Archive for the ‘Goldman Sachs’ Category

Friday Roundup

Friday, May 9th, 2014

Is trust “reasonable,” Sigelman formally indicted, scrutiny alerts and updates, and for the reading stack.  It’s all here in the Friday roundup.

Is Trust “Reasonable”

This prior post asked:

Would FCPA compliance be better achieved if companies had fewer formal internal controls and instead devoted greater effort to fostering trust within a business organization?  Would such an approach even satisfy an issuer’s obligations under the FCPA’s internal controls provisions which require that issuers devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are properly authorized, recorded, and accounted for by the issuer?

The questions are posed once again after reading this New York Times article titled “Berkshire’s Radical Strategy: Trust.”  In the article, Charlie Munger, vice chairman of Berkshire Hathaway (arguably one of the most well-respected companies in America) “ruminates on the state of corporate governance, offering a counternarrative to the distrustful culture of most businesses: instead of filling your ranks with lawyers and compliance people, he argued, hire people that you actually trust and let them do their job.”

As highlighted in the article:

“Here’s a little-known fact: Berkshire Hathaway, the fifth-largest company in the United States, with some $162.5 billion in revenue and 300,000 employees worldwide, has no general counsel that oversees the holding company’s dozens of units. There is no human resources department, either.

If that sounds like a corporate utopia, that’s probably because it is. To some people in this day and age — given the daily onslaught of headlines about scandal and fraud in corporate America — that also may sound almost like corporate negligence.”

Sigelman Formally Indicted

In January 2014, the DOJ announced FCPA and related charges against former executives of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, “for their alleged participation in a scheme to pay bribes to foreign government officials in violation of the FCPA, to defraud PetroTiger, and to launder proceeds of those crimes.”  The individuals charged were former co-CEOs of PetroTiger Joseph Sigelman and Knut Hammarskjold and former general counsel Gregory Weisman.  (See this prior post for additional details).

In this criminal complaint, Sigelman was charged with conspiracy to violate the FCPA’s anti-bribery provisions as well as three substantive FCPA charges.  The FCPA charges were based on allegations that Sigelman and others made at least four transfers of money in the approximate amount of $333,500 to an account in Colombia of a “foreign government official in Colombia.”

In this release, the DOJ announced today that Sigelman was formally criminally indicted for the same conduct.  The release states that Sigelman “charged with conspiracy to violate the FCPA and to commit wire fraud, conspiracy to launder money, and substantive FCPA and money laundering violations.”

The DOJ release further states:  ”The case was brought to the attention of the department through a voluntary disclosure by PetroTiger, which cooperated with the department’s investigation.”

As previously noted, both Hammarskjold and Weisman have pleaded guilty.

Scrutiny Alerts

Key Energy Services

Key Energy Services disclosed in its recent SEC filing:

“The U.S. Securities and Exchange Commission has advised us that it is investigating possible violations of the U.S. Foreign Corrupt Practices Act involving business activities of Key’s operations in Russia. We take any such allegations very seriously and are conducting an investigation into the allegations. We are fully cooperating with and sharing the results of our investigation with the Commission. While the outcome of our investigation is currently not determinable, we do not expect that it will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.”

Quanta Services

Quanta Services (an engineering, procurement and construction services company) disclosed in its recent SEC filing:

“On March 10, 2014, the SEC notified Quanta of an inquiry into certain aspects of Quanta’s activities in certain foreign jurisdictions, including South Africa and the United Arab Emirates. The SEC also requested that Quanta take necessary steps to preserve and retain categories of relevant documents, including those pertaining to Quanta’s U.S. Foreign Corrupt Practices Act compliance program. The SEC has not alleged any violations of law by Quanta or its employees. Quanta has complied with the preservation request and is cooperating with the SEC.”

PTC Inc.

