Archive for the ‘FCPA Sentences’ Category

Friday Roundup

Friday, October 16th, 2015

Roundup2Rama sentenced but what is the back story, scrutiny alert, and for the reading stack.  It’s all here in the Friday roundup.

Rama Sentenced, But What is the Back Story?

As noted here, last week James Rama, a former executive at defense contractor IAP Worldwide Services, was sentenced to four months in federal prison for his role in a bribery scheme involving a security systems project with the Kuwaiti Ministry of the Interior.

In its sentencing memo, the DOJ requested that Rama be sentenced to one year.  That the judge rejected the DOJ’s sentencing recommendation is not the story – judges frequently reject DOJ sentencing recommendations in individual FCPA cases.

Rather, according to a knowledgeable source who was unable to provide specifics, there is a more interesting back story in connection with the Rama prosecution.  Indeed, as noted in this article:

“Mr. Rama said he was disappointed that after a long investigation the case wasn’t pursued to its “proper conclusion.” Defense counsel William Brennan said the elaborate system required for the bribery reached higher at IAP than the Justice Department prosecuted. “There are people…that should have been prosecuted in this case and for whatever reason they were not,” Mr. Brennan said about the bribery scheme Mr. Rama helped engineer on the ground in Kuwait. The Justice Department lawyers present didn’t respond to the allegations at the hearing. The government said in its settlement with IAP that a “variety of factors, including but not limited to IAP’s cooperation,” led to the non-prosecution agreement.”

Consistent with the above, Rama’s lawyers stated in this sentencing memo as follows.

“Mr. Rama was a minor, albeit integral, part of a much larger scheme concocted by more senior executives at IAP – none of whom will be prosecuted in this case. In addition, IAP has entered into a non-prosecution agreement with the government and agreed to pay a $7.1 million penalty to resolve the matter. It would appear that Mr. Rama is the only individual who will face criminal prosecution in this matter.” (Emphasis in original).

Consistent with there being an interesting backstory in the IAP / Rama prosecution, on the same day the DOJ filed its sentencing memo, the court docket indicates that the DOJ also filed a motion under seal, a motion that will likely never see the light of day.

Just remember as Assistant Attorney General Leslie Caldwell recently stated, “greater transparency benefits everyone.”  (See here for the prior post).

Scrutiny Alert

Approximately four years ago (see here for the prior post), Kraft Foods disclosed FCPA scrutiny resulting from its acquisition of Cadbury in connection with a manufacturing facility in India.  Kraft, now known as Mondelēz International, Inc., was recently the focus of this Wall Street Journal article which states:

“[The SEC] preparing civil charges against snack-food maker Mondelez International Inc. in connection with a long-running investigation of payments its Cadbury unit made in India, said people familiar with the matter. [...]  The company concluded in an internal report by its lawyers in 2011 that Cadbury had used a consultant to funnel bribes to Indian officials in return for factory approvals and permits, which ultimately allowed Cadbury to claim a tax exemption valued at more than $90 million, according to the report, which was reviewed by The Wall Street Journal. The report says Cadbury also paid fees to eight other consultants from May 2008 to October 2010 “for which the only reasonable explanation is that they have been used to mask payments to government officials.” [...] Mondelez’s outside attorneys at Baker & McKenzie have told government investigators that they identified suspicious payments to consultants but couldn’t determine what ultimately became of the money, according to a person familiar with the matter. [...]  The most serious allegations centered on a tax break available to companies that began production in new plants in the Northern Indian state of Himachal Pradesh,where Cadbury’s Baddi plant is located, by March 31, 2010. Cadbury had planned to build a new standalone factory in Baddi, but instead it decided to add a second floor to its existing plant in 2008, with three new production lines for chocolate candies. The company gave the second floor its own entrance and claimed it as an independent unit on paper to qualify for the tax exemption, which would save the company more than $90 million over a decade, according to legal documents the company filed in India. But Cadbury’s lawyers determined in late 2009 that, in order to claim the exemption, the company needed to get separate licenses and approvals for the second-floor unit from Indian authorities, a process that typically takes more than six months, according to a timeline created as part of the internal investigation. With the sunset of the tax break just a few months off, Cadbury hired a consultant to “get all necessary approvals to start-up Unit 2 at Baddi…urgently,” the 2011 report said. Internal investigators concluded that the consultant’s fees—about $55,000—were passed on to Indian officials as bribes, according to their report. [...]  In March, an Indian tax commissioner fined Cadbury more than $90 million, rejecting the company’s argument that the addition of a second floor was the legal equivalent, for tax purposes, of a new plant. [A Mondelez spokesman] said the company is appealing the commissioner’s order. “We continue to believe that the decision to claim the excise-tax benefit is valid.”

