of companies’ relationships with officials employed by the United States federal, state, and local governments.

Second, the SEC’s choice of a consented-to cease-and-desist order to announce a new and expansive interpretation of the FCPA leaves its interpretations of the law entirely untested by judicial scrutiny and adversarial process. Given that BNYM did not admit the allegations in the Order, BNYM had very little incentive to challenge the SEC’s view of the facts and law, yet as with Schering-Plough’s resolution (referenced above), the SEC’s debatable interpretive position may go years (or decades) without judicial scrutiny.

As noted at the outset, the BNYM Order is just the first resolution of a case of this kind. Others may follow, including in DOJ matters, which will likely shed additional light on the landscape in this area.”


A good weekend to all.

Friday Roundup

Friday, July 31st, 2015

RoundupScrutiny alerts, noisy exit, double standard, quotable and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts


As predicted in this May post about the FIFA-related enforcement action, while the enforcement action was not an FCPA enforcement action it was likely to lead to scrutiny of various companies concerning books and records and internal controls issues.

Sure enough.

Various reports (see here and here for instance) suggest that the SEC is :examining the behavior of several companies with links to FIFA or other soccer bodies caught up in a major corruption scandal to see if there were possible violations of U.S. federal bribery laws, a person with knowledge of the matter said.”  According to the article:

“The civil probe, which is in its early stages and may not lead to any findings of wrongdoing or enforcement action, is being conducted by the U.S. Securities and Exchange Commission.” [...] The SEC probe centers on publicly-traded companies who have been involved in soccer contracts, such as athletic shoes and sportswear company Nike Inc, said the source, who asked not to be named because of the non-public nature of the investigation. The exact scope of the probe and the names of other companies being scrutinized could not be learned. An SEC spokeswoman declined to comment.”


Reuters reports:

“Drugmaker GlaxoSmithKline, which was fined a record 3 billion yuan ($483 million) for corruption in China last year and is examining possible staff misconduct elsewhere, faces new allegations of bribery in Romania. GSK confirmed it was looking into the latest claims of improper payments set out in a whistleblower’s email sent to its top management on Monday. A copy of the email was seen by Reuters. The company is already probing alleged bribery in Poland, the United Arab Emirates, Lebanon, Jordan, Syria and Iraq. The latest allegations say GSK paid Romanian doctors hundreds, and in one cases thousands, of euros between 2009 and 2012 for prescribing its medicines, including prostate treatments Avodart and Duodart and Parkinson’s disease drug Requip. According to the email, the doctors were notionally paid for speaking engagements, but in three out of six cases, including the most highly paid one, they did not give any speech. The other three medics gave only one speech each, despite receiving multiple payments. GSK also provided doctors with many international trips and made payments to them under the guise of participation in advisory boards, the email said. [...] The sender of the Romania email said its contents would be passed on to the U.S. Department of Justice and the Securities and Exchange Commission (SEC), which are investigating GSK for possible breaches of the Foreign Corrupt Practices Act.”

Noisy Exit

My article “Foreign Corrupt Practices Act Ripples” chronicles, among other things, how the FCPA is increasingly being used offensively by litigants.  One such example is a “noisy exit” a term coined by FCPA Professor in 2010 to describe an employee alleging unfair employment practices in connection with some aspect of FCPA scrutiny or enforcement.

The latest example is this civil complaint recently filed by Keisha Hall (a certified public accountant, certified fraud examiner and former director of finance for the Latin America region of Teva Pharmaceutical USA, INC.’s (“Teva”).

According to the complaint,  Teva allegedly fired Hall after she “began cooperating in a Securities and Exchange Commission/Department of Justice investigation into potential violations of the Foreign Corrupt Practices Act (“FCPA”) and the Sarbanes-Oxley Act (“SOX”), stemming from, among other things, allegations of bribery of government officials in the region.”

As highlighted in this prior post, Teva has been under FCPA scrutiny since July 2012.

Double Standard

A few weeks after an official is sworn in to a high-ranking government position, the official asserts herself into a pending government investigation against a corporation and brokers a settlement (an unusual task given the official’s position).

From that point forward, the corporation significantly increases its contributions to a charitable organization set up by the official’s family and pays the official’s spouse $1.5 million to participate in a series of question and answer sessions with the corporation’s CEO.

A prudent FCPA practitioner would immediately see numerous red flags and recommend an internal investigation.

But wait, the official is not a foreign official, it’s a U.S. official and once again it is Hillary Clinton.  (See here for the Wall Street Journal’s recent article “Clinton’s Complicated UBS Ties.”)


On the other side of the Presidential ticket is Donald Trump.  Regardless of what you think of “The Donald” he is blunt.  In this recent Wall Street Journal article, Trump explains why he previously donated to Hillary Clinton’s 2008 presidential campaign and other political campaigns.

“As a businessman, [Trump] needed to curry favor with an influential senator from his home state. In turn, he said, [Clinton] had incentive to court him as a campaign donor. “As a businessman and a very substantial donor to very important people, when you give, they do whatever the hell you want them to do,” Mr. Trump said. “As a businessman, I need that.”


In this recent Law360 article “FCPA Challenges Make for Spotty Trial Record for DOJ,” Michael Levy (Paul Hastings) states:

“We’ve seen several trials in which the judges have been skeptical, if not outwardly hostile, to some of the government’s more aggressive interpretations of the FCPA. While those trials may have fallen apart for other reasons, that skepticism still played, I believe, a substantial role.”

“Without the development of the law through judicial decisions, it’s very unclear what judges believe the FCPA means compared to what the DOJ think the FCPA means.”

(See here for Levy’s FCPA Professor guest post titled “Prosecutorial Common Law”).

In the same article, George Terwilliger (McGuireWoods and a former high-ranking DOJ official) states:

“It is fundamental to due process that a person of ordinary intelligence should be able to read a law and understand what is required or prohibited, as the case may be. Many people of great intelligence on both sides of an FCPA question debate just such issues.”

“That does not produce the fair warning that those subject to the law deserve to have.”

For the Reading Stack

An informative article here by Jon N. Eisenberg (K&L Gates) titled “Are Public Companies Required to Disclose Government Investigations.”  While not FCPA-specific, the article is FCPA relevant and begins as follows.

“For many public companies, the first issue they have to confront after they receive a government subpoena or Civil Investigative Demand (“CID”) is whether to disclose publicly that they are under investigation. Curiously, the standards for disclosure of investigations are more muddled than one would expect. As a result, disclosure practices vary—investigations are sometimes disclosed upon receipt of a subpoena or CID, sometimes when the staff advises a company that it has tentatively decided to recommend an enforcement action, sometimes not until the end of the process, and sometimes at other intermediate stages along the way. In many cases, differences in the timing of disclosure may reflect different approaches to disclosure. We discuss below the standards that govern the disclosure decision and practical considerations. We then provide five representative examples of language that companies used when they disclosed investigations at an early stage.”