Archive for the ‘Foreign Issuers’ Category

Non-FCPA Legal Developments Should Cause Pause As To Certain FCPA Enforcement Theories

Thursday, July 31st, 2014

The substance of this post is the same as this August 2013 post regarding the civil RICO action involving Pemex and Siemens.  The only difference is that instead of a S.D. of New York decision that should cause pause as to certain FCPA enforcement theories, it is now a Second Circuit decision that should cause pause.

By way of background, the FCPA is explicit as to the jurisdictional scope of the anti-bribery provisions and states as follows as to foreign companies.

  • As to foreign issuers subject to 78dd-1 of the FCPA (i.e. foreign companies with shares registered on U.S. exchanges or otherwise required to file periodic reports with the SEC), the jurisdictional prong is “use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance” of a bribery scheme.
  • As to persons other than U.S. persons (legal or natural) or foreign issuers, the FCPA was amended in 1998 to create an entire new category of “person” subject to the FCPA’s anti-bribery provisions.  See 78dd-3.  This category applies to non-U.S. actors and non-foreign issuers such as foreign private companies and foreign nationals and contains the following jurisdictional prong – ”while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance [of a bribery scheme."

In  short, as to foreign actors, the FCPA's anti-bribery provisions contain explicit territorial requirements.

Several FCPA enforcement actions have been brought against foreign companies based on sparse U.S. jurisdiction allegations. For instance:

  • The Total enforcement action (the third largest in FCPA history in terms of fine and penalty amount) was based on a 1995 wire transfer of $500,000 (representing less than 1% of the alleged bribe payments at issue) from a New York based account.
  • The JGC Corp. enforcement action was based on the jurisdictional theory that certain alleged bribe payments flowed through U.S. bank accounts and that co-conspirators faxed or e-mailed information into the U.S. in furtherance of the bribery scheme.
  • The Magyar Telekom enforcement action was based on allegations that a company executive sent two e-mails to a foreign official from his U.S. based e-mail address that passed through, was stored on, and transmitted from servers located in the U.S. and that certain electronic communications made in furtherance of the alleged bribery scheme and the concealment of payments, including drafts of certain agreements and copies of certain contracts with intermediaries, were transmitted by company employees and others through U.S. interstate commerce or stored on computer servers located in the U.S.
  • The Bridgestone enforcement action was based on allegations that employees sent and received e-mail and fax communications to/from the U.S. in connection with the bribery scheme.
  • The Tenaris enforcement action was based on allegations that a payment to an agent in connection with the alleged bribery scheme was wired through an intermediary bank located in New York.

The above background is important in understanding why a recent Second Circuit decision should cause pause as to the above FCPA enforcement theories.

The decision involved a civil RICO action in which PEMEX alleged that Siemens, among others, violated RICO and engaged in common law fraud by bribing PEMEX officials to approve overrun and expense payments to to CONPROCA, a Mexican corporation completing an oil refinery rehabilitation project in Mexico.  According to the complaint, CONPROCA would receive payment from PEMEX’s Project Funding Master Trust (the “Master Trust”), organized under Delaware law, and managed by its then-trustee Bank of New York.  According to the complaint, The Master Trust paid each invoiced amount from its New York account to CONPROCA’s account at Citibank in New York.  The complaint further alleged that CONPROCA financed the project at issue ”through the issuance of bonds registered with the SEC, and through institutional credit, a substantial amount of which were issued by U.S. financial institutions and guaranteed by the Export Import Bank of the United States.”

The DOJ would surely take the position that the above U.S. jurisdictional allegations would be sufficient to bring a criminal FCPA enforcement action against a foreign company for bribing foreign officials.

Not so in a civil RICO action subjected to actual judicial scrutiny.

As noted in the prior August 2013 post, in ruling on the defendants’ motion to dismiss based on the argument that the RICO claims were extraterritorial, the S.D. of N.Y. first noted that because RICO is silent as to any extraterritorial application, the RICO statutes do not apply extraterritorially.  The court then observed that “when foreign actors were the primary operators, victims, and structure of a RICO claim” courts have properly concluded that the claims were extraterritoritial.  The S.D. of N.Y. then held that PEMEX’S RICO claims were extraterritorial because “they allege a foreign conspiracy against a foreign victim conducted by foreign defendants participating in foreign enterprises.”