Reading Stack

An informative read from Morgan Lewis regarding the European Court of Justice opinion in Maximillian Schrems v. Data Protection Commissioner, in which the court struck down a US-EU agreement that allowed companies to move personal electronic data between the European Union and the United States.

“This ruling, which is final and cannot be appealed, is likely to have far-reaching effects on how US corporations investigate allegations of wrongdoing by affiliates and subsidiaries based in Europe, including investigations of potential violations of the US Foreign Corrupt Practices Act (FCPA).”

Among those critical of the DOJ’s recently released Yates Memo is James Koukios (previously the Senior Deputy Chief of the Fraud Section in the DOJ Criminal Division and an Assistant Chief in the Fraud Section’s FCPA Unit).  In this Corporate Crime Reporter interview, Koukios offers his perspectives on the Yates Memo and other issues relevant to FCPA enforcement.


A good weekend to all.

Friday Roundup

Friday, September 18th, 2015

Roundup2DOJ compliance counsel identified, additional lenient PetroTiger exec sentences, scrutiny alerts and updates, and for the reading stack. It’s all here in the Friday roundup.

DOJ Compliance Counsel

As highlighted in this previous post, last month word spread that “the [DOJ] is hiring a compliance counsel who will help prosecutors determine whether companies facing corruption allegations are victims of rogue employees or willfully blind.”

According to this Global Investigations Review article:

“According to two people familiar with the matter, the US Department of Justice (DoJ) has hired Hui Chen, Standard Chartered’s former head of anti-bribery and corruption compliance, as its new compliance counsel. [...] Before joining Standard Chartered, Chen served as an assistant general counsel at US pharmaceutical company Pfizer between June 2010 and September 2013. In this position, she oversaw the drug-maker’s internal investigations in the Asia-Pacific region, and also led compliance reviews in Latin America, Europe and the Middle East. Chen previously worked for Microsoft for 13 years, serving first in the intellectual property litigation team and later as a compliance officer in China. During the 1990s, Chen worked as a DoJ trial lawyer in Washington, DC, and as an assistant US attorney in Brooklyn.”

PetroTiger Exec Sentences

The DOJ’s FCPA enforcement action against former PetroTiger executives has concluded with additional thuds.

By way of background, the DOJ’s prosecution of Joseph Sigelman fell apart after a key cooperating witness acknowledged giving false testimony. The DOJ effectively pulled its case although Sigelman did plead guilty to substantially reduced charges.  In sentencing Sigelman to probation, Judge Joseph Irenas (D.N.J.) blasted the DOJ.  (See here for the prior post).

Recently, Judge Irenas sentenced the two remaining defendants in the case: Gregory Weisman and Knut Hammarskjold.

Weisman was sentenced to two years probation and ordered to pay a $30,000 fine.  Hammarskjold was likewise sentenced to two years probation and ordered to pay a $15,000 fine as well as approximately $106,000 in restitution for the benefit of PetroTiger.

According to a media source: “before pronouncing the sentence[s], Judge Irenas said he had to reflect the reality that the ultimate sentence here is influenced by the Sigelman case.”