PTC Inc. (formerly known as Parametric Technology) first disclosed its FCPA scrutiny in August 2011 and recently disclosed in this  SEC filing:

China Investigation
We have been cooperating to provide information to the U.S. Securities and Exchange Commission and the Department of Justice concerning payments and expenses by certain of our business partners in China and/or by employees of our Chinese subsidiary that raise questions concerning compliance with laws, including the U.S. Foreign Corrupt Practices Act. Our internal review is ongoing and now includes periods earlier than those previously examined. We continue to respond to requests for information from these agencies, including a subpoena issued to the company by the SEC. We cannot predict when or how this matter may be resolved. Resolution of this matter could include fines and penalties; however we are unable to estimate an amount that could be associated with any resolution and, accordingly, we have not recorded a liability for this matter. If resolution of this matter includes substantial fines or penalties, this could materially impact our results for the period in which the associated liability is recorded or such amounts are paid. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.”
Fresenius Medical Care
Germany-based Fresenius Medical Care first disclosed FCPA scrutiny in August 2012 and stated as follows in its recent SEC filing:
“[The previously disclosed internal] review has identified conduct that raises concerns under the FCPA or other anti-bribery laws that may result in monetary penalties or other sanctions.  In addition, the Company’s ability to conduct business in certain jurisdictions could be negatively impacted.  The Company has recorded a non-material accrual for an identified matter.  Given the current status of the internal review, the Company cannot reasonably estimate the range of possible loss that may result from additional identified matters or from the final outcome of the continuing internal review.”
Financial Services Industry

In case you had not heard that numerous financial services companies were under FCPA scrutiny for alleged hiring practices, the Wall Street Journal reports:

“U.S. regulators have expanded their investigation into large banks’ hiring practices in Asia, seeking more information from at least five U.S. and European firms, according to people close to the probe.  The Securities and Exchange Commission in early March sent letters to a group of companies including Credit Suisse Group AG, Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and UBS AG seeking more information about their hiring in Asia, according to people.  [...]  The SEC late last year issued a round of letter to at least six banks, seeking information on their hiring practices, such as whether the firms had special programs dedicated to relatives of influential officials, according to people close to the inquiry.  The second round of requests reflects a deepening of the probe.  The agency is seeking more data on the banks’ recruiting in Asia, including lists of employees hired as a result of referrals from foreign officials and clients, added the people familiar with the investigation.”

As to the above, Goldman disclosed in its most recent SEC filing:

“Regulatory Investigations and Reviews and Related Litigation.

[The company] and certain of its affiliates are subject to a number of other investigations and reviews by, and in some cases have received subpoenas and requests for documents and information from, various governmental and regulatory bodies and self-regulatory organizations and litigation relating to various matters relating to the firm’s businesses and operations, including:

compliance with the U.S. Foreign Corrupt Practices Act, including with respect to the firm’s hiring practices …”

Reading Stack

No surprise that an individual who paid $174 million to post bail has hired an A-list legal team in defense of DOJ allegations that he violated, among other laws, the FCPA.  (See here for a recent New York Times article regarding Dmitry Firtash).

Sound advice from former DOJ FCPA Unit Chief Chuck Duross in this MoFo Tech article concerning FCPA risk and the technology industry:

“[T]echnology companies are also at risk from the distribution model that’s often used in the industry. Many companies sell their products to channel partners, which add some value to the product or service—such as other hardware, software, an installation, or a service plan—and then resell it at a higher price. That’s an entirely appropriate business model. But as with any third party, companies need to appreciate the potential risk if, for example, the distributor is simply reselling at a higher price without adding any legitimate value and using that profit as a slush fund to funnel bribes to government officials. It may seem to the company that it is not violating the FCPA. It has simply sold its product to another company. But if a company’s employees are aware that the distributor is paying (or just offering) bribes to government officials to help sell the product, the company and its employees could be criminally liable as conspirators and aiders and abettors.

What should tech companies be doing to avoid these issues?

