Archive for the ‘FCPA Statistics’ Category

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.

Issues To Consider From The BNY Mellon Enforcement Action

Thursday, August 20th, 2015

IssuesThis recent post highlighted and offered initial commentary on the SEC’s FCPA enforcement action against BNY Mellon.  This post continues the analysis by highlighting other issues to consider.

First Ever

FCPA practitioners would likely be hard pressed to imagine an enforcement action that includes alleged violations of the FCPA’s anti-bribery provisions and internal controls provisions, without alleged violations of the books and records provisions

There would be good reason for the struggle – it has never happened before – until earlier this week.

The BNY Mellon enforcement action is believed to be the first-ever SEC FCPA enforcement action not to include allegations or findings regarding books and records violations.  A future post will explore this issue in more detail.

A Step Further Than Schering-Plough and Eli Lilly

The FCPA’s anti-bribery provisions expressly state, in pertinent part, that money, a gift, or anything of value must be given to, offered to, or promised to: (1) a foreign official; (2) a foreign political party of official or candidate for foreign political office; or (3) any person “while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office …”.

Regardless of the prong, as evident from the statutory text, the thing of value must ultimately be intended for a “foreign official.”

Previously in the Schering-Plough and Eli Lilly enforcement actions the SEC alleged that the companies violated the FCPA by making charitable contributions to a bona fide Polish charity dedicated to restoring historical cases.  However, as alleged by the SEC, the charity was a pet project of an alleged Polish official with discretionary authority over the purchase of pharmaceuticals.

While perhaps a distinction without a difference, the charges/findings in both cases as to the above conduct were limited to the FCPA’s books and records and internal control provisions.

Even so, the enforcement theory was clear: in analyzing “anything of value” the enforcement agencies will put themselves in the shoes of the alleged “foreign official” and ask how the recipient perceived the thing of value and whether the recipient subjectively valued the thing of value.

The BNY Mellon enforcement action goes a step further than Schering-Plough and Eli Lilly by finding violations of the FCPA’s anti-bribery provisions.  The key language from the SEC is the following: “The internships were valuable work experience, and the requesting officials derived significant personal value in being able to confer this benefit on their family members.” (emphasis added).

Notable Findings

Notwithstanding the SEC’s findings that the Interns did not meet BNY’s Mellon’s supposed “rigorous criteria” for hiring and were not evaluated and hired through the company’s “established internship programs,” the following SEC findings are notable.

One of the Interns (Intern C) was not paid.

As to the other two interns, the SEC’s order states: “because Interns A and B had already graduated from college” BNY paid the interns “above the normal salary scale for BNY Mellon undergraduate interns but below the scale for postgraduate interns.”

In other words, the SEC found that BNY Mellon violated the FCPA’s anti-bribery provisions, not necessarily because of the compensation offered to the Interns, but rather the SEC’s belief that the Interns should never have been interns at BNY Mellon in the first place and because of this – again in the words of the SEC – the alleged “foreign officials” “derived significant personal value in being able to confer this benefit on their family members.”

Time Line

According to BNY Mellon’s disclosures: “in January 2011, the Enforcement Division of the U.S. Securities and Exchange Commission (the “SEC Staff”) informed several financial institutions, including BNY Mellon, that it had commenced an inquiry into certain of their business practices and relationships with sovereign wealth fund clients.”

Thus, BNY Mellon was under FCPA scrutiny for approximately 4.5 years.

How Rare Are Parallel DOJ And SEC FCPA Enforcement Actions Against Individuals?

Friday, August 14th, 2015

question marks2Yesterday’s post regarding the Foreign Corrupt Practices Act enforcement action against former SAP sales executive Vicente Garcia noted that it was rare instance of a parallel DOJ and SEC enforcement action against an individual.

A reader asks “how rare is rare” and this post provides the answer.

For starters, the SEC can only bring an FCPA enforcement action against issuers and associated persons, whereas the DOJ’s FCPA enforcement authority is not as limited.  (See here for a prior post discussing DOJ and SEC FCPA jurisdiction).