Scrutiny Alerts and Updates

NextEra Energy

In the “you don’t see this everyday” category, as indicated in this press release, it appears someone hired a public relations company to issue a release stating:

“[C]omplaints were [recently] filed with the United States Department of Justice regarding the conduct of NextEra Energy Inc. and RES Americas subsidiaries under the Foreign Corrupt Practices Act related to each company’s attempts to win renewable energy contracts in Addington Highlands, Ontario and North Frontenac, Ontario, from the Government of Ontario through the Independent Electricity System Operator.”


The company which has been under FCPA scrutiny since 2011 recently disclosed:

“As initially disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2011, we identified certain transactions involving our Danish subsidiary BK Medical ApS, or BK Medical, and certain of its foreign distributors, with respect to which we have raised questions concerning compliance with law, including Danish law and the U.S. Foreign Corrupt Practices Act, and our business policies. We have commenced discussions with the Securities and Exchange Commission concerning the resolution of the SEC inquiry into the matter and have proposed a payment of $1.6 million in settlement of such inquiry. During the three months ended July 31, 2015, we accrued a $1.6 million charge in connection with our settlement proposal. We are uncertain whether the U.S. Department of Justice or the Danish Government will seek to impose any sanctions or penalties against us and have not engaged in settlement discussions with either of these entities. There can be no assurance that we will enter into any settlement with the SEC, the DOJ or the Danish Government, and the cost of any settlements or other resolutions of these matters could materially exceed our accruals.”

Listening In

A fruitful source of unscripted, “real-person” talk about FCPA issues is earnings conference calls and other investor calls.  A recent Expeditors (a global logistics company headquartered in Seattle, Washington) investor day conference call caught me eye.

During the call, an analyst asked:  ”Do you see any limits to, whether it’s Europe or Africa or any other geographies, where maybe that’s a difficult – that’s a barrier that kind of prevents as much growth or marketplace capture as you would like, that there’s maybe less receptivity to that?”

Jeff Musser, Senior V.P. and CFO stated:

“When we look at other markets [besides Europe], some of the challenges that we have seen in other markets really have nothing to do with our model and how we roll out our model. The bigger concerns are compliance in some of those markets.So you look at places like Africa, you look at places like Russia. There’s tremendous pressure on us and on our customers to deal with things like the Foreign Corrupt Practices Act. We may — as we decide to go into those markets, we may have to do it in a little bit different way that incentivizes the right behavior and drives the right thing, so those are things that are in the back of our mind as we start thinking about these markets. We don’t think that we are limited in these markets. It just may take a little bit different approach.”

For the Reading Stack

Consistent with my own observations in “The Facade of FCPA Enforcement” (2010) and numerous articles and posts thereafter, Brian Whisler (Baker & McKenzie) writes in “Why DOJ Struggles to Convict Individuals in FCPA Cases” as follows.

“Given the enormous litigation and reputational risk, companies are generally averse to contesting criminal charges at trial. As a result, the FCPA practice has primarily evolved through a series of corporate settlement agreements, over which courts have little to no supervision and in which the burden of proof for evidentiary purposes has less impact. The relative absence of case law in the field has meant that the Justice Department has been able to advance expansive views regarding the scope and applicability of the FCPA, largely unhindered by skeptical juries and contrary case law. However, these settlements carry little to no precedential value, and if individual prosecutions multiply as the Justice Department has promised, then prosecutors will increasingly be held to the high burden of proof and forced to defend their theories before judges. It is already clear that the Justice Department will face difficulties in advancing some of its more aggressive theories in court. Last month, a federal judge rejected the Justice Department’s contention that a nonresident foreign national who worked for a U.S. company’s foreign affiliate could be convicted of conspiracy to violate the FCPA based on traditional accomplice liability theories. See United States v. Lawrence Hoskins, 3:12cr238 (D. Conn. Aug. 13, 2015). Instead, the Justice Department must show that the defendant acted as an agent for the U.S. company itself, a harder task given the defendant’s lack of a direct relationship to the U.S. company. Over the last few years, the Justice Department has used increasingly expansive views of conspiracy and accomplice liability to assert jurisdiction over potentially improper payments paid by employees and agents of foreign subsidiaries and affiliates of U.S.-listed companies. As a result, companies have routinely entered into massive FCPA settlements regarding conduct that has only minimal connections to the United States, U.S. citizens or even U.S. companies. The court’s ruling may ultimately encourage other nonresident foreign nationals, and corporations that only face exposure due to the conduct of their foreign affiliates’ employees, to resist settling future charges with the government. Hoskins is likely to be one of a number of adverse legal rulings regarding the scope of the FCPA if the Justice Department maintains its commitment to increase individual FCPA prosecutions. Adverse case law seems to beget more adverse case law for the DOJ; Hoskins heavily relied on the reasoning of one of the other rare FCPA cases to go to trial, United States v. Castle, 925 F.2d 831 (5th Cir. 1991), which rejected prosecutors’ efforts to charge officials who accept bribes under the FCPA.”