As to those U.S. jurisdictional allegations, the S.D. of N.Y. stated:

“They fail to shift the weight of the fraudulent scheme away from Mexico. Seen simply, as a result of the claimed conspiracy PEMEX, the Mexican Plaintiff for whom the work was done in Mexico, paid fraudulent overcharges to CONPROCA, the Mexican corporation which did the work.  PEMEX officials in Mexico granted the challenged approvals to pay CONPROCA. The American trustee merely transferred the payments through two banks in New York.  The defendants’ bribery of PEMEX officials, and CONPROCA’s underbidding and submitting false claims under Mexican public works contracts, all occurred in Mexico. Thus, ‘it is implausible to accept that the thrust of the pattern of racketeering activity was directed at’ the United States.  The RICO claims are accordingly dismissed.”

PEMEX appealed the S.D. of N.Y. dismissal and last week the Second Circuit (see here) affirmed the dismissal.  In pertinent part, the Second Circuit's order states:

"To the extent Pemex relies on several allegations of domestic activity to support its RICO claim, these, too, are insufficient.  “[S]imply alleging that some domestic conduct occurred cannot support a claim of domestic application.” [...]

The scheme alleged by Pemex possesses three minimal contacts with the United States: the financing was obtained here, the invoices were sent to the bank for payment, and the bank issued payment. Absent from the pleadings are any allegations that the scheme was directed from (or to) the United States. The activities involved in the alleged scheme–falsifying the invoices, the bribes, the approval of the false invoices–took place outside of the United States. The allegations of domestic conduct are simply insufficient to sustain RICO jurisdiction.”

Because of the general absence of substantive FCPA case law, one must often reference non-FCPA case law involving similar legal issues to best appreciate the many controversial aspects of FCPA enforcement.

As the above Second Circuit highlights, such case law should cause pause as to certain FCPA enforcement theories.

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

Wednesday, June 18th, 2014

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

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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.

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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.

The First FCPA Enforcement Action Against A Foreign Issuer, Plus An Interesting Issue

Tuesday, May 13th, 2014

[This post is part of a periodic series regarding "old" FCPA enforcement actions]

In 1996, the SEC brought this civil complaint against Montedison, an Italian corporation with headquarters in Milan that had interests in the agro-industry, chemical, energy and engineering sectors.  The enforcement action was principally a financial fraud case as the SEC alleged that the company committed “financial fraud by falsifying documents to inflate artificially the company’s financial statements.”  (See here for the SEC’s release).

However, the enforcement action also included allegations that Montedison violated the FCPA’s books and records and internal control provisions based on allegations that the company concealed “hundreds of million of dollars of payments that, among other things, were used to bribe politicians in Italy and other persons.”

As described in the SEC’s complaint, Montedison wanted to enter into a joint venture with an Italian state energy agency and “determined to secure political backing” to change the terms of the underlying joint venture agreement as well as overturn a judge’s decision that had the effect of making the proposed transaction more difficult.  According to the complaint, “Montedison determined that to achieve these ends, the company would need to pay extensive bribes.”

The complaint then states:

“In an attempt to do so, Montedison management entered into an arrangement with a Rome real estate developer (the “Developer”), who was developing real estate complexes in Rome for Montedison at that time.  Under their agreement, Montedison, directly or through companies it controlled, effected numerous real estate purchases and sales at artificially high prices.  The artificial prices had the effect of transferring hundreds of million of dollars to the Developer.  On information and belief, the Developer used this money to bribe politicians in Italy and other persons on Montedison’s behalf.”

For example, the complaint alleges that Montedison, through a wholly-owned subsidiary, overpaid the Developer approximately $95 million and agreed to pay an additional $123 million “for properties that were either owned by, or had connections to, various politicians.

As noted in the SEC’s complaint, “despite these efforts, Montedison’s management was ultimately unsuccessful” in its bribery scheme.

According to the complaint:

“The fraudulent conduct … continued undetected for several years because of a seriously deficient internal control environment at Montedison.  In fact, Montedison’s internal controls were so deficient that, according to Montedison, neither the company itself, nor its auditors, have been able to reconstruct previously what occurred and who was responsible.”

The Montedison enforcement action was the first SEC Foreign Corrupt Practices Act enforcement action against a foreign issuer and was based on the company having American Depository Receipts ADRs listed on the New York Stock Exchange.

Montedison did not immediately resolve the SEC’s complaint as is the norm today.  Rather, the 1996 complaint was resolved in 2001.   As noted in the SEC’s release Montedison was ordered to pay a civil penalty of $300,000 and resolved the enforcement action without admitting nor denying liability for the allegations in the complaint.  According to the release, “the fraudulent conduct was disclosed only after new management was appointed when Montedison disclosed it was unable to service its bank debt.  Virtually all of the former senior management at Montedison responsible for the fraud were convicted by Italian criminal authorities and were sued by the company.”

The release notes as follows.