Moreover, as highlighted in this post, approximately 85% of corporate SEC FCPA enforcement actions since 2008 have not resulted in any related enforcement activity against individuals.

Given the above dynamics, it is thus a rather small subset of actions in which a parallel DOJ and SEC enforcement action against an individual might occur.

Even though the DOJ and SEC are rarely put to its burden of proof – even in individual enforcement actions – it is nevertheless relevant in analyzing this issue to note that the SEC as a civil law enforcement agency has a burden of proof of preponderance of the evidence, whereas the DOJ as a criminal law enforcement agency has a much higher burden of proof of beyond a reasonable doubt.

Against this backdrop, the parallel DOJ and SEC enforcement action against Garcia is believed to be only the second such instance in the last 3.5 years and one of only a handful over last decade.

Other examples of parallel DOJ and SEC FCPA enforcement actions against individual are as follows.

Garth Peterson (associated with Morgan Stanley) 2012 (see here and here).

Various Siemens executives – 2011 (see here and here).

Ousama Naaman (associated with Innospec) 2010 (see here and here).

Bobby Elkin (associated with Alliance One International) 2010 (see here and here).

Albert Stanley (associated with KBR / Halliburton)  2008 (see here and here).

Si Chan Wooh (associated with Schnitzer Steel) 2007 (see here and here). (Note, four years after Wooh pleaded guilty, the court granted the DOJ’s motion to dismiss the case in the “interests of justice).

Jim Brown and Jason Steph (associated with Willbros) 2006, 2008  (see here and here) (see here and here).

Steven Ott, Roger Young, and Yaw Amoako (associated with ITXC Corp.)  2006, 2005 (see here and here) (see here and here).

The Lack Of Criminal Charges Against PetroTiger Was Not Unique

Tuesday, June 23rd, 2015

FactsThe FCPA-related media has a troubling tendency to take things that are not unique and try to make them unique.

For instance, this recent Compliance Week article stated:

“Typically, when the Justice Department brings charges of FCPA violations against company executives, charges against the company itself aren’t far behind. [...] The decision not to pursue charges of any kind [against PetroTiger] is a marked departure from most FCPA cases, in which the Justice Department will give companies credit for strong compliance programs, often entering into non-prosecution agreements or deferred prosecution agreements, which almost always come with strings attached.  It’s rare that companies get complete exoneration.”

Contrary to the above assertion, the lack of criminal charges against PetroTiger – even though there was an enforcement action against individuals associated with the company – was not unique.

This post highlights the 18 instances since 2000 of the DOJ bringing an enforcement action against an individual or individuals, but not an enforcement action against the business organization associated with the individual(s). (Note: excluded from the list is the manufactured Africa Sting enforcement action against 22 individuals employed by over a dozen companies).

Interesting fact, 16 of the 18 instances (89%) involved individuals associated with privately-held companies like PetroTiger.  The only two instances to involve individuals associated with publicly-traded companies are highlighted below with ***.