A good weekend to all.

In Sentencing Sigelman, Judge Irenas Blasts The DOJ

Wednesday, June 17th, 2015

Judge IrenasForeign Corrupt Practices Act sentencing transcripts often make for interesting reads.

After all, sentencing is a judicial function and the transcripts provide a rare glimpse of someone other than the enforcement agencies weighing in on issues relevant to FCPA enforcement.

In sentencing Joseph Sigelman to probation after the DOJ effectively pulled its case early in the trial after its star witness admitted to making false statements on the stand (see here and here for prior posts), Judge Irenas dished up a few zingers.

See here for the sentencing transcript.

For starters, Judge Irenas chided the DOJ for acting inconsistent with the plea agreement it negotiated a day before sentencing in which the DOJ stated that the parties agreed that Sigelman’s sentence should be “a range from a non-custodial term of probation up to 12 months and one day of incarceration.”  Judge Irenas wondered why then the DOJ’s sentencing brief asserted that anything less than a year sentence would be unreasonable.  At one point, Judge Irenas stated “I feel like I am being played.” At pg. 25 of the transcript, Judge Irenas says “probation is appropriate. By def—you agreed to that. You can’t back off that. And your brief really does back off that.”

Of further note, at pgs. 22-23 of the transcript as highlighted below, Judge Irenas  blasted oft-stated DOJ rhetoric about the purported difficulty of prosecuting FCPA cases.  (Note: Mr. Stokes is DOJ FCPA Unit Chief Patrick Stokes and Duran is David Duran the alleged Colombian “foreign official” allegedly bribed).

MR. STOKES: In a complex white-collar case, certainly in a FCPA case, where there are numerous difficulties to obtaining evidence overseas, there are often opinions—we are often—the government is in a position of obtaining evidence from overseas, from years past, obtaining witnesses from overseas, and because of the complex and difficult nature of building these cases, we think that—

THE COURT: Well, I mean, that’s a general statement. The fact of the matter is, Duran was over in this country, in fact, wanted to stay here, if he could have arranged it. And he was, in a sense, in your control. I mean, he was

cooperating with you. Wasn’t cooperating with the defense.

MR. STOKES: Your Honor—

THE COURT: So I don’t know what difficulty you’re exactly talking about. You had PetroTiger through the investigation done by Sidley & Austin, basically dumped—dumped the case in your lap.


THE COURT: You know, I mean, so you could talk generally how difficult this is. There may have been certain legal issues, but—what was difficult? What was the particular difficulty here? You had—


THE COURT: —two co-conspirators pled guilty early on cooperating, alleged co-conspirators. You had Duran, here right in the country talking to you. It was not as if, you know, he was hiding somewhere in the jungle of Colombia to avoid—he actually wanted to be here. And then you had Sidley & Austin, turned over thousands and thousands of—I think it was 4,000 pages. I can’t remember the number, but it was some very large number of documents, and had done—you know, and Sidley does this kind of work in other context. I mean, they know what they’re doing, and they—you know, and they did all this investigation.