“Montedison was acquired by Compart, S.p.A., in late 2000 and its ADRs were delisted. Compart then changed its name to Montedison. No securities of Compart are listed for sale by U.S. stock exchanges. Compart, which agreed to the settlement on behalf of the former Montedison, was not a defendant in the Commission’s complaint.”

In original source media reports, Paul Gerlach (SEC Associate Enforcement Director at the time) stated:

“The case’s message is if you are a foreign company wanting to trade stock here, you are going to have to adhere to the same reporting, accounting and internal control standards followed by U.S. companies.”

Of interest, a 1996 Washington Post article about the enforcement action noted:

“The commission has been locked in debate with the NYSE for years over whether foreign companies that raise money from U.S. investors should be held to the same reporting standards as U.S. companies. SEC officials have argued that loosening the standards would hurt U.S. investors. The exchange has responded that overly stringent rules will discourage foreign companies from raising capital in the United States and erode the preeminent position of U.S. securities markets.”

Why, despite the SEC’s allegations, was Montedison not charged with FCPA anti-bribery violations?  Jurisdictional issues aside, according to a knowledgeable source at the SEC at the time, there was a belief that there were no “foreign” officials involved because Montedison, an Italian company, allegedly bribed Italian officials.

It’s an interesting question.

Does the “foreign” in official mean as it relates to the specific company at issue or as to the U.S.?

I believe that the legislative history supports the later, but will also add that Congress likely never understood that it was legislating as to foreign issuers when the FCPA was passed in 1977 because there were few foreign issuers.  Today, there are approximately 1,000 foreign issuers.  (See here and here).

In most FCPA enforcement actions against foreign issuers (Siemens, Daimler, Total, Technip, Alcatel-Lucent, etc.) the question is not relevant as, for example, German or French officials were not among the officials allegedly bribed.

Friday Roundup

Friday, March 14th, 2014

Guilty plea in FCPA obstruction case, SEC trims a pending case, across the pond, turnabout is fair play, and for the reading stack.  It’s all here in the Friday roundup.

Cilins Pleads Guilty

Earlier this week, the DOJ announced that Frederic Cilins pleaded guilty “to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.”  The DOJ release further states:

“Cilins pleaded guilty to a one-count superseding information …, which alleges that Cilins agreed to pay money to induce a witness to destroy, or provide to him for destruction, documents sought by the FBI.   According to the superseding information, those documents related to allegations concerning the payment of bribes to obtain mining concessions in the Simandou region of the Republic of Guinea.”

Cilins was originally charged in April 2013 (see this prior post for a summary of the criminal complaint) and there was much activity leading up to Cilins’s March 31st trial date.  For instance, on February 18th the DOJ filed a superseding indictment and on March 4th Cilins filed this motion to dismiss.  In pertinent part, the motion stated:

“For almost a year, the government has proceeded against Mr. Cilins under the theory that he criminally obstructed an investigation conducted by a federal grand jury in the Southern District of New York and the Federal Bureau of Investigation, after he first learned of that investigation in the spring of 2013. Now, on the eve of trial, the government has charged Mr. Cilins with conspiracy to commit criminal obstruction. The supposed conspiracy began in 2012, when, as the government admits, he had no intent to obstruct an American investigation—indeed, well before any such investigation had even been contemplated. The charge is instead based on a radical new theory: that Mr. Cilins interfered with a Guinean civil licensing investigation, which somehow amounts to a violation of U.S. obstruction law under 18 U.S.C. § 1519.

The government’s unprecedented and breathtaking attempt to federalize protection for investigations spread far and wide throughout the world has no basis in the text of the obstruction statute itself and no support in the case law. It also runs up against the well-established presumption that, absent strong evidence to the contrary, Congress did not intend to give federal statutes extraterritorial reach. Not only does § 1519 contain no textual evidence that Congress meant to give the law a worldwide sweep, the statute’s legislative history also confirms the obvious: that Congress wrote a federal obstruction statute in order to criminalize intentional interference with American investigations. The government’s new conspiracy count is fatally defective and must be dismissed.”

Cilins has been widely reported to be linked to Guernsey-based BSG Resources Ltd.  As reported here from 100 Reporters:

“The U.S. Justice Department has formally notified the Franco-Israeli billionaire Beny Steinmetz [the founder of BSG Resources] that he is the target of a federal probe of allegations of bribery in the Republic of Guinea, according to a source with knowledge of the matter. The disclosure places Steinmetz … personally at the center of a broad-based multinational corruption investigation involving some of the largest remaining untapped iron ore deposits in the world.  [...] According to the source, who spoke on condition of anonymity, attorneys for Steinmetz have received a so-called “target letter” from federal prosecutors investigating allegations that Steinmetz’s mining company offered millions of dollars in bribes to win and keep the multi-billion dollar concession first awarded by the Guinean government in 2008.  The letter went to Steinmetz’s lawyers in January, the source said.”