One thing is to know the third parties they’re doing business with. It is also fundamental to understand the business reason for working with third parties. One of the first questions asked during a DOJ or SEC investigation will often be, “What was the business purpose behind working with X?” Having a clear answer will earn credibility with regulators and underscore the company’s commitment to compliance. Also, making sure employees—and third parties—understand company policies, are properly trained, execute FCPA certifications, and are subject to appropriate ongoing reviews can prevent violations and mitigate (or avoid altogether) penalties if a problem does occur. That is just good business. Corruption tends to occur at companies with loose control environments. While I was at DOJ, we routinely saw loose control environments leading to embezzlement, self-dealing, fraud, and even antitrust violations. When a company doesn’t know where its money is going, that’s bad business and negatively impacts shareholder value. When companies invest in a compliance program, they are investing in the health of the business.”

This Kyiv Post article notes:

“Some of Ukraine’s underpaid cadre of civil servants might get bonuses from international finance institutions to reduce the temptation of taking bribes. According to Ukrainian Tax Service chief Ihor Bilous, the European Bank for Reconstruction and Development is exploring the idea of setting up a fund that would provide officials with additional pay. ‘Last week I had a meeting with EBRD representatives and they proposed to create a fund to pay money for people who serve the state in high positions,’ Bilous told the Kyiv Post. This idea was successfully implemented in Georgia, he adds, “we need to change the system, state salaries are very low and this situation creates some kind of temptation.”

*****

A good weekend to all, and to all mothers, Happy Mother’s Day!

The U.S. Government Bears Some Responsibility

Wednesday, February 5th, 2014

The U.S. government bears some responsibility when it comes to certain circumstances that result in FCPA scrutiny.  While some are likely to view this as a controversial statement or being a corporate apologist, this basic fact has always been relevant to the Foreign Corrupt Practices Act.

As highlighted in this prior post, one of the more insightful things found in the FCPA’s extensive legislative history is an October 1975 article by Milton Gwirtzman published by the New York Times Magazine.  At this point in time, Congress was in the midst of its investigations into the so-called foreign corporate payments problem and Gwirtzman noted:

“If corporate bribery abroad has offended the post-Watergate morality, the companies implicated have nevertheless taken a greater share of the blame than they deserve.  [...]  The responsibility for present practices must also be shared by our Government,  which not only encouraged investment in countries whose ethical standards differ  from ours, but also in many respects set the pattern for the graft under censure today.  [...]  The rapid acceleration of American private investment in foreign lands, which began in the mid-nineteen-sixties, was seen by our foreign policy makers as a welcome opportunity.  If U.S. firms could build a nation’s infrastructure, supply its consumer goods and hire a portion of its workers, the greater the likelihood the nation would be bound to ours by the safest and strongest of ties, economic self-interest.  As a result, our Government wrote the foreign investment laws of several developing countries and urged our multinationals to make use of them.  New programs were established to insure foreign investment against the risks of war and expropriation.  Embassy personnel were ordered to scout out export possibilities for American firms, which were published in Commerce Business Daily, the Government’s daily list of business opportunities.”

Gwirtzman then stated as follows.  “For all these reasons, it would be unwise, as well as unfair, simply to write off bribery abroad to corporate lust.  It is a symbol of far deeper issues that really involve America’s role in the world.”

In 2004, the U.S. government lifted various sanctions against Libya after Moammar Kadafi agreed to abandon a nuclear weapons program.  The White House encouraged “Libya’s reintegration with the global market” and a White House statement read:  “U.S. companies will be able to buy or invest in Libyan oil and products. U.S. commercial banks and other financial service providers will be able to participate in and support these transactions.”