You know, you tell me as a general matter, it’s hard to prove Foreign Corrupt Practices Act. I guess as a generic form of—

MR. STOKES: Absolutely, Your Honor.

THE COURT: —that’s difficult. But in this case, what was the difficulty?

MR. STOKES: And, Your Honor, there’s ample Third Circuit case law, Supreme Court case law, and otherwise on the point of general deterrence. And the point I’m making is simply a general point, that the white — complex white-collar financial crimes are difficult to prove, FCPA cases are difficult to prove, and so, therefore, we believe that a sentence of incarceration is — sends an important message in –

THE COURT: Well, I guess they haven’t been in my court because I tried several. I tried a nine and-a-half-month criminal white-collar case, in which I gave the longest tax fraud sentence ever given, twice what Al Capone got, for someone who was engaged in a tax fraud trial. I’ve done three or four –

MR. STOKES: And we certainly support that.

THE COURT: I’ve done three or four big white-collar cases, all resulted in convictions and all resulted in substantial sentences.

MR. STOKES: Absolutely.

THE COURT: I don’t know what you’re talking about.

MR. STOKES: So, Your Honor, the point we’re making is again –

THE COURT: You chose not to complete the trial, not me.

MR. STOKES: Of course. Of course, Your Honor. And the point we’re making is that Mr. Sigelman has admitted the crime –

THE COURT: In some form, you’re going to have to explain why, but maybe not here.

DOJ Prosecution Of Sigelman Ends With No Jail Time

Tuesday, June 16th, 2015

SigelmanAs highlighted in this previous post, the DOJ’s prosecution of Joseph Sigelman came to an abrupt halt early in the trial after the DOJ’s star witness admitted to giving false testimony on the stand.

As further evidence of the DOJ’s failures, earlier today federal court judge Joseph Irenas (D.N.J.) refused to sentence Sigelman to any jail time after Sigelman agreed to a plea agreement involving substantially reduced charges.

Sigelman’s defense team (Sigelman was represented by Quinn Emanuel Urquhardt & Sullivan LLP, William Burck led the defense team with his partners, William Price and Juan Morillo) issued a release which states in full as follows.

“Today Judge Joseph Irenas, Federal District Court Judge for the District of New Jersey, gave Joseph Sigelman probation and no jail time.  This followed on the heels of DOJ’s sudden decision to drop five and a half of six charges against Mr. Sigelman including the most serious charges.  The Government’s decision appears driven in large part by an admission last Thursday by the Government’s star witness, Gregory Weisman, that he made false statements to the jury during his testimony.  It also follows the admission by the only other witness presented thus far, an FBI Agent assigned to the investigation, that the Colombian citizen at the center of the prosecution’s case was allowed to leave the United States to his native Colombia without facing arrest or any charges from the Government.  Indeed, he was permitted to go to Disney World while Mr. Sigelman faced indictment.

Mr. Sigelman’s plea speaks for itself. He recognizes that he failed as a manager to provide stringent oversight of some of his colleagues and employees at PetroTiger. He takes full responsibility for his perosnal failures, including to ensure that all employees at PetroTiger always acted with the highest integrity. Mr. Sigelman has expressed deep regret for not instituting more quickly and forcefully a compliance regime.  Such a regime would have prevented any payments that were not appropriate in the then-two-year old PetroTiger, a company he co-founded that grew organically and through rapid acquisitions of existing companies.

In sentencing Mr. Sigelman, Judge Irenas chastised the Government for asserting that a one-year prison term was the only correct sentence.  He rejected the Government’s position as contrary to the plea agreement negotiated between the Government and Mr. Sigelman’s lawyers — and most importantly contrary to the interests of justice.  Judge Irenas further noted that Mr. Sigelman has employed thousands of people and will continue to do a great deal of good in society, and that Mr. Sigelman is less likely to commit an offense in the future than any other defendant he has seen in his more than two decades on the bench.  Mr. Sigelman is now free to continue his career as an entrepreneur.