  • Dmitrij Harder (2015 – ongoing criminal prosecution of individual associated with  Chestnut Consulting Group Inc., no enforcement action against Chestnut Group).
  • Dmitry Firtash, Andras Knopp, Suren Gevorgyan, Gajendra Lal, Periyasamy Sunderalingam (2014 – ongoing criminal prosecutions of individuals associated with DF Group, no enforcement action against DF Group).
  • Ernesto Lujana, Tomas Clark, Alejandro Hurtado,Benito Chinea, Joseph DeMeneses  (2013-2014 – criminal prosecutions of individuals associated with Direct Access Partners, no enforcement action against Direct Access Partners).
  • Washington Cruz, Amadeus Richers and Cecilia Zurita (2011 – criminal prosecutions of individuals associated with Cinergy Telecommunications Inc., enforcement action against Cinergy Telecommunications was dropped).
  • Jean Fourcand (2010 – criminal prosecution of individual associated with Fourcand Enterprises, Inc., no enforcement action against Fourcand Enterprises).
  • Juan Diaz (2009 – criminal prosecution of individual associated with JD Locator Services Inc., no enforcement action against JD Locator Services).
  • Antonio Perez, Joel Esquenazi and Carlos Rodriguez (2009 – criminal prosecutions of individuals associated with Terra Telecommunications Corp., no enforcement action against Terra Telecommunications).
  • Marguerite Grandison (2009 – criminal prosecution of individual associated with Telecom Consulting Services Corp., no enforcement action against Telecom Consulting Services).
  • Charles Jumet, John Warwick (2009 – criminal prosecutions of individuals associated with Ports Engineering Consulting and Overman Associates- no enforcement action against Ports Engineering Consulting Corp or Overman Associates).
  • Shu Quan-Sheng (2008 – criminal prosecution of individual associated with AMAC International Inc. – no enforcement action against AMAC International Inc.)
  • Leo Smith and Martin Self (2007-2008 – criminal prosecutions of individuals associated with Pacific Consolidated Industries – no enforcement action against Pacific Consolidated Industries).
  • Gerald and Patricia Green (2008 – criminal prosecutions of individuals associated with Film Festival Management – no enforcement action against Film Festival Management).
  • *** Yaw Osei Amoako, Steven Ott, Roger Young (2006-2007  - criminal prosecutions of individuals associated with ITXC Corporation – no enforcement action against against ITXC Corp.)
  • Richard Novak (2006 – criminal prosecution of individual associated with ”several internet businesses” – no enforcement action against the businesses).
  • *** David Kay, Douglas Murphy (2002 – criminal prosecutions of individuals associated with American Rice, Inc. – no enforcement action against American Rice).
  • Richard Pitchford (2002 – criminal prosecution of individual associated with the Central Asia American Enterprise Fund – no enforcement action against the Central Asia American Enterprise Fund).
  • Daniel Rothrock (2001 – criminal prosecution of individual associated with Allied Products Corp. – no enforcement action against Allied Products Corp.) ***
  • Richard Halford, Albert Reitz, Robert King, Pablo Hernandez (2001 – criminal prosecutions of individuals associated with Owl Securities and Investments, Limited – no enforcement action against Owl Securities).

The SEC Frequently Alleges Or Finds Only Books And Records And Internal Controls Violations In FCPA Enforcement Actions

Thursday, June 11th, 2015

SECThis recent post highlighted critical commentary regarding the recent BHP Billiton enforcement action.

One theme from much of the commentary was that the BHP action was somehow unique in charging (or finding as the case may be since it was an SEC administrative action) books and records and internal controls violations in the absence of anti-bribery violations.

More broadly, some FCPA commentators have suggested (here and here) that the SEC is placing a new emphasis on internal controls in the absence of anti-bribery violations.

However, the enforcement approach in BHP Billiton was hardly unique and more broadly the SEC has long charged or found books and records and internal controls violation in the absence of anti-bribery violations or findings.

Set forth below are numerous instances over the past five years in which the SEC has alleged or found only books and records and internal controls violations in Foreign Corrupt Practices Act enforcement actions.  (All actions can be found on the SEC’s FCPA website).



In other words 3 of 7 (43%) corporate SEC FCPA enforcement actions in 2014 did not allege or find anti-bribery violations.


Philips Electronics

In other words, 3 of 8 (38%) corporate SEC FCPA enforcement actions did not allege or find anti-bribery violations.



In other words, 4 of 8 (50%) corporate SEC FCPA enforcement actions did not allege of find anti-bribery violations.


Watts Water
Rockwell Automation
Ball Corp

In other words 8 of 13 (62%) corporate SEC FCPA enforcement actions did not allege or find anti-bribery violations.


Veraz Networks
General Electric

In other words, 3 of 19 (16%) corporate SEC FCPA enforcement actions did not allege or find anti-bribery violations.  (Note 2010 enforcement statistics are impacted by the 7 related Panalpina enforcement actions.  If one counts these related actions as one, 3 of 12 (25%) corporate SEC FCPA enforcement actions did not allege or find anti-bribery violations).

So prominent is SEC FCPA enforcement actions without anti-bribery violations or findings that the term non-bribery charged disgorgement has been part of the FCPA vocabulary for years.  (See here).