For additional coverage of Cilins’s plea, see here from Reuters (noting that the plea agreement does not require any cooperation with the government’s investigation) and here from Bloomberg.

SEC Trims a Pending Case

This recent post highlighted how the SEC has never prevailed in an FCPA enforcement action when put to its ultimate burden of proof.

Against this backdrop, it is notable, as reported by the Wall Street Journal here and citing an SEC official, that the SEC is dropping its claims that former Magyar Telekom executives Elek Straub, Andras Balogh and Tomas Morval bribed Montenegro officials.  (The SEC’s claims that the former executives bribed Macedonian officials remains active).

See this prior post summarizing the SEC’s original 2011 complaint.

Across the Pond

More from the U.K. trial of former News Corp. executive Rebekah Brooks.  From the Guardian:

“Rebekah Brooks has admitted rubber stamping payments to military sources while she was editor at the Sun at the Old Bailey phone hacking trial. Brooks also admitted on Monday that she did not question whether the source of a series of stories that came from a reporter’s “ace military source” was a public official who could not be paid without the law being broken. Crown prosecutor Andrew Edis, QC, quizzed her about a series of emails from the reporter requesting tens of thousands of pounds for his military source. She responded to one request for payment in under a minute and to another within two minutes, the phone hacking trial heard. ”You really were just acting as a rubber stamp weren’t you,” Edis asked. Brooks replied: “Yes.”

As noted in previous posts here and here:

“What happens in these trials concerning the bribery offenses will not determine the outcome of any potential News Corp. FCPA enforcement action. But you can bet that the DOJ and SEC will be interested in the ultimate outcome. In short, if there is a judicial finding that Brooks and/or Coulson or other high-level executives in London authorized or otherwise knew of the alleged improper payments, this will likely be a factor in how the DOJ and SEC ultimately resolve any potential enforcement action and how News Corp.’s overall culpability score may be calculated under the advisory Sentencing Guidelines.”

Turnabout Is Fair Play

Last week’s Friday Roundup (here) highlighted how Senator Harry Reid (D-NV) called out Koch Industries on the Senate floor and accused the company of violating the FCPA.  The previous post noted that it was not just executives or companies that support Republican causes that have come under FCPA scrutiny (several Democratic examples could be cited as well).

Indeed, that is just what the Washington Examiner did in this article which states as follows.

“Senate Majority Leader Harry Reid, D-Nev., has received campaign contributions from people and political action committees linked to multiple companies suspected of violating the Foreign Corrupt Practices Act.  [...]  [R]ecords reveal that Reid has accepted campaign money from individuals and political action committees associated with 10 companies linked to FCPA investigations.  The contributions total $515,100 between 2009 and 2013.”

The inference from both Senator Reid’s initial volley and the Washington Examiner report would seem to be that companies that resolve FCPA enforcement actions or companies under FCPA scrutiny are bad or unethical companies and that politicians who accept support from such companies are thus tainted as well.

Such an inference is naive in the extreme.

Yes, certain FCPA enforcement actions are based on allegations that executive management or the board was involved in or condoned the improper conduct at issue. However, this type of FCPA enforcement action is not typical.

A typical FCPA enforcement action involves allegations that a small group of people (or perhaps even a single individual) within a subsidiary or business unit of a business organization engaged in conduct in violation of the FCPA. Yet because of respondeat superior principles, the company is exposed to FCPA liability even if the employee’s conduct is contrary to the company’s pre-existing FCPA policies and procedures.

Also relevant to the question of whether companies that resolve FCPA enforcement actions are “bad” or “unethical” is the fact that most FCPA enforcement actions are based on the conduct of third-parties under the FCPA’s third-party payment provisions. Further, certain FCPA enforcement actions are based on successor liability theories whereby an acquiring company is held liable for the acquired company’s FCPA liability.

Finally, given the resolution vehicles typically used to resolve an FCPA enforcement – such as non-prosecution and deferred prosecution agreements – companies subject to FCPA scrutiny often decide it is quicker, more cost efficient, and more certain to agree to such a resolution vehicle than engage in long-protracted litigation with the DOJ or SEC. These resolution vehicles do not require the company to plead guilty to anything (or typically admit the allegations in the SEC context), are not subject to meaningful judicial scrutiny, and do not necessarily represent the triumph of one party’s legal position over the other. Rather resolution via such a vehicle often reflects a risk-based decision often grounded in issues other than facts or the law. Indeed, a former high-ranking DOJ FCPA enforcement official has stated that given the availability of such alternative resolution vehicles, “it is tempting for the [DOJ], or the SEC since it too now has these options available, to seek to resolve cases through DPAs or NPAs that don’t actually constitute violations of the law.”