Mr. Burck said: “Joe has been through hell.  He accepts full responsibility for his role in all of this.  But the government made the right call in agreeing to a very generous plea deal.  It gives certainty to Joe and his family, and saves the Government from a potentially embarrassing loss at trial.  We thank Judge Irenas for the extraordinary thought and care he brought to every aspect of this case, and ultimately his mercy in sentencing Joe to no jail time, which is the most just result.”

Mr. Price added:  “We are delighted with the result of this deal and believe that all parties can now move on with their respective endeavors.  Mr. Sigelman’s case highlights the unique challenges that building a start-up company in a foreign land can pose even above the normal chaos of a fast-growing company.  We are deeply grateful to Judge Irenas and the devoted members of the jury who dedicated their time, energy and attention to this case.”

Friday Roundup

Friday, March 27th, 2015

Roundup2Is this appropriate, sentenced, scrutiny alerts and updates, quotable, a future foreign official teaser?, Brazil update, and for the reading stack.

It’s all here in the Friday roundup.

Is This Appropriate?

If this truly is an event, “Drinks With an FBI Agent – Inside Stories From the Foreign Corrupt Practices Act,” is it appropriate?


Chinea and DeMeneses Sentences

The DOJ announced

“Benito Chinea and Joseph DeMeneses, the former chief executive officer and former managing director of a broker-dealer Direct Access Partner “were sentenced to prison … for their roles in a scheme to pay bribes to a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes), in return for trading business that generated more than $60 million in commissions.”

Chinea and DeMeneses were each sentenced to four years in prison.  They were also ordered to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.  On Dec. 17, 2014, both defendants pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.”

In the release, Assistant Attorney General Leslie Caldwell stated:

“These Wall Street executives orchestrated a massive bribery scheme with a corrupt official in Venezuela to illegally secure tens of millions of dollars in business for their firm. The convictions and prison sentences of the CEO and Managing Director of a sophisticated Wall Street broker-dealer demonstrate that the Department of Justice will hold individuals accountable for violations of the FCPA and will pursue executives no matter where they are on the corporate ladder.”

U.S. Attorney Preet Bharara of the Southern District of New York stated:

“Benito Chinea and Joseph DeMeneses paid bribes to an officer of a state-run development bank in exchange for lucrative business she steered to their firm. Chinea and DeMeneses profited for a time from the corrupt arrangement, but that profit has turned into prison and now they must forfeit their millions of dollars in ill-gotten gains as well as their liberty.”

Elgawhary Sentence

This previous post highlighted the DOJ enforcement action against Asem Elgawhary, a former principal vice president of Bechtel Corporation and general manager of a joint venture operated by Bechtel and an Egyptian utility company, for allegedly accepting $5.2 million in kickbacks to manipulate the competitive bidding process for state-run power contracts in Egypt.

The DOJ recently announced that Elgawhary was sentenced to 42 months in federal prison.

When the Alstom enforcement action was announced in December 2014 (see here and here for prior posts), Elgawhary was described as an Egyptian “foreign official.”

So what was Elgawhary?

A former principal vice president of Bechtel Corporation and general manager of a joint venture operated by Bechtel and an Egyptian utility company or a Egyptian “foreign official?”

Can the DOJ have it both ways?

Scrutiny Alerts and Updates

Anheuser-Busch InBev

Anheuser-Busch InBev recently disclosed in its annual report:

“We have been informed by the U.S. Securities and Exchange Commission and the U.S. Department of Justice that they are conducting investigations into our affiliates in India, including a non-consolidated Indian joint venture that we previously owned, ABInBev India Private Limited, and whether certain relationships of agents and employees were compliant with the FCPA. We are investigating the conduct in question and are cooperating with the U.S. Securities and Exchange Commission and the U.S. Department of Justice.”


As highlighted in this previous post, in December 2013 German-based Bilfinger paid approximately $32 million to resolve an FCPA enforcement action concerning alleged conduct in Nigeria.  The enforcement action was resolved via a three-year deferred prosecution agreement.