The front-page article earlier this week in the Wall Street Journal read “Probe Widens Into Dealings Between Finance Firms, Libya.”  The article states, in pertinent part:

“The Justice Department has joined a widening investigation of banks, private-equity firms and hedge funds that may have violated antibribery laws in their dealings with Libya’s government-run investment fund, people familiar with the matter said. The criminal investigation, which has intensified in recent months, is proceeding alongside a civil probe by the Securities and Exchange Commission that began in 2011 and initially honed in on Goldman Sachs Group Inc. The Justice Department’s involvement hasn’t been reported previously. In addition to Goldman Sachs, federal investigators are examining Credit Suisse Group AG , J.P. Morgan Chase & Co., Société Générale SA, private-equity firm Blackstone Group LP and hedge-fund operator Och-Ziff Capital Management Group LLC, these people said. Spokesmen for the Justice Department and the SEC declined to comment.  Authorities are examining investment deals made around the time of the financial crisis and afterward, these people said. In the years leading up to Libya’s 2011 revolution, Western firms—encouraged by the U.S. government—raced to attract investment money from the North African nation, which was benefiting from oil sales and recently had opened to foreign investment. Investigators are trying to determine whether the firms violated the Foreign Corrupt Practices Act, the people said.

[…]

The U.S. lifted sanctions against Libya in 2004 in return for the country’s dismantling of its nuclear-weapons program. By 2008, as the financial crisis set in, Western firms were jockeying for business there. That year, then-Secretary of State Condoleezza Rice visited Libya and met with Col. Gadhafi in part to improve the investment climate there for U.S. companies, she said at the time. The government advised companies on investing in Libya, and U.S. executives went there on a government-sponsored trade mission in 2010.”

Whether its leading trade missions, providing export financing or provide support through diplomatic channels, in certain instances the U.S. government encourages companies (for foreign policy and other strategic interests) to go to the edge of the cliff.  As the passage of time occasionally shows, when the footing on the cliff becomes a bit loose, and the market participants fall over the edge, other segments of the U.S. government then launch a criminal inquiry seeking to discover why.

As I told a Foreign Policy reporter earlier this week in connection with the recent news:

“There is an irony of course in the U.S. government encouraging companies to do business in certain countries because it serves U.S. interests.  Then when the company does business in that country and encounters business conditions that the U.S. government no doubt knew it was going to encounter, the company then becomes the subject of a U.S. law enforcement inquiry.”

As so it goes.

If not before, I predict I will write about this issue again in the next few years when the DOJ and SEC launch an FCPA inquiry of various companies doing business in Myanmar.  In case you haven’t heard, the U.S. government recently eased various restrictions relevant to doing business in that country and is actively encouraging companies to toe the cliff.

Friday Roundup

Friday, January 31st, 2014

What others are saying, more candy, seriously out-of-whack, not first hand, and for the reading stack.  It’s all here in the Friday Roundup.

What Others Are Saying

Last week, I published this article “Why You Should Be Alarmed By The ADM FCPA Enforcement Action.”  I’ve received a higher than norm amount of feedback – all positive - about the article via e-mail and social media.  Below is what others are saying about the article.

“For many reasons this is a terrific article.  [You are] very brave to write this necessary and timely analysis.”

“Just wanted to say thank you for keeping me updated on your FCPA-related work.  It looks like your 2010 Facade article is still holding up pretty well, despite the DOJ’s “Guidance” from last year.  It will be interesting to see how long the agencies can continue with their relatively unconstrained enforcement practices.”

Thanks for sharing Mike. And don’t change: you are as good as ever!

“Excellent article, Mike!  Readable even by those of us who are not lawyers.  The conclusion about why ADM chose settlement is undoubtedly true of many others who are charged, but leads to a question of the [conduct] of those who are charged to extract “easy takings” rather than have to justify themselves to the SEC or DOJ.  On whose behalf are they acting?”

Also a thank you for the many positive and encouraging comments I’ve received since publishing two posts (here and here) concerning the recent departure of the DOJ’s FCPA Unit Chief.