Last, but certainly not least, many corporate FCPA enforcement actions concern conduct that allegedly took place 5, 7, 10 or even 15 years ago.

Reading Stack

An informative read from Catherine Palmer and Daiske Yoshida (Latham & Watkins) titled “Deemed Public Officials:  A Potential Risk For U.S. Companies in Japan.”  The article states:

“Deemed public officials are officers and employees of entities that are not government owned but serve public functions. This concept is somewhat analogous to state-owned enterprises, but rather than being government owned/controlled entities that participate in commercial activities, these are commercial entities that play quasi-government roles.  [...] The statutes that authorized the establishment of these companies stipulate that their officers and  employees are “deemed to be an employee engaged in public service” for the purposes of the Penal Code of Japan.”

Another informative read from Wendy Wysong (Clifford Chance) titled “Why, Whether, and When the FCPA Matters in Capital Market Transactions: The Asian Perspective.”  The article, in part, covers the FCPA’s tricky “issuer” concept and explores FCPA liability in Rule 144A and Regulation S offerings.

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A good weekend to all.

Congress Remains Interested In FCPA Issues

Wednesday, February 26th, 2014

Foreign Corrupt Practices reform may not be the hot issue it was circa 2011 (political posturing by the DOJ in connection with the FCPA Guidance as well as certain headlines caused the issue to simmer), but Congress remains interested in FCPA issues.

For instance, in connection with a recent confirmation hearing for Leslie Caldwell to be the DOJ’s Assistant Attorney General of the Criminal Division, Senator Charles Grassley (R-IA), Ranking Member of the Senate Judiciary Committee, asked Caldwell several FCPA-related questions for the record.

Caldwell punted on every question (perhaps not surprising given that Caldwell is not currently at the DOJ), but the questions posed nevertheless highlight specific FCPA issues on the minds of certain members of Congress.

Set forth in full below are the FCPA-related questions by Senator Grassley and Caldwell’s responses.

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“I recently asked Attorney General Holder these questions and have not yet received response.  As the FCPA falls within the Criminal Division, would you please respond to the following questions.

What are the Department’s current enforcement priorities under the FCPA?

Answer:  I am not in the Department; therefore, I am not in a position to address this question.  If I am confirmed as the Assistant Attorney General of the Criminal Division, I assure you that I will be vigilant in pursuing cases under the FCPA.

What particular industries, markets or practices is the Department focusing on, and why?

Answer:  I am not in the Department; therefore, I am not in a position to address this question.  As noted above, if I am confirmed as the Assistant Attorney General of the Criminal Division, I assure you that I will be vigilant in pursuing cases under the FCPA.

What proportion of the Department’s enforcement activity during 2013 involved non-U.S. companies?

Answer:  I am not in the Department; therefore, I am not in a position to address this question.  If I am confirmed as the Assistant Attorney General of the Criminal Division, I assure you that I will be vigilant in pursuing cases against U.S. and non-U.S. companies that violate the FCPA.

Has the Department seen a recent increase in whistleblower claims of FCPA violations?  If so, to what would you attribute that?  How has the Department responded?

Answer:  I am not in the Department; therefore, I am not in a position to address these questions.

Although the Department does not publicize each particular instance in which it declines prosecution despite evidence of an FCPA violation, what characterized the Department’s declinations during 2013?  Did the number increase from 2012?  What factors were most important in leading the Department to decline prosecution?

Answer:  I am not in the Department; therefore, I am not in a position to address these questions.  While I have not been privy to the internal deliberations surrounding the Department’s declination decisions, if confirmed as the Assistant Attorney General of the Criminal Division, I assure you that declination decisions will be based on the law and the evidence presented.

In November 2012, the Department and SEC issued the FCPA ”Resource Guide,” which reflected guidance from your agencies regarding the interpretation and enforcement of the FCPA.  Does the Department anticipate updating, supplementing or amending the “Resource Guide” in the foreseeable future?

Answer:  I am not in the Department; therefore, I am not in a position to address this question.

In 2013, the Department issued only one Opinion Release concerning the FCPA.  Does the Department consider the “Resource Guide” a substitute for its opinion release program?

Answer:  I am not in the Department; therefore, I am not in a position to address this question.