As noted in the previous post, Bilfinger’s CEO described the conduct at issue as “events from the distant past.”

From the not-so distant past, Bilfinger recently announced:

“Bilfinger received internal information last year indicating that there may have been violations of the Group’s compliance regulations in connection with orders for the supply of monitor walls for security control centres in several large municipalities in Brazil. The company immediately launched a comprehensive investigation. The allegation relates to suspected bribery payments from employees of a Bilfinger company in Brazil to public officials and employees of state companies.”

See here for a follow-up announcement from the company.

As a foreign company, Bilfinger is only subject to the FCPA’s anti-bribery violations to the extent the payment scheme involves a U.S. nexus (as was alleged in the prior Bilfinger FCPA enforcement action).


Canadian media reports:

“Seven people, including Revenue Quebec employees and officials with computer companies IBM and EBR, were [recently] arrested … in connection with an alleged corruption scheme aimed at obtaining a government IT contract worth $24 million.Two Revenue Quebec employees, Hamid Iatmanene and Jamal El Khaiat, stand accused of providing privileged information about an upcoming government contract to a consortium made up of IBM and Quebec company Informatique EBR Inc.”

As highlighted here, in 2000 IBM resolved an FCPA enforcement action.

As highlighted here, in 2011 IBM resolved another FCPA enforcement action.  This enforcement action was filed in federal court (back in the day when the SEC actually filed FCPA enforcement actions in federal court vs. its preferred in-house method now) and Judge Richard Leon was concerned about the settlement process.  As highlighted here, Judge Leon approved the settlement, but his July 2013 final order states, among other things:

“[For a two year period IBM is required to submit annual reports] to the Commission and this Court describing its efforts to comply with the Foreign Corrupt Practices Act (“FCPA”), and to report to the Commission and this Court immediately upon learning it is reasonably likely that IBM has violated the FCPA in connection with either improper payments to foreign officials to obtain or retain business or any fraudulent books and records entries …””

According to media reports, Judge Leon stated: “if there’s another violation over the next two years, it won’t be a happy day.”


In this Law360 article, Richard Grime (former Assistant Director of Enforcement at the SEC and current partner at Gibson Dunn) states regarding recent alleged FCPA violations.

“It’s not that you couldn’t intellectually [conceive of] the violation. It’s that the government is sort of probing every area where there is an interaction with government officials and then working backwards from there to see if there is a violation, as opposed to starting out with the statute … and what it prohibits.”

Given that most SEC FCPA enforcement actions are the result of voluntary disclosures, it is a curious statement.  Perhaps its companies, at the urging of FCPA Inc., that are probing every area where there is an interaction with government officials and then working backwards?


As reported here:

“Greek authorities [recently] indicted 64 people to stand trial over years-old allegations of bribery involving Siemens AG, the German engineering giant … A probe of corporate dealings from 1992 to 2006 allegedly found that Greece had lost about 70 million euros in the sale of equipment from Siemens to Greek telephone operator Hellenic Telecommunications also known as OTE, which was still owned by the state at the beginning of that period … A panel of judges decided that those indicted, including both Greek and German nationals, should stand trial for bribery or money laundering. The list of suspects includes former Siemens and OTE officials.”

As noted here, Joe Kaeser (President and CEO of Siemens) reportedly stated:

“I really believe the country (Greece) can move to the future, rather than trying to find the solutions in the past.” He added that his company had a “dark history,” mentioning compliance issues. But he said it was not a “black and white story” when asked whether the indictments had been politically motivated by the current friction between the German and Greek governments. ”Looking at the past doesn’t help the future because the past is the past.”

If the U.S. brings FCPA enforcement actions based on conduct that in some instances is 10 – 15 years old, it is not surprising that Greece is doing the same.  Yet is this right?