In other news on that front, White & Case recently announced here that Kathleen Hamann will join the firm as a partner “from the DOJ where she was an anticorruption policy counsel and trial lawyer assigned to the Foreign Corrupt Practices Act (FCPA) Team in the Criminal Division’s Fraud Section.”  The head of White & Case’s Global White Collar Practice stated: “Kathleen’s experience at the DOJ gives her a strong understanding of the complexities of the FCPA and the federal government’s anticorruption policies.  Kathleen is a wonderful addition to our global white collar team, and will further strengthen our ability to represent and defend clients around the world in all phases of investigations, and criminal and civil enforcement proceedings.”

More Candy

This previous post “Like a Kid In A Candy Store” highlighted the abundant offerings of FCPA year in reviews this time of year.

There is more candy to digest.

See here for the slick Global Bribery and Corruption Review 2013 from Hogan Lovells.

See here for Mayer Brown’s FCPA Update:  Year-End 2013.

But again, be warned - the divergent enforcement statistics are likely to make you dizzy at times and as to certain issues.  [Given the increase in FCPA Inc. statistical information and the growing interest in empirical FCPA-related research, I again highlight the need for an FCPA lingua franca (see here for the prior post), including adoption of the “core” approach to FCPA enforcement statistics (see here for the prior post), an approach endorsed by even the DOJ (see here), as well as commonly used by others outside the FCPA context (see here)]

Seriously Out-Of-Whack

One could have either of the following positions.

DOJ enforcement of criminal laws is more about leverage against public companies and risk aversion by corporate leaders rather than facts and law.  Therefore, even if a company settles various enforcement actions for approximately $20 billion in a year, it is not surprising that a company’s profits and stock price are up and that the company’s CEO is therefore given a substantial raise.

DOJ enforcement of criminal laws is about facts and law and if a company settles various enforcement actions for approximately $20 billion in a year, it is just not right that the company’s CEO is given a substantial raise.

Regardless of your position (I know where I fall), you would have to agree that things are seriously out-of-whack these days.

See here and here for articles regarding the compensation of James Dimon (CEO of JPMorgan).  As highlighted in the Wall Street Journal article.

“J.P. Morgan Chase’s board delivered a strong endorsement of Chief Executive James Dimon, boosting his pay 74% for a year in which the nation’s largest bank agreed to more than $20 billion in legal payouts …”  [...] The raise reflects the view among the board that most shareholders believe Mr. Dimon is doing a good job protecting the bank’s earnings power and driving the stock price higher despite the high-profile legal settlements, according to people familiar with the board’s conversations. [...] Many large shareholders seem comfortable with the bank’s leadership, too. The company’s stock price rose 33% during 2013, outpacing the 30% increase in the S&P 500 stock index. If not for its billions in legal expenses, J.P. Morgan likely would have earned record profits.  [...]   Warren Buffett, the billionaire investor who personally owns an undisclosed number of shares in J.P. Morgan, described Mr. Dimon as a “bargain.” “If I owned J.P. Morgan Chase, he would be running it, and he would be making more money than the directors are paying him,” said Mr. Buffett, who has publicly defended the bank executive before.”

“Not First Hand”

JPMorgan of course is under FCPA scrutiny for its alleged hiring practices in China.  (See here among other posts).

In this video interview, Goldman Sach’s CEO Lloyd Blankfein talks about hiring issues at his company.  As noted in the related article, “asked whether he had seen any hiring that looked like a bribe, Mr. Blankfein paused for a moment” and said “not first hand.”

Reading Stack

From BalkanInsight, an in-depth piece regarding the Magyar Telecom enforcement action (see here for the prior post).

From the Economist regarding Brazil’s new FCPA-like law.

*****

A good weekend to all.

Friday Roundup

Friday, January 3rd, 2014

Scrutiny alerts and updates, sunshine, year in review roundups, and for the reading stack.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates

H-P

The company has been under FCPA scrutiny since at least 2010 and recently disclosed, in pertinent part, as follows.