As the U.S. Supreme Court recently stated in Gabelli:

“Statute of limitations are intended to ‘promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.  They provide ‘security and stability to human affairs.  [They] are ‘vital to the welfare of society [and] ‘even wrongdoers are entitled to assume that their sins may be forgotten.’ […] It ‘would be utterly repugnant to the genius of our laws if actions for penalties could ‘be brought at any distance of time.’”


Since day one, I called Morgan-Stanley’s so-called declination politically motivated.  (See here and here).

I am glad to see that FCPA commentator Michael Volkov recently joined the club.  Writing on the Garth Peterson / Morgan Stanley so-called declination, Volkov states:  ”my intelligence on the case indicated that … [the] DOJ apparently wanted to demonstrate for political reasons that it could recognize a company’s compliance program to decline a case against a company.

A Future Foreign Official Teaser?

As recently reported by the Wall Street,

“China’s leadership is preparing to radically consolidate the country’s bloated state-owned sector, telling thousands of enterprises they need to rely less on state life support and get ready to list on public markets. [...] Communist Party leaders plan to release broad guidelines in the next months for restructuring the country’s more than 100,000 state-owned enterprises, according to government officials and advisers with knowledge of the deliberations. [...]  Strategically important industries such as energy, resources and telecommunications are marked for consolidation, the officials and advisers say. The merged entities would then be reorganized as asset-investment firms, with a mandate to make sure they run more like commercial operations than arms of the government. Upper management will be under orders to maximize returns and prepare many of the companies for eventual listing on stock markets, these people say.”

In U.S. v. Esquenazi, the 11th Circuit concluded that  an “instrumentality” under the FCPA is an “entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.” The Court recognized that what “constitutes control and what constitutes a function the government treats as its own are fact-bound questions” and, without seeking to list all “factors that might prove relevant,” the court did list “some factors that may be relevant” in deciding issues of control and function.

As to control, the 11th Circuit listed the following factors:

“[whether] the foreign government’s formal designation of that entity; whether the government has a majority interest in the entity; the government’s ability to hire and fire the entity’s principals; the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break even; and the length of time these indicia have existed.”

As to function, the 11th Circuit listed the following factors:

“whether the entity has a monopoly over the function it exists to carry out; whether the government subsidizes the costs associated with the entity providing services; whether the entity provides services to the public at large in the foreign country; and whether the public and the government of that foreign country generally perceive the entity to be performing a governmental function.”

Have fun applying this test should China’s proposed changes go forward.

Brazil Update

My own cents regarding Brazil’s recent implementation of regulations regarding certain features of its Clean Companies Act (a law which provides for only civil and administrative liability of corporate entities for alleged acts of bribery) is that the regulations are a yawner for any company that is already acting consistent with FCPA best practices.

Yet, if you feel the urge to read up on Brazil’s recent regulations, comprehensive coverage can be found here from Debevoise & Plimpton and here from FCPAmericas.

For the Reading Stack

A thoughtful article here from Alexandra Wrage (President of Trace) regarding the “cult of the imperfect.”  It states:

“Sir Robert Alexander Watson-Watt is credited with saving thousands of lives in Britain during the worst days of World War II after developing Chain Home, a low-frequency radar system able to detect aircraft from about 90 miles away. He openly encouraged what he called the “cult of the imperfect” among his team. He knew that Britain didn’t need the best possible radar system in five years; the country needed a viable radar system urgently. Immediately. Watson-Watt, who was knighted shortly after the Battle of Britain, is said to have instructed his team to strive for the third-best option, because “the second-best comes too late . . . the best never comes.


Perfect due diligence risk assessments never come. And even second-best may come too late. Just get started. You’ll see more protections and benefits from good (for now) than perfect (some day, maybe . . .).”

Sound advice that I agree with and completely consistent with Congressional intent in enacting the FCPA’s internal controls provisions and even prior enforcement agency guidance.

Problem is, the DOJ and SEC wear rose-colored glasses, including as to conduct years ago, and if a company is acting consistent with FCPA best practices 99% of the time, that means 1% of the time they are not.


A good weekend to all. On Wisconsin!