“The U.S. Department of Justice and the SEC have been conducting an investigation into the Russia GPO deal and potential violations of the Foreign Corrupt Practices Act (“FCPA”). These U.S. enforcement agencies, as well as the Polish Central Anti-Corruption Bureau, are also conducting investigations into potential FCPA violations by an employee of Hewlett-Packard Polska Sp. z o.o., an indirect subsidiary of HP, in connection with certain public-sector transactions in Poland. In addition, the same U.S. enforcement agencies are conducting investigations into certain other public-sector transactions in Russia, Poland, the Commonwealth of Independent States, and Mexico, among other countries.  HP is cooperating with these investigating agencies. In addition, HP is in advanced discussions with the U.S. enforcement agencies to resolve their investigations.”

JPMorgan

The New York Times returned – yet again (see here and here for prior NY Times article) – to JPMorgan’s hiring practices in China.  The article states:

“For Wall Street banks enduring slowdowns in the wake of the financial crisis, China was the last great gold rush. As its economy boomed, China’s state-owned enterprises were using banks to raise billions of dollars in stock and debt offerings — yet JPMorgan was falling further behind in capturing that business.  The solution, the executives decided over email, was to embrace the strategy that seemed to work so well for rivals: hire the children of China’s ruling elite.

[...]

In the months and years that followed, emails and other confidential documents show, JPMorgan escalated what it called its “Sons and Daughters” hiring program, adding scores of well-connected employees and tracking how those hires translated into business deals with the Chinese government. The previously unreported emails and documents — copies of which were reviewed by The New York Times — offer a view into JPMorgan’s motivations for ramping up the hiring program, suggesting that competitive pressures drove many of the bank’s decisions that are now under federal investigation.

The references to other banks in the emails also paint for the first time a broad picture of questionable hiring practices by other Wall Street banks doing business in China — some of them hiring the same employees with family connections. Since opening a bribery investigation into JPMorgan this spring, the authorities have expanded the inquiry to include hiring at other big banks. Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley have previously been identified as coming under scrutiny. A sixth bank, UBS, is also facing scrutiny, according to interviews with current and former Wall Street employees.

[...]

The investigation has also had a chilling effect on JPMorgan’s deal-making in China, interviews show. The bank, seeking to build good will with federal authorities, has considered forgoing certain deals in China and abandoned one assignment altogether.”

Once again, the latest NY Times article sparked much commentary.  See here, here and here.

Former Siemens Executives

The Buenos Aires Herald reports:

“Seventeen people, including former managers of the Siemens company, were … accused of paying off officials in order to help win a contract to produce the national identity cards …”.  The decision was made by Federal Judge Ariel Lijo, who decided to indict them for having allegedly committed bribery.”

Regarding the defendants, the article states:

“Twelve people working for Siemens were included in the indictment: Uriel Jonathan Sharef, Ulrich Albert Otto Fritz Bock, Eberhard George Reichert, Luis Rodolfo Schirado, Andrés Ricardo Truppel, Ernst Michael Brechtel, Bernd Regendatz, Ralph Matthias Kleinhempel and José Alberto Ares. Sharef, for instance, was a member of Siemens’ managing board. He also was the first former board member of a Fortune Global 50 company to be indicted under the US Foreign Corrupt Practices Act, as happened in 2011.  Judge Lijo also charged Carlos Francisco Soriano, Miguel Ángel Czysch and José Antonio David as “middlemen” between the company and Menem’s administration to arrange the payment for benefitting the company in the bid. The magistrate also accused Antonio Justo Solsona, Guillermo Andrés Romero, Orlando Salvestrini, Luis Guillermo Cudmani and Federico Rossi Beguy, who allegedly worked for the company competing in the bid against Siemens IT Services and who presumably agreed not to challenge the government’s decision.”

Allegations regarding the Argentine identity card project were included in the 2008 FCPA enforcement action against Siemens (see here) and also served as the basis for 2011 criminal and civil charges against several former Siemens executives, including those recently charged in Argentina (see here for the prior post summarizing the action).

As noted in this previous post, the U.S. charges against the former Siemens executives were brought after the DOJ faced scrutiny (including at the Senate’s 2010 FCPA hearing) for not bringing any individual enforcement action in connection with a bribery scheme “unprecedented in scale and geographic reach” in which there existed at Siemens a “corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company.”

The U.S. criminal charges against former Siemens executives sits on the docket and a recent docket search indicates that there has not been any activity in the case in over two years.

Sunshine

Mark Cuban, who recently prevailed against the SEC in a long-running insider trading enforcement action, says in this Wall Street Journal article that he is “now considering a new venture publicizing SEC transcripts.”  Says Cuban, “I’m going to get as many as I can, and I’ll put it out there.” “Sunshine is the best disinfectant.”

The article further states:

“Mr. Cuban says he isn’t against the SEC as a whole but thinks that the lawyers who work there should be held responsible for their actions. “There’s such a revolving door, and it was run by attorneys with an attorney’s mind-set looking for their next job,” he says. “It’s a résumé builder.” Mr. Cuban says individual lawyers aren’t held accountable because the public is familiar only with the name of the SEC’s chair, Mary Jo White.  “No wonder they say or do whatever they damn well please,” he says. “I’m like, ‘OK, I’m going to start calling them out by name.’  George Canellos, co-director of the SEC’s enforcement division, sent a response to Mr. Cuban’s statements through an SEC spokesperson: “Mr. Cuban’s comments are without merit and uncalled for. Our lawyers acted in the finest traditions of government counsel and entirely appropriately in strongly advocating the position of the government in this matter.”

On a related note, did you know that the FCPA Professor Scribd page contains approximately 250 hard to find FCPA documents, pleadings, briefs, etc.

Year In Review Roundups

From the Wall Street Journal Risk & Compliance Journal page – a “Q&A with Asheesh Goel, Ropes & Gray, on The Year in FCPA

From Trace Blog – “FCPA Corporate Settlements by the Numbers

From Michael Volkov (Corruption, Crime & Compliance) – “The FCPA Person of the Year – The Prosecutor” and “FCPA Predictions for the New Year – 2014

From Thomas Fox (FCPA Compliance and Ethics Blog) – “My Favorite Blog Posts from 2013

Reading Stack

Thomas Fox (FCPA Compliance and Ethics Blog) and Jon Rydberg (Orchid Advisor) are out with a new book here titled “Anti-Bribery Leadership: Practical FCPA and U.K Bribery Act Compliance Concepts for the Corporate Board Member, C-Suite Executive and General Counsel.”

*****

A good weekend to all.

Friday Leftovers

Friday, November 29th, 2013

Scrutiny alerts, corruption in China, quotable, and for the reading stack.  It’s all here in the Friday leftover version of the roundup.

Scrutiny Alerts

Caribbean News Now reports here as follows.

“A complaint has been filed with the Department of Justice (DOJ) in the United States under the Foreign Corrupt Practices Act (FCPA) in relation to a contract purporting to grant oil exploration rights over some eight million acres of Saint Lucia’s maritime territory.  The 46-page complaint, which Caribbean News Now has seen, names Saint Lucia’s prime minister, Dr Kenny Anthony, and RSM Production Company (RSM), a Texas company, along with its president Jack J. Grynberg. Caribbean News Now has also seen a written notification confirming receipt of the document by the DOJ.

[...]

Specifically, the complaint notes that, in or about February 2000, Anthony, as then minister of finance, planning and sustainable development, signed a contract with RSM that purported to grant the company an “Exploration License” in respect of territorial maritime resources belonging to Saint Lucia amounting to 8,726,263 acres.  However, under Saint Lucia’s Minerals Vesting Act, all minerals in, on or under any land in Saint Lucia are vested in and controlled by the Crown and only the governor general may grant a licence to prospect for and/or mine such minerals.  Further, although the contract provides that RSM shall pay a royalty to “the Government” (as required by section 5 of the Minerals Vesting Act), it goes on to state that the liability of RSM in this respect shall be discharged by paying such royalty to the minister and not the government.”

Reuters reports here as follows.

“The U.S. Justice Department is probing Morgan Stanley for its hiring practices in China as part of an industry-wide investigation by the government into whether banks’ employment of politically connected Chinese breached U.S. bribery laws, according to people familiar with the matter.  As part of the industry sweep, the U.S. Securities and Exchange Commission sent letters to Morgan Stanley and other banks, including Goldman Sachs and Citigroup, seeking information about their hiring practices, according to several people familiar with the matter.  The SEC has asked the financial services firms to provide information about their hiring of the relatives of government officials in China …”.

This is not a surprising development following the New York Times August story regarding JPMorgan (see here for the prior post).

Corruption in China

The Congressional-Executive Commission on China recently held a roundtable on “Corruption in China Today: Consequences for Governance, Human Rights, and Commercial Rule of Law.”  As stated on the Commission’s website:

“Corruption takes many forms in China, from corrupt officials at all levels using their public office for private gain and seizing land for development to corrupt state-owned enterprises gaming the system to their advantage. Corruption also continues to be among the root causes of rights abuses against Chinese citizens. Senior leaders acknowledge that corruption threatens the legitimacy of the Communist Party and contributes to citizen dissatisfaction, and President Xi Jinping has stated that fighting corruption is a high priority. But Chinese authorities continue to crack down on independent and citizen-led efforts to combat corruption. Panelists will discuss corruption among Chinese high-level officials and recent anti-corruption efforts, and explore corruption’s role in human rights violations. Panelists also will examine corruption linked to state-owned and other enterprises and explore the implications for commercial rule of law.”

Among the panelists were Professor Daniel Chow (Ohio State) (see here for his statement).  In 2012,  I was pleased to play a role, along with   Professor Chow and the staff of the Ohio State Law Journal, in organizing “The FCPA at Thirty-Five and Its Impact on Global Business,” a full-day symposium at The Ohio State University Moritz College of Law.  (See here).

Quotable

On his Corruption, Crime & Compliance site, Michael Volkov states:

“The idea of legal ‘marketing’ has been diluted in the last few years.  As businesses become smarter consumers of legal services, in-house counsel and Chief Compliance Officers are much better at deciphering legal mumbo jumbo.  Perhaps the best example of legal marketing as an oxymoron, was the roll-out of the UK Bribery Act.  Legal marketing was premised on one idea –fear and fear alone.  Client alert after client alert warned companies about the impending doom, the effective date of the UK Bribery Act.  Not to pat myself on the back (assuming my arm is long enough), but I wrote that the UK Bribery Act was a real non-event in the world anti-corruption compliance and that it was unlikely to have any real impact.  To this day, those words still ring true.  After writing the ‘truth’ about the UK Bribery Act, I received a call from the firm’s London partners and was chastised for undermining their entire ‘marketing’ program.  (In stark contrast, many clients wrote me and thanked me for my ‘honesty.’”

Spot-on.

Nearly three years ago, I wrote:

“The U.K. Bribery Act … has been the subject of much discussion and much over-hype in my opinion.  It has been called the FCPA ‘on steroids’ (here) and if one subscribes to the industry marketing material, you might be left with the impression that the end of the world is near.  [...]   In sum, I don’t see how companies already subject to the FCPA and already thinking about compliance in a pro-active manner, have much to worry about when it comes to the U.K. Bribery Act because of the adequate procedures defense.  I will be surprised if U.K. enforcement of the Bribery Act reaches the level of U.S. enforcement of the FCPA …”.

See here for my post the day the U.K. Bribery Act went live in July 2011.

See here for my post “Marketing The FCPA … The FCPA Risks Of … Well, Just About Everything.”

For the Reading Stack

The most recent issue of the always-informative FCPA Update from Debevoise & Plimpton is here.  Among other things, the issue summarizes recent remarks of DOJ and SEC officials regarding the FCPA and FCPA enforcement.

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A good weekend